|
on Industrial Competition |
| By: | Olivier Bonroy (GAEL - Economie Appliquée de Grenoble - Institut national de la recherche agronomique (INRA) : UR1215 - Université Pierre-Mendès-France - Grenoble II); Stéphane Lemarié (GAEL - Economie Appliquée de Grenoble - Institut national de la recherche agronomique (INRA) : UR1215 - Université Pierre-Mendès-France - Grenoble II); Jean-Philippe Tropeano (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | The existing literature on credence goods and expert services has overlooked the importance of risk aversion. In this paper we extend a standard expert model of credence goods with verifiable service quality by considering risk-averse consumers. Our results show that the presence of risk aversion reduces the expert's incentive to invest in diagnosis and may thus lead to consumers' mistreatment. |
| Keywords: | Credence goods; Expert services; Risk aversion |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:hal-00976890&r=com |
| By: | Gagnon, Etienne (Board of Governors of the Federal Reserve System (U.S.)); Lopez-Salido, J. David (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | We study the pricing response of U.S. supermarkets to large demand shocks triggered by labor conflicts, mass population relocation, and shopping sprees around major snowstorms and hurricanes. Our focus on demand shocks is novel in the empirical literature that uses large datasets of individual data to bridge micro price behavior and aggregate price dynamics. We find that large swings in demand have, at best, modest effects on the level of retail prices, consistent with flat short- to medium-term supply curves. This finding holds even when shocks are highly persistent and even though stores adjust prices frequently. We also uncover evidence of tit-for-tat behavior by which retailers with radically different demand shocks nonetheless seek to match their local competitors' pricing movements and recourse to sales and promotions. |
| Keywords: | Demand shocks; inflation; sales; labor conflicts; mass population displacement; severe weather events |
| Date: | 2014–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-18&r=com |
| By: | Matsumura, Toshihiro; Ogawa, Akira |
| Abstract: | We investigate endogenous timing in a mixed duopoly in a differentiated product market. We find that private leadership is better than public leadership from a social welfare perspective if the private firm is domestic, regardless of the degree of product differentiation. Nevertheless, the public leadership equilibrium is risk-dominant, and it is thus robust if the degree of product differentiation is high. We also find that regardless of the degree of product differentiation, the public leadership equilibrium is risk-dominant if the private firm is foreign. These results may explain the recent revival of public financial institutions in Japan. |
| Keywords: | public financial institutions, differentiated products, risk dominance, Stackelberg |
| JEL: | H42 L13 |
| Date: | 2014–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56539&r=com |
| By: | Vitor Miguel Ribeiro (Vitor Miguel Ribeiro - FEP and CEF.UP - Vitor) |
| Abstract: | We develop a duopoly price competition model that establishes a link between the recent literature of two-sided markets and behavior economics. We fully characterize the subgame perfect Nash equilibrium, which depends on the level of …xed costs. Moreover, introducing discrimination between the two sides of the market in terms of the desutility in time, we demonstrate that divide & conquer strategies are present in equilibrium. Finally, we study entry by an inferior-quality platform and entry by a superior-quality platform to conclude that, in both cases, the entry deterrence strategy can be sustain. We conclude that, under the presence of inter-group externalities, the entry deterrence strategy occurs when price competition is softened but the inter-group externalities do not promote a higher presence of an entry deterrence strategy on the market. Finally, entry deterrence strategies may be conducted by an inferior-quality incumbent although less likely relatively to the case where the incumbent has a superior-quality. |
| Keywords: | Two-sided markets, Horizontal differentiation, Vertical differentiation, Behavior Economics. |
| JEL: | D42 D43 L13 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:538&r=com |
| By: | Sofia Priazhkina (Department of Economics, Indiana University); Frank Page (Department of Economics, Indiana University) |
| Abstract: | This paper presents a model of collusive bargaining networks. Given a status quo network, game is played in two stages: in the first stage, pairs of sellers form the network by signing two-sided contracts that allow sellers to use connections of other sellers; in the second stage, sellers and buyers bargain for the product. We extend the notion of a pairwise Nash stability with transfers to pairwise Nash stability with contracts and characterize the subgame perfect equilibria. The equilibrium rents are determined for all firms based on their collateral and bargaining power. When a stable equilibrium exists, sharing always generates maximum social welfare and eliminates the frictions created by the network structure. The equilibria depend on the initial network setup, likewise bargaining and contractual procedures. In the homogeneous case, equilibria exist when the number of buyers and sellers are relatively unequal. When the number of buyers exceeds number of sellers, bargaining privileges of sellers over buyers and a low sharing transfer are required for the equilibrium to exist. In the networks with relatively few monopolized sellers, sharing leads to a complete reallocation of surplus to sellers and a zero sharing transfer. When the global market is dominated by sellers, surplus is divided relatively equitably. It is also shown that in the special case of the model with only one monopolistic seller and no market entry, the sharing process organizes sellers in the supply chain order. |
