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on Technology and Industrial Dynamics |
| By: | Amiti, Mary; Khandelwal, Amit |
| Abstract: | How does competition affect innovation? We address this question by using a novel approach to measure quality - an important component of innovation - using highly disaggregated product data for a large set of countries. Constructing an internationally comparable measure of quality enables us to separate the effect of reducing import tariffs, our measure of competition, on quality upgrading from other country level differences in competitive environments, and product demand shocks. We base our analysis on recent theoretical frameworks that predict that the effect of competition on innovation depends on firms’ proximity to the world technological frontier. As predicted by theory, we find that lower tariffs are associated with quality upgrading for products close to the world frontier; whereas lower tariffs discourage quality upgrading for varieties distant from the frontier. |
| Keywords: | Competition; Growth; Proximity to Frontier; Quality Upgrading |
| JEL: | F1 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7562&r=tid |
| By: | Shimomura, Ken-Ichi; Thisse, Jacques-François |
| Abstract: | Armchair evidence shows that many industries are made of a few big commercial or manufacturing firms, which are able to affect the market outcome, and of a myriad of small family-run businesses with very few employees, each of which has a negligible impact on the market. Examples can be found in apparel, catering, publishers and bookstores, retailing, finance and insurances, and IT industries. We provide a new general equilibrium framework that encapsulates both market structures. Due to the higher toughness of the market, the entry of big firms leads them to sell more through a market expansion effect, which is generated by the exit of small firms. Furthermore, the level of social welfare increases with the number of oligopolistic firms because the procompetitive effect associated with the entry of a big firm dominates the resulting decrease in product variety. |
| Keywords: | monopolistic competition; oligopoly; product differentiation; welfare |
| JEL: | L13 L40 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7404&r=tid |
| By: | Maija Halonen-Akatwijuka (University of Bristol); Tobias Regner (Max Planck Institute of Economics, Jena) |
| Abstract: | We apply the property rights theory of Grossman-Hart-Moore in the music industry and study the optimal allocation of copyright between the artists who create music and the labels who promote and distribute it. Digital technology opens up a role for new intermediaries. We find that entry of online platforms occurs only if they are sufficiently more productive in distribution than the incumbent label. Furthermore, entry leads to a change in bargaining positions and it can become optimal for the copyright to be shifted from the label to the artist. |
| Keywords: | property rights theory, copyright, internet, music industry |
| JEL: | D23 L22 L23 L82 L86 |
| Date: | 2009–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-096&r=tid |
| By: | Henry, Emeric; Ponce, Carlos |
| Abstract: | We study the problem of an inventor who brings to the market an innovation that can be legally copied. Imitators may 'enter' the market by copying the innovation at a cost or by buying from the inventor the knowledge necessary to reproduce and use the invention. The possibility of contracting affects the need for patent protection. Our results reveal that: (i) Imitators wait to enter the market and the inventor becomes a temporary monopolist; (ii) The inventor offers contracts which allow resale of the knowledge acquired by the imitators; (iii) As the pool of potential imitators grows large, the inventor may become a permanent monopolist. |
| Keywords: | contracting; knowledge trading; Patents; war of attrition |
| JEL: | C73 D23 L24 O31 O34 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7511&r=tid |