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on Microeconomics |
| By: | Gastón Llanes (Harvard Business School, Entrepreneurial Management Unit); Ramiro de Elejalde (Universidad Carlos III de Madrid) |
| Abstract: | We present a model of industry equilibrium to study the coexistence of Open Source (OS) and Proprietary (P) firms. Two novel aspects of the model are: (1) participation in OS arises as the optimal decision of profit-maximizing firms, and (2) OS and P firms may (or may not) coexist in equilibrium. Firms decide their type and investment in R&D, and sell packages composed of a primary good (like software) and a complementary private good. The only difference between both kinds of firms is that OS share their technological advances on the primary good, while P keep their innovations private. The main contribution of the paper is to determine conditions under which OS and P coexist in equilibrium. Interestingly, this equilibrium is characterized by an asymmetric market structure, with a few large P firms and many small OS firms. |
| Keywords: | Industry Equilibrium, Open Source, Innovation, Complementarity, Technology Sharing, Cooperation in R&D |
| JEL: | O31 L17 D43 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:09-0xx&r=mic |
| By: | David Hugh-Jones (Max Planck Institute for Economics, Jena); David Reinstein (Department of Economics, Essex University) |
| Abstract: | Costly signaling of commitment to a group has been proposed as an explanation for participation in religion and ritual. But if the signal's cost is too small, freeriders will send the signal and behave selflshly later. Effective signaling may then be prohibitively costly. If the average level of signaling in a group is observable, but individual effort is not, then freeriders can behave selflshly without being detected, and group members will learn about the average level of commitment among the group. We develop a formal model, and give examples of institutions that enable anonymous signaling, including ritual, religion, music and dance, voting, charitable donations, and military institutions. We explore the value of anonymity in the laboratory with a repeated two-stage public goods game with exclusion. When first-stage contributions are anonymous, subjects are better at predicting second-stage behavior, and maintain a substantially higher level of cooperation. |
| Keywords: | signaling, anonymity, public goods |
| JEL: | H41 |
| Date: | 2009–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-048&r=mic |
| By: | John Duffy; Huan Xie; Yong-Ju Lee |
| Abstract: | How do norms of trust and reciprocity arise? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The parameters of the game are chosen so as to support trust and reciprocity as a sequential equilibrium when no reputational information is available. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and how long that history must be. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information. |
| JEL: | C72 C91 C92 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:384&r=mic |
| By: | Angel Bujosa Bestard (Centre de Recerca Econòmica (UIB · Sa Nostra)); Antoni Riera Font (Centre de Recerca Econòmica (UIB · Sa Nostra)); Robert L. Hicks (The College of William and Mary) |
| Abstract: | This paper investigates heterogeneity in preferences for forest recreators in Mallorca, Spain. We develop a latent class approach combining discrete and continuous representations of tastes and compare it with the conventional latent class and random parameter logit approaches. We investigate the performance of the discrete-continuous model by comparing welfare estimates and predictive accuracy. The discrete-continuous model outperforms latent class and mixed logit approaches when comparing goodness-of-fit and in- sample site-choice forecasts. We find that the discrete-continuous model for preference heterogeneity reveals variation among individuals' preferences and WTP, and for some policy changes our results reveal striking differences in means and distributions of WTP. |
| Keywords: | Travel Cost Method, latent class model, random parameter model, recreation demand, forests |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pdm:wpaper:2009/2&r=mic |
| By: | Fratini, Saverio M.; Levrero, Enrico Sergio |
| Abstract: | We consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets. |
| Keywords: | Arrow-Debreu equilibrium; Complete markets; Sequential equilibrium; Perfect foresight; Indeterminacy |
| JEL: | D46 D84 D51 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15988&r=mic |
| By: | Jaap W.B. Bos; Ryan C.R. van Lamoen; James W. Kolari |
| Abstract: | In this paper we seek to contribute to the literature on competition and innovation by focusing on individual firms within the U.S. banking industry in the period 1984-2004. We measure innovation by estimating technology gaps and find evidence of an inverted-U relationship between competition and the technology gaps in banking. This finding is robust over several different specifications and is consistent with theoretical and empirical work by Aghion, Bloom, Blundell, Griffith, and Howitt (2005b). The optimal amount of innovation requires a slightly positive mark up. Also, we find that the U.S. banking industry as a whole has consolidated beyond this optimal innovation level and that state-level interstate banking deregulation has lowered innovation. |
