nep-ind New Economics Papers
on Industrial Organization
Issue of 2019‒10‒28
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A low willingness to pay in a duopoly a la Hotelling: The role of the public firm By Stefano Quarta
  2. Measuring Substitution Patterns in Differentiated Products Industries By Amit Gandhi; Jean-François Houde
  3. Technological spillovers from multinational firms By Barge-Gil, Andrés; López, Alberto; Núñez-Sánchez, Ramón
  4. Endogenizing managerial delegation: A new result under Nash bargaining and network effects By Marcella Scrimitore
  5. Per unit and ad valorem royalties in a patent licensing game By Montinaro, Marta; Scrimitore, Marcella
  6. What goes around, comes around: Reciprocal effects and double-sided moral hazard in the choice of brand licensing By E. Bacchiega; M. Colucci; M. Magnani
  7. Health and Pollution in a Vertically Differentiated Duopoly By Stefano Quarta; Skerdilajda Zanaj
  8. Geocoding of worldwide patent data By Gaétan de Rassenfosse; Jan Kozak; Florian Seliger
  9. Technology evolution in the global automotive industry: a patent-based analysis By Alessandra Perri; Daniela Silvestri; Francesco Zirpoli

  1. By: Stefano Quarta
    Abstract: The purpose of this paper is to analyze the role of the public firm in a spatial duopoly model a la Hotelling in the case of a low willingness to pay. We find that the presence of a public firm has the well known regulatory function in a market with a relative high willingness to pay; it is irrelevant in a market with a medium level of the willingness to pay; the relevance is for a low willingness to pay, where it ensures the full market coverage (as a result of the standard welfare maximization); finally, if the willingness to pay is very low, the public firm ensures a higher, but not full, market coverage with respect to the pure private case. Finally, we find that, for a low willingness to pay, the presence of the public firm is not sufficient to guarantee the optimal market configuration, so that the efficient level of welfare.
    Keywords: Mixed duopoly, full market coverage, low willingness to pay, efficient welfare.
    JEL: L13 C72 D71
    Date: 2019–11–12
  2. By: Amit Gandhi; Jean-François Houde
    Abstract: We study the estimation of substitution patterns within the discrete choice framework developed by Berry (1994) and Berry, Levinsohn, and Pakes (1995). Our objective, is to illustrate the consequences of using weak instruments in this non-linear GMM context, and propose a new class of instruments that can be used to estimate a large family of models with aggregate data. We argue that relevant instruments should reflect the (exogenous) degree of differentiation of each product in a market (Differentiation IVs), and provide a series of examples to illustrate the performance of simple instrument functions.
    JEL: C35 C36 L13
    Date: 2019–10
  3. By: Barge-Gil, Andrés; López, Alberto; Núñez-Sánchez, Ramón
    Abstract: This paper is aims to identify genuine technological spillovers from multinational firms (MNEs). To this end, we use data on R&D from MNEs to measure spillovers, while most of the existing literature uses output to measure the foreign presence in an industry (what we call output-based spillovers). In line with the existing literature, we distinguish between horizontal spillovers (i.e., intra-industry linkages) and vertical spillovers (i.e., backward –or downstream– and forward –or upstream– inter-industry linkages). Our results show that the three types of technological spillovers from MNEs are positive, with the horizontal spillovers the larger ones, followed by backward spillovers. The effect of forward spillovers is much smaller in magnitude. Moreover, we find that not controlling for industry size (i.e., technological spillovers from all firms in an industry) leads to underestimating both horizontal and backward spillovers from MNEs, and to overestimating forward spillovers from MNEs. Finally, we find that the distinction between technological and output-based spillovers is of great relevance. The size of backward technological spillovers is approximately 44% of the size of output-based backward spillovers, while for horizontal spillovers both types of spillovers are quite similar. Importantly, output-based forward spillovers are negative while technological forward spillovers are positive.
    Keywords: technological spillovers; multinational firms; productivity; R&D
    JEL: F23 L53 O12
    Date: 2019–10–22
  4. By: Marcella Scrimitore
    Abstract: We reconsider the endogenous choice of delegation to a manager by two down-stream firms in both a Cournot and a Bertrand vertical market with network effects. An upstream monopolist charges a two-part tariff for a crucial input. By applying the Nash solution in a centralized bargaining, we show that hiring a manager is never an equilibrium under Cournot, regardless of network effects, while it can be the equilibrium choice for firms competing à la Bertrand, depending on the interplay between the network externalities and the degree of product substitutability.
