crowding in of complementary contributions to public goods firm investment into open source software abstract we present a fairly general model in which firms are competitors in a commercial market segment and can invest into a complementary public good like open source software we show that contrary to standard predictions additional contribution to the public good by the government or a new market entrant can lead to higher investments of all incumbent firms that is a crowding in effect this result occurs if the investment cost function is superadditive we find that government contribution leads to larger crowding in effects than subsidizing market entry if the price elasticity of demand with respect to the private good is large relative to the one with respect to the public good our results are robust to extensions in the timing and the mode of competition

hybrid r d we develop a model of r d collaboration in which individual firms carry out in house research on core activities and undertake bilateral joint projects on non core activities with other firms we develop conditions on the profit functions of the firm under which r d investments in different projects of a firm are complementary we show that this condition is met by standard price and quantity setting oligopoly models we then study the relation between the number of joint projects and investments and profits in this context we identify a second aspect of complementarity equilibrium investments in in house as well as in each joint project are increasing in the number of projects however we find that an increase in number of joint projects of all firms lowers collective profits suggesting the presence of excessive incentives for conducting research

welfare properties of strategic r d investments in hotelling models abstract in linear city models if firms are allowed not allowed to locate outside the linear city they engage in excessive insufficient r d investments from the normative viewpoint this implies that the feasible set of locations drastically affects their investments

on the effects of downstream entry we study the effects of entry in a downstream market where firms e g compaq and ibm cvs and safeway buy an input e g microprocessor grocery items from an upstream supplier e g intel procter gamble and sell their output to consumers we show demand conditions where contrary to conventional wisdom entry of a new downstream firm lowers the downstream market output and increases the consumer price thus consumers may be better off with fewer sellers in such markets we also show that this entry may cause the profit of each incumbent downstream firm to i remain unchanged ii decrease or iii even increase also for a class of widely used demand conditions the supplier s optimal price is shown invariant to the entry exit of its downstream buyer firms we classify all possible effects of downstream entry in terms of fundamental market demand conditions

strategic trade policy intellectual property rights protection and north south trade abstract in this paper we analyze the issue of optimal tariffs when the northern and southern firms compete in quantities in an imperfectly competitive northern market and there are potentially varying degrees of intellectual property rights ipr violation by the south ipr violation is reflected through the leakage of technological knowledge spillovers from the northern to the southern firm creating unit cost reduction it is shown that optimal tariffs in this framework are always higher than in the simple duopoly model since they serve here not only as profit shifting devices but also as instruments that influence domestic innovative activity generate scale economies and countervail the ipr violation of the south the other notable difference from the standard duopoly model is that positive tariffs may be desirable from the world welfare point of view

r d policies trade and process innovation we set up a simple trade model with two countries hosting one firm each the firms invest in cost reducing r d and each government may grant r d subsidies to the domestic firm we show that it is optimal for a government to provide higher r d subsidies the lower the level of trade costs even if the firms are independent monopolies if firms produce imperfect substitutes policy competition may become so fierce that only one of the firms survives international policy harmonization eliminates policy competition and ensures a symmetric outcome however it is shown that harmonization is not necessarily welfare maximizing the optimal coordinated policies may imply an asymmetric outcome with r d subsidies to only one of the firms

efficiency and equity in the producer levy of india india s producer levy scheme has been considered a prime example of government market intervention to depress price incentives for farm producers analysis in this study shows that the scheme increases the average producer price for the short run with inelastic supply in this case significant improvements in income distribution can be obtained with little loss of economic efficiency if the scheme is implemented effectively however if the scheme is applied for the long run it might result in market instability more critically the scheme is likely to have an adverse effect on income distribution in the absence of effective implementation

generic advertising in an asymmetric cournot oligopoly we examine how benefits of mandated generic advertising vary with firm size in an asymmetric cournot oligopoly market generic advertising funded through a mandatory assessment changes demand but also increases firms costs the effect on a firm s profits depends upon the nature of the change in demand and the company s market share situations are identified in which generic advertising 1 disproportionately favors large small firms 2 decreases profits and 3 increases decreases social welfare our findings explain the concerns that are often raised on small firms being disadvantaged by generic advertising we discuss implications for policy and for firms advertising strategies copyright 2010 oxford university press

endogenous formation of coalitions in a model of a race abstract this paper examines the endogenous formation of coalitions among symmetric firms who are racing to innovate a new product or process the probability of success depends on a coalition s research intensity which in turn depends on the r d of member firms forming joint ventures allows firms to maintain a higher research intensity and increase their probability of success we characterize the equilibrium coalition structure when the innovation is drastic as well as non drastic and examine its variation with respect to input spillovers and imperfect appropriability of benefits we also compare equilibrium and efficient coalition structures

unequal treatment of identical agents in cournot equilibrium oligopoly models where prior actions by firms affect subsequent marginal costs have been useful in illuminating policy debates in areas such as antitrust regulation environmental protection and international competition we discuss properties of such models when a cournot equilibrium occurs at the second stage aggregate production costs strictly decline with no change in gross revenue or gross consumer surplus if the prior actions strictly increase the variance of marginal costs without changing the marginal cost sum therefore unless the cost of inducing second stage asymmetry more than offsets this reduction in production costs the private and social optima are asymmetric

