large scale deployment of renewables for electricity generation comparisons of resource assessments suggest that sufficient renewable energy resources are available to allow for large scale deployment of renewable energy technologies economic analysis identifies barriers to the adoption of renewable energy sources resulting from i market structure ii competition in an uneven playing field and iii various non marketplace barriers however even if these barriers are removed the problem of technology lock out remains the key policy response is strategic deployment coupled with increased r d support to accelerate the pace of improvement through market experience this paper suggests significant contributions from various technologies are possible but does not assess their optimal or maximal market share copyright 2005 oxford university press

environmental policy vs public pressure innovation and diffusion of alternative bleaching technologies in the pulp industry abstract in the late 1980s and early 1990s concern over dioxin in both paper products and wastewater led to the development of techniques that reduced the use of chlorine in the pulp industry both regulatory and consumer pressure motivated this change unlike previous studies we use patent data to examine the evolution of two competing bleaching technologies in five major paper producing countries both of which reduce the use of chlorine in the pulping process the use of patent data allows us to focus on the invention stage however adoption data are also presented and by the end of the 1990s nearly all pulp production in these countries used one of these technologies while previous studies emphasize the importance of regulation for inducing innovation here we find substantial innovation occurring before regulations were in place instead pressure from consumers and the public at large to reduce the chlorine content of paper drove invention prior to the introduction of environmental policies in any of the countries concerned

the impact of the german feed in tariff scheme on innovation evidence based on patent filings in renewable energy technologies abstract over the last two decades feed in tariffs have pushed the massive expansion of electricity from renewable energy sources in germany between 1991 and 1999 feed in tariffs were prescribed through the electricity feed in law the so called stromeinspeisungsgesetz seg at relatively moderate rates from 2000 onwards the seg was replaced by the renewable energy sources act the so called erneuerbare energien gesetz eeg with much higher subsidy rates the rise in subsidies to renewable power generation under the eeg came along with a substantial increase in electricity prices provoking an intense public debate on the benefits of renewable energy promotion in our regression analysis we assess one popular justification for feed in tariffs the demand side effect of induced innovation we find that the innovation impact of the german feed in tariff scheme over the last two decades supports the positive innovation hypothesis however the inducement effect of the feed in tariff scheme under the eeg is not significantly different from that of the seg given the drastic cost of the eeg we caution against the appraisal of the eeg feed in tariff scheme solely on the grounds of its impact on technological innovation

the economics of the internet infrastructure and regulation the purpose of this article is to inform users regulators and economists about the basic economics of the internet focusing on regulation of its infrastructure it defines the internet and describes its development and organization it analyses the regulatory and competition issues associated with conveyance on the internet it then discusses three current puzzles of economic interest while the article reaches several conclusions the overall message is that much more work is needed in this area

competitive non linear pricing and bundling we examine the impact of multiproduct nonlinear pricing on profit consumer surplus and welfare in a duopoly when consumers buy all their products from one firm the one stop shopping model nonlinear pricing leads to higher profit and welfare but often lower consumer surplus than linear pricing by contrast in a unit demand model where consumers may buy one product from one firm and another product from another firm bundling generally acts to reduce profit and welfare and to boost consumer surplus in a more general model where consumers may buy from more than one firm and where consumers have elastic demands for each product nonlinear pricing has ambiguous effects compared with linear pricing nonlinear pricing tends to raise profit but harm consumer surplus when i demand is elastic ii there is substantial product differentiation iii there is substantial heterogeneity in consumer demand iv consumers face substantial shopping costs when visiting more than one firm and v a consumer s brand preference for one product is strongly correlated with her brand preference for another product nonlinear pricing is more likely to lead to welfare gains when i ii iv and v hold but iii does not

does foreign environmental policy influence domestic innovation evidence from the wind industry this paper analyses the relative influence of domestic and foreign demand pull policies in wind power across oecd countries on the rate of innovation in this technology we use annual wind power generation to capture the stringency of the portfolio of demand pull policies in place e g guaranteed tariffs investment and production tax credits and patent data as an indicator of innovation activity we find that wind technology improvements respond positively to policies both home and abroad but the marginal effect of domestic policies is 12 times greater the influence of foreign polices is reduced by barriers to technology diffusion in particular lax intellectual property rights reducing such barriers therefore constitutes a powerful policy leverage for boosting environmental innovation globally

the analytics of the pricing of higher education and other services in which the customers are inputs many services provide outputs that depend partially on the customers as inputs the presence of other customers often contributes to the output experienced by each purchaser higher education is the premier example others are legion we provide a simple model that addresses the questions of competitive pricing and allocative efficiency for these types of services prices that charge customers for what they get on net output minus input from the firm both are competitive and support efficient allocations these prices internalize the apparent external effects of customers on each other few examples of such prices exist in the real world

on the desirability of compatibility with product selection the paper analyses a three stage game where two integrated system suppliers first decide whether to provide compatible system components then choose the product specifications of their two offered components and finally set prices contrary to results with exogenous product characteristics the achievement of compatibility does not improve social welfare here given the assumed distribution of the consumers preferences on the product space consumers losses from the changed product designs under compatibility outweigh the gains from these changes and from the availability of two additional system goods nevertheless one firm ensures compatibility if compatibility costs do not exceed a certain threshold

from fossil fuels to renewables the role of electricity storage abstract electricity storage represents a solution to curb carbon emissions by enabling more use of intermittent renewable energy our goal is to empirically analyze the determinants of innovation in electricity storage and its role in fostering technological innovations in renewable and conventional electricity generation using a global firm level data set of electricity patents from 1963 to 2011 we find that better electricity storage promotes innovation not only in renewable energy but also in conventional technologies specifically our estimates show that an additional storage patent increases the probability to apply for patents in renewable energy and efficiency improving fossil fuel technologies two years from now by 1 09 and 0 65 respectively this implies that improved electricity storage technologies can boost the energy efficiency of conventional fossil fuel fired power plants as well as increase the use of renewable electricity thus the ability of electricity storage to curb carbon emissions depends on the competitiveness of renewable energy against conventional electricity generation and conventional power generation mix as storage increases fossil fuel efficiency and reduces ramping costs