| Keywords: | Social Networks, Oligopoly Pricing, Collusion, Market Sharing Agreements |
| JEL: | L11 L14 L12 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.52&r=com |
| By: | Alessia LO TURCO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Daniela MAGGIONI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali) |
| Abstract: | We explore the role of firm and local product-specific capabilities in fostering the introduction of new products in the Turkish manufacturing. Firms' product space evolution is characterised by strong cognitive path dependence which, however, is relaxed by firmheterogeneity in terms of size, efficiency and international exposure. The introduction of new products in laggard Eastern regions, which is importantly related to the evolution of their industrial output, is mainly affected by firm internal product specific resources. On the contrary, product innovations inWestern advanced regions hinge relatively more on the availability of suitable local competencies. |
| Keywords: | Firm heterogeneity, Product Innovation |
| JEL: | D22 O12 O53 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:402&r=com |
| By: | Maurizio Naldi (Dpt. of Computer Science and Civil Engineering, University of Rome at Tor Vergata - Università di Roma Tor Vergata); Marta Flamini (Università Telematica Internazionale UNINETTUNO - Università Telematica Internazionale UNINETTUNO) |
| Abstract: | Concentration indices are employed to measure the level of competition within an industry. Among the several indices proposed in the literature, the Herfindahl-Hirschman Index (HHI) and the Four-firm concentration ratio (CR4) are among the most established. However, the HHI requires the market shares of all market players to be known, while the CR4 requires just the top four. In order to investigate whether we can always use the CR4 in place of the HHI, we have compared the indices resulting from a selected group of datasets. This preliminary analysis shows that the relationship between the CR4 and the HHI may not be monotonic, so that the CR4 does not preserve the order relationship established through the HHI. |
| Keywords: | Concentration indices; Competition; Herfindahl-Hirschman Index (HHI); Four-firm concentration ratio |
| Date: | 2014–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01008144&r=com |
| By: | Andreea Cosnita-Langlais; Lars Sørgard |
| Abstract: | This paper deals with the enforcement of merger policy, and aims to identify situations where the introduction of remedies can lead to a lower welfare. For this we study how merger remedies affect the deterrence accomplished by controlling mergers, and determine the optimal frequency of investigations launched by the agency. We find that when conditional approvals are possible, it may be harder to deter the most welfare-detrimental mergers, and the agency might have to investigate mergers more often. The resulting welfare from merger control can indeed be lower than without remedies. |
| Keywords: | merger control, merger remedies, enforcement, deterrence. |
| JEL: | K21 L41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2014-29&r=com |
| By: | Levitskiy, Stanislav; Frunze, Igor |
| Abstract: | The paper reviews integration problems for complex economic objects aiming to achieve a synergy effect from complementary actions of their assets, which total value exceeds isolated functioning results. In the present times in Ukraine problems concerning assessment of synergy effect at M&A of companies are the new among examining objects and that is why need further development. It is shown that application of system approach to investigation the efficiency integration of economic objects at mergers and acquisitions with regards of process design peculiarities of managerial decisions allows maximum accurate analyzing the results of interaction of economic units within unified integrated structure. So, one of the main reasons to make a bargain on M&A is intention to obtain positive synergy effect because basing on management theory its appearance promotes competitiveness and efficiency increase of the company. According to carried out analysis of existing approaches to assessment of expected synergy effect mostly models offer to calculate one-off synergy effect. It is worth noting that different kinds of synergies can appear not just after combining, but with time, that requires further investigations. It has been proposed a planning mechanism developed on the base of conceptual description the function results for integrated formation, which is the key technique tool for mergers and acquisitions. |
| Keywords: | Planning Technique, Mergers & Acquisitions, Integration, Complex Economic Object |
| JEL: | D60 L22 |
| Date: | 2014–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56709&r=com |
