nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒03‒26
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Patent Protection and Threat of Litigation in Oligopoly By Carlo Capuano; Iacopo Grassi
  2. Firm-level Productivity Dispersion and Convergence By G. Cette; S. Corde; R. Lecat
  3. Competition in the Venture Capital Market and the Success of Startup Companies: Theory and Evidence By Hong, Suting; Serfes, Konstantinos; Thiele, Veikko
  4. Preventives Versus Treatments Redux: Tighter Bounds on Distortions in Innovation Incentives with an Application to the Global Demand for HIV Pharmaceuticals By Kremer, Michael; Snyder, Christopher
  5. How effective are remedies in merges cases? A European and national assessment By Polemis, Michael

  1. By: Carlo Capuano; Iacopo Grassi
    Abstract: In recent years, the increasing awarding of patents has captured the attention of scholars operating in di?erent fields. Economic literature has studied the causes of this proliferation; we propose an entry game focusing on one of the consequences, showing how an incumbent may create a patent portfolio in order to control market entry and to collude. The incumbent fixes the level of patent protection and the threat of denunciation reduces the entrant’s expected profits; moreover, if the entrant deviates from collusion, the incumbent can strengthen punishment suing the competitor for patent infringement, reducing her incentive to deviate. Our analysis suggests that antitrust authorities should pay attention to the level of patent protection implemented by the incumbent and note whether the holder of a patent reacts to entry by either suing or not suing the competitor. In the model, we use completely general functional forms in analyzing the is- sues, and this allows us to obtain general results not depending on the assumptions about the kind of oligopolistic competition.
    Keywords: Patents, patent portfolio, litigation, collusion, foreclosing, entry game.
    JEL: D43 K21 L13
    Date: 2018–03–03
    URL: http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2018_03&r=ind
  2. By: G. Cette; S. Corde; R. Lecat
    Abstract: The productivity slowdown has been analysed as an effect of weaker technological progress, of the digital economy or of a less efficient reallocation process. Using data on firms operating in France, we highlight that, at the technological frontier, productivity has accelerated, especially over the recent period, which contradicts the hypothesis of a decline in innovation. The most productive firms in a given year do not, however, improve their relative advantage. The convergence of firms’ productivity does not seem to have slowed down in the 2000s, which does not confirm the hypothesis of a decrease in the dissemination of innovation. On the other hand, the dispersion of productivity between firms has increased, which suggests growing difficulties in reallocating production factors, labour and capital, between firms.
    Keywords: total factor productivity, dissemination of innovation.
    JEL: E22 L11 O47
    Date: 2018
    URL: http://d.repec.org/n?u=RePEc:bfr:banfra:662&r=ind
  3. By: Hong, Suting (Shanghai Tech University); Serfes, Konstantinos (Drexel University); Thiele, Veikko (Queen's University)
    Abstract: We examine the effect of a competitive supply of venture capital (VC) on the success rates of VC-backed startup companies (e.g. IPOs). We first develop a matching model of the VC market with heterogeneous entrepreneurs and VC firms, and double-sided moral hazard. Our model identifies a non-monotone relationship between VC competition and successful exits: a more competitive VC market increases the likelihood of a successful exit for startups with low quality projects (backed by less experienced VC firms in the matching equilibrium), but it decreases the likelihood for startups with high quality projects (backed by more experienced VC firms). Despite this non-monotone effect on success rates, we find that VC competition leads to higher valuations of all VC-backed startups. We then test these predictions using VC data from Thomson One, and find robust empirical support. The differential effect of VC competition has a profound impact on entrepreneurship policies that promote VC investments.
    Keywords: entrepreneurship; venture capital; matching; double-sided moral hazard; exit; IPO
    JEL: C78 D86 G24 L26 M13
    Date: 2018–02–01
    URL: http://d.repec.org/n?u=RePEc:ris:drxlwp:2018_002&r=ind
  4. By: Kremer, Michael; Snyder, Christopher
    Abstract: Kremer and Snyder (2015) show that demand curves for a preventive and treatment may have different shapes though they target the same disease, biasing the pharmaceutical manufacturer toward developing the lucrative rather than the socially desirable product. This paper tightens the theoretical bounds on the potential deadweight loss from such biases. Using a calibration of the global demand for HIV pharmaceuticals, we demonstrate the dramatically sharper analysis achievable with the new bounds, allowing us to pinpoint potential deadweight loss at 62% of the global gain from curing HIV.We use the calibration to perform policy counterfactuals, assessing welfare effects of government policies such as a subsidy, reference pricing, and price-discrimination ban. The fit of our calibration is good: we find that a hypothetical drug monopolist would price an HIV drug so high that only 4% of the infected population worldwide would purchase, matching actual drug prices and quantities in the early 2000s before subsidies in low-income countries ramped up.
    Keywords: deadweight loss; pharmaceuticals; product development
    JEL: F23 I14 L65 O31
    Date: 2018–02
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:12751&r=ind
  5. By: Polemis, Michael
    Abstract: Remedies form an essential tool of any enforcement action and need to be devised with great caution from National Competition Authorities (NCAs). If the remedy is ineffective, the enforcement action does not reach the desired objective and resources will have been wasted. If the remedy is disproportionate, the decision is put at risk in a possible subsequent appeal. Remedies either behavioural or structural imposed by competition authorities seek to eliminate unilateral or/and coordinated effects as a result of the merger and restore competition on the relevant market(s) to the status quo ante. Moreover, remedy packages have typically included extensive structural divestments to remove competition concerns. The scope of this paper is to examine various issues relating to the imposition of remedies in merger cases focusing on the gas and electricity sectors (commodity and capacity release programmes, customer release schemes, network related remedies). This paper relies on the energy sector with a view to developing general principles for imposing effective remedies in other sectors as well. Given the nature of competition in energy markets, particularly effective remedies are those that involve gas release programmes, the sale of price-setting generation plants, network assets, and controlling stakes in merging parties’ competitors.
    Keywords: Merger remedies; competition; energy sector; Gas release programs; European Union
    JEL: G34 K21 L10 L40
    Date: 2018–01–02
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:85180&r=ind

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