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on Microeconomics |
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Issue of 2006‒04‒08
fifteen papers chosen by Joao Carlos Correia Leitao Universidade da Beira Interior |
| By: | Lemarié, S. |
| Abstract: | In this paper, we analyse a situation where a patent holder is considered as an upstream firm that can license its innovation to some downstream companies that compete on a final market with differentiated products. Licensing contract may be based either on a royalty or a fixed fee. The patent holder can either be independant or vertically integrated with one of the downstream companies. We show that a licence based on a royalty works better with vertical integration, and that consequently, the patent holder have some interest to vertically integrate if it enables him to apply a royalty based license. The effect of vertical integration on the social surplus can be either positive or negative. |
| Keywords: | LICENSING; INNOVATION; VERTICAL INTEGRATION |
| JEL: | D45 L22 L42 O31 O32 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:200517&r=mic |
| By: | Hoernig, Steffen |
| Abstract: | The differential between on-net and off-net prices, for example on mobile telephony networks, is an issue that is hotly debated between telecoms operators and regulators. Small operators contend that their competitors' high off-net prices are anticompetitive. We show that if the utility of receiving calls is taken into account, the equilibrium pricing structures will indeed depend on firms' market shares. Larger firms will charge higher off-net prices even without anticompetitive intent, both under linear and two-part tariffs. Predative behavior would be accompanied by even larger on-net / off-net differentials even if access charges are set at cost. |
| Keywords: | asymmetry; call externality; on/off-net pricing; telecommunications network competition |
| JEL: | L51 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5588&r=mic |
| By: | Garcia Pires, Armando José |
| Abstract: | In a spatial economy where oligopolist firms compete in R&D, it is found that geography affects the innovative behaviour of firms. Notably, international differences in market size conduce to endogenous asymmetries between firms given that firms located in the country with more demand have stronger incentives to invest in R&D. This 'R&D linkage' between demand and competitiveness promotes firms to strategically delocalize to the larger country. As a result, a spatial equilibrium arises with only total or partial agglomeration, but never with symmetric dispersion. |
| Keywords: | agglomeration effects; asymmetric firms; industrial location; oligopoly; R&D investment |
| JEL: | F12 L13 O31 R3 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5582&r=mic |
| By: | CRAMPES, Claude; HOLLANDER, Abraham; MACDISSI, Charbel M. |
| Abstract: | This paper examines the use of bundling by a firm that sells in two national markets and faces entry by parallel traders. The firm can bundle its main product, - a tradable good- with a non-traded service. It chooses between the strategies of pure bundling, mixed bundling and no bundling. The paper shows that in the low-price country the threat of grey trade elicits a move from mixed bundling, or no bundling, towards pure bundling. It encourages a move from pure bundling towards mixes bundling or no bundling in the high-price country. The set of parameter values for which the profit maximizing strategy is not to supply the low price country is smaller than in the absence of bundling. The welfare effects of deterrence of grey trade are not those found in conventional models of price arbitrage. Some consumers in the low-price country may gain from the threat of entry by parallel traders although they pay a higher price. This is due to the fact that the firm responds to the threat of arbitrageurs by increasing the amount of services it puts in the bundle targeted at consumers in that country. Similarly, the threat of parallel trade may affect some consumers in the hight-price country adversely. |
| Keywords: | rallel trade, bundling, arbitrage |
| JEL: | F12 L12 L41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montde:2006-07&r=mic |
| By: | David Newbery |
| Abstract: | Should regulation of potentially competitive elements of network utilities be left with sector regulators or solely subject to normal competition laws? Britain evolved licenses for network activities overseen by regulators while the EU places more emphasis on making sector regulation consistent with competition law. The paper discusses the appropriateness of the competition law approach for telecoms and electricity. Post-modern utilities like telecoms, in which facilities-based competition is possible, lend themselves to the approach laid out in the Communications Directives, and its application to mobile call termination is discussed. Electricity, where collective dominance is more likely, does not fit comfortably into this approach. Instead, licence conditions retain advantages where it may be necessary to modify market rules in a timely and well-informed manner, as exemplified by the English Electricity Pool. |
| Keywords: | Regulation, competition policy, telecommunications, electricity, market power |
| JEL: | G18 L94 L96 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0631&r=mic |
| By: | Jehiel, Philippe; Meyer-Ter-Vehn, Moritz; Moldovanu, Benny |
| Abstract: | We study multi-object auctions where agents have private and additive valuations for heterogeneous objects. We focus on the revenue properties of a class of dominant strategy mechanisms where a weight is assigned to each partition of objects. The weights influence the probability with which partitions are chosen in the mechanism. This class contains efficient auctions, pure bundling auctions, mixed bundling auctions, auctions with reserve prices and auctions with pre-packaged bundles. For any number of objects and bidders, both the pure bundling auction and separate, efficient auctions for the single objects are revenue-inferior to an auction that involves mixed bundling. |
