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on Microeconomics |
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Issue of 2008‒10‒13
eleven papers chosen by Joao Carlos Correia Leitao Technical University of Lisbon |
| By: | Paul de Bijl; Martin Peitz |
| Abstract: | The introduction of packet-switched telephony in the form of VoIP raises concerns about current regulatory practice. Access regulation has been designed for traditional telephony on PSTN networks. In this paper, we analyze the effect of access regulation and retail price regulation of PSTN networks on the adoption of a new technology in the form of VoIP. In particular, we show that with endogenous consumer choice between PSTN and VoIP telephony, higher prices for terminating access to the PSTN network make VoIP less likely to succeed and lead to lower profits of operators that offer VoIP telephony exclusively |
| Keywords: | telecommunications; voice over broadband (VoB); voice over Internet protocol (VoIP); entry; access; regulation; imperfect competition |
| JEL: | L96 L51 L13 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:109&r=mic |
| By: | Olivier Bonroy (GAEL, INRA—Pierre Mendes France University); Christos Constantatos (Department of Economics, University of Macedonia) |
| Abstract: | In a vertically differentiated market with cost asymmetries, the risk dominance criterion selects the equilibrium where the high quality is produced by the efficient firm. We show that a sufficiently high MinimumQuality Standard reverses equilibrium selection. Hence, MQS may be used in order to increase a domestic firm’s profit at the expense of a more efficient foreign rival. This produces higher domestic and lower world welfare. Since the protectionist impact of MQS comes through equilibrium targeting rather than directly affecting equilibrium outcomes, it cannot be easily detected. |
| Keywords: | Vertical product differentiation, Minimum quality standards, Equilibrium selection, Protectionism. |
| JEL: | L13 L5 F13 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2008_13&r=mic |
| By: | Zoltan J. Acs; Mark Sanders |
| Abstract: | We develop a model in which stronger protection of intellectual property rights has an inverted U-shaped effect on innovation. Intellectual property rights protection allows the incumbent firms to capture part of the rents of commercial exploration that would otherwise accrue to the entrepreneurs. Stronger patent protection will increase the incentive to do R&D and generate new knowledge. This has a positive impact on entrepreneurship and innovation. However, after some point, further strengthening patent protection will reduce the returns to entrepreneurship sufficiently to reduce overall economic growth. |
| Keywords: | Intellectual Property Rights, Endogenous Growth, Entrepreneurship, Incentives, Knowledge Spillovers, Rents |
| JEL: | J24 L26 M13 O3 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0823&r=mic |
| By: | Alireza Naghavi; Dermot Leahy |
| Abstract: | We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinational's decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or a North-South joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection by encouraging a JV, whereas policies to limit foreign ownership in a JV gain importance in technology intensive industries as complementary policies to strong IPRs. |
| Keywords: | North-South Joint Ventures, Intellectual Property Rights, FDI Policy, Technology Transfer, R&D Spillovers |
| JEL: | O34 F23 O32 F13 L24 O24 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:mod:recent:017&r=mic |
| By: | Toshihiro Okubo (Research Institute for Economics and Business Administration, Kobe University); Pierre M. Picard (University of Manchester (United Kingdom) and CORE, Université catholique de Louvain (Belgium)); Jacques-François Thisse (CORE, Université catholique de Louvain (Belgium), PSE (France) and CEPR) |
| Abstract: | The aim of this paper is to study the spatial selection of firms once it is recognized that heterogeneous firms typically choose different locations in respond to market integration of regions having different sizes. Specifically, we show that decreasing trade costs leads to the gradual agglomeration of efficient firms in the large region because these firms are able to survive in a more competitive environment. In contrast, high-cost firms seek protection against competition from the efficient firms by establishing themselves in the small region. However, when the spatial separation of markets ceases to be a sufficient protection against competition from the low-cost firms, high-cost firms also choose to set up in the larger market where they have access to a bigger pool of consumers. This leads to the following prediction: the relationship between economic integration and interregional productivity differences first increases and then decreases with market integration. |
| Keywords: | firm heterogeneity; spatial selection; trade liberalization |
| JEL: | F12 H22 H87 R12 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:229&r=mic |
| By: | Flavia Cortelezzi; Giovanni Villani |
| Abstract: | This article describes a methodology for evaluating R&D investment projects using Monte Carlomethods. R&D projects generally involves multiple phases with or without overlapping. R&D investments are made often in a phased manner, with the commencement of subsequent phase being dependent on the successful completion of the preceding phase, it is known as sequential investment. Moreover, each stage creates an opportunity (option) for subsequent investment. Therefore, R&D projects can be considered as ‘Compound Options’ in which investments present uncertainty both in the gross project value and in costs. It is possible to use exchange options to value the R&D investment opportunities. In this paper, we propose to value the European and American Real Compound Exchange options through Monte Carlo simulation. We also provide a set of numerical experiments to provide evidence for the accuracy of the proposed methodology. |