compatibility and bundling of complementary goods in a duopoly this paper presents a simple model of compatibility and bundling in industries where consumers assemble several necessary components into a system that is close to their ideal the authors show that for a wide range of parameters firms will choose to produce compatible components but will offer discounts to consumers who purchase all components from the same firm however firms would be better off if they could commit not to provide such discounts furthermore the equilibrium tends to involve socially excessive bundling finally mixed bundling strategies tend to increase the range of parameters over which socially excessive standardization occurs copyright 1992 by blackwell publishing ltd

the induced innovation hypothesis and energy saving technological change we develop a methodology for testing hicks s induced innovation hypothesis by estimating a product characteristics model of energy using consumer durables augmenting the hypothesis to allow for the ine uence of government regulations for the products we explored the evidence suggests that i the rate of overall innovation was independent of energy prices and regulations ii the direction of innovation was responsive to energy price changes for some products but not for others iii energy price changes induced changes in the subset of technically feasible models that were offered for sale iv this responsiveness increased substantially during the period after energy efficiency product labeling was required and v nonetheless a sizable portion of efficiency improvements were autonomous

product introduction with network externalities the authors study the introduction of a new product in a market with network externalities there is a common presumption that such markets exhibit excess inertia i e that they are biased toward existing products in contrast the authors provide conditions under which equilibrium involves insufficient friction i e a tendency to rush into new incompatible technologies they also analyze the firms incentives to make their products compatible and they show that the firm introducing the new technology is biased against compatibility copyright 1992 by blackwell publishing ltd

demand pull technology push and government led incentives for non incremental technical change abstract rising expectations about future demand for new technologies increase the incentives for investments in innovation by enlarging payoffs to successful innovations how well does this notion of demand pull apply to non incremental technological change when demand is largely attributable to actions by governments in this case inventors of the most important inventions did not respond positively to strong demand pull policies filing of highly cited patents declined precipitously just as demand for wind power created a multi billion dollar market three explanations for this apparent inconsistency with the demand pull hypothesis played a role 1 the rapid convergence on a single dominant design limited the market opportunity for non incremental technical improvements 2 even though the policies implemented were stringent enough to stimulate demand uncertainty in their longevity dampened the incentives for inventions that were likely to take several years to pay off and 3 alternative explanations such as declining r d funding and weakening presidential engagement on energy appear to have been important

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

the performance of us corporations 1981 1994 this study decomposes the performance of us public firms between 1981 and 1994 into year industry corporate focus and firm effects performance is measured by tobin s q accounting profitability and a hybrid measure the results show that firm effects were more important to performance than industry effects although industry effects had a large permanent component corporate focus was not important the stylized facts suggest that competitive advantages that is differences between direct competitors in the same industry were at least as important as industry influences on performance industry influences were more predictable and sustainable than competitive advantages however

desirability of compatibility in the absence of network externalities i compare the incentives firms have to produce individual components compatible with components of other manufacturers instead of systems composed of components that are incompatible with components of competing manufacturers i show that even in the absence of positive consumption externalities network externalities prices and profits will be higher in the regime of compatibility equilibrium total surplus could be higher in either regime both regimes overprovide variety compared to the surplus maximizing solution in today s environment many products are complex specified by a long array of characteristics part of the decision of the firm is to choose if it should break this long array of features into two or more smaller parts and produce the products corresponding to the smaller arrays instead of the product that embodies the full array we will call the products that correspond to these smaller arrays components and the product that corresponds to the full array a system note that components are by their definition complements components produced by different manufacturers are compatible if it is feasible for the consumers to combine them costlessly into a working system in this paper we will assume that there are two components which make up a system we will discuss competition under full compatibility when components produced by all firms are compatible with each other and under incompatibility when no components produced by different firms are compatible and no hybrid systems can exist 2 assuming availability of the same

do consumers search for the highest price oligopoly equilibrium and monopoly optimum in differentiated products markets we develop a model of search among substitutes for the best combination of commodity variant and price in which the structure of search costs is manipulable by the suppliers of these variants e g by joining an existing market or opening a new one we analyze the subgame perfect equilibria arising in a multistage game involving specialized firms choice of entry variant and price and we compare them to a multiproduct monopolist s optimal choice we show that equilibrium prices increase in the number of substitutes sold in one market and that in the situation considered here monopoly increases welfare

complementarity coordination and compatibility the role of fixed costs in the economics of systems abstract we analyze industry equilibrium and incentive to compatibility when goods produced by different producers generate utility only when consumed as component parts of a system we assume the presence of two systems each composed of some basic component and a set of differentiated complementary products the combination of complementarity between the two components of the system and of fixed costs in the production of the complementary product results in a form of network effect we focus on the role played by the size of the fixed costs in the production of the complementary products in determining the size of this system effect and by this means the structure and types of equilibria that may be observed monopolistic or duopolistic symmetric or asymmetric we also highlight the consequence of the same fixed costs for the private and social incentives to render the systems compatible

standardization and the stability of collusion we characterize the interplay between firms decision in terms of product standardization and the nature of their ensuing market behaviour we prove the existence of a nonmonotone relationship between firms decision at the product stage and their intertemporal preferences c 1998 elsevier science s a

why and how to subsidise energy r d lessons from the collapse and recovery of electricity innovation in the uk the uk electricity sector liberalisation was a pioneer in the worldwide reform trend and its reform model and outcomes have been the subject of many studies however lesser known are the effects of privatisation market based reforms and incentive regulation of networks on research and development as well as patenting activities in the sector this paper updates our previous studies of this subject and discusses the recent developments in the innovative activities in the uk electricity sector we find that in recent years the initial absence of support policies and the subsequent decline in innovation efforts in the aftermath of the reform has resulted in efforts towards forming an energy technology and innovation policy although we already observe some positive outcomes from these efforts we discuss whether the balance of the innovation efforts are calibrated appropriately and whether the institutional framework can be further improved to promote long term progress

