nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒05‒31
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. U.S. Market Concentration and Import Competition By Mary Amiti; Sebastian Heise
  2. Technology sharing incentives for monopolistic firms By Template-Type: ReDIF-Paper 1.0; Takahiro Ishii
  3. Market selection in global value chains By Mundt, Philipp; Cantner, Uwe; Inoue, Hiroyasu; Savin, Ivan; Vannuccini, Simone
  4. Shelving or developing? The acquisition of potential competitors under financial constraints. By Fumagalli, Chiara; Motta, Massimo; Tarantino, Emanuele
  5. Competition and Innovation: the effects of scientist mobility and stronger patent rights By Ganguly, Madhuparna

  1. By: Mary Amiti; Sebastian Heise
    Abstract: A rapidly growing literature has shown that market concentration among domestic firms has increased in the United States over the last three decades. Using confidential census data for the manufacturing sector, we show that typical measures of concentration, once adjusted for sales by foreign exporters, actually stayed constant between 1992 and 2012. We reconcile these findings by linking part of the increase in domestic concentration to import competition. Although concentration among U.S.-based firms rose, the growth of foreign firms, mostly at the bottom of the sales distribution, counteracted this increase. We find that higher import competition caused a decline in the market shares of the top twenty U.S. firms.
    Keywords: market concentration; markups; import competition; international trade
    JEL: F14 F60 L11
    Date: 2021–05–01
  2. By: Template-Type: ReDIF-Paper 1.0; Takahiro Ishii (Graduate School of Economics, Osaka University)
    Abstract: The present study examines the effects of free technology sharing by a monopolistic final-good firm with other final-good firms. To this end, we consider two cases-first, where there exists one final-good firm in the final-good market and second, where there exist two final-good firms in the final-good market. Considering the free entry into the differentiated intermediate-goods market , the results of this study show that, when another firm enters the final-good market and transforms it into a two-firm oligopoly, cost efficiency improves because of an increase in the number of intermediate-goods firms. Furthermore, there is a possibility that the incumbent firm fs profits increases not only for a two-firm oligopoly, but also for an oligopoly with three or more firms. Thus, sharing technology for free could improve the profits of incumbent firms.
    Keywords: Monopolistic competition; Endogenous variety of intermediate goods; T echnology sharing; Intermediate goods; Technology transfer
    JEL: D43 L13 L16
    Date: 2021–05
  3. By: Mundt, Philipp; Cantner, Uwe; Inoue, Hiroyasu; Savin, Ivan; Vannuccini, Simone
    Abstract: The idea that market selection promotes survival and expansion of the 'fittest' producersis a key principle underlying theories of competition. Yet, despite its intuitive appeal, thehypothesis that companies with superior productivity also exhibit higher growth lacks em-pirical support. One reason for this is that companies are not 'islands' that produce goodsand services in isolation but depend on their suppliers in value chains, implying that exces-sive growth can also originate in the superior productive performance of these value-chainpartners. Neglecting these dependencies in empirical tests of the selection hypothesis leadsto measurement errors and may impair the identification of competition for the market.In this paper, we use data from the World Input-Output Database to capture these globalvalue-chain relationships in an empirical test for market selection, studying competitionbetween country-sectors for a global market share in different economic activities. Com-pared to the conventional view that focuses on individual productivities, our value-chainperspective on the productivity-growth nexus provides stronger empirical support for mar-ket selection. This suggests that the scope of selection reaches beyond the level of individualproducers and requires a systemic analysis of production networks. Our findings contributeto a better understanding of the determinants of selection in competitive environments andalso represent a novel application of global value-chain data.
    Keywords: competition,country-sector dynamics,input-output analysis,replicator dynamics,productivity decomposition
    JEL: C67 D22 L14 L16 L20
    Date: 2021
  4. By: Fumagalli, Chiara; Motta, Massimo; Tarantino, Emanuele
    Abstract: We analyse the optimal policy of an antitrust authority towards the acquisitions of potential competitors in a model with financial constraints and asymmetric information. With respect to traditional mergers, these acquisitions trigger a new trade-off. On the one hand, the acquirer may decide to shelve the project of the potential entrant. On the other hand, the acquisition may allow for the development of a project that would otherwise never reach the market. We first show that a merger policy does not need to be lenient towards acquisitions of potential competitors to take advantage of their pro-competitive effects on project development. This purpose is achieved by a strict merger policy that pushes the incumbent towards the acquisition of potential competitors lacking the financial resources to develop their project independently. An equivalent rule would consist in blocking takeovers whose acquisition price is above a certain threshold. However, we also show that, if the anticipation of a takeover relaxes the target firm's financial constraints, a more lenient merger policy, which allows for the acquisition of firms that have already committed to enter the market, may be optimal. We identify the cumulative conditions necessary for this to be the case. They include the presence of pronounced financial imperfections. Hence, the more developed financial markets, the more likely that a stringent merger policy will be optimal.
    Keywords: Conglomerate mergers; Digital Markets; Merger Policy; Potential competition
    JEL: K21 L13 L41
    Date: 2020–07
  5. By: Ganguly, Madhuparna
    Abstract: We analyze the relationship between innovation attributes and competition intensity in a framework of endogenous knowledge spillover due to scientist mobility, and identify the effects of stronger patents on innovation at different levels of product market competition. We �nd non-monotone relations of patenting propensity, innovation incentives and investment in R&D, and monotone relation of scientist mobility, with potential product market competition intensity. The study further shows that stronger patent laws reduce (increase) innovation profitability (R&D expenditure) when the market for the new product is moderately competitive, and have no effect otherwise. The results suggest important implications for patent policy reforms.
    Keywords: Competition intensity; Innovation; Patent strength; Scientist mobility
    JEL: D43 J60 L11 L13 O34
    Date: 2021–05–19

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