| By: | David Encaoua (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | Book's Review:Louis Kaplow, Competition Policy and Price Fixing, Princeton University Press, Princeton and Oxford, 2013 |
| Keywords: | collusive behavior: economic and legal approaches |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:halshs-00989261&r=com |
| By: | A. R. Lamorgese (Bank of Italy); A. Linarello (Bank of Italy and UPF); Frederic Warzynski (Department of Economics and Business, Aarhus University, Denmark) |
| Abstract: | In this paper, we use detailed information about firms’ product portfolio to study how trade liberalization affects prices, markups and productivity. We document these effects using firm product level data in Chilean manufacturing following two major trade agreements with the EU and the US. The dataset provides information about the value and quantity of each good produced by the firm, as well as the amount of exports. One additional and unique characteristic of our dataset is that it provides a firm-product level measure of the unit average cost. We use this information to compute a firm-product level measure of the profit margin that a firm can generate. We find that new products start being sold on foreign markets as export tariff fall. Moreover, for those products, we observe a fall in both prices and unit average costs. Those effects are mainly driven by an increase in productivity at the firm-product level. On average, adjustment on the profit margin does not appear to play a role. However, for more differentiated products, we find some evidence of an increase in markups, suggesting that firms do not fully pass-through increases in productivity on prices whenever they have enough bargaining power. |
| Keywords: | markups, physical productivity, free trade agreements |
| JEL: | F13 F14 L11 |
| Date: | 2014–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2014-16&r=com |
| By: | Haus, Axel (Dept. of Management and Microeconomics, Goethe University Frankfurt); Juranek, Steffen (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | We examine the role of non-practicing entities (NPEs), often called patent trolls, in patent litigation. We present a theoretical model that predicts that cases with NPE patentees resolve faster. We test this prediction using a hand-collected data set of US patent litigation cases. We find that NPEs challenge larger and more technology intensive firms, and use more valuable patents from technology areas that have a less fragmented ownership base compared to the control group. Controlling for these factors, we find that NPE cases are indeed resolved faster. NPEs help to increase the speed of diffusion of technology into the economy; therefore, increasing the effectiveness of the market for innovation. |
| Keywords: | Litigation; patents; patent trolls; technology diffusion |
| JEL: | K00 K41 O34 |
| Date: | 2014–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_024&r=com |
| By: | Marco Marinucci (Bank of Italy) |
| Abstract: | This paper provides theoretical background to the increasing R&D cooperation among firms and public research institutions. We find that R&D spillovers may impede cooperation among firms or research institutions even when the cost of forming a link is negligible. Further, the presence of heterogeneous players results in different concepts of network regularity but also increases the number of possible pairwise stable networks. Consequently, stronger concepts of stability are needed to study networks in which players are not homogeneous. |
| Keywords: | networks, innovation, R&D cooperation, spillovers |
| JEL: | C70 L14 O30 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_962_14&r=com |
| By: | A. Mantovani; O. Tarola; C. Vergari |
| Abstract: | We analyse how market competition in a vertically differentiated polluting industry is affected by product variants that comply at different levels with "green" social norms. A green consumption behaviour is considered as a byword of good citizenship. Consumer preferences depend on a combination of hedonic quality and compliance with the norms. Assuming that the high hedonic quality variant complies less with the norms than the low hedonic quality one, we characterize the different equilibrium configurations, depending on the perceived intensity of such norms. Then, we focus on the role that institutions may have in using these norms to reduce pollution emissions. |
| JEL: | D62 L13 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp950&r=com |
| By: | Yasunori Ouchida (Department of Economics, Hiroshima University); Daisaku Goto (Graduate School for International Development and Cooperation, Hiroshima University) |
| Abstract: | This paper presents examination of environmental R&D of Cournot duopolists with end-of-pipe technology under a regulator’s precommitment to an emissions tax. Results show that, in the presence of technological spillover effect, the government invariably prefers environmental R&D cartelization to environmental R&D competition. In addition, this paper, in stark contrast to those presenting earlier studies, reveals that consumer surplus is not necessarily maximized by environmental research joint venture (ERJV) cartelization, although there invariably exist private incentives to firms for ERJV cartelization as well as social incentives for it. |