| Keywords: | auction; mixed bundling; revenue maximization |
| JEL: | D4 D44 D82 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5566&r=mic |
| By: | Matteo Maria GALIZZI |
| Abstract: | Several results from bargaining and networks microeconomic litera ture are presented and their main insights and applications to bi lateral market power and price formation in gas thin markets are discussed. Bargaining models encompass the bilateral Rubinstein negotiations, bargaining between a single seller and two buyer, b oth symmetric and heterogeneous and negotiations in bilateral oli gopolies. Models of price formation both in fixed and in endogeno usly formed buyers-sellers networks are also discussed. |
| Keywords: | Gas Industry, Bargaining, Networks, Thin markets |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2006-12&r=mic |
| By: | Thomas Wein (Institute of Economics, University of Lüneburg) |
| Abstract: | The EU electricity directive (96/92/EC) established the right of the member states to choose between Regulated and Negotiated Third Party Access (RTPA and NTPA). The interest group theory is able to explain whether the introduction of NTPA in Germany had been an interest group equilibrium under the restriction of EU-directive. Using the NTPA associations of electricity power suppliers, network monopolists and industrial consumers negotiated three agreements. The last one (AA VVII+) in December 2001 introduced a market comparison scheme with three structural features: “East-/West-Germany”, “consumption/population density”, and “cable rate”. These features are variables which are supposed to reflect cost differences between network suppliers. The theoretical analysis will derive the hypothesis that this conception allows to introduce a cost irrelevant factor and therefore to increase prices without harming firms which do not hold this factor. This hypothesis could be tested by analyzing the German low and medium voltage network suppliers in 2002 and 2003. Our estimations show that the use of structural feature “East-/West Germany” and “consumption/population density” could be explained by this hypothesis. But because we have no firm specific information about cost differences other explanations could not be excluded: Monopoly prices differ with marginal costs, and regulation could reflect real cost differences. The third structural feature “cable rate” has no influence in low voltage networks, but has an impact on access charges levied in medium voltage networks. This relationship is only given if we use the borderlines given by AA VVII+. Hence, we are not able to reject the interest group theory: The feature “cable rate” was introduced successfully to increase access charges for medium network suppliers which have high cable rates without having higher costs. |
| Keywords: | deregulation, natural monopoly, interest groups |
| JEL: | D42 L43 L94 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:7&r=mic |
| By: | Cremer, Helmuth; Pestieau, Pierre |
| Abstract: | This paper develops a simple model of piracy to analyze its effects on prices and welfare and to study the optimal enforcement policy. A monopolist produces an information good (involving a 'large' development cost and a 'small' reproduction cost) that is sold to two groups of consumers differing in their valuation of the good. We distinguish two settings: one in which the monopoly is regulated and one in which it maximizes profits and is not regulated, except that the public authority may be responsible for the control of piracy. We show that copying or piracy might be welfare enhancing because it is a way to 'provide' the good to some individuals (those with a low willingness to pay) without undermining the firm’s ability to finance the development cost via the pricing scheme applied to high valuation consumers. The level of piracy control differs according to the regulatory environment. Three levels of piracy control emerge. The highest is the one chosen by the private monopoly. The next level is the one chosen by the regulated monopoly. The lowest, that can be zero, is the level of control chosen by the public authority when the good is sold (and priced) by a private monopoly. |
| Keywords: | copying; information good; intellectual property; piracy |
| JEL: | D82 L11 L86 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5556&r=mic |
| By: | Broda, Christian; Limão, Nuno; Weinstein, David E |
| Abstract: | The theoretical debate over whether countries can and should set tariffs in response to export elasticities goes back over a century to the writings of Edgeworth (1894) and Bickerdike (1907). Despite the optimal tariff argument's centrality in debates over trade policy, there exists no evidence about whether countries actually apply it when setting tariffs. We estimate disaggregate export elasticities and find evidence that countries that are not members of the World Trade Organization systematically set higher tariffs on goods that are supplied inelastically. The result is robust to the inclusion of political economy variables and a variety of model specifications. Moreover, we find that countries with higher aggregate market power have on average higher tariffs. In short, we find strong evidence in favour of the optimal tariff argument. |
| Keywords: | GATT; international trade; optimal tariffs; trade policy; WTO |
| JEL: | F13 F14 H21 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5540&r=mic |
| By: | Marchetti, Domenico J.; Nucci, Francesco |
| Abstract: | Recent contributions have suggested that technology shocks have a negative impact on hours, contrary to the prediction of standard flexible-price models of the business cycle. Some authors have interpreted this finding as evidence in favour of sticky-price models, while others have either extended flexible-price models or disputed the empirical finding itself. In this paper we estimate a variety of alternative TFP measures for a representative sample of Italian manufacturing firms and on average find a negative effect of productivity shocks on hours. Using the reported frequency of price reviews, we show that the contractionary effect is stronger for firms with more flexible prices. Price stickiness remains a crucial factor in the response of hours even if product storability or market power are allowed for. Our results hold under alternative assumptions for the stationarity of hours per capita. |