quality coordination and complementary products this article models the choice of price and quality where products are complementary and components can be provided by either one or two monopolists the firms have to choose price and quality simultaneously but can coordinate in the latter dimension we consider two specifications for the quality of the composite good bottleneck and additive set ups in both cases a single monopolist may produce lower quality as compared to dual ownership if the latter is modelled as a single stage quality and price setting game when separate markets for components of the composite good are added to the model we provide an example where dual ownership leading to higher quality also yields higher consumer surplus but not total welfare than a single monopolist

empirical studies of financial innovation lots of talk little action this paper reviews the extant empirical studies of financial innovation adopting broad criteria we could find only somewhat more than two dozen studies and since some financial innovations are examined by more than one study they cover only seventeen phenomena especially striking is the fact that only two studies offer tests of the broad hypotheses concerning the environmental conditions spurring financial innovation e g regulation taxes unstable macroeconomic conditions and ripe technologies that have been advanced in descriptive articles we offer some tentative conjectures as to why empirical studies of financial innovation are comparatively rare among our suggested culprits is an absence of accessible data we urge financial regulators to undertake more surveys of financial innovation and to make the survey data more available to researchers

local demand pull policy and energy innovation evidence from the solar photovoltaic market in china abstract market demand is an important driver for inducing innovation with many empirical studies supporting the demand induced innovation hypothesis critiques of such studies however emphasize that new empirical evidence that can address existing empirical challenges is needed furthermore existing literature disagrees about whether the locus of demand pull policy matters in this paper we use empirical evidence from the distributed solar photovoltaic pv market in china to address the following questions 1 is there evidence of demand induced innovation 2 does the effect of local demand pull policy differ from the effect of non local demand pull policy on demand induced innovation to address these questions we develop and analyze an original database of pv balance of system bos patents in the distributed pv market filed between 2005 and 2014 in china our results support the demand induced innovation hypothesis and suggest that only local demand significantly induces pv bos innovations in the distributed pv market in china the different effects of local demand and non local demand emphasize the importance of local markets and local policies lending some support to bottom up approaches to clean energy governance

foreclosure of railroad markets a test of chicago leverage theory the possibility of vertical foreclosure arises when at least one firm in a market is vertically integrated and other firms are not for example in the well known alcoa case the production of aluminum ingot is monopolized by a single firm while the aluminum sheet industry is competitive the ingot producer is vertically integrated into sheet rolling nonintegrated sheet rollers are thus dependent for aluminum ingot on their vertically integrated competitor who has a monopoly in the aluminum ingot market 1 foreclosure implies that no transactions among integrated and nonintegrated firms will occur or at least that the quantities exchanged will be less than would occur in the absence of vertically related bargaining power as in the alcoa case the vertically integrated firm can also price squeeze its nonintegrated buyers by raising its price above competitive levels these potential inefficiencies have generated considerable concern in the industrial organization and antitrust literature the long standing legal view which first appeared in the 1911 american tobacco case was

product differentiation in successive vertical oligopolies this is a successive oligopoly model with two varieties of a final product downstream firms choose one variety to sell on a final market upstream firms specialize in the production of one input specifically designed for one variety but they also produce the input for the other variety at an extra cost we show that as more downstream firms choose one particular variety more upstream firms specialize in the input specific to that variety and vice versa multiple equilibria may result and the softening effect of product differentiation on competition might not be strong enough to induce maximal differentiation jel classification l11 l13 l23

network effects software provision and standardization in this paper we examine the software provision decision of software firms the provision decision by software firms determines the value and hence the market share of competing hardware technologies we show how the provision decision by software firms determines whether multiple hardware technologies are supported in equilibrium or whether there is de facto standardization with only one hardware technology supplied with software in equilibrium we show that when consumers place a high value on software variety there is a suboptimal amount of standardization by the market

innovation policy for directing technical change in the power sector this paper discusses policy instruments for redirecting technical change within the electricity sector to mitigate climate change first we unravel the mechanism behind directed technical change explaining why markets may underprovide innovations in expensive renewable technologies in comparison to innovations in energy efficient fossil fuel generators subsequently we characterize technical change in electricity generation technologies stressing the heterogeneity of knowledge spillovers both within and between clean electricity generation technologies we argue that there exists a rationale for a portfolio approach to innovation in the electricity sector i e optimal innovation policies are neither fully generic nor fully specific and they need to be adapted in response to new information learned by the government the existing innovation literature does not however provide a clear cut answer for designing such a policy we compare policy instruments and argue that public r d support to clean technologies either in the form of subsidies or prizes seems to be the prime candidate for implementing non generic innovation policy

compatibility standardization and network effects some policy implications given the dramatic growth of the internet and information technology industries in general and the importance of interconnection in these networks the economics of compatibility and standardization has become mainstream economics in this paper i examine several key policy aspects of standard setting in industries with network effects copyright 2002 oxford university press

how does incompatibility affect prices evidence from atm s if consumers value mix and match combinations of network complements incompatibility between different sellers components should affect prices in atm markets a 1996 governance change exogenously generated such incompatibility by allowing banks to impose surcharges when other banks deposit customers use their atm s in our data incompatibility makes the relationship between deposit account pricing and own atm s more positive and makes the relationship between deposit account pricing and competitors atm s more negative the level effect on prices is positive the pattern of results is more pronounced in high population density markets where customers may care more about atm s