antidumping protection and r d competition in recent years antidumping protection has spread throughout the world evidence shows that antidumping often targets r d intensive sectors raising a con cern that it may adversely affect worldwide investments in r d we investigate this issue in a model of reciprocal dumping extended to a two stage game in which two firms first choose r d levels and then compete in prices we find that when a single government institutes antidumping law the protected firm decreases investment in r d while the constrained firm invests more when both governments engage in antidumping actions both firms invest more in r d than under free trade jel classification f12 f13

an experimental analysis of dynamic incentives to share knowledge knowledge sharing arrangements are an important part of the innovation process as they help firms acquire technological capabilities shorten development time and spread risk and cost a question central to the study of knowledge sharing arrangements is the impact of competition on cooperation while cooperation has the benefit of avoiding duplication it may have an adverse effect on the competitive advantage of a leading firm hence firms face a difficult challenge during the innovation process while deciding which components of it if any to carry out in collaboration with other firms this paper reports the results of controlled laboratory experiments which identify how the decision to form research joint ventures changes with both relative progress during the r d process and the intensity of product market competition the design is based on a modified version of erkal and minehart optimal sharing strategies in dynamic games of research and development research paper 1038 university of melbourne department of economics 2008 the results indicate that if expected profits are such that the lagging firms always stay in the race cooperation unravels as firms move forward in the discovery process and as monopoly profits become more attractive these results are generally consistent with the theoretical predictions jel c91 l24 o30 d81

networks of collaboration in oligopoly abstract in an oligopoly prior to competing in the market firms have an opportunity to form pair wise collaborative links with other firms these pair wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms we study the incentives of firms to form links and the architecture of the resulting collaboration network we find that incentives to form links are intimately related to the nature of market competition our analysis also suggests that collaborations are used by firms to generate competitive advantage and that strategically stable networks are often asymmetric with some firms having many links while others have few links or are isolated specifically we show that networks with the dominant group architecture stars and inter linked stars are stable we also present some results on the architecture of socially efficient networks

strategic trade and industrial policy towards dynamic oligopolies we characterise optimal trade and industrial policy in dynamic oligopolistic markets if governments can commit to future policies optimal first period intervention should diverge from the profit shifting benchmark to an extent which exactly offsets the strategic behaviour implied by fudenberg and tirole s animal spirits taxonomy of business strategies without government commitment there is an additional basis for intervention whose sign depends on the strategic substitutability between future policy and current actions we consider a variety of applications to rd spillovers consumer switching costs etc and also extensions to constrained second best policies

the market for knowledge brokers a widely used policy to diminish the market failure on the market for innovations is the provision of rd ii obtaining research proposals iii monitoring the research efforts and iv disseminating the research results it can be expected that creation of such a market yields a better match between demand and supply on the market for r d yields a higher quality research product for a given price and that it increases the dissemination of research results

cost heterogeneity industry concentration and strategic trade policies abstract we show that if domestic firms do not have identical unit costs then the interplay between the herfindahl index of concentration and the elasticity of the slope of the demand curve is of major importance in the determination of optimal trade policies in some cases the direction of optimal policy is reversed

rent seeking and market competition this paper emphasizes that political behavior of interest groups is a result of economic calculation and therefore is affected by the market conditions under which they operate we develop a two stage game to link political and market decision making we find that if unproductive rent seekingdirectly contributes to rent seekers market operations then their lobbying efforts will be excessive if the number of outsiders is relatively large restrained if it is relatively small if rent seekingdirectly impairs rent seekers market operations the above described behavior will be reversed the analysis also reveals that as wasteful rent seeking may increase rent seeker s production cost market competition shifts production from now less efficient rent seekers to their non rent seeking rivals welfare gains from this shift may overshadow the direct waste of influence activities

approximate dynamic programming for lateral transshipment problems in multi location inventory systems abstract companies commonly allocate their inventories across multiple locations based on their historical sales rates however random fluctuations in customer purchases such as those caused by weather conditions and other external factors might cause significant deviations from expected demand leading to excess stock in some locations and stockouts in others to fix this mismatch companies often turn to lateral transshipments e g the movement of stock between locations of the same echelon in this paper we examine multi location inventory systems under periodic review with multiple opportunities for proactive transshipments within one order cycle if stockouts occur demand is lost with no opportunity to backorder the objective of our model is to find an optimal policy that indicates the sources and the destinations of transshipments as well as the number of units to maximise the profit of the network we create a dynamic program that can in principal be solved to optimality using bellman s equation however the size of the state and decision spaces makes it impossible to find the optimal policy for real world sized problem instances thereby we use forward approximate dynamic programming to find a near optimal transshipment policy finally we conduct an extensive numerical study to gauge the performance of our transshipment policy for small size instances we compare our policy to the optimal one for larger scale instances we consider other practically oriented heuristics our numerical experiments show that our proposed algorithm performs very well compared to state of the art methods in the literature

cross border acquisitions and taxes efficiency and tax revenues we develop a theoretical oligopoly model to study how international differences in profit and capital gains taxes affect foreign acquisitions reductions in foreign profit taxes tend to trigger inefficient foreign acquisitions while reductions in foreign capital gains taxes may trigger efficient foreign acquisitions foreign acquisitions can increase domestic tax revenues even when profit taxes are evaded the reason is that bidding competition between foreign firms ensures that all benefits from the acquisition including tax advantages are captured by a domestic seller paying capital gains taxes tax code issues such as the treatment of goodwill are shown to affect the pattern of foreign acquisitions jel classification f23

