nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒08‒27
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Patent licensing in a Cournot oligopoly: general results By Sen, Debapriya; Tauman, Yair
  2. "Product Proliferation and First Mover Advantage in a Multiproduct Duopoly" By Yi-Ling Cheng; Takatoshi Tabuchi
  3. Stackelberg Mixed Triopoly Games with State-Owned, Labour-Managed and Capitalist Firms By Ohnishi, Kazuhiro
  4. Dynamic Price Discrimination in Airlines By Escobari, Diego; Rupp, Nicholas; Meskey, Joseph
  5. Do hospitals respond to decreasing prices by supplying more services? By Salm, M.;; Wübker, A.;
  6. Missing money, missing policy and Resource Adequacy in Australia’s National Electricity Market By Simshauser, P

  1. By: Sen, Debapriya; Tauman, Yair
    Abstract: This paper presents a comprehensive analysis of patent licensing in a Cournot oligopoly with general demand and looks at both outside and incumbent innovators. The licensing policies considered are upfront fees, unit royalties and combinations of fees and royalties (FR policies). It is shown that (i) royalties unambiguously ensure full diffusion of the innovation while diffusion is limited under upfront fees, (ii) the Cournot price is higher under royalties compared to upfront fees and the price could even exceed the post-innovation monopoly price, (iii) for generic values of magnitudes of the innovation, when the industry size is relatively large, royalties are superior to upfront fees for the innovator and (iv) for any m, there is always a non empty subset of m-drastic innovations such that for relatively large industry sizes, upfront fee policy results in higher consumer surplus as well as welfare compared to both royalty and FR policies.
    Keywords: patent licensing; m-drastic innovation; royalties; upfront fees; FR policy
    JEL: D4 D43 D45 L13 L24
    Date: 2018–08
  2. By: Yi-Ling Cheng (Institute of Economics, National Sun Yat-sen University); Takatoshi Tabuchi (Faculty of Economics, The University of Tokyo)
    Abstract: This study aims to understand product proliferation and Â…first mover advantage in the case of multiproduct Â…firms that engage in Stackelberg competition on the number of varieties and prices. We show that when fiÂ…rms sequentially choose the number of varieties and then simultaneously decide prices, the leader produces more varieties and enjoys fiÂ…rst mover advantage. By contrast, when the leader sets both the number of varieties and prices before the follower does, the follower tends to produce more varieties and enjoy second mover advantage in the case of a large demand and a small cost of expanding product lines. This result sharply contrasts with those of studies on the sequential entry of single-product firms. We also show that the market provides too few varieties relative to the social optimum.
    Date: 2018–08
  3. By: Ohnishi, Kazuhiro
    Abstract: This paper investigates three sequential-move games with a capitalist firm, a labour-managed firm and a state-owned firm. The first game is as follows. In stage one, the capitalist firm chooses its output level. In stage two, the other firms choose their output levels simultaneously and independently. In stage three, the market opens and all firms sell their outputs. The structures of the second and third games are nearly identical and differ only in order in which the firms choose output levels in the first two stages. The paper discusses the equilibrium outcomes of the three sequential-move games.
    Keywords: Stackelberg games; Capitalist firm; Labour-managed firm; State-owned firm
    JEL: C72 D21 L30
    Date: 2018–06–03
  4. By: Escobari, Diego; Rupp, Nicholas; Meskey, Joseph
    Abstract: Prices for the same flight change substantially depending on the time of purchase. Labeling this time-variation as discriminatory is misleading because the cost of an unsold airline seat changes with inventory, days before departure and aggregate demand expectations. This paper uses a unique dataset with round-the-clock posted fares to identify a dynamic price discrimination component. Consistent with agents forming expectations of future prices, we find higher prices during office hours (when business travelers are likely to buy tickets) and lower prices in the evening (when leisure travelers are more likely to purchase). As the proportion of business travelers increases closer to departure, both price dispersion and price discrimination become larger. We also find that price discrimination is more pronounced for low cost carriers than for legacy carriers.
    Keywords: Pricing, Price discrimination, Price dispersion, Airlines
    JEL: C23 D40 L93
    Date: 2018–05–29
  5. By: Salm, M.;; Wübker, A.;
    Abstract: Regulated prices are common in markets for medical care. We estimate the effect of changes in regulated reimbursement prices on volume of hospital care based on a reform of hospital financing in Germany. Uniquely, this reform changed the overall level of reimbursement – with increasing prices for some hospitals and decreasing prices for others – without affecting the relative prices for different groups of patients or types of treatment. Based on administrative data, we find that hospitals react to decreasing prices by supplying more services. We interpret our findings as evidence for a negative income effect of lower prices on higher volume of care.
    Keywords: government expenditures and health; hospital care; procurement;
    JEL: I11 L10 L21
    Date: 2018–08
  6. By: Simshauser, P
    Abstract: From 2012-2017 more than 5000MW of coal plant exited Australia’s National Electricity Market (NEM). The average plant exit notice period was 5.2 months. Exit at scale peaked just as imbalances in the market for natural gas emerged. Compounding matters were Variable Renewable Energy (VRE) plant entry lags due to policy discontinuity in prior periods. By 2016/17, the culmination of coal plant exit, gas market imbalances and VRE entry lags produced more than 20 Lack of Reserve events across the NEM, three blackouts including a black system event in the South Australian region. Spot and forward electricity prices rose to record levels, viz. $90-$130/MWh compared to an historic average of $42.50. In this article, the lead-up to these abnormal trading conditions are traced back to policy decisions a decade earlier in the markets for electricity, natural gas and renewable energy. Lessons for other energy markets undergoing transformation include i). transparency over lumpy plant exit decisions, ii). climate change policy stability, and iii). clear policy limits to gas export capacity vis-à-vis domestic supply.
    Keywords: Resource Adequacy, Climate Change Policy, Electricity Prices
    JEL: D61 L94 L11 Q40
    Date: 2018–08–15

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