marketing information a competitive analysis selling information that is later used in decision making constitutes an increasingly important business in modern economies jensen jensen fred o 1991 information services congram friedman eds the ama handbook of marketing for the service industries chapter 22 ama com new york 423 443 information is sold under a large variety of forms industry reports consulting services database access and or professional opinions given by medical engineering accounting financial and legal professionals among others this paper is the first attempt in marketing to study competition in the rapidly emerging information sector specifically we are interested in answering the following questions 1 is competition fundamentally different when competing firms sell information rather than traditional goods and services and if yes why 2 what are the implications of such differences for decision makers marketers and regulators 3 can we explain some of the observed marketing strategies in the information industry as such the audience of the paper includes academics as well as professionals who are interested in understanding what is specific about competition in information markets familiarity with the practical implications of such differences and understanding of the mechanisms that drive them is essential for those who are faced with the problem of marketing information to answer the above research questions we build a simple game theoretic model that consists of two firms selling information to a population of consumers who are heterogeneous in their willingness to pay for the quality of information the most important features of the model are the following information products sold by the two firms are modeled as random draws from two normal distributions having equal mean the variances of these distributions and their correlatedness constitute the product attribute space which is assumed to be common knowledge consumers are interested in assessing the mean of the distributions and to do so they can buy the sample from any of the firms or they can buy both samples and combine them to obtain a more accurate estimate quality of information is linked to the accuracy of consumers estimate of the mean which in turn is influenced by the accuracy of each sample as well as by their correlatedness consumers utility depends on the quality of information they purchased on their inherent utility for quality taste and on the total price they paid to acquire information knowing consumer preferences firms simultaneously price their information products the main finding of the paper is that information markets face unique competitive structures in particular the qualitative nature of competition changes depending on basic product characteristics while traditional products and services compete either as substitutes or as complements in the relevant product attribute space information may be one or the other depending on its position within the same product attribute space said differently the nature of competition changes qualitatively with a continuous change in basic product attribute levels the intuition behind this finding is the following when purchasing information consumers facing important decisions may find it beneficial to purchase from several information sellers this is more likely to happen when the reliability of information is low and the sources of information are independent under such conditions information products tend to be complements and as a result competition between sellers is relatively mild in the opposite case when information is reliable and or sellers sources are highly correlated consumers are satisfied after consulting a single source in this case information products are substitutes and sellers tend to undercut one another s prices to induce consumers to choose their brand understanding this discontinuity in competitive structures has important implications for decision makers as very different strategies are optimal under different product characteristics under substitution traditional strategies to avoid competition e g differentiation are recommended when the competing products reliability is generally low they are complements firms are better off accommodating competition in fact we find that a firm may benefit from inviting a competitor finally our findings are also important for regulators of information markets as the literature on complementarity suggests price fixing agreements between firms offering complementary products may benefit firms as well as consumers

intraconnectivity and interconnectivity when value creation may reduce profits this paper analyses firms decisions to provide connectivity to their customers we distinguish between intraconnectivity the ability of one firm s customers to connect to each other and interconnectivity the ability of one firm s customers to connect with another firm s customers the profitability implications of allowing connectivity are not a straightforward consequence of the consumer value of connectivity because connectivity affects not only the customer value but also the intensity of competition by creating or changing network externality we find that if sales are driven by brand switching rather than by category expansion a firm may find it optimal not to provide intraconnectivity even if providing it is not costly and may find it optimal to provide interconnectivity even at a cost exceeding the consumer value of connectivity on the other hand if category expansion is possible providing intraconnectivity may be profitable in this case either the equilibrium intraconnectivity provision may be asymmetric or both firms may find it individually optimal to provide intraconnectivity under certain conditions in the latter case the firms choice of intraconnectivity is a prisoner s dilemma game

do converters facilitate the transition to a new incompatible technology a dynamic analysis of converters abstract this paper analyzes the process of transition in standards between incompatible technologies when converters are available contrary to a common presumption that converters facilitate the transition from an old technology to an otherwise incompatible new technology i find circumstances in which the possibility of transition is blockaded by the existence of converters in the welfare analysis of converters a distinction is made between ex ante and ex post efficiency effects finally i also analyze the equilibrium behavior in the provision of converters and compare it to the socially optimal outcome

network externalities and market segmentation in a monopoly abstract network externalities characterize the consumption of many products in a setting where a monopolist does not price discriminate without externalities we show that presence of network externalities induces the monopolist to price discriminate and segment its market

competition and integration among complements and network market structure this article analyzes the competition and integration among complementary products that can be combined to create composite goods or systems the model generalizes the cournot duopoly complements model to the case in which there are multiple brands of compatible components it analyzes equilibrium prices for a variety of organizational and market structures that differ in their degree of competition and integration the model applies to a variety of product networks including automatic teller machines real estate multiple listing services and airlines crs as well as to nonnetwork markets of compatible components such as computer cpus and peripherals hardware and software and long distance and local telephone services copyright 1992 by blackwell publishing ltd

effects of policies on patenting in wind power technologies abstract this paper explores the effects of policies and other factors driving innovation in wind power technologies in twelve oecd countries over more than two decades patent counts are used as an indicator for innovation the factors considered are generally derived from the systems of innovation literature count data econometric model were used for the estimations the suggest that patenting in wind power technology is positively related to public r d in wind power reflecting supply side policy the stock of wind capacity reflecting learning effects the number of patents per capita reflecting a country s innovative capacity and the share of green party voters reflecting the legitimacy of the technology in particular the presence of production or capacity targets for wind power or renewable energy sources and a stable policy environment reflecting policy process appear to be favourable for patenting wind power technologies these results are robust to various model specifications distributional assumptions and alternative classifications of wind power technologies in the patent search

mix and match compatibility with vertical product dimensions this article considers a duopoly in which each firm produces two components of a system if the components are compatible consumers may mix and match the firms components the system components and consumer tastes are assumed to differ with regard to vertical characteristics in the model one firm may be the quality leader in one or both characteristics moreover a consumer s taste for the quality of one component may be perfectly correlated with or independent of his taste for the quality of the other component it is shown that in all cases the sum of each producer s component prices is weakly higher if the components are compatible the same is true of producer profits

the division of markets is limited by the extent of liquidity spatial competition with externalities liquidity considerations will limit the number of markets in a competitive economy welfare implications are ambigious since liquidity is a positive externality there may be too little liquidity per market at a noncooperative equilibrium and too many markets compared to the surplus maximizing market structure but liquidity is also self reinforcing given an existing equilibrium new markets may not open because nobody wants to use a new market with low liquidity there may be too few markets to achieve efficiency a nondiscriminating monopolist will operate smaller and more numerous markets compared to optimality as well as to the equilibrium of independent auctioneers copyright 1988 by american economic association