| Keywords: | labour input; price rigidity; productivity shocks |
| JEL: | E31 E32 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5504&r=mic |
| By: | Aurora A.C. Teixeira (CEMPRE, Faculdade de Economia, Universidade do Porto); Joana Costa (Faculdade de Economia and Faculdade de Letras, Universidade do Porto) |
| Abstract: | Using large-scale survey data for (1538) firms located in Portugal, we analyze which firm characteristics are conducive to establishing contacts with universities. Although almost half of the firms surveyed stated they had established some contacts with universities in the period 2001-2003, only a few (21.5%) consider universities an important source of knowledge and information for their innovation activities. A more disturbing finding is that 61% of the total firms claimed they had no intentions of establishing future contacts with universities and 38% would only be moderately interested in doing so (‘if requested’). The Universities of Minho, Porto and Aveiro are the ones that cover a higher percentage of contacts from firms. Furthermore, in terms of the most demanding type of contacts (protocols, partnerships and projects), the Técnica de Lisboa (Lisbon Technical), Aveiro and Porto are the best-ranked universities. Our analysis indicates that the firms’ propensity to draw on each of the Portuguese universities is explained by the characteristics of the different firms and their regional and industrial patterns. For instance, firms that have established contacts with the Aveiro, Coimbra, Évora, Lisboa, and the Nova (Lisbon) universities tend to be relatively R&D-intensive, whereas those that contact the Católica (Porto) and Porto universities are relatively large and export-intensive. If we exclude the Algarve and Beira Interior universities, firms that contact all the other universities tend to be relatively human capital-intensive. Firms belonging to ‘R&D and Engineering services’ show a relatively high propensity to draw on universities in general, and the Aveiro, Beira Interior, Católica (Porto), Porto and Técnica de Lisboa universities, in particular. ‘Textiles and leather’ firms establish more contacts with the Beira Interior and Minho universities, thus reflecting to some extent the specialization pattern of the corresponding region. An unambiguous and statistically robust finding is that proximity matters highly in firms-universities linkages - our estimations reveal that firms are more likely to contacts universities located nearby. |
| Keywords: | University, Firm, linkages |
| JEL: | O38 C25 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:207&r=mic |
| By: | Crespi, John M.; Marette, Stéphan |
| Abstract: | This paper empirically explores the link between quality and concentration in a cross-section of manufactured goods. Using concentration data and product quality indicators, an ordered probit estimation explores the impact of concentration on quality that is defined as an index of quality characteristics. The results demonstrate that market concentration and quality are positively correlated across different industries. When industry concentration increases, the likelihood of the product being higher quality increases and the likelihood of observing a lower quality decreases. |
| Keywords: | concentration, market structure, ordered probit, product differentiation, product quality. |
| Date: | 2006–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12555&r=mic |
| By: | Stefan Brandauer; Florian Englmaier |
| Abstract: | We analyze a contest between two groups where group members have differing valuations for the contested rent. Generically the pivotal group member with the median valuation of the rent will not act himself but will want to send a group member that has preferences different to her own into the contest. The delegation can be either to more or less 'radical' group members. The direction of delegation depends on the order of moves and the relative 'aggressiveness' of the group medians. We show that almost certainly very asymmetric equilibria arise, even if the median group members value the rent (almost) equally. Delegation can lead to a social improvement in terms of resources spent in the contest. |
| Keywords: | strategic delegation, contests, rent seeking, political economy, arms races, distributional conflict |
| JEL: | D40 D72 D73 P16 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1654&r=mic |
| By: | Boot, Arnoud W A; Marinc, Matej |
| Abstract: | We assess the influence of competition and capital regulation on the stability of the banking system. We particularly ask two questions: i) how does capital regulation affect (endogenous) entry; and ii) how do (exogenous) changes in the competitive environment affect bank monitoring choices and the effectiveness of capital regulation? Our approach deviates from the extant literature in that it recognizes the fixed costs associated with banks’ monitoring technologies. These costs make market share and scale important for the banks’ cost structures. Our most striking result is that increasing (costly) capital requirements can lead to more entry into banking, essentially by reducing the competitive strength of lower quality banks. We also show that competition improves the monitoring incentives of better quality banks and deteriorates the incentives of lower quality banks; and that precisely for those lower quality banks competition typically compromises the effectiveness of capital requirements. We generalize the analysis along a few dimensions, including an analysis of the effects of asymmetric competition, e.g. one country that opens up its banking system for competitors but not vice versa. |
| Keywords: | banking; capital regulation; competition |
| JEL: | G21 L13 L50 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5518&r=mic |