| Keywords: | competition, innovation, stochastic frontier analysis, technology gap ratio, banking |
| JEL: | D21 G21 L10 O30 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0916&r=mic |
| By: | Steven Brakman; Charles van Marrewijk; Arjen van Witteloostuijn |
| Abstract: | In the European Union, energy markets are increasingly being liberalized. A case in point is the European natural gas industry. The general expectation is that more competition will lead to lower prices and higher volumes, and hence higher welfare. This paper indicates that this might not happen for at least two reasons. First, energy markets, including the market for natural gas, are characterized by imperfect competition and increasing costs to develop new energy sources. As a result, new entrants in the market are less efficient than incumbent firms. Second, energy markets, again including the market for natural gas, are associated with capacity constraints. Prices are determined in residual markets where the least efficient firms are active. This is likely to lead to price increases, rather than decreases. |
| Keywords: | natural gas, capacity constraints, efficiency, market liberalization |
| JEL: | Q4 L1 L7 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0915&r=mic |
| By: | Simona Bovha-Padilla; Joze P. Damijan; Jozef Konings |
| Abstract: | This paper uses firm level data to show how R&D investment responds to shocks in sales growth in credit constrained firms. A credit constrained firm has to rely on its cash flow and borrowing capacity to survive its short-run liquidity shock when hit by a negative shock. This reduces the possibility for further borrowing in order to invest in non-tangible long term R&D, hence a negative shock should hit R&D investments more in firms that are more credit constrained. We find that in financially constrained firms sales growth is positively associated with R&D investment, suggesting procyclical behavior of R&D investment in credit constrained firms. In contrast, we find that in firms with no financial constraints R&D investment is negatively correlated with sales growth, suggesting countercyclical behavior of R&D, consistent with the Schumpeterian idea of restructuring. Furthermore, we find that the firm level response in R&D investment to sales growth is stronger in firms that are more financially dependent, such as firms that are no part of a multinational, firms not receiving subsidies or firms with less collateral. |
| Keywords: | R&D investment, financial constraints, cyclicality |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:23909&r=mic |
| By: | Hauge, Karen Evelyn (Department of Economics, Oslo University); Brekke, Kjell Arne (Department of Economics, Oslo University); Johansson, Lars-Olof (Department of Psychology, University of Gothenburg); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University); Svedsäter, Henrik (Organisational Behaviour, London Business School) |
| Abstract: | We study the impact of cognitive load in dictator games to test two conflicting views of moral behavior. Are social preferences skindeep in the sense that they are the result of humans’ cognitive reasoning while the natural instinct is selfish, or is rather the natural instinct to share fairly while our cognitive capacities are able to adjust moral principles in a selfserving manner? Some previous studies in more complex settings give conflicting answers, and to disentangle different possible mechanisms we use simple games. We study both charitable giving and the behavior of dictators under high and low cognitive load, where high cognitive load is assumed to reduce the impact of cognitive processes on behavior. In the dictator game we use both a give frame, where the dictator is given an amount and may share some or all of it to a partner, and a take frame, where dictators may take from an amount initially allocated to the partner. The results from four different studies indicate that the effect of cognitive load is small if at all existing.<p> |
| Keywords: | Social Preferences; experiments; dictator game; cognitive load |
| JEL: | C91 |
| Date: | 2009–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0371&r=mic |
| By: | Filip De Beule; Ilke Van Beveren |
