nep-mic New Economics Papers
on Microeconomics
Issue of 2007‒05‒04
five papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Strategic Advertisement with Externalities: A New Dynamic Approach By R. Joosten
  2. Organ Transplants, Hiring Committees, and Early Rounds of the Kappell Piano Competition By Donald E. Campbell; Jerry S. Kelly
  3. Science linkages and innovation performance: An analysis on CIS-3 firms in Belgium By Cassiman, Bruno; Veugelers, Reinhilde; Zuniga, Pluvia
  4. Appropriating value from external technology: Absorptive capacity dimensions and innovation strategy By Ricart, Joan E.; Adegbesan, Tunji
  5. Cooperative Production and Efficiency By Carmen Beviá; Luis C. Corchón

  1. By: R. Joosten
    Abstract: We model and analyze strategic interaction over time in a duopolis-tic market. Each period the firms independently and simultaneously choose whether to advertise or not. Advertising increases the own immediate sales, but may also cause an externality, e.g., increase or decrease the immediate sales of the other firm ceteris paribus. There exists also an effect of past advertisement efforts on current sales. The 'market potential' of each firm is determined by its own but also by its opponent's past efforts. A higher effort of either firm leads to an increase of the market potential, however the impact of the own past efforts is always stronger than the impact of the opponent's past efforts. How much of the market potential materializes as immediate sales, then depends on the current advertisement decisions. We determine feasible rewards and (subgame perfect) equilibria for the limiting average reward criterion using methods inspired by the repeated-games literature. Uniqueness of equilibrium is by no means guaranteed, but Pareto efficiency may serve very well as a refinement criterion for wide ranges of the advertisement costs.
    Keywords: advertising, externalities, average rewards, equilibria Length 21 pages
    JEL: C72 C73 L13 M31 M37
    Date: 2007–04
  2. By: Donald E. Campbell (Department of Economics, College of William and Mary); Jerry S. Kelly (Department of Economics, Syracuse University)
    Abstract: Function g selects exactly k alternatives as a function of the preferences of n individuals. It cannot be manipulated by any individual, assuming that an individual prefers set A to B whenever A can be obtained from B by eliminating some alternatives and replacing each with a preferred alternative. Then there is someone whose k top-ranked alternatives are always selected if: (i). k = 2 and n $ 2; or (ii). k = 3 and n = 2; or (iii). k > 3, n = 2, and g has a unanimity property; or (iv). k > 2, n $ 2, g has a unanimity property, and no coalition can manipulate.
    Keywords: coalitions, dictatorship, manipulation, multi-valued social choice function
    JEL: D70 D71
    Date: 2007–04–30
  3. By: Cassiman, Bruno (IESE Business School); Veugelers, Reinhilde (Katholike Universiteit Leuven); Zuniga, Pluvia (Katholike Universiteit Leuven)
    Abstract: This paper examines the diversity of linkages of firms to science and their effect on innovation performance for a sample of Belgian firms (CIS-3). While at the sectoral level links to science are highly related to the R&D intensity of the sector, we show that there is considerable heterogeneity in the type of links to science at the firm level. Overall, firms with a science linkage -which can be of various sorts- have superior innovation performance, in particular with respect to innovations new to the market. At the invention level, our findings confirm that patents from firms engaged in science are more frequently cited and have a broader technological and geographical impact, but we show that it is crucial to distinguish between direct science links at the invention level and indirect science links at the firm level to encounter these distinct positive effects of science links. Therefore, Science & Technology indicators should control for both invention-level and firm-level science links to really account for the effect of these industry-science links.
    Keywords: Innovation; patents; forward citation; science; industrial innovation;
    JEL: L13 O32 O34
    Date: 2007–01–21
  4. By: Ricart, Joan E. (IESE Business School); Adegbesan, Tunji (IESE Business School)
    Abstract: Innovation from external sources has continued to grow in importance in recent years, in defiance of conventional wisdom advocating internal sourcing of core technologies. One important reason for the previous emphasis on internal sourcing of core technologies relates to concerns of horizontal and vertical appropriability. Thus, the question arises of whether and how firms can reconcile horizontal and vertical appropriability with the rise of the external sourcing of new technologies. Must firms sacrifice value appropriation on the altar of value creation? To answer these questions, we delve beneath individual technological innovations to examine the technical and market capabilities underlying them. Specifically, we show how the amount of value a firm stands to appropriate relative to competitors and relative to technology suppliers depends on the fit between its innovation strategy and its previous investments in distinct dimensions of absorptive capacity. At the same time, we also show how first-order capabilities and dynamic capabilities interact to determine firm performance. Thus, we shed light on how and when the move to 'open' innovation will affect the amount of value innovating firms stand to appropriate.
    Keywords: Innovation strategy; external sourcing; technology innovation; value appropriation;
    Date: 2007–01–17
  5. By: Carmen Beviá; Luis C. Corchón
    Abstract: We characterize the sharing rule for which a contribution mechanism achieves efficiency in a cooperative production setting when agents are heterogeneous. The sharing rule bears no resemblance to those considered by the previous literature. We also show for a large class of sharing rules that if Nash equilibrium yields efficient allocations, the production function displays constant returns to scale, a case in which cooperation in production is useless.
    Keywords: Cooperative Production, sharing rules, efficiency
    JEL: D29 D6 D78
    Date: 2007–04–23

This nep-mic issue is ©2007 by Joao Carlos Correia Leitao. 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.