the closed loop effect and the profitability of horizontal mergers we study the profitability of horizontal mergers in a dynamic competition context with sticky prices it is shown that when firms use open loop strategies a merger is profitable only if the share of the market that merges is significant enough in the case where firms use closed loop strategies we provide a method to conduct analytically the study of the profitability of horizontal mergers we first prove the existence of an equilibrium of the game when a subset of firms merges when firms use feedback strategies mergers are profitable even when the share of the market that

cooperative and noncooperative r d in experimental duopoly markets abstract we analyze the relation between technological spillovers and r d cooperation in a duopoly experiment based on the well known model of d aspremont and jacquemin for scenarios without and with full spillovers two noncooperative treatments are run one without and one with non binding communication possibilities and one cooperative treatment with binding contract possibilities we find that without technological spillovers binding r d contracts are needed for r d decisions to deviate from the subgame perfect nash r d level towards the cooperative level with full spillovers the possibility of non binding cheap talk may suffice to move closer to r d cooperation

long run effects of public private research joint ventures the case of the danish innovation consortia support scheme subsidized research joint ventures rjvs between public research institutions and industry have become increasingly popular in europe and the us we study the long run effects of such a support scheme that has been maintained by the danish government since 1995 to cope with identification problems we apply nearest neighbor matching and conditional difference in difference estimation methods our main findings are that i program participation effects are instant for annual patent applications and last for three years ii employment effects materialize first after one year and iii there are no statistically significant effects on value added or labor productivity we further show that these overall results are primarily driven by firms that were patent active prior to joining the rjv and that there are no statistically significant effects for large firms the insignificant results we document for large firms coupled with the fact that these type of firms are over represented in many support programs including the one considered here leads us to suggest a rethinking of support policies that often aim at large firms

comparative dynamics in a productive asset oligopoly abstract we build a subgame perfect nash equilibrium of a common property productive asset oligopoly and analyze separately the impact of a change in the implicit growth rate of the asset and a change in the number of firms exploiting the asset we show that the steady state level of asset can be a decreasing function of the asset s implicit growth rate this phenomenon arises when the initial stock of asset is below a certain threshold in the short run we show that firms exploitation rate can be a decreasing function of the implicit growth rate we study the impact of a change in the number of firms that share access to the asset reducing the number of firms can result in the long run in higher industry production in the short run it can result in an increase of the industry s exploitation and a decrease of the level of the asset s stock

existence and uniqueness of cournot equilibrium a contraction mapping approach abstract we provide a new proof of existence and uniqueness of a cournot equilibrium the contraction mapping approach is used equilibrium is characterized in terms of marginal costs the result is useful for applications to two stage games

combined demand and capacity sharing with best matching decisions in enterprise collaboration abstract demand and capacity sharing dcs among entities within a supply network are common practice and have become attractive strategies for competing and non competing supply enterprises ses examples include airlines test and assembly factories and outsourced maintenance and logistics providers the purpose maximize profit and resource utilization enable timely delivery to customers in spite of uncertain market demands and unexpected capacity shortages and maximize the overall stability dcs protocols are defined for the ses with capacity shortage known as demand sharing ses to utilize excess capacities of other ses known as capacity sharing ses thus fulfilling their current customers demand more effectively while eliminating excess inventory of capacity sharing ses these dcs roles vary over time high frequency of dcs decisions could impose additional costs to the collaborative network of ses cnse in terms of transactions negotiations and lateral transshipment of stocks between ses attention must be paid to the inevitable costs of collaboration for dcs best matching bm protocol is proposed to minimize the dcs costs through dynamic matching of ses and customers with respect to the customers demand and ses available capacity to share bm protocol is also applied for finding the best matches between dcs proposals during collaboration negotiations among ses a novel mixed integer programming mip formulation is developed for modeling and analyzing the combined dcs bm decisions the dcs bm model is then validated using the queuing theory it is shown mathematically and through numerical experiments that the dcs bm model 1 outperforms the previous non collaborative models in terms of resource utilization and stability and 2 provides a dominating strategy compared with both collaborative and non collaborative models for optimizing the total cnse profit and service level

tax incidence under imperfect competition comment abstract delipalla and o donnell 2001 contains a formula for the incidence of specific and ad valorem taxes in a conjectural variation oligopoly model with potentially asymmetric firms the formula is incorrect we derive the correct formula and provide a discussion of the error and its implications for empirical studies of pass through

india s food procurement and distribution policy impact on prices and welfare abstract india procures wheat rice and sugar at a price below the market price and sells them in ration shops in the urban areas the rest is sold in the open market various authors including dantwala mellor and hayami et al have claimed that such a policy raises the open market price to such an extent that it leads to an increase in the average price received by farmers they conclude that both farmers and low income urban consumers with access to the ration shops gain while high income urban consumers who buy at the open market price lose we argue in this paper that the above result holds only in a special case and under unrealistic assumptions we examine several alternative cases we find that the impact of the policy on the average price is either negative or ambiguous a negative impact implies that farmers lose from the procurement policy the impact of the policy on the average price is unambiguously negative under rationing and an unsegmented market access by the rich to the ration shops under rationing and market segmentation the impact on the average price is ambiguous unless there is significant queuing at the ration shops in which case the impact is negative the impact is also negative under free trade the inclusion of distribution costs increases the probability that the policy will have a negative impact on the average price