| Keywords: | R&D coordination; Environmental R&D; End-of-pipe technology; Precommit- ment ability; Emission tax |
| JEL: | O32 L13 Q55 Q58 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:hir:idecdp:4-3&r=com |
| By: | Florian LEON |
| Abstract: | Many studies have attempted to investigate the determinants and implications of competition in the banking industry. The literature on the measurement of competition can be divided between the structural and non-structural approaches. The structural approach infers the degree of competition from the structure of the market. The non-structural approach, based on the New Empirical Industrial Organization, assesses the degree of competition directly by observing behavior of firms in the market. This paper reviews the most frequently-used structural and non structural measures of competition in banking. It highlights their strengths and weaknesses, especially for studies based on a limited number of observations. |
| Keywords: | competition, Bank, HHI, Lerner index, Conjectural variation model, Panzar-Rosse model, Boone indicator |
| JEL: | O55 L13 L11 G21 D4 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1569&r=com |
| By: | Florian LEON |
| Abstract: | Whether competition helps or hinders small firms' access to finance is in itself a much debated question in the economic literature and in policy circles, especially in the developing world. Economic theory offers conflicting predictions and empirical contributions provide mixed results. This paper considers the consequences of interbank competition on credit constraints using firm level data covering 70 developing and emerging countries. In addition to the classical concentration measures, competition is assessed by computing three non-structural measures (Lerner index, Boone indicator, and H-statistics). The results show that bank competition alleviates credit constraints, while bank concentration measures are not robust predictors of a firm's access to finance. Findings highlight that bank competition not only leads to less severe loan approval decisions but also reduces borrowers' discouragement. In addition, a secondary result of this paper documents that banking competition enhances credit availability more by reducing prices than by increasing relationship lending. |
| Keywords: | Bank competition, access to credit, developing countries, discouraged borrower |
| JEL: | L10 G20 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1570&r=com |
| By: | Ahmed, Javed I. (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | This article relates corporate credit rating quality to competition in lending between the public bond market and banks. In the model, the monopolistic rating agency's choice of price and quality leads to an endogenous threshold separating low-quality bank-dependent issuers from higher-quality issuers with access to public debt. In a baseline equilibrium with expensive bank lending, this separation across debt market segments provides information, but equilibrium ratings are uninformative. A positive shock to private (bank) relative to public lending supply allows banks to compete with public lenders for high-quality issuers, which threatens rating agency profits, and informative ratings result to prevent defection of high-quality borrowers to banks. This prediction is tested by analyzing two events that increased the relative supply of private vs. public lending sharply: legislation in 1994 that reduced barriers to interstate bank lending and the temporary shutdown of the high-yield bond market in 1989. After each event, the quality of ratings (based on their impact on bond yield spreads) increased for affected issuers. The analysis suggests that strategic behavior by the rating agency in an issuer-pays setting dampens the influence of macroeconomic shocks, and explains the use of informative unsolicited credit ratings to prevent unrated bond issues, particularly during good times. Additionally, the controversial issuer-pays model of ratings leads to more efficient outcomes than investor-pays alternatives. |
| Keywords: | Issuer pays; credit rating; segmented markets; unsolicited rating |
| Date: | 2014–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-23&r=com |
| By: | Ryan, Robert M. (Central Bank of Ireland); O'Toole, Conor M. (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland) |
| Abstract: | This paper examines the extent to which bank market power alleviates or magnifies SME credit constraints using a large panel dataset of more than 118,000 SMEs across 20 European countries over the period 2005-2008. To our knowledge, this is the first study to examine bank market power and SME credit constraints in an international, developed economy setting. More- over, our study is the first to address a number of econometric considerations simultaneously, in particular by controlling for the availability of profitable investment opportunities using a structural Q model of investment. Our results strongly support the market power hypothesis, namely, that increased market power results in increased financing constraints for SMEs. Ad- ditionally, we find that the relationship exhibits heterogeneity across firm size and opacity in a manner that suggests that the true relationship between bank market power and financing constraints might not be fully explained by the existing theory. Finally, we find that the effect of bank market power on financing constraints increases in financial systems that are more bank dependent. |
