Union structure and incentives for innovation
Abstract In this paper, we consider the effect of union structure on the adoption of innovation in the context of Cournot duopoly. With a market size large enough, we show that the incentive to innovate is higher under a decentralized union structure (with each firm facing its own independent union) than under an industry-wide union. However, for a small market size (or, equivalently, for sufficiently drastic potential innovation), the new technology is more likely to be adopted in the presence of a centralized union. This result goes against the conventional view that unionization harms the incentive to innovate.
Merger policy in innovative industries
We analyze optimal merger policy in R&D-intensive industries with product innovation aiming to improve the quality of products. Our results suggest that a permissive merger policy is rarely optimal in high-tech industries when the antitrust authority considers a welfare standard that balances the impact of mergers on con- sumers’ surplus and firms’ profits. In particular, relative to a benchmark where the effects from R&D are absent, we show that the optimal merger policy should not be substantially more permissive in the presence of those effects from R&D. info:eu-repo/semantics/publishedVersion
BASIC RESEARCH AND DEVELOPMENT IN VERTICAL MARKETS*
This paper considers the role of basic research and development (R&D) investment in vertical markets in which an incumbent owner of a basic technological input faces potential competition. We identify the conditions under which the socially optimal investment in basic research involves entry by new firms. Our main insight is that there is a role for public investment in R&D that appears to have been overlooked in the existing literature. This role draws on the idea that basic R&D adds to the credibility of the threat of the potential development of alternative technologies by reducing their implementation costs.
Excessive vs. insufficient entry in spatial models: When product design and market size matter
Abstract Under spatial product differentiation and product design, we identify conditions for either excessive or insufficient firm entry. We extend previous settings, based on the Salop circular model, to analyze the combined role of positive demand elasticity and endogenous targeted product design. First, we show that, given the number of firms, the equilibrium level of targeted design is either excessive or insufficient, depending on demand elasticity. Second, with free entry, we show that the degree of targeted product design increases with the relative market size and decreases with demand elasticity. Based on these effects, the interplay between demand elasticity and market size yield…
Industrial loans and market structure
Abstract Based on the observation that financing is one of the main obstacles to create new firms, this paper deals with the interactions between the market structure of both the banking sector and the borrowing industries. We consider that firms’ installation costs are financed by means of industrial loans from specialized banks. With endogenous entry in banking activity as well as in the borrowing industry, we find that a natural oligopoly emerges in both sectors if the entry cost in the industrial sector is small enough, relative to the banks’ entry cost.
Competition with targeted product design: Price, variety, and welfare
Abstract We consider the price and welfare effects of competition in targeted product design, in the context of the Salop circle model. Changes in product design lead to demand rotations that set the stage for our analysis. With an exogenous number of firms, we show that the degree of targeted product design tends to increase with the number of firms. Moreover, under reasonable conditions, price-increasing competition takes place, for intermediate levels of the number of firms. This effect is associated with the possibility of lower consumer welfare. With endogenous firm entry, an interesting insight from our analysis is that in some situations an increase in market size or a technological …
Duopoly and Product Design
Competition in product design is considered in the context of a circular duopoly model where each duopolist can choose either a standardized design or a customized version of its product. We examine the circumstances that lead to multiple equilibria, and characterize the type of equilibrium as a function of both the customization costs and the lower bound on the degree of customization. In the welfare analysis, it is shown that the degree of customization offered in equilibrium can be substantially different from the socially optimal level of this variable.