comparative statics for oligopoly a generalized result we perform comparative statics for a general model of asymmetric oligopoly and derive a concise formula for the response of one firm to a marginal change in its rival s strategic variable taking into account the responses of all other firms we obtain the conditions under which the sign of this response coincides with that of the mixed second order partial derivative of the firm s payoff function we then propose a distinction between gross and net strategic relationships i e strategic substitute and complement

strategic incentives for innovations and market competition abstract we consider a principal agent model to provide a general analysis of how risk affects incentives of firms who invest in cost reducing r d and compete in the product market we specify the conditions under which higher risk reduces incentives of all firms we also examine the conditions under which an increase in risk may trigger opposite responses of rivals in the same industry some firms will strengthen while other firms will weaken the incentives provided to their agents this result holds regardless of the mode of competition in the product market cournot or bertrand as long as the rivals r d decisions are strategic substitutes it can generate new empirical implications and can provide an explanation for the lack of strong empirical support in the literature for a negative relationship between risk and incentives we also discuss policy implications regarding the effect of risk on the incentives to innovate and welfare

markets with untraceable goods of unknown quality beyond the small country case when importing durables and nondurables consumers often cannot discern quality prior to purchase if they cannot also identify the individual producer exporters have diminished incentives to produce high quality goods to raise the quality of traded experience goods previous international literature has proposed consolidation of export firms and the imposition of export quotas policies that may be appropriate for tiny taiwan but not a colossus like china we contribute to this literature in three ways first we explicitly model the way in which consumers of experience goods rely on the reviews of previous buyers who in turn rely on the reviews of buyers before them when deciding whether to purchase an experience good second we endogenize the price of any given quality third we assume that firms may exercise market power as we show once the small country assumption is dropped policies advocated in the literature such as the merger of exporters or the imposition of export quotas can have adverse consequences on the profits of domestic exporters and on the welfare of all consumers on the other hand the unilateral imposition of minimum quality standards will increase the profits of domestic exporters while improving the welfare of all consumers

r d networks we develop a model of strategic networks that captures two distinctive features of interfirm collaboration bilateral agreements and nonexclusive relationships our analysis highlights the relationship between market competition firms incentives to invest in r d and the architecture of collaboration networks in the absence of firm rivalry the complete network where each firm collaborates with all others is uniquely stable industry profit maximizing and efficient by contrast under strong market rivalry the complete network is stable but intermediate levels of collaboration and asymmetric networks are more attractive from a collective viewpoint this suggests that competing firms may have excessive incentives to form collaborative links

on the profitability of production perturbations in a dynamic natural resource oligopoly abstract static oligopoly analysis predicts that if a single firm in cournot equilibrium were to be forced to marginally contract its production its profits would fall on the other hand if all the firms were simultaneously forced to reduce their production thus moving the industry towards monopoly output each firm s profit would rise we show that these very intuitive results may not hold in a dynamic oligopoly such as a nonrenewable natural resource oligopoly where the exogenous constraint would take the form of a contraction of the firm s output path over some fixed interval of time there are situations where a firm will gain from being the lone firm constrained in this way and cases where each firm will lose if all the firms in the industry are so constrained thus exactly reversing the conclusions obtained from purely static analysis

environmental policy with endogenous technology from a game theoretic perspective the case of the us pulp and paper industry the merits of different types of regulatory tools in eliminating pollution and at the same time inducing innovation have long been an interest of researchers in both environmental economics and industrial organization although there is a substantial theoretical literature investigating the potential for various environmental policies to attain these dual goals this is a challenging empirical problem because every industry has its own inherent characteristics that play an important role in determining the performance of different regulatory tools the majority of the work to date focuses on pollution abatement while leaving pollution prevention understudied in most of the literature firms are also assumed to be symmetric asymmetries among firms add another degree and level of complexity to their strategic interactions and affect the performance of different regulatory tools this paper investigates the performance of two alternative regulatory tools an emissions performance standard and an emissions tax in reducing pollution and inducing pollution prevention and abatement r d in the us pulp and paper industry we construct a model representing the industry in an asymmetric cournot duopoly framework calibrate the model to disaggregated industry data and run scenarios to replicate the behavior of the firms in an imperfectly competitive output market our results suggest that pollution prevention r d can respond quite differently than abatement r d to different policy instruments the results indicate that r d spillovers among firms play crucial role in technology development and strategies of the firms our results also suggest that strategic interactions between firms in an imperfectly competitive industry can have significant impacts of the levels of both types of r d

plan and market in china s agricultural commerce this article examines interactions between markets and state commercial planning in the context of china s agricultural sector it begins with a discussion of recent trends in agricultural planning and commerce in china and then presents a theoretical model that analyzes the way that a mixed commercial system of the sort observed in china functions the theoretical analysis suggests that a mixed system is sustainable and can have desirable efficiency and distributional effects markets however limit the range of sustainable plans and in the presence of markets state planning may no longer directly influence production and consumption behavior

r d and endogenous asymmetries between firms abstract we endogenize competitiveness asymmetries between firms through commitment power asymmetries in r d we show that relatively to firms with no commitment power in r d firms with a first mover advantage in r d achieve higher competitiveness levels