| Keywords: | Bank Competition, Bank Concentration, Financing Constraints, Tobin's Q, Firmlevel Investment |
| JEL: | G21 G31 G32 F34 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:03/rt/14&r=com |
| By: | Kondo, Kazumine |
| Abstract: | This paper examines whether credit associations in Japanese regional lending markets compete on price now that Japanese financial authorities have replaced the convoy system of financial regulation with the principle of competition. Specifically, the effects of the market share of credit associations in regional markets on their lending rates are empirically investigated. Accordingly, we determined that credit associations compete with each other in regional lending markets by using two different proxies for the market share held by credit associations in a region. The first proxy was the credit associations’ share of all deposits in a region and the second was the credit associations’ share of all branch offices in a region. In addition, credit associations that face more intense competition from regional banks in regional markets were found to face more intense competition from other credit associations. |
| Keywords: | credit associations, abolition of convoy system of financial regulation, lending rates, market share of credit associations, regional lending market |
| JEL: | G21 |
| Date: | 2014–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56669&r=com |
| By: | Liran Einav; Amy Finkelstein; Heidi Williams |
| Abstract: | We present a simple framework to illustrate the welfare consequences of a “top up” health insurance policy that allows patients to pay the incremental price for more expensive treatment options. We contrast it with common alternative policies that require essentially no incremental payments for more expensive treatments (as in the United States), or require patients to pay the full costs of more expensive treatments (as in the United Kingdom). We provide an empirical illustration of this welfare analysis in the context of treatment choices among breast cancer patients, where lumpectomy with radiation therapy is a more expensive treatment than mastectomy, with similar average health benefits. We use variation in distance to the nearest radiation facility to estimate the relative demand for lumpectomy and mastectomy. Extrapolating the resultant demand curve (grossly) out of sample, our estimates suggest that the “top-up” policy, which achieves the efficient treatment decision, increases total welfare by $700-2,500 per patient relative to the current US “full coverage” policy, and by $700-1,800 per patient relative to the UK “no top up” policy. While we caution against putting much weight on our specific estimates, the analysis illustrates the potential welfare gains from more efficient reimbursement policies for medical treatments. We also briefly discuss additional tradeoffs that arise from the top-up and UK-style policies, which both lead to additional (ex-ante) risk exposure. |
| JEL: | H44 I13 I18 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20226&r=com |
| By: | Mark Pauly; Scott Harrington; Adam Leive |
| Abstract: | This paper provides estimates of the changes in premiums, average or expected out of pocket payments, and the sum of premiums and out of pocket payments (total expected price) for a sample of consumers who bought individual insurance in 2010 to 2012, comparing total expected prices before the Affordable Care Act with estimates of total expected prices if they were to purchase silver or bronze coverage after reform, before the effects of any premium subsidies. We provide comparisons for purchasers of self only coverage in California and in 23 states with minimal prior state premium regulation before the ACA now using federally managed exchanges. Using data from the Current Population Survey, we find that the average prices increased by 14 to 28 percent, with similar changes in California and the federal exchange states; we attribute the increase primarily to higher premiums in exchanges associated with insurer expectations of a higher risk population being enrolled. The increase in total expected price is similar for age-gender population subgroups except for a larger than average increases for older women. A welfare calculation of the change in risk premium associated with moving from coverage that prevailed before reform to bronze or silver coverage finds small changes. |
| JEL: | I11 I13 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20223&r=com |
| By: | Karen Stockley; Thomas McGuire; Christopher Afendulis; Michael E. Chernew |