strategic incompatibility in atm markets abstract we test whether firms use incompatibility strategically using data from atm markets high atm fees degrade the value of competitors deposit accounts and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes atm profit considered as a stand alone operation the results are consistent with such behavior by large banks but not by small banks for large banks the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base

symmetric equilibrium existence and optimality in differentiated product markets abstract equilibrium existence and optimality are analysed in a market for products differentiated by their variety a game of three stages is analysed firms enter in the first stage choose varieties in the second stage and choose prices in the third stage the existence of subgame perfect equilibria is established at equilibrium products are symmetrically located in the space of characteristics and are offered at equal prices the surplus maximizing solution is characterized and it is shown that surplus maximizing product diversity is lower than the equilibrium one

integrated product architecture and pricing for managing sequential innovation science and technology advances drive firms to continually enhance their product s performance and launch sequentially improving offerings firms face challenges in marketing such improving products to well informed forward looking consumers who anticipate product improvements and seek to delay their purchase timing product design specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence however such an architecture based approach can present new challenges as well and dealing with them requires carefully coordinated cross functional decision making by the firm in this paper we identify and formalize the notion of design inconsistency which refers to the monopolist firm s inability to commit to future product design architectures we find that firms experience design inconsistency even when they are able to commit to future prices and design inconsistency lowers firm profits as well as consumer surplus we then derive a joint product architecture and pricing approach to solve this problem this enables an innovating firm to optimally and in a time consistent manner launch modular upgradable products the modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation this paper was accepted by preyas desai marketing

multi category competition and market power a model of supermarket pricing in many competitive settings consumers buy multiple product categories and some prefer to use a single firm generating complementary cross category price effects to study pricing in supermarkets an organizational form where these effects are internalized we develop a multi category multi seller demand model and estimate it using uk consumer data this class of model is used widely in theoretical analysis of retail pricing we quantify crosscategory pricing effects and find that internalizing them substantially reduces market power we find that consumers inclined to one stop rather than multi stop shopping have a greater pro competitive impact because they generate relatively large cross category effects

consumer myopia standardization and aftermarket monopolization abstract in this paper i show that the standard bertrand competition argument does not apply when firms compete for myopic consumers who optimize period by period i develop the model in the context of aftermarket with overlapping generations of consumers simultaneous product offerings in the primary market and aftermarket establishes a price floor for the primary good this constraint prevents aftermarket rents from being dissipated by the primary market competition duopoly firms earn positive profits despite price competition with undifferentiated products nonetheless government interventions to reinforce aftermarket competition such as a standardization requirement may lead to the partial collapse of the primary market

characterizing the policy mix and its impact on eco innovation a patent analysis of energy efficient technologies abstract this paper provides an empirical investigation of the role played by selected characteristics of the policy mix in inducing innovation in energy efficiency technologies an original dataset covering 23 oecd countries over the period 1990 2010 combines the full set of policies in the energy efficiency domain for the residential sector with data on patents applied over the same period in this specific technological sector the econometric results suggest that when the policy mix is characterised by a more balanced use in demand pull and technology push instruments its positive effects on eco innovation tend to be greater moreover a more comprehensive policy mix is shown to be able to enhance innovation activities for the generation of new energy efficient technologies however the simple addition of an indiscriminate number of simultaneous policy instruments may reduce policy mix effectiveness finally the empirical findings confirm previous evidence on the importance of policy spillover effects and suggest that policy similarity between countries may represent an important aspect to be accounted for in policy mix design

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

technology adoption in the presence of network externalities we analyze technology adoption in industries where network externalities are significant the pattern of adoption depends on whether technologies are sponsored a sponsor is an entity that has property rights to the technology and hence is willing to make investments to promote it key findings include the following 1 compatibility tends to be undersupplied by the market but excessive standardization can occur 2 in the absence of sponsors the technology superior today has a strategic advantage and is likely to dominate the market 3 when one of two rival technologies is sponsored that technology has a strategic advantage and may be adopted even if it is inferior 4 when two competing technologies both are sponsored the technology that will be superior tomorrow has a strategic advantage

anniversary article the strategy field from the perspective of management science divergent strands and possible integration we reflect on the evolution of the strategy field as seen through the window ofmanagement science reflecting the diverse disciplinary roots of strategy research we identify a broad ranging body of work that varies with respect to the assumptions made regarding individual rationality and the level of analysis at which the research is carried out we argue that recent developments begin to delineate a potentially unifying conceptual framework for treating the field s defining questions the conceptual apparatus of evolutionary economics we conclude by laying out important challenges for evolutionary economics if it is to serve as a foundation for both the positive and the normative research agendas of the strategy field

optimal cross licensing arrangements collusion versus entry deterrence this paper analyzes optimal cross licensing arrangements between incumbent firms in the presence of potential entrants the optimal cross licensing royalty rate trades off incentives to sustain a collusive outcome vis a vis incentives to deter entry with the threat of patent litigation we show that a positive cross licensing royalty rate which would otherwise relax competition and sustain a collusive outcome dulls incentives to litigate against entrants our analysis can shed light on the puzzling practice of royalty free cross licensing arrangements between competing firms in the same industry as such arrangements enhance incentives to litigate against any potential entrants and can be used as entry deterrence mechanism

induced innovation and energy prices this paper uses u s patent data from 1970 to 1994 to study the impact of energy prices on energy efficient innovations theories of technological change have focused both on demand side factors which spur innovative activity by increasing the value of new innovations and supply side factors such as scientific advancements that make new innovations possible data on demand side factors are easily obtained but data on supply side factors that influence innovation are not readily available this paper uses patent citations as a measure of the usefulness of the existing base of scientific knowledge citations to previous patents are used to construct productivity estimates which measure the usefulness of the existing stock of knowledge to inventors in a given energy field for any given year these estimates are then combined with data on demand side factors to estimate a model of induced innovation in energy technologies the results indicate that both energy prices and the supply of knowledge have strongly significant positive effects on innovation the paper concludes with a discussion of the implication of this work for environmental policy