distributional consequences of rural food levy and subsidized urban rations abstract governments in many developing countries have imposed food levies on farmers to provide subsidized food to urban consumers the resulting price discrimination between individuals has general equilibrium effects so that the welfare consequences of such a policy for different socio economic groups have been controversial we relate the distributional consequences to the parameters of the economy and identify systematic relationships among different partitions of the outcomes we show for instance that if the policy helps hurts richer city dwellers then it hurts helps poorer farmers

modelling imperfectly appropriable r d via spillovers abstract we provide an extensive comparison of the well known r d models of d aspremont jacquemin and kamien muller zang exposing full or partial conflict in key conclusions and policy prescriptions using a mix of formal and or intuitive criteria we argue that the first model is of questionable validity for large spillover values the latter being characterized by jointly increasing returns to scale in the r d process an argument leading to equivalence between the two r d processes but not to agreement on some key conclusions is exposited in conclusion the models emerge as fundamentally different although a unilateral shift in the cost function of the first leads to agreement in all equilibrium outcomes

export orientation and domestic merger policy theory and some empirical evidence abstract recent open economy industrial organization literature finds export orientation enhances the weight of post merger international competitive gains favouring lenient domestic merger policy however mergers seldom generate the significant synergies supportive of international competitive gains since a joint economies of production effect suggests domestic mergers tend to generate international competitive losses not gains export orientation favours strict not lenient domestic merger policy we show how non synergistic domestic mergers in the presence of international sales might reduce national welfare and incur stringent merger reviews a panel data set of u s merger policy by manufacturing sector 1990 2001 empirically supports export orientation leading to strict merger policy jel classification l40 f10

common ownership market power and innovation abstract i examine the effects of overlapping ownership on market power when there are external effects across firms this is done in an oligopoly model with cost reducing innovation with technological spillovers where firms have an overlapping ownership structure based largely on lopez and vives 2019 the model allows for cournot competition with homogeneous product and for bertrand with differentiated products as well as for strategic effects of r d investment it derives positive testable implications and normative results to inform policy

the relationship between r d collaboration subsidies and r d performance empirical evidence from finland and germany this study focuses on the impact of innovation policies and r d collaboration in germany and finland we consider collaboration and subsidies as heterogeneous treatments and perform an econometric matching to analyze r d and patent activity at the firm level in general we find that collaboration has positive effects in germany subsidies for individual research do neither exhibit a significant impact on r d nor on patenting but the innovative performance could be improved by additional incentives for collaboration for finnish companies public funding is an important source of finance for r d without subsidies recipients would show less r d and patenting activity whilst those firms not receiving subsidies would perform significantly better if they were publicly funded copyright 2007 john wiley sons ltd

mixed oligopoly cost reducing research and development and privatisation abstract we develop a mixed oligopoly model to examine the role of r d subsidies and evaluate the welfare effects of privatisation in solving the oligopoly model we propose a novel use of aggregative games techniques our analysis reveals that privatisation reduces the optimal r d subsidy furthermore privatisation improves social welfare but only when the number of firms is sufficiently large implementing solely a subsidy to r d does not lead to a privatisation neutrality theorem or irrelevance result

windfall profits and vertical relationships who gained in the japanese auto industry from vers this paper employs an event study to analyze the effect of the 1981 voluntary export restraint agreements on profits in the japanese automobile industry stock price movements of seven japanese automakers and sixty nine of their suppliers are examined the results indicate that the profits of japan s producers of passenger cars rose as a result of the voluntary export restraints while only some suppliers large ones and those producing specialized parts or services appear to have shared the benefits voluntary export restraints increased profits for some firms in the japanese auto industry but many suppliers did not share the windfall copyright 1993 by blackwell publishing ltd

idiosyncratic shocks in an asymmetric cournot oligopoly abstract several authors have studied the impact of a marginal cost variation in the cournot model on consumers surplus firms profits and social welfare we unify and extend the results when all marginal costs change simultaneously hence we bring together two strands of literature respectively on mean preserving and subgroup common shocks the effect of any shock is decomposed into two parts an average impact ai and a heterogeneity effect he the former improves welfare if the inverse demand function is concave enough and the market is concentrated enough the latter when the diffusion of the shock is negatively correlated with the market share distribution finally we apply our decomposition to various special cases

firm heterogeneity imitation and the incentives for cost reducing r d effort i develop and test a model of strategic r d investments where innovating and non innovating firms compete on the basis of their ability to reduce costs and imitate rivals i find that a larger proportion of non innovating rivals stimulates cost reducing investments and attenuates the disincentive effect of imitation by innovators on firm level r d key model properties are verified by estimating the first order condition for the optimal choice of r d using the 1994 carnegie mellon survey of u s industrial r d results also suggest that r d and size are simultaneously determined with r d being proportional to size as predicted by the theoretical model

green tax reform in an oligopolistic industry oecd countries reduce or eliminate certain taxes when they introduce new environmental taxes the purpose of this paper is to analyze the incidence of such green tax reform in an oligopolistic industry the paper shows that a rise in taxes could result in the expansion of the aggregate pollution in the presence of a large technology gap the paper further shows that the government loses tax revenue as a result of the green tax reform if it continues to apply the same environmental standard this implies that the government needs to raise environmental standards to keep the existing level of public spending after a green tax reform

