1,721,007 research outputs found
Product innovation and vertical integration: private and social incentives
No full textWe study the licensing incentives of an independent input producer owning a patented product innovation which allows the downstream firms to improve the quality of their final goods. We consider a general two-part
tariff contract for both outside and incumbent innovators. We find that technology diffusion critically depends on the nature of market competition (Cournot vs. Bertrand). Moreover, the vertical merger with either downstream firm is always privately profitable and it is welfare improving for large innovations: this implies that not all protable mergers should be rejected. We contribute to the literature on optimal licensing of product innovations as well as to the literature on the competitive effects of
vertical integration
Asymmetric Complements in a Vertically Differentiated Market: Competition or Integration?
Full text linkWe study the effects of integration of asymmetric complements when they are vertically differentiated. While confirming the standard effects of integration, namely the internalization of the double marginalization externality and the reduction of competition, we point out a new positive quality effect, due to an increase in the average quality of the goods on sale. We also characterize the conditions under which integration turns out to be optimal for both firms' and consumers. We thus provide valuable directions for competition agencies when considering the joint ownership in vertically differentiated markets
Compatibility choice in vertically differentiated technologies
No full textWe analyse firms' incentives to provide two-way compatibility between two network goods with different intrinsic qualities. We study how the relative importance of vertical differentiation with respect to the network effect influences the price competition as well as the compatibility choice. The final degree of compatibility allows firms to manipulate the overall differentiation. Under weak network effect, full compatibility may arise: the low quality firm has higher incentives to offer it in order to prevent the rival from dominating the market. Under strong network effect we observe multiple equilibria for consumers' demands. However, in any equilibrium of the full game, coordination takes place on the high quality good which, we assume, always maintains its overall quality dominance
Herd behaviour, strategic complementarities and technology adoption
No full textIn technology adoption, herd behaviour can lead to a suboptimal outcome. An example is given by Choi (1997): it is a model of technology choice under uncertainty where herding arises because of strategic complementarities and risk aversion. It causes a positive experimenting bias against the adoption of a more efficient (in terms of expected value) technology. We introduce in his model an additional element upon which firms base their technology decision: the economic environment. We investigate how this additional source of uncertainty can affect herding and so the efficiency of the technology choice. The result is that, under certain conditions, the experimenting bias decreases and in the limit it is possible to induce firms to experiment with the new technology thus improving social welfare
Turmoil over the crisis: innovation capabilities and firm exit
Full text linkThis work investigates the relationship between the characteristics and survival probabilities of firms, distinguishing between “involuntary” firm exit and exit by merger and acquisition (M&A). More in detail, we study how, and to what extent, innovation capabilities, as proxied by patents and trademarks, are able to shape, together with standard performance variables, the observed dynamics at the firm level. By using comprehensive data on Italian firms from business registers, we separate the administrative procedures leading to “involuntary” exit from those ending up with an event of M&A. We find that while higher productivity is associated with a lower probability of “involuntary” exit, productivity increases the chances of being the target for M&A. As far as intellectual property instruments are concerned, they tend to reduce the probability of both “involuntary” exit and M&A. However, the relative importance of the two instruments differs according to the exit route: patents are more relevant than trademarks in preventing “involuntary” exit, while the opposite is true for M&A. Plain English Summary We investigate firm’s exit after a crisis. Overall innovation plays a positive role, but the relative importance of IP depends on the exit route: patents are more relevant than trademarks against “involuntary” exit, while the opposite is true for M&A. We resort to the virtual universe of Italian limited liability firms from manufacturing, trade, and service to investigate the determinants of firm survival over the period 2010–2014. We scrutinize detailed administrative data on significant events occurring to firms to distinguish between events leading to involuntary exit and to M&A. In addition to the evidence on innovation, our results show that higher productivity decreases the probability of “involuntary” exit, yet productivity increases the chances of being the target for M&A. Taken together, these findings warn against a simplistic perspective on exit: the role of innovation and firm characteristics heavily depends on the exit route
Object-Oriented Bayesian Networks for a Decision Support System for Antitrust Enforcement
No full textWe study an economic decision problem where the actors are two firms
and the Antitrust Authority whose main task is to monitor and prevent firms’
potential anti-competitive behaviour and its effect on the market. The Antitrust Authority’s decision process is modelled using a Bayesian network
where both the relational structure and the parameters of the model are estimated from a data set provided by the Authority itself. A number of economic
variables that influence this decision process are also included in the model.
We analyse how monitoring by the Antitrust Authority affects firms’ strategies about cooperation. Firms’ strategies are modelled as a repeated prisoner’s dilemma using object-oriented Bayesian networks. We show how the
integration of firms’ decision process and external market information can be
modelled in this way. Various decision scenarios and strategies are illustrated
Green monopoly and downward leapfrogging
Full text linkIn this paper we show that environmental consciousness may act as a substitute for environmental regulation. We consider a vertically differentiated duopoly in which the high quality firm pollutes more than the low quality rival. Consumers attach a positive value to the green firm, while stigmatizing the brown one. For relatively high values of this environmental concern, only the green firm is active in the market. When this happens, a downward leapfrogging mechanism takes place, leading to a recursive race to the bottom. At equilibrium, polluting emissions can be reduced to the level established by environmental agencies
Object oriented Bayesian networks for a decision support system
No full textWe study an economic decision problem where the actors are two rms and the Antitrust Authority whose main task is to monitor and prevent rms potential anti-competitive behaviour. The Antitrust Au-
thority's decision process is modelled using a Bayesian network whose relational structure and parameters are estimated from data provided
by the Authority itself. Several economic variables in
uencing this decision process are included in the model. We analyse how monitoring
by the Antitrust Authority aects rms cooperation strategies. These are modelled as a repeated prisoners dilemma using object-oriented Bayesian networks, thus enabling integration of rms decision process and external market information
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