1,720,972 research outputs found
Strictly convex variable cost does not imply U-shaped average cost
No full textWe show that strictly convex variable costs do not imply U-shaped average costs and provide a sufficient condition for U-shaped average costs. As an application we study endogenous entry when firms have market power and they have decreasing average cost but increasing marginal cost
Cumulative innovation, open source, and distance to frontier
No full textWe develop a multistage game in which firms do cumulative research and development (R&D) to complete a lengthy process, and we study whether firms patent intermediate results or release them in Open Source. A patent holder obtains a larger reward in the market, but since in equilibrium it forecloses R&D, it remains alone to complete the process and so pays a larger cost than an Open Source firm. We have Open Source equilibria when R&D is highly complementary, R&D costs are large, and firms are sufficiently different and far from the frontier. We identify two market failures, in the forms of free riding and coordination failure, and we discuss public intervention
Crowding out the change: business networks and persisting economic elites in the South of Italy over Unification (1840–1880)
Full text linkIn this article, we study the effect of the Unification on the network power of economic elites in the South of Italy. We study the persistence of economic elites as evidence of the stability of the institutional set up beyond the effect of Unification, and thus as a primary explaining factor of the persistence of social forces slowing and opposing modernization. We use original archival data on the universe of Naples enterprises to build the networks of business relations between individual economic actors for the 20-year period immediately before and after Unification. The persistence of network power and its determinants is tested via a difference-in-difference model. The main finding is that economic elites persist over Unification. The long-term business relations, rooted in the Bourbon period, the persisting lobbying power of the financial industry, the close collusive ties with potential foreign competitors and the closeness to politics after 1861 are all elements that explain how the Southern economic elites were able to crowd-out the change
The economics of extortion: Theory and the case of the Sicilian Mafia
No full textThis paper studies extortion of firms operating in legal sectors by a profit-maximizing criminal
organization. We develop a simple taxation model under asymmetric information to find the
Mafia optimal extortion as a function of firms’ observable characteristics, namely size and sector.
We test the predictions of the model on a unique dataset on extortion in Sicily, the Italian
region where the Sicilian Mafia, one of the most ancient criminal organizations, operates. In
line with our theoretical model, our empirical findings show that extortion is strongly concave
with respect to firm size and highly regressive. The percentage of profits appropriated by the
Mafia ranges from 40% for small firms to 2% for large enterprises. We derive some implications
of these findings for market structure and economic development
Selection and Gratitude: Anonymity and gratitude
Full text linkWhat kind of candidate is selected into a job when the principal has to appoint a
committee to measure the candidate's ability and select a winner through a call specifying
a wage for the job? In a model where the principal fixes the wage anticipating the
committee's choice, under a rather natural assumption about the committee's objective
we find that if the committee takes into account the candidate's gratitude a candidate
with less than first best ability will be selected in equilibrium. First best selection is
achieved if the committee is anonymous to the candidates. If the committee could also
set the wage the first best candidate would be selected, but the principal would be worse
off hence he would not implement full delegation
A dynamic model of open source vs proprietary R&D
No full textWe propose a dynamic model in which firms compete to produce sequential and cumulative innovations, and in which the more firms do research in one sector the more likely it is that one of them innovates. Firms choose research effort and whether to patent innovations or to use an Open Source license like the General Public License. We show that (i) patents generate a larger stationary reward but foreclose research within a sector, and that (ii) Open Source generates a smaller stationary reward but allows everyone to use the technology, and therefore, by attracting firms to the sector, it induces a faster pace of innovation. We characterize all the equilibria of the model and show that in equilibrium an Open Source sector appears only after a proprietary sector. We also find conditions under which the model has a unique equilibrium, in which a proprietary and an Open Source sector coexist and compete in the short run, but the Open Source sector dominates the industry in the long run. We use our model to study whether patents are inefficient, and to explain firms’ behavior in the software and the biomedical industry
- …