    Keywords: Nash bargaining, two-part tariff, strategic delegation, network externalities.
    JEL: D43 L14 L21
    Date: 2019–11–15
  5. By: Montinaro, Marta; Scrimitore, Marcella
    Abstract: In a context of product innovation, we study two-part tariff licensing between a patentee and a potential rival which compete in a differentiated product market characterized by network externalities. The latter are shown to crucially affect the relative profitability of Cournot vs. Bertrand when a per unit royalty is applied. By contrast, we find that Cournot yields higher profits than Bertrand under ad valorem royalties, regardless of the strength of network effects.
    Keywords: licensing, product innovation, bertrand vs. cournot, network effects
    JEL: D43 L13 L20
    Date: 2019–03–06
  6. By: E. Bacchiega; M. Colucci; M. Magnani
    Abstract: Extending a brand beyond its original product category is a major strategy for long-term profitability. A brand owner can internalize the development of the extension product, or license the brand to an external partner in order to exploit the licensee’s better capabilities and higher efficiency on the targeted market. Brand extension is characterized by the presence of the socalled reciprocal effect, whereby the effort exerted to develop and market the extension has a feedback effect – either positive or negative – on the value of the parent brand. Under licensing, this effect is an externality from the standpoint of the brand owner. The licensing relationship is characterized by double-sided moral hazard, requiring an incentivizing contract; the reciprocal effect adds a further element that should be governed by the contract. Indeed, a positive effect can boost the attractiveness of licensing relative to internal development, whereas a negative one can have the opposite effect. Drawing from extant literature, we build a game-theoretical model and show how reciprocal effect, (dis)similarity between the extension product and the parent brand, and (in)efficiency of the brand owner relative to the licensee in developing the extension shape the optimal licensing contract and affect the choice between internal development and licensing.
    JEL: L12 L24
    Date: 2019–10
  7. By: Stefano Quarta; Skerdilajda Zanaj
    Abstract: In this paper, we analyze a vertically differentiated mixed duopoly in medical care services. Pollution is the source of illness. The government has a dual role. It decides how much to invest to reduce the pollution level and it may participate in the health market running a public hospital. We find that the presence of the public provider increases the average quality of the service in the market and it reduces the rate of mortality. Furthermore, when the public hospital offers services with the highest quality, then this has positive spillovers on the quality offered by the private provider. Despite these positive welfare improving features, the mixed duopoly in medical care goes along with the highest level of pollution. In the presence of an increasing concern about the relationship between pollution and health, understanding the role of public intervention appears crucial.
    Keywords: Pollution, health, public provider, mixed duopoly.
    JEL: L13 H42 H44 I11
    Date: 2019–11–14
  8. By: Gaétan de Rassenfosse (Chair of Innovation and IP Policy, EPFL, Lausanne, Switzerland); Jan Kozak; Florian Seliger (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: The dataset provides geographic coordinates for inventor and applicant locations in 18.8 million patent documents spanning over more than 30 years. The geocoded data are further allocated to the corresponding countries, regions and cities. When the address information was missing in the original patent document, we imputed it by using information from subsequent filings in the patent family. The resulting database can be used to study patenting activity at a fine-grained geographic level without creating bias towards the traditional, established patent offices.
    Date: 2019–07
  9. By: Alessandra Perri (Dept. of Management, Università Ca' Foscari Venice); Daniela Silvestri (Dept. of Management, Università Ca' Foscari Venice); Francesco Zirpoli (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: This study explores the evolution of the knowledge base of the automotive industry. Over the last decades, the knowledge base of this industry has experienced major changes. New and originally unrelated fields have increasingly become relevant in the industry. Using data on utility patent families granted in the period 1990-2014, we map the knowledge base of the automotive industry by reconstructing and analyzing the innovative portfolio of the top firms operating in this industry. The analysis documents exploration in new technical fields as well as persistence in industry-specific technical areas, pointing to the relevance of core competences that might be difficult to accumulate for industry outsiders.
    Keywords: knowledge base evolution, automotive industry, patent analysis
    JEL: L62 O34
    Date: 2019–10

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