cooperative r d under uncertainty with free entry abstract this paper analyzes the effects of cooperative r d arrangements in a model with stochastic r d and output spillovers our main innovation is to allow for free entry in both the r d race and product market moreover in contrast with the literature we assume that cooperative r d arrangements do not have to include all the firms in the industry we show that sharing of research outcomes is a necessary condition for the profitability of cooperative r d arrangements with free entry the profitability of rjv cartels depends on their size subsidies may be desirable in cases of larger rjvs since they are the ones which are less likely to be profitable

divisionalization franchising and divestiture incentives in oligopoly a two stage game is used to model firms strategic incentives to divide production among autonomous competing units through divisionalization franchising or divestiture firms simultaneously choose their number of competing units which then engage in cournot competition while it is costly to form autonomous units each firm does so in equilibrium thus reducing firm profits and increasing social welfare relative to the case where firms cannot form competing units with linear demand and costs duopolists choose the socially optimal number of competing units oligopolies with larger numbers of firms choose too many the case of nonlinear demand is also examined copyright 1996 by american economic association

uncertainty spillovers and cooperative r d abstract this paper extends the literature on cooperative r d in an oligopoly with spillovers the model has three new features it introduces uncertainty focuses on spillover of innovation instead of effort spillover and offers a new definition of the research joint venture rjv the rjv is an arrangement to coordinate r d efforts and also to share the innovation firms form an rjv only if the innovation raises flow industry profit but independently of the speed of spillovers and the degree of uncertainty the model is robust when we allow for licensing the single lab endogenous spillovers and r d effort spillovers

the market selects the wrong firms in the long run we consider the effects of free entry on the market structure and social welfare of an asymmetric cournot oligopoly even if we allow for the existence of different types of firms initially only one type in almost all cases can survive in the long run free entry leads an economy to a symmetric equilibrium in which the excess entry theorem holds further we consider the socially optimal policy for this economy in cases of either i a concave demand which implies strategic substitutability or ii strategic complementarity which implies a convex demand the type of firms that should remain in the market to achieve social optimality does not necessarily coincide with the type of firms that will survive in the long run the market may select not only the wrong number of firms but also the wrong type of firms in the long run

how many franchises in a market abstract this paper studies how firms use their number of franchises as a strategic tool firms can commit to high output by creating many franchises however signing a single franchise contract with a low wholesale price is an equally effective way to generate output the value of granting many franchises is undercut when firms can sign contracts afterwards so firms place only a single franchise in a market this finding reverses previous results which did not model contracts the same issues arise in international competition policy where countries use anti trust policy to affect their number of exporters and use subsidies to affect the choices of exporters

owners incentives during the 2004 05 national hockey league lockout this study shows that firm owners can indirectly benefit from work stoppages if they own other firms in substitute industries and gain market power for those other firms the incentives of the owners are examined with a model of cross ownership cartels and data from professional sports assuming that various professional sport events are substitutes owners may increase profits by eliminating competition even if they own the competition this study shows that the recent national hockey league nhl lockout caused a statistically significant increase in attendance for the national basketball association and junior hockey leagues given that many nhl owners own teams in these substitutable leagues this could be construed as anti competitive behaviour and may have prolonged the nhl lockout and helped nhl owners in collective bargaining given the public investment in sports facilities and market power in professional sports this analysis calls for cross ownership across professional sports to be questioned

beat em or join em export subsidies versus international research joint ventures in oligopolistic markets this paper compares adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in r d and output and because of spillovers each firm benefits from the other s r d when the government can commit to an export subsidy such a policy raises welfare relative to cooperation except when r d is highly effective and spillovers are near complete without commitment however subsidisation may yield welfare levels much lower than cooperation and lower even than free trade though qualifications to the dangers from no commitment are noted

a characterization for the negative welfare effects of cost reduction in cournot oligopoly abstract this paper characterizes the welfare effects of cost reductions in a cournot model with linear costs under linear demand a small reduction in a firm s marginal cost reduces welfare if and only if its market share is less than 1 2n 2 or equivalently its marginal cost exceeds a critical level determined by the market a large cost reduction by the firm increases welfare if and only if its magnitude is at least twice the difference between the current marginal cost and its critical value the paper also extends the results to non linear demand but the characterizations become less tractable

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

price vs quantity competition in vertically related markets generalization abstract this paper generalizes the result of alipranti et al 2014 regarding the wholesale prices i prove that upstream firms always charge the wholesale prices above below their marginal costs in case of bertrand cournot competition downstream alipranti et al 2014 demonstrates this result for the case of linear demand functions and monopolist that sells its product to two retailers i relax the assumption of linear demands allow for arbitrary number of retailers and for the competition upstream

inter firm complementarities in r d a re examination of the relative performance of joint ventures we compare duopoly outcomes between two alternative modes of research and development rd the reverse holds for high spillovers when rjvs yield higher technological improvement they also yield higher industry profit and social welfare

how to order and transship in multi location inventory systems the simulation optimization approach abstract the efficient control of multi location inventory systems with lateral transshipments has become increasingly important however existing models are analytically solvable only under simplifying assumptions there is a variety of heuristics to find approximate solutions but interdependencies between ordering and transshipment decisions for continuous time are not addressed thus we suggest using simulation optimization in our paper we describe a widely adaptable simulation model for mapping highly complex multi location inventory systems with lateral transshipments by applying this model to a special case from the literature and to some examples we show its validity and generality