| Abstract: | In the Medicare Advantage (MA) market, private health insurers compete to offer plans with the most attractive premium and benefit package. Medicare provides a subsidy, based on a "benchmark payment rate", for each Medicare beneficiary a plan enrolls. We investigate how this subsidy, the primary policy lever in the market, affects the equilibrium premiums and benefits of MA plans. We exploit variation in benchmark payment rates within plans over time, coming from rebasing years where benchmark changes differed across areas in ways that were plausibly exogenous, to determine empirically how plan premiums and benefit generosity respond to changes in benchmarks. We find that premiums do not respond to changes in the benchmark payment rate on average but that insurers do pass through a portion of the benchmark increase by increasing plan benefit generosity. We argue that the way premium information is communicated to consumers influences the way in which plans pass through subsidy dollars and can account for the empirical results. More specifically, institutional features make it difficult for consumers to observe a large component of the plan premium, leading to a lack of demand response to premium reductions below the premium charged by traditional Medicare (the fee-for-service Part B premium). When demand does not respond to lower premiums, plans have an incentive to pass-through cost subsidies to consumers via more generous benefits that consumers may not value at cost, creating an inefficiently high level of benefit generosity. Our results provide evidence that a lack of premium transparency in the MA market may distort the combination of premium levels and benefit generosity offered in equilibrium, resulting in some degree of inefficiently high benefits. We conclude by discussing changes to the choice environment that would increase premium transparency and potentially soften the premium rigidities we find. |
| JEL: | I11 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20208&r=com |
| By: | David Dranove; Craig Garthwaite; Manuel Hermosilla |
| Abstract: | Prior research has shown that exogenous shocks to the demand for medical products spur additional product development. These studies do not distinguish between breakthrough products and those that largely duplicate the performance of existing products. In this paper, we use a novel data set to explore the impact of the introduction of Medicare Part D on the development of new biotechnology products. We find that the law spurred development of products targeting illnesses that affect the elderly, but most of this effect is concentrated among products aimed at diseases that already have multiple existing treatments. Moreover, we find no increase in products targeting orphan disease or those receiving either fast track or priority review status from the FDA. This suggests that marginal changes in demand may have little effect on the development of products with large welfare benefits. |
| JEL: | H0 I1 I18 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20212&r=com |
| By: | Michael Gerfin; Boris Kaiser; Christian Schmid |
| Abstract: | Deductibles in health insurance generate nonlinear budget sets and dynamic incentives. This paper uses detailed individual claims data from a large Swiss insurance company to estimate the response in health care demand to the discrete price increase that is generated by resetting the deductible at the start of each calendar year. We use a regression discontinuity type framework based on daily data to estimate the change in health care demand right before and right after the turn of the year. We find that for individuals with high deductibles health care demand drops by 27%, which translates into an elasticity of -.21. The decrease is most pronounced for inpatient care and prescription drugs. By contrast, for individuals with low deductibles there is no significant change in health care demand (except for prescription drugs). A remaining open question is whether the observed behavioral responses can be attributed to intertemporal substitution or whether they constitute a classic moral hazard effect. |
| Keywords: | Health care demand; nonlinear pricing; dynamic incentives; health insurance |
| JEL: | C31 D12 I13 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1403&r=com |
| By: | Marc Baudry; Adrien Hervouet |
| Abstract: | This article deals with the impact of legislation in the seed sector on incentives for variety creation. Two categories of rules interact. The first category consists in intellectual property rights and is intended to address a problem of sequential innovation and R&D investments by the private sector. The second category concerns commercial rules that are intended to correct a problem of adverse selection on the seed market. We propose a dynamic model of market equilibrium with vertical product differentiation that enables us to take into account the economic consequences of imposing either Plant Breeders’ Rights (PBRs) or patents as IPRs. We simultaneously examine two kinds of commercial legislation: compulsory registration in a catalogue and minimum standards for commercialisation. Analytical results are completed by numerical simulations. The main result is that the combination between minimum standards and PBRs provides higher incentives for sequential innovation and may be preferred by a public regulator to maximise the expected and discounted total surplus when sunk investment costs are low or when they are medium and the probability of R&D success is sufficiently high. This solution differs from the combination of IPRs and commercialisation rules used in both the US and Europe. Otherwise, PBRs have to be replaced by patents, which yields a configuration close to that observed in the US. The catalogue commercialisation rule is seldom preferred to minimum standards, so that the combination of IPRs and commercialisation rules that prevails in Europe is not supported by our model. |
| Keywords: | Intellectual Property Rights, Plant Breeders’ Rights, Catalogue, Product differentiation, Asymmetric information, Biodiversity. |
| JEL: | D43 D82 K11 L13 Q12 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2014-32&r=com |