nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2007‒01‒13
three papers chosen by

  1. Patent protection, creative destruction, and generic entry in pharmaceuticals: Evidence from patent and pricing data By Marco, Alan C.
  2. Technology Innovation and Market Turbulence: A Dotcom Example By Zhu Wang
  3. An Estimable Dynamic Model of Entry, Exit and Growth in Oligopoly Retail Markets By Victor Aguirregabiria; Pedro Mira; Hernan Roman

  1. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: This paper merges patent citation data with data on pharmaceutical patent expirations, generic entry, and pricing to explore the effects of observable patent characteristics on off-patent and on-patnet pharmaceutical pricing. Using a sample of drug patents facing generic entry in the 1990s, I find that the price of branded drugs increased on average in the face of generic entry. Importantly, I find that the number of patent citations that a drug receives from other firms is correlated with a decrease in markup and a decrease in the duration of the markup. Conversely, self-citations are correlated with higher prices and slower decay in prices. The results indicate that patent citations may signal the degree of inter-molecule substitution. And, importantly, self-citations may indicate a degree of cumulative patenting that enables a firm to effectively extend or strengthen the original patent protection. This research takes a step forward in understanding the distinction between “positive” citations and “negative” citations related to creative destruction.
    Date: 2006–11
  2. By: Zhu Wang (Payments System Research Federal Reserve Bank of Kansas City)
    Abstract: This paper explains market turbulence, such as the recent dotcom boom/bust cycle, as equilibrium industry dynamics triggered by technology innovation. When a major technology innovation arrives, a wave of new firms implement the innovation and enter the market. However, if the innovation complements existing technology, some new entrants will later be forced out as more and more incumbent firms succeed in adopting the innovation. It is shown that the diffusion of Internet technology among traditional brick-and-mortar firms is indeed the driving force behind the rise and fall of dotcoms as well as the sustained growth of e-commerce. Systematic empirical evidence from retail and banking industries supports the theoretical findings
    Keywords: Technology Diffusion, Industry Dynamics, Shakeout
    JEL: E30 L10 O30
    Date: 2006–12–03
  3. By: Victor Aguirregabiria; Pedro Mira; Hernan Roman
    Abstract: This paper presents an estimable dynamic structural model of an oligopoly retail industry. The model can be estimated using panel data of local retail markets with information on new entries, exits and the size and growth of incumbent firms. In our model, retail firms are vertically and horizontally differentiated, compete in prices, make investments to improve the quality of their businesses, and decide to exit or to continue in the market. The model extends in two important ways the entry-exit model estimated in Aguirregabiria and Mira (2007). First, it includes firm size and growth as endogenous variables. And second, the empirical model has two sources of permanent unobserved heterogeneity: local-market heterogeneity and firm heterogeneity. This allows the researcher to control for potentially important sources of bias when using firm panel data with many local markets and several time periods.
    Keywords: Industry dynamics; Oligopoly retail markets; Structural estimation
    JEL: L11 L13 C51
    Date: 2007–01–02

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