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on Technology and Industrial Dynamics |
| By: | Angelo Baglioni (DISCE, Università Cattolica) |
| Abstract: | This paper presents a model of entry into a network industry. The entrant tries to attract the customer base of the incumbent service provider. While the entrant is more efficient, the incumbent enjoys an advantage thanks to a bias in consumers’ expectations. Buyers enter the game with heterogenous beliefs as to which of the two firms is going to win competition. Then expectations converge - through higher order beliefs - and select one winner, who ends up being the single supplier. The path of expectations convergence crucially depends on the pricing policy followed by firms: so equilibrium beliefs are endogenous. Depending on parameter values, one of two outcomes obtains: (i) the incumbent is able to exclude the entrant, by lowering his price below the monopoly level; (ii) the entrant is successful, by undercutting the incumbent price. Productive efficiency and consumers’ welfare are hurt by exclusion; the entry threat is beneficial to consumers anyway. Imposing compatibility among networks is welfare improving, as it removes the exclusionary potential enjoyed by the incumbent. |
| Keywords: | network industries, critical mass, entry, exclusion, higher order beliefs |
| JEL: | D42 D84 L12 L41 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie3:ief69&r=tid |
| By: | Ulrich Doraszelski; Mark Satterthwaite |
| Date: | 2007–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:321307000000000912&r=tid |
| By: | Malte Schwoon (Statkraft, Duesseldorf) |
| Abstract: | Fuel cell vehicles (FCVs) running on hydrogen do not cause local air pollution. Depending on the energy sources used to produce the hydrogen they may also reduce greenhouse gases in the long-term. Besides problems related to the necessary investments into hydrogen infrastructure, there is a general notion that current fuel cells costs are too high to be competitive with conventional engines, creating an insurmountable barrier to introduction. But given historical evidence from many other technologies it is highly likely that learning by doing (LBD) would lead to substantial cost reductions. In this study we implement potential cost reductions from LBD into an existing agent based model that captures the main dynamics of the introduction of the new technology together with hydrogen infrastructure build up. Assumptions about the learning rate turn out to have a critical impact on the projected diffusion of the FCVs. Moreover, LBD could imply a substantial first mover advantage. We also address the impact of learning spillovers between producers and find that a government might face a policy trade off between fostering diffusion by facilitating learning spillovers and protecting the relative advantage of a national technological leader. |
| Keywords: | Fuel cell vehicles, Hydrogen, Learning by doing, Agent based modeling |
| JEL: | O33 D11 D21 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:112&r=tid |
| By: | David Besanko; Ulrich Doraszelski; Yaroslav Kryukov; Mark Satterthwaite |
| Date: | 2007–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:321307000000000903&r=tid |
| By: | Schneider, Cédric |
| Abstract: | This paper studies the behaviour of firms facing the decision to create a patent fence, defined as a portfolio of substitute patents. We set up a patent race model, where firms can decide either to patent their inventions, or to rely on secrecy. It is shown that firms build patent fences, when the duopoly profits net of R&D costs are positive. We also demonstrate that in this context, a firm will rely on secrecy when the speed of discovery of the subsequent invention is high compared to the competitors. Furthermore, we compare the model under the First-to-Invent and First-to-File legal rules. Finally, we analyze the welfare implications of patent fence |
| JEL: | L10 O34 |
| Date: | 2005–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2087&r=tid |