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on Technology and Industrial Dynamics |
| By: | Luigi Marengo; Corrado Pasquali; Marco Valente; Giovanni Dosi |
| Abstract: | The economic theory of intellectual property rights is based on a rather narrow view of both competition and technological knowledge. We suggest some ways of enriching this framework with a more empirically grounded view of both and, by means of a simulation model, we analyze the impact of different property right regimes on the dynamics of a complex product industry, that is an industry where products are complex multi-component objects and competition takes place mainly through differentiation and component innovation. We show that, as the complexity of the product spaces increases, stronger patent regimes yield lower rates of innovation, lower product quality and lower consumers' welfare. localized ones. |
| Keywords: | patents; appropriability of innovation; complex product industries; industrial dynamics |
| JEL: | O31 O34 L11 |
| Date: | 2009–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2009/05&r=tid |
| By: | Marius Schwartz (Department of Economics, Georgetown University) |
| Abstract: | Arrow (1962) showed that a secure monopolist (unconcerned with preemption) has a weaker incentive than would a competitive firm to invest in a patentable process innovation. This paper shows that the ranking can be reversed for product innovations. Only the innovator sells the new product, a differentiated substitute for the old. Under alternative market structures considered, the old product is sold only by that same firm (two-product monopoly), only by a different firm (post-innovation duopoly), or in perfect competition. In an asymmetric Hotelling model, the innovation incentive under monopoly is greater than under duopoly if and only if the new product has the higher quality, and is always greater than under perfect competition. Classification-JEL Codes: D4, L1 |
| Date: | 2009–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~09-09-02&r=tid |
| By: | Bruno Versaevel (EMLYON Business School, Ecully, F-69134 and University of Lyon, Lyon, F-69003, France; CNRS, UMR 5824, GATE, Ecully, F-69130, France; ENS LSH, Lyon, F-69007, France) |
| Abstract: | This paper investigates the combined impact of a first-mover advantage and of firms’ limited mobility on the equilibrium outcomes of a continuous-time model adapted from by Boyer, Lasserre, and Moreaux (2007). Two firms face market development uncertainty and may enter by investing in lumpy capacity units. With perfect mobility, when the first entrant plays as a Stackelberg leader a Markov perfect preemption equilibrium obtains in which the leader invests earlier, and the follower later, than in the Cournot benchmark scenario. There is rent equalization, and the two firms’ equilibrium value is lower. This result is not robust to the introduction of firm-specific limited mobility constraints. If one firm is sufficiently less able than its rival to mobilize resources at early stages of the market development process, there is less rent dissipation, and no equalization, in a constrained preemption equilibrium. The first-mover advantage on the product market then results in more value for the less constrained firm, and in less value for the follower than when they play `a la Cournot with perfect mobility. The leading firm maximizes value by entering immediately before its constrained rival, though later than made possible by its superior mobility. Greater uncertainty reduces the value differential to the benefit of the follower. It also increases the distance between the firms’ respective investment triggers. The specifications and results are discussed in light of recent developments in the market for music downloads. |
| Keywords: | Real options, Preemption, First-mover advantage, Mobility |
| JEL: | C73 D43 D92 L13 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0906&r=tid |
| By: | Adelina Gschwandtner; Val E. Lambson |
| Abstract: | Dynamic competitive models of industry evolution predict higher variability of firm value over time and lower variability of firm activity over time in industries where sunk entry costs are higher. These predictions have done well empirically. Here we extend the theory to allow an additional category of sunk costs---depreciation---and argue that this generates countervailing effects. We test this assertion empirically and find the results are consistent with the theory. |
| JEL: | L00 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:0902&r=tid |
| By: | Richard Rubble (EMLYON Business School - EMLYON Business School); Bruno Versaevel (EMLYON Business School - EMLYON Business School, GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines) |
| Abstract: | Current EU policy exempts horizontal R&D agreements from antitrust con- cerns when the combined market shares of participants are low enough. This paper argues that existing theory does not support limiting the exemption to low market shares. This is done by introducing a set of non-innovating outside ï¬rms to the standard framework to assess what link might exist between the market share of innovating ï¬rms and the product market beneï¬ts of cooperation. With R&D output choices, the market share criterion, while it rules out the most socially harmful R&D cooperation agreements, also hinders the most beneï¬cial ones. With R&D input choices, cooperation may actually be desirable in concentrated industries, and harmful in more competitive ones. If R&D cooperation does have anti-competitive effects in product markets, it seems that these are therefore best addressed by other tools than market share criteria. |
| Keywords: | R&D; Cooperation; Competition; Regulation |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00377541_v1&r=tid |