Review of Industrial Organization最新文献

In the past year, Division economists have contributed to the Division’s many investigations and enforcement actions. This review highlights several of the Division’s enforcement efforts that have confronted issues of labor market competition, as well as a merger challenge that focused on the Division’s theory of harm that would occur before the merger was consummated.

We study a vertically integrated producer (VIP) that supplies a downstream firm under price competition. The VIP may decentralize the final price decision to its downstream unit; the latter thereby ignores the effect of the output price on upstream sales. We find that decentralization benefits the VIP – irrespective of whether the products are substitutes or complements. Decentralization also benefits the consumers when products are substitutes, but it harms them when the products are complements. Interestingly, when products are substitutes, decentralization decreases both output prices despite restoring a double margin on the downstream unit’s sales.

Abstract

Using data on field trial applications, we estimate the lower bounds to concentration in research and development (R&D) activity for genetically modified (GM) cotton and soybean seed markets in the U.S. We find that both crop types exhibit endogenous costs of entry, which implies that firms respond to increases in market size with escalations of R&D investment, so as to improve product quality rather than permit additional firm entry. The implications of these results are that as markets for GM crop varieties become large, market concentration ratios will remain bounded away from perfectly competitive levels. In subsequent analyses, we adjust the measures of R&D concentration according to merger and acquisition (M&A) activity. We find that accounting for M&A activity increases the fitted lower bound to R&D concentration in both GM cotton and soybean seed markets by increasing the observed levels of concentration in small- and medium-sized submarkets for both crops.

This article shows that the usual result of full adoption of a superior technology induced by pure royalty licensing may not hold when firms have different production technologies. By modeling a Cournot licensing game with an external innovator that offers per-unit royalty contracts to downstream firms, this article shows that full adoption of the innovation occurs only if (1) the new technology is sufficiently more efficient than the best one that is available in the market; or (2) if the firms have similar efficiency levels. Moreover, I disentangle two distinct forces that influence the innovator’s choice: a price effect (PE) and a market share effect (MSE). The former highlights the asymmetry in willingness to pay for the latest technology. The inefficient firms, which benefit the most from the cost-reducing innovation, are willing to pay a higher price to become a licensee than are their efficient rivals. The latter illustrates the innovator’s aim to maximize the volume of royalties that are collected by licensing to many firms. When PE dominates MSE, the patent holder sets a higher royalty rate and attracts fewer, less efficient firms. Otherwise, if MSE dominates, the patent holder reduces the royalty rate and attracts more firms so as to reach as many consumers as possible. From a policy perspective, I show that royalty licensing improves consumer surplus and that the positive effect increases with the number of licensees.

The U.S. Federal Communications Commission (FCC) is responsible for regulation of the communications marketplace and for management of the nation’s non-federal radio spectrum. During the past year, FCC economists have evaluated competitive changes in the satellite marketplace—including an analysis of the recently approved Viasat-Inmarsat and Eutelsat-OneWeb mergers. FCC economists also worked on the novel Broadband Data Collection and developed drive-testing methodologies in several proceedings. Further, FCC economists continued to work on the 988 Suicide & Crisis Lifeline. Finally, FCC economists continued to work on issues in broadcast station ownership.

We develop a bilateral monopoly model with a downstream entrant to examine anticompetitive exclusive supply contracts that prevent the upstream supplier from selling inputs to the downstream entrant. When the entrant is more efficient and needs a lesser amount of the input that is produced by the supplier than does the incumbent, the input demand may not increase significantly following the entry. Therefore, the socially efficient entry does not increase the supplier’s profits significantly, which allows the downstream incumbent to deter socially efficient entry through an exclusive supply contract. This result holds even in the simplest framework, which is composed of a single seller, buyer, and entrant.