durable products time inconsistency and lock in many durable products cannot be used without a contingent consumable product e g printers require ink ipods require songs razors require blades etc for such products manufacturers may be able to lock in consumers by making their products incompatible with consumables that are produced by other firms we examine the effectiveness of such a strategy in the presence of strategic consumers who anticipate the future prices of both the durable product and the contingent consumable under a lock in strategy the manufacturer has pricing power over the contingent consumable which she can use to extract additional rents from higher valuation consumers but such pricing power may also reduce consumers willingness to pay for the durable because it subjects them to being held up with higher consumables prices in the future restricting our attention to linear pricing policies we find that if the manufacturer can commit to shutting down production of her durable after an initial one time sale then competition from another consumable of an appropriately degraded level of quality can benefit the manufacturer by mitigating consumers fears of being held up on the other hand when the manufacturer cannot commit to shutting down production of her durable then her own output of additional durables gives her an incentive to keep consumables prices low and competition in the consumables market is less beneficial this paper was accepted by pradeep chintagunta and preyas desai special issue editors this paper was accepted by pradeep chintagunta and preyas desai special issue editors

self confirming equilibrium rium path of play thus if a self confirming equilibrium occurs repeatedly no player ever observes play that contradicts his beliefs even though beliefs about play at off path information sets need not be correct we characterize the ways in which self confirming equilibria and nash equilibria can differ and provide conditions under which self con firming equilibria correspond to standard solution concepts nash equilibrium and its refinements describe a situation in which i each player s strategy is a best response to his beliefs about the play of his opponents and ii each player s beliefs about the opponents play are exactly correct we propose a new equilibrium concept self confirming equilibrium that weakens condition ii by requiring only that players beliefs are correct along the equilibrium path of play thus each player may have incorrect beliefs about how his opponents would play in contingencies that do not arise when play follows the equilibrium and moreover the beliefs of different players may be wrong in different ways the concept of self confirming equilibrium is motivated by the idea that noncooperative equilibria should be interpreted as the outcome of a learning process in which players revise their beliefs using their observations of previous play suppose that each time the game is played the players observe the actions chosen by their opponents but that players do not observe the actions their opponents would have played at the information sets that were not reached along the path of play then if a self confirming equilibrium occurs repeatedly no player ever observes play that contradicts his beliefs so the equilibrium is self confirming in the weak sense of not being inconsistent with the evidence by analogy with the literature on the bandit problem e g rothschild 1974 one might expect that a non nash self confirming equilibrium can be the outcome of plausible learning processes this point was made by fudenberg and

equilibrium vertical foreclosure the authors formulate a complete but analytically simple equilibrium model of vertical mergers to evaluate the logic of standard vertical foreclosure claims and the criticisms made of those claims the model includes incentives of the integrated firm and unintegrated input suppliers to exclude rivals and the potential holdout problem in this fully specified model vertical foreclosure can emerge in equilibrium copyright 1990 by american economic association

terminal railroad revisited foreclosure of an essential facility or simple horizontal monopoly rollowing the supreme court s 1986 decision in aspen ski there has been a renewed interest in the essential facilities doctrine the doctrine as we understand it is inconsistent with economic theory broadly stated the doctrine says that if assets cannot be economically reproduced by another firm but are economically essential to all producers of some good then all producers of that good should have equal access to the assets the doctrine presumes that the firm controlling such assets will not provide access equally to all firms this problem is thought to be particularly acute in cases where the firm owning the asset is one among a group of competitors needing that asset to produce some other good the case that has been cited as establishing the doctrine and the classic essential facilities case 2 is united states v terminal railroad association of st louis 3 several recent articles4 on this case detail three important propositions

fragmented duopoly a conceptual and empirical investigation where wireline distribution networks compete each network typically has some customers over which it competes and others for which it is the sole provider this paper conceptually and empirically assesses the effects of such competition on market prices demand and service quality for cable television service the results suggest that the effectiveness of competition in lowering prices is contingent on the degree of system overlap in particular in equilibrium an increase in overlap substantially reduces prices the conceptual model of fragmented duopoly developed in the paper may be useful in analyzing emerging competition in other network distribution industries

do policy mix characteristics matter for low carbon innovation a survey based exploration of renewable power generation technologies in germany abstract policy mixes may play a crucial role in redirecting and accelerating innovation towards low carbon solutions thus addressing a key societal challenge towards this end some argue that the characteristics of such policy mixes matter greatly yet with little empirical evidence backing up such claims in this paper we explore this link between policy mix characteristics and low carbon innovation using the research case of the transition of the german electricity system towards renewable energy our empirical insights are based on an innovation survey administered to german manufacturers of renewable power generation technologies which builds on the community innovation survey for our purposes we adjusted the survey to better capture companies perceptions of policy mixes employing a bivariate tobit model we find evidence that companies perceptions regarding the consistency and credibility of the policy mix are positively associated with their innovation expenditures for renewable energies and this positive link intensifies when considering the mutual interdependence of these policy mix characteristics in contrast neither the comprehensiveness of the instrument mix nor the coherence of policy processes were found to be related to innovation expenditures overall these findings suggest that future research on low carbon and eco innovation should pay greater attention to the characteristics of policy mixes rather than focusing on policy instruments only finally our findings indicate a need to consider how policy may be measured in innovation surveys to generate better informed policy advice regarding the greening of innovation

competing compatibility standards and network externalities in the pc software market this paper is an empirical study of the value of four file compatibility standards for transferring data in the personal computer software market the results are that only the lotus file compatibility standard is significant in explaining price variations and it is significant in both the spreadsheet and database management system markets this supports the hypothesis that the personal computer software market exhibits complementary network externalities copyright 1995 by mit press

vertical mergers and market foreclosure ythe model in this paper illustrates three effects of vertical mergers when both stages are oligopolistic and vertically integrated and unintegrated producers coexist first the merging firm increases its final good output second the resulting backward shift in the residual demand curve facing unintegrated final good producers ylowers their demand for the intermediate good third the merged firm withdraws from the intermediate good market the increased concentration pushes the intermediate good price upward which effect dominates depends on market structure under some conditions a vertical merger causes the price of the final good to increase