technology policy and the organization of r d abstract in this study we examine how technology policy in the form of r d subsidies and encouragement of research joint ventures rjvs affects the investment incentives of firms in various types of imperfectly competitive markets we find that joint ventures yield lower research intensities in the absence of subsidies in the presence of optimal subsidy policy higher expected welfare is obtained with rjvs but the optimal policy may also involve a more costly subsidy program the analysis also identifies possible difficulties in implementing socially optimal policies arising from private incentives conflicting with the public interest

optimal and approximate policies in multiperiod multilocation inventory models with transshipments this paper examines the effects on the optimal ordering policy and its cost of allowing for interactions among retail outlets specifically transshipments are allowed as recourse actions occurring after demands are realized but before they must be satisfied the resultant savings in holding and shortage costs are balanced against the costs of transshipment a base stock ordering policy is optimal for this model if the final period base stock order up to point is nonnegative then it will be the base stock order up to point for all periods unfortunately it can be found analytically only for two special cases where either the cost parameters are equal at every outlet or there are only two outlets these two special cases are used to validate a heuristic solution technique employing monte carlo integration which is then compared to an easily calculated base policy in order to gauge the contribution of this model the additional savings from using this heuristic policy are significant particularly for problems with many retail outlets and low transshipment costs

increasing the profits of a subset of firms in oligopoly models with strategic substitutes consider an industry composed of n firms in a symmetric equilibrium designate a subset of s n firms and marginally reduce the strategic variables of the firms in the subset if the remaining firms simultaneously make the best reply to this exogenous displacement under what circumstances will profits of the firms in the designated subset increase we show that in the case of cournot competition among producers of perfect substitutes a marginal contraction is strictly beneficial strictly harmful if and only if the number of firms in the designated subset exceeds the adjusted number of firms outside it by strictly more strictly less than one the adjustment factor is unity when cost and demand functions are linear but more generally depends on the convexity of the cost and demand curves thus a marginal contraction of two firms in a triopoly has no effect on the profits of firms in the subset if cost and demand functions are linear if instead cost is linear but the inverse demand function is strictly concave strictly convex a marginal contraction will strictly decrease strictly increase profits the analysis is extended to the effects of nonmarginal exogenous changes in the outputs of the constrained firms this extension has implications for the relationship of stackelberg sequential move and nash simultaneous move equilibria our analysis has broad application to illustrate we show that it unifies results in the literature on export subsidies horizontal mergers and strikes the paper is organized as follows in section i our comparative static result is derived in section ii we present a wide range of applications in the conclusion and the appendix we generalize our analysis to other situations involving strategic substitutes

the effect of emission taxes and abatement subsidies on market structure abstract emission taxes and abatement subsidies are considered to be efficient measures for environment protection the purpose of this paper is to quantify their effects on industry output firm output and on the number of firms in the industry three types of market structure are under discussion perfect competition oligopoly and a dominant firm with a competitive fringe it turns out that emission taxes and abatement subsidies affect the structure of the polluting industry in opposite ways while the effects on industry s emissions are similar in direction but different

helping minor firms reduces welfare the effect on national welfare of uneven technical progress and eli mination of a firm is analyzed under the existence of a cournot oligopolistic sector an increase in the share of an inefficient firm owing to its innovations results in a shift of production from more efficient firms to the inefficient firm causing a less efficie nt allocation of production it may decrease welfare even though the innovation itself is beneficial conversely policies keeping ineffic ient firms from innovations or eliminating them may increase welfare though they make the market structure more oligopolistic copyright 1988 by royal economic society

voluntary disclosure and investment in environmental technology abstract i examine the role of voluntary disclosure programs in creating market incentives for competing firms to invest in environmentally cleaner technology in an industry subject to environmental regulation such as emission taxes such programs may allow firms to credibly disclose their progress in achieving compliance cost reduction through investments in internal rd the outcome of the investment is private information i show that the ex ante incentive to invest is always higher in the presence of the voluntary disclosure program than without it in particular the opportunity to credibly disclose progress in cost reduction allows a successful firm to convey its true position of competitive advantage to the rival firm and realize higher market share and profit thus voluntary disclosure programs increase the efficacy of traditional forms of environmental regulation in creating incentives for green technological change even when buyers have no preference for greener technology i show that such programs generally increase social welfare

strategic alliances as stackelberg cartels concept and equilibrium alliance structure abstract this paper analyzes incentives of oligopolistic firms to form strategic alliances and the effects of the endogenously derived alliance structure on product market competition a three stage game is considered in the first stage firms decide about forming strategic alliances in the second stage each alliance designs a strategic contract and in the third stage alliance members and outsiders compete in the product market it is shown how contractual terms about transfer prices and profit sharing in a production joint venture for an intermediate product may serve as an appropriate commitment device profits of alliance members and outsiders under different alliance structures are then determined based on this profit structure the alliance formation process is analyzed in a linear cournot oligopoly with at most five firms only one alliance forms and industry output is reduced with more than five firms an alliance structure with at least two alliances results if an equilibrium of the alliance formation game exists and in this case competition is enhanced