| Abstract: | This paper analyzes the drivers of multinational affiliates' R&D intensity, using a unique dataset based on the fourth Community Innovation Survey for Belgium. Specifically, we investigate the role of foreign affiliates' local (host country) embeddedness and of host country spillovers on foreign affiliates' research efforts. Our findings show that foreign affiliates who are able to tap into local knowledge sources demonstrate a higher research intensity, compared to firms lacking such access. Links to clients and public research institutions, in particular, have a powerful impetus on the research effort by foreign subsidiaries. Our findings suggest a complementary relationship between foreign firms' R&D intensity and the internal research efforts of their competitors as a result of demonstration effects, while the use of external R&D by competitors has a negative impact on the research effort of foreign affiliates as a result of technological spillovers. Our findings have important policy implications, especially in terms of the high dependency of the Belgian economy on foreign R&D. One way to attain the R&D intensity put forward by the Lisbon agenda would be to increase public expenditure on research and development, which would also indirectly increase the research intensity of (foreign) firms. |
| Keywords: | R&D intensity, multinational ownership, knowledge sources, spillovers |
| JEL: | F23 L23 O31 O33 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:24209&r=mic |
| By: | Matthias Bürger (Friedrich-Schiller-University Jena, RTG 1411 - The Economics of Innovative Change); Tom Brökel (Utrecht University, Urban and Regional Research Centre Utrecht (URU)); Alex Coad (Max Planck Institute of Economics, Jena; Centre d'Economie de la Sorbonne, Univ. Paris 1) |
| Abstract: | We investigate the lead-lag relationship between growth of patent applications, growth of R&D, and growth of total sectoral employment for 270 German labour market regions over the period 1999-2005. Our unique panel dataset includes information on four two-digit industries, namely Chemistry, Transport equipment, Medical & Optical Equipment as well as Electrics & Electronics. The results obtained from a vector autoregression model show that an increased innovative activity is associated with subsequent growth of employment in the Medical & Optical Equipment industry as well as in the Electrics & Electronics sector. With respect to the latter growth of patent applications is also associated with subsequent growth of R&D employees indicating either a "success-breeds-success" story or benefits due to agglomeration economies at the level of the region. However we do not find those effects for the other industries due to their idiosyncratic innovation and patenting behaviour. |
| Keywords: | Innovation, Agglomeration, Employment |
| JEL: | O18 R11 |
| Date: | 2009–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-046&r=mic |
| By: | Zakaria Babutsidze |
| Abstract: | This paper presents the computational model of consumer behaviour. We consider two sources of product specific consumer skill acquisition, termed here as learning how to consume: learning by consuming and consumer socialization. Consumers utilize these two sources in order to derive higher valuations for products they are consuming. In this framework we discuss the behavior of returns to product promotion relative to the changes in product characteristics, such as quality and user-friendliness, as well as in case of varying intensity of consumer socialization. The main finding is that in case of duopoly the dependence of returns to advertising on product quality is not monotonic as it has been claimed by earlier studies. Additional important finding indicating the importance of the models with interacting agents is that returns to advertising exhibit qualitatively different behavior in case of zero intensity of consumer socialization. |
| Keywords: | Consumer skills, learning by consuming, consumer socialization, product promotion, returns to advertising Length 23 pages |
| JEL: | D11 M37 C63 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2009-05&r=mic |
| By: | Hsiao, Chih-Ru; Chiou, Wen-Lin |
| Abstract: | The H&R Shapley value defined by Hsiao and Raghavan for multi-choice cooperative game is redundant free. If the H&R Shapley value is used as the solution of a game, there won't be any objection to a player's taking redundant actions. Therefore, the spirit of the law on equal job opportunities is automatically fulfilled. Also, if the H&R Shapley value is used as the solution of a game, it makes no difference to the players whether they have the same number of options or not. Moreover, the D&P Shapley value, the P&Z Shapley value and the WAC value are linear combinations of the H&R Shapley value, hence, they have all the same dummy free properties and the independent property as does the H&R Shapley value. Finally the N&P Shapley value is not redundant free. |
| Keywords: | Shapley value; multi-choice cooperative game; redundant free; independent of non-essential players. |
| JEL: | C7 K31 |
| Date: | 2009–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16023&r=mic |
| By: | Eslava, Marcela (Universidad de los Andes); Haltiwanger, John C. (University of Maryland); Kugler, Adriana (University of Houston); Kugler, Maurice (Wilfrid Laurier University) |