modeling the evolution of markets with indirect network externalities an application to digital television the usefulness of a technology product for an end user often depends on the availability of complementary software products and services computers require software cameras require film and dvd players require movie programming in order for customers to value the whole product this phenomenon where the demand for hardware products is mediated by the supply of complementary software products is called an indirect network externality indirect network externalities create a two way contingency between the demand for the hardware product and the supply of software products and result in a strategic interdependence between the actions of hardware manufacturers and the actions of software providers indirect network externalities are gaining economic significance in technology markets because hardware and software are typically provided by independent firms and both sets of firms have an incentive to free ride on each others demand creation efforts despite the ubiquity of this phenomenon it has largely been ignored in the marketing science literature we present a conceptual and operational model for the evolution of markets with indirect network externalities the key feature of our framework is to model the market mediated dependence between the actions of hardware manufacturers and software complementors created by the direct dependence of consumer demand for the whole product on the actions of manufacturers as well as complementors in addition we incorporate marketing mix effects on consumer response aswell as heterogeneity in consumer preferences for hardware and software attributes we model consumer response usinga latent class choice model to estimate the complementor response functions we use a modified delphi technique that allows us to convert qualitative response data into quantitative response functions we integrate the consumer and complementor response models to create a simulation modelthat generates forecasts of market shares and sales volumes for competing technologies as a function of marketing mix effects and exogenously specified regulatory scenarios the modeling framework is of interest to new product modelers interested in creating empirical models and decision support systems for forecasting demand in technology markets characterized by indirect network externalities the decision support aspects of the modeling framework should appeal to managers interested in understanding and quantifying the complex interplay between hardware manufacturers and software complementors in the evolution of markets with indirect network externalities we present an application of the modeling framework to the u s digital television industry and use the framework to characterize the competition among analog and digital tv technologies our results suggest that complementor actions play an important role in the acceptance of digital tv technologies in general and high definition television hdtv in particular we find that forecasts that ignore the influence of indirect network externalities would be seriously biased in favor of hdtv we illustrate how the modeling framework can be used to identify and profile customer segments in the digital tv market based on their utility for hardware related features as well as programming related features we also illustrate the decision support capabilities of the modeling framework by evaluating the sensitivity of the forecasts to varying marketing regulatory and complementor response scenarios we derive implications for marketing and public affairs policies of the hardware manufacturers the developments in the digital tv industry generally support our finding that hdtv will be a niche product and will diffuse slower than originally expected due in part to the lack of programming the delays in the introduction of digital tv to the marketplace also suggest that most forecasts for infrastructure intensive technologies like digital tv may be too optimistic simply because they underestimate the delays in agreeing upon technology standards and resolving regulatory debates

open architecture and r d incentives in open systems firms give up their property rights to technologies and permit other companies to use these technologies we ask how an incumbent s architecture choice affects social welfare by altering r d competition among firms more specifically we ask whether an incumbent by adopting an open system can establish its socially inefficient technology as the market standard while an entrant is developing a more efficient technology it is shown that an incumbent has an incentive to preempt an entrant s competing technology by choosing an open system but that the open system might result in a premature market standard

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

why firms may prefer not to price discriminate via mixed bundling abstract we analyze a simple model of joint purchase discounts using a discrete choice framework to characterize consumer choices the model suggests that mixed bundling is more likely to be associated with monopoly this is due to the benefits reaped via price discrimination in a duopoly environment however only pure components pricing may be offered in equilibrium since firms fear the extra degree of competition inherent in mixed bundling

demand pull instruments and the development of wind power in europe a counterfactual analysis renewable energy technologies are called to play a crucial role in the reduction of greenhouse gas emissions since most of these technologies did not yet reach grid parity public policies have been implemented in order to foster their deployment the approach that has been privileged in europe is the demand pull approach that aims at creating a demand for these new technologies and at stimulating their diffusion this paper examines the effect of demand pull policies on the diffusion of onshore wind power technology in six european countries denmark france germany italy portugal and spain in a first step a micro founded model of diffusion is calibrated in order to replicate the observed diffusion of wind power in these six countries in a second step a counterfactual analysis is conducted by investigating several scenarios by taking into account the complex self sustained dynamics of diffusion and the learning spillovers that operate in the wind power sector we can derive several insights about demand pull policies first the impact of a demand pull policy on the diffusion of wind power is determined by the stage at which it comes to support it the effect seems to be stronger at the beginning of the diffusion second international spillovers do operate in the wind power sector these international spillovers however are not strong enough to foster the diffusion of wind power in a country having no demand pull support we can derive from these two statements that a strategy consisting in not implementing any demand pull policy with the expectation that international spillovers will reduce the cost of wind power and foster the diffusion of the technology that then shall become competitive is not a good option for a country targeting a high share of wind power in its energy mix

networks and compatibility implications for antitrust in this paper we draw crucial parallels between the concepts of compatibility and networks and the more traditional concepts of complementarity and vertical relationships we also develop the important distinctions between two way networks and one way networks we then apply our framework to a number of current antitrust issues

subjective games and equilibria applying the concepts of nash bayesian and correlated equilibria to the analysis of strategic interaction requires that players possess objective knowledge of the game and opponents strategies such knowledge is often not available the proposed notions of subjective games and of subjective nash and correlated equilibria replace essential but unavailable objective knowledge by subjective assessments when playing a subjective game repeatedly subjective optimizers converge to a subjective equilibrium we apply this approach to some well known examples including single and multi person multi arm bandit games and repeated cournot oligopoly games journal of economic literature classification numbers c73 and c83

does host market regulation induce cross border environmental innovation this paper evaluates the effect of host country environmental policy stringency on the offshoring of environmental patents for 2000 top world r d performers it is shown that a more stringent environmental regulation triggers both the extensive and intensive margin of patent offshoring in the field of environmental technologies results are robust to various different specifications alternative definitions of innovation offshoring and of regulation restrictions and to the consideration of possible endogeneity of regulation it is suggested inter alia that r d subsidies and non market based regulatory measures are more important than market based instruments as drivers of cross border environmental innovation length 26 pages