| Keywords: | Pseudo Compound American Exchange option; R&D;Monte Carlo Methods. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ufg:qdsems:04-2008&r=mic |
| By: | Kaas, Leo (University of Konstanz) |
| Abstract: | This paper provides a novel microeconomic foundation for pecuniary human capital externalities in a labor market model of monopsonistic competition. Multiple equilibria arise because of a strategic complementarity in investment decisions. |
| Keywords: | externalities, human capital, multiple equilibria |
| JEL: | D43 J24 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3729&r=mic |
| By: | Andrew Sharpe; Ian Currie |
| Abstract: | The objective of the report is to survey and assess the existing economic theoretical literature and empirical evidence on the linkages between open and competitive markets (competitive intensity) and innovation and productivity growth. The report is divided into three main parts. The first part examines the state of economic theory on the relationship between competitive intensity, innovation and productivity. The second section examines relevant empirical work that has been done on the role of firm dynamics in sustaining a competitive environment. The third section surveys evidence of linkages provided by the international case studies of the effects of open and competitive markets on innovation and productivity. The report concludes that the weight of the evidence indicates that competitive intensity has a strong positive effect on innovation and productivity. Accordingly, Canada should pay closer attention to the competitive implications of public policy than has been the case in the past. The international experience provides strong support for this conclusion. While there can be negative implications for certain groups from such policy changes, the evidence shows that they are often smaller than anticipated. Restrictions on competition should only be allowed when it can be demonstrated that they are needed to achieve overriding societal interests. |
| Keywords: | Competition, Competition policy, competitive intensity, innovation, productivity, firm dynamics, empirical work, case studies |
| JEL: | O20 O33 O38 O47 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:0803&r=mic |
| By: | Bianco, Dominique |
| Abstract: | The aim of this paper is to analyze the relationship between competition and growth in a model of human capital accumulation and research by disentangling the monopolistic mark-up in the intermediate goods sector and the returns to specialization in order to have a better measure of competition. We find that the steady-state output growth rate depends on the parameters describing preferences, human capital accumulation technology and R&D activity. We also show that the relationship between competition and growth is inverse U shaped. This result that seems to be in line this empirical results (Aghion and Gri±th (2005)) is explained by the resource allocation effect. |
| Keywords: | Endogenous growth; Horizontal differentiation; Technological change; Imperfect competition; Human capital |
| JEL: | L16 O41 J24 O31 D43 |
| Date: | 2008–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10913&r=mic |
| By: | De Marco, Giuseppe; Romaniello, Maria |
| Abstract: | In Hart and Kurz (1983), stability and formation of coalition structures has been investigated in a noncooperative framework in which the strategy of each player is the coalition he wishes to join. However, given a strategy profile, the coalition structure formed is not unequivocally determined. In order to solve this problem, they proposed two rules of coalition structure formation: the $\gamma$ and the $\delta$ models. \par In this paper we look at the evolutionary games arising from the $\gamma$ and $\delta$ models in which players determine at every instant their strategies and, in particular, we study how the coalition structure evolve according to the strategic choices. For this purpose we consider mixed strategies and, firstly, we notice that natural generalizations of the $\gamma$ and $\delta$ models to this case lead to multiplicity of beliefs (on the set of coalition structures) coherent with the probability assignments given by the strategy profile. Coherency is regarded as a viability constraint for the differential inclusions describing the evolutionary games. Therefore, we investigate viability properties of the constraints and characterize velocities of pairs belief/strategies which guarantee that coherency of beliefs is always satisfied. Finally, among many coherent belief revisions (evolutions), we investigate those characterized by minimal change and provide existence results. |
| Keywords: | Coalition formation; coherent beliefs; differential inclusions; viability theory; minimal change belief revision |
| JEL: | D71 C71 D83 C72 C73 |
| Date: | 2008–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10923&r=mic |
| By: | Bruno, Randolph Luca (University of Bologna); Bytchkova, Maria (London School of Economics); Estrin, Saul (London School of Economics) |
| Abstract: | We analyse a three-year panel data set of Russian firms spanning from 2000 to 2002 and we investigate the effect of regional institutional and economic factors on entry rates across time, industries and regions. The paper builds on a novel database and exploits inter-regional variation in a large number of institutional variables. We find entry rates in Russia are not especially low by international standards and are correlated with natural entry rates, institutions and firm size. Furthermore, industries that ─ for scale and technological reasons ─ are characterised by higher entry rates will experience lower entry within regions affected by higher business risk. In other words industries that naturally have low entry barriers are most affected by business constraints. |
| Keywords: | entry rate, business environment, Tobit model |
| JEL: | D21 L26 P31 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3724&r=mic |