nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒08‒14
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Price Competition with Decreasing Returns-to-Scale: A General Model of Bertrand-Edgeworth Duopoly By Blake Allison; Jason Lepore
  2. The Empirical Economics of Online Attention By Andre Boik; Shane Greenstein; Jeffrey Prince
  3. Global spread of pharmaceutical patent protections: micro evidence from the international equivalents of the drug patents in Japan By OKADA, Yoshimi; NAGAOKA, Sadao

  1. By: Blake Allison (Department of Economics, Emory University); Jason Lepore (Department of Economics, California Polytechnic State University)
    Abstract: We present a novel approach to analyzing models of price competition. By realizing price competition as a class of all-pay contests, we are able to generalize the models in which pricing behavior can be characterized, accommodating convex (possibly asymmetric) cost structures and general demand rationing schemes. Using this approach, we identify necessary and sufficient conditions for a pure strategy equilibrium and use them to demonstrate the fragility of deterministic outcomes in pricing games. Consequently, we characterize bounds on equilibrium pricing and profits of all mixed strategy equilibria and examine the effect of demand and supply shifts on those bounds. Our focus on bounds can be motivated by the potential for multiple non-payoff equivalent equilibria, as we identify two types of equilibrium strategies through a derivation of sufficient conditions for uniqueness of equilibrium.
    Keywords: Price competition, Contest, Demand rationing, Convex costs, Capacity constraints
    Date: 2016
  2. By: Andre Boik; Shane Greenstein; Jeffrey Prince
    Abstract: In several markets, firms compete not for consumer expenditure but instead for consumer attention. We model and characterize how households allocate their scarce attention in arguably the largest market for attention: the Internet. Our characterization of household attention allocation operates along three dimensions: how much attention is allocated, where that attention is allocated, and how that attention is allocated. Using click-stream data for thousands of U.S. households, we assess if and how attention allocation on each dimension changed between 2008 and 2013, a time of large increases in online offerings. We identify vast and expected changes in where households allocate their attention (away from chat and news towards video and social media), and yet we simultaneously identify remarkable stability in how much attention is allocated and how it is allocated. Specifically, we identify (i) persistence in the elasticity of attention according to income and (ii) complete stability in the dispersion of attention across sites and in the intensity of attention within sites. We illustrate how this finding is difficult to reconcile with standard models of optimal attention allocation and suggest alternatives that may be more suitable. We conclude that increasingly valuable offerings change where households go online, but not their general online attention patterns. This conclusion has important implications for competition and welfare in other markets for attention.
    JEL: D12 L81 L86
    Date: 2016–07
  3. By: OKADA, Yoshimi; NAGAOKA, Sadao
    Abstract: We investigate the global spread of pharmaceutical patent protections as acquired by firms, based on a novel global patent database for all significant medical drugs introduced in Japan. It gives us the propensity of filing and grant rate for each country for the granted patents in Japan. Major findings are the following. Both the filing propensity to and the grant rate of major Asian countries approached those of the OECD economies by the early 2000s for chemical substance inventions. However, there still exists substantial heterogeneity with respect to the other drug inventions: crystal, use, formulation or combination, suggesting a significant future room for international harmonization of patent granting standard. We found clear evidence for policy impact on the spread of protections for the two largest non-OECD economies. The Patent Law reform in China in 1993 had an immediate and significant impact on patent filing propensity to China (25 percentage points increase) well before it becoming a WTO member in late 2001. Furthermore, the mailbox application system in India had a substantial effect: the filing propensity reached 80 percent of the number of corresponding EP patent applications around year 2000, well before the year of TRIPS implementation for drug patents.
    Keywords: pharmaceutical patent, chemical substance patent, TRIPS Agreement, India, China, propensity of patent filing, grant rate
    JEL: O34 O38 K29
    Date: 2016–07

This nep-ind issue is ©2016 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.