renewable energy and politics a systematic review and new evidence abstract this paper reviews the literature in the intersection of renewable energies and politics adopting a multidisciplinary social sciences perspective we begin by analyzing the recent literature dealing with renewable energies and politics illustrating the analysis with bibliometric data the search protocol revealed 853 contributions dated from 1998 then we focus on the 186 contributions approached from a social sciences perspective establishing a taxonomy to classify the contributions into the main issues covered we identify contributions dealing with governance with public acceptance with markets and prices and with political or policy determinants of renewable energies in an empirical application we show that more democratic countries tend to invest more in renewable energies taking into account other determinants e g income energy dependence pollution emissions of this investment

determinants of environmental innovation in us manufacturing industries abstract this paper provides new evidence on the determinants of environmental innovation we employ panel data models to study how environmental innovation by us manufacturing industries responded to changes in pollution abatement expenditures and regulatory enforcement during the period 1983 through 1992 we find that 1 environmental innovation as measured by the number of successful environmental patent applications granted to the industry responded to increases in pollution abatement expenditures however 2 increased monitoring and enforcement activities related to existing regulations did not provide any additional incentive to innovate we also find some empirical evidence that environmental innovation is more likely to occur in industries that are internationally competitive

quality distortion by a discriminating monopolist the standard model of monopolistic imperfect quality discrimination involving consumer self selection has shown that no distortion occurs at the highest quality level while all lower quality levels are degraded in order to maintain profitable market segmentation this result flows from the assumption that consumers with a higher total utility of quality also have a higher marginal utility of quality the paper develops a reasonable model in which the standard assumption is not satisfied and this alternative model yields vastly different conclusions regarding the form of quality distortion in particular quality may be enhanced not degraded to maintain profitable market segmentation copyright 1989 by american economic association

innovation and the international diffusion of environmentally responsive technology abstract new evidence is presented on environmental innovation and diffusion over the 1970s and 1980s at a global level a substantial amount of innovations occurred in the united states japan and germany the share of environmental patents in all patents varied between 0 6 and 3 and as such was higher than the corresponding share of pollution abatement expenditure in gdp japanese environmental innovation rates were consistently high certain plausible connections between environmental regulation and innovation also emerge across these three countries and over time innovation responded to pollution abatement expenditure an indicator of the severity of environmental regulations environmental patenting rates in developing countries were also high reaching 2 in many years in brazil developing country innovators obtained a non trivial number of patents most of which appear geared towards adapting imported technologies to local conditions however domestic innovation was only one path to new technologies imports of disembodied environmental technologies foreign patents registered in developing countries were substantial foreign patents were typically important or generic patents evidence also suggests that such patents protected intellectual property in equipment exported developing countries especially in east asia often chose to obtain technologies embodied in pollution abatement equipment

environmental policies and risk finance in the green sector cross country evidence abstract this paper provides a detailed description of venture capital investment in the green sector across 29 countries over the period 2005 2010 and identifies the role that policies might play in explaining observed cross country differences the analysis is based on a deal level database of businesses seeking financing combined with indicators of renewable policies and government r d expenditures the econometric analysis relates the number of deals and their volumes in a country to deployment and supply policies using count data and limited dependent variable tobit models the results suggest that both supply side policies and environmental deployment policies designed with a long term perspective of creating a market for environmental technologies are associated with higher levels of venture capital relative to more short term fiscal policies when focusing on policies related to renewable energy generation the results confirm the positive association of generous feed in tariffs fits with venture capital investment however in the solar sector excessively generous fits tend to discourage investment perhaps reflecting a lack of credibility over the longer term thus both sets of results point to long term policy stability sustainability and credibility as important policy features to ensure venture capital backing of innovative and risky ventures in a country s green sector

diversification ricardian rents and tobin s q according to prevailing theory firms diversify in response to excess capacity of factors that are subject to market failure by probing into the heterogeneity of these factors we develop the corollary that firms that elect to diversify most widely should expect the lowest average rents an empirical test with tobin s q as the measure of rents is consistent with this theory

subjective rationality self confirming equilibrium and corporate strategy this paper presents a formal theory of subjective rationality and demonstrates its application to corporate strategy an agent is said to be subjectively rational when decisions are consistent with the available facts and where these are lacking with the agent s own subjective assessments a self confirming equilibrium arises when agents subjectively rational actions generate events that are consistent with their own expectations equilibrium strategies may be suboptimal because certain counterfactual beliefs may be erroneous and yet fail to be contradicted by events observed in equilibrium this weakening of the stronger rationality assumptions inherent in many of the more familiar equilibrium ideas appears well suited to applications in strategy in particular performance advantage may be sustained by a firm when its subjectively rational competitors persistently employ suboptimal self confirming strategies

systems competition and network effects this paper discusses firm behavior market performance and the public and private institutions that arise in systems markets i e markets where consumers use compatible components together to generate benefits in such markets which include communications networks and hardware software networks popular products are inherently more valuable these network effects can drive corporate strategies and are critical in understanding innovation in many high technology markets the discussion here emphasizes the dynamics of consumer adoption decisions in the presence of network effects competition between incompatible systems and how suppliers choose which components are compatible and which are not

inventor networks in renewable energies the influence of the policy mix in germany technological change and gains in efficiency of renewable power generation technologies are to a large extent driven by governmental support various policy instruments that can broadly be categorized as technology push demand pull or systemic constitute part of the policy mix for renewable energies our goal is to gain insights into the influence of this policy mix on the intensity and organization of inventive activities for wind power and photovoltaics in germany since the 1980s we examine the effect of different instruments on the size and structure of co inventor networks based on patent data our results indicate notable differences between the technologies the network size for wind power is driven by technology push and systemic instruments while in photovoltaics demand pull is decisive for network growth by and large the instruments complement each other and form a consistent mix of policy instruments the structure of the networks is driven by demand pull for both technologies systemic instruments increase interaction especially in the wind power network and are complementary to demand pull in fostering collaboration