| Abstract: | We use plant output and input prices to decompose the profit margin into four parts: productivity, demand shocks, mark-ups and input costs. We find that each of these market fundamentals are important in explaining plant exit. We then use variation across sectors in tariff changes after the Colombian trade reform to assess whether the impact of market fundamentals on plant exit changed with in creased international competition. We find that greater international competition magnifies the impact of productivity, and other market fundamentals, on plant exit. A dynamic simulation that compares the distribution of productivity with and without the trade reform shows that improvements in market selection from trade reform help to weed out the least productive plants and increase average productivity. In addition, we find that trade liberalization increases productivity of incumbent plants and improves the allocation of activity within industries. |
| Keywords: | trade liberalization, plant exit, market selection |
| JEL: | F43 L25 O47 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4256&r=mic |
| By: | Dalen, Dag Morten (BI Norwegian School of Management); Moen, Espen R (BI Norwegian School of Management); Riis, Christian (BI Norwegian School of Management) |
| Abstract: | In this paper we propose a simple, market based mechanism to set prices in health care markets, namely a system where the patients are auctioned out to the hospitals. Our aim is to characterize principles as to how such an auction should be designed. In the case of elective treatment, health authorities thus organize a competition between hospitals. The hospital with the lowest price signs a contracts with authority (or the insurer) that commits him to treat a given number of patients within a predetermined period. However, this is not a simple mechanism that identi…es the hospital with the lowest treatment cost. Due to potentially rapid and unpredictable shifts in demand, treatment capacity may be hard to know in advance. There is always a risk that treatment must be canceled due to arrival of patients that require acute treatment. This calls for a market design that accounts for the risk of default. Our main result is that the expected cost for the government is reduced if the government chooses to ”subsidize” default. This could be thought of as a system in which the government buys treatment in the spot market in the case of default, and let the hospital pay a default fee that is lower than the spot price. The reason why this reduces expected costs for the government is that the e¤ect on the bids is asymmetric: The second lowest bid is on average reduced more than the winning bid. Hence, the winner’s profit tends to shrink. This is due to what we characterize an endogenous correlation. Since the cost of treatment increases in the default risk (as the hospital must pay a penalty if it defaults), high cost hospitals typically have larger default risks than low costs hospitals. |
| Keywords: | Health care markets; health care; hospitals; competition |
| JEL: | I11 I12 |
| Date: | 2009–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oslohe:2001_003&r=mic |
| By: | Alex Dickson; Roger Hartley |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:0911&r=mic |
| By: | Matthias Buerger; Tom Broekel; Alex Coad |
| Abstract: | We investigate the lead-lag relationship between growth of patent applications, growth of R&D, and growth of total sectoral employment for 270 German labour market regions over the period 1999-2005. Our unique panel dataset includes information on four two-digit industries, namely Chemistry, Transport equipment, Medical & Optical Equipment as well as Electrics & Electronics. The results obtained from a vector autoregression model show that an increased innovative activity is associated with subsequent growth of employment in the Medical & Optical Equipment industry as well as in the Electrics & Electronics sector. With respect to the latter growth of patent applications is also associated with subsequent growth of R&D employees indicating either a ‘success-breeds-success’ story or benefits due to agglomeration economies at the level of the region. However we do not find those effects for the other industries due to their idiosyncratic innovation and patenting behaviour. |
| Keywords: | innovation, regional dynamics, r&d growth, employment growth, patent growth |
| JEL: | O18 R11 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:0908&r=mic |
| By: | Germà Bel; Xavier Fageda |
| Abstract: | This paper examines factors determining prices that airports charge to airlines. Using data for 100 large airports in Europe, we find that they charge higher prices when they move more passengers. Additionally, competition from other transport modes and other nearby airports imposes some discipline on the pricing behavior of airports. Low-cost carriers and airlines with a high market share seem to have a stronger countervailing power. Finally, we find that private airports not regulated charge higher prices than public or regulated airports. From our analysis, we can infer that market power of each airport is dependent upon its specific characteristics. |
| Keywords: | Privatization; regulation, pricing; air transportation; airports |
| Date: | 2009–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/27&r=mic |