cost parametric analysis of lateral transshipment policies in two echelon supply chains abstract in this paper we examine the cost effects of two lateral intra echelon transshipment approaches in a two echelon supply chain network with a single supply source at the higher echelon and multiple retail locations at the lower through a series of simulation experiments under different operating conditions an important finding is that either of the proposed lateral shipment approaches is considerably superior to a policy of no such shipments albeit at the expense of increased transportation activity further an ad hoc emergency transshipment approach appears to be significantly more effective in terms of several important criteria as compared to a more systematic transshipment technique based on stock level equalization

competition and investment a unified approach using a simple but general two stage framework this paper identifies the circumstances under which increasing competition leads to more cost reducing investments the framework can for instance capture increasing substitutability for different types of oligopoly models or changes from cournot to bertrand competition the paper identifies four transmission mechanisms by which competition affects investment for a firm with lower initial marginal costs higher efficiency a positive effect of competition on investment is more likely positive spillovers support a negative effect of competition on investment the relation between competition and investment is not affected in an unambiguous way by the level of pre existing competition

the indian public distribution system as provider of food security evidence from child nutrition in andhra pradesh abstract we study whether a sudden increase of the price of rice supplied by the indian public distribution system in andhra pradesh a large indian state had a negative impact on child nutrition a few months after the price increase a health survey started to record weight for a large sample of children the data collection continued for several months so that children measured later lived for a longer period of time in a less favorable price regime using different estimation techniques we find that longer exposure to high prices are not accompanied by worse nutritional status as measured by weight for age

an index heuristic for transshipment decisions in multi location inventory systems based on a pairwise decomposition in multi location inventory systems transshipments are often used to improve customer service and reduce cost determining optimal transshipment policies for such systems involves a complex optimisation problem that is only tractable for systems with few locations consequently simple heuristic transshipment policies are often applied in practice this paper develops an approximate solution method which applies decomposition to reduce a markov decision process model of a multi location inventory system into a number of models involving only two locations the value functions from the subproblems are used to estimate the fair charge for the inventory provided in a transshipment this estimate of the fair charge is used as the decision criterion in a heuristic transshipment policy for the multi location system a numerical study shows that the proposed heuristic can deliver considerable cost savings compared to the simple heuristics often used in practice

unilateral production restrictions in a dynamic duopoly abstract this paper examines a dynamic game of exploitation of a productive asset by a duopoly a closed loop nash equilibrium of the game is constructed and used to analyze the effects of a unilateral production restriction surprisingly such unilateral action may result in a decrease of the long run asset s stock we also exhibit production restrictions that can result simultaneously in an increase of the asset s stock and the long run profits of the firm that is being imposed the production restriction moreover a unilateral decrease of the production of one firm can induce its rival to also decrease its production

uk industrial policy old tunes on new instruments this paper discusses the current labour government s industrial policy as most recently reflected in its document on manufacturing strategy in the context of industrial policy in the uk over the last 50 years and the form that it has taken elsewhere in europe it concludes that the thematic priorities for uk industrial policy in the 1960s international competitiveness innovation competition and skills continue to be the key themes of uk policy today the paper presents data that illustrate the gaps that exist in key indicators of performance between the uk and its main economic competitors the difference between the 1960s and the 2000s is that there are new instruments of policy two areas in particular are focused on competition policy and technology policy and an attempt is made to assess the likely effectiveness of these new instruments the paper concludes that the international evidence base for these new approaches is reasonably robust but that it is still too soon to tell if they are having the hoped for impact on the performance of the uk economy copyright 2002 oxford university press

voluntary export restraints profits and quality adjustment this paper develops a model of vertical differentiation to assess the impact of output constraints on the profits and quality choices of firms subject to them a competitive environment is developed with the automobile industry in mind multiproduct oligopolists producing differentiated goods who behave as coumot competitors the results show that an output constraint will not induce constrained firms to upgrade their product line when their unconstrained competitors produce higher quality models it is also shown that an output constraint can raise the profits of constrained firms despite output increases by unconstrained firms

public policy towards r d in oligopolistic industries the importance of determining optimal policy towards r d cannot be exaggerated given the worldwide interest in fostering r d and given the significant differences between european and u s policies towards interfirm cooperation on r d moreover the problem is an inherently difficult one because of the complex nature of the r d process since r d is a component of fixed costs industries where it is important tend to be concentrated hence r d policy must go hand in hand with competition policy at the same time r d is like any form of investment in that it precedes the production stage hence issues of time consistency and strategic commitment inevitably arise in considering the choice of r d policy finally r d by one firm typically leads to spillovers wbich benefit other firms so that r d exhibits many of the character department of economics university college dublin belfield dublin 4 ireiatid for helpful discussions and comments we are grateful to two anonymous referees to pedro bartos steve martin massimo motta and damien neven and to participants at seminars in birmingham st andrew s and warwick at a cepr workshop on r d spillovers in lausanne at erwit 94 in caslel gandolfo eea 95 in prague the 1996 conference on industrial economics at universidad carlos iii de madrid and a meeting of the dublin economics workshop this paper was produced as part of the international economic performance programme of the centre for economic performance london school of economics supported by the u k esrc an earlier version was circulated as cepr discussion paper no 1243 see alexis jacquemin 1988 and stephen martin 1996 istics of a public good albeit one that is mostly privately produced tbe degree to which such spillovers occur and can be internalized is another crucial influence on the desirable pattem of intervention