Wednesday, August 17, 2016

Spanish Antitrust Private Enforcement: Enhancing Consumer Collective Redress

Francisco Romero de Avila Ruiz-Peinado, University of York explores Spanish Antitrust Private Enforcement: Enhancing Consumer Collective Redress.

ABSTRACT: Following the decisions of the European Court of Justice in the Courage and Manfredi cases, victims of antitrust practices may seek redress before their national civil courts against the infringing businesses. In Spain, an empirical study on private enforcement of competition law collecting the cases brought before the Spanish courts from 1999 to 2012, it found that, despite the increase of antitrust private enforcement cases in this country in the last decade, only one out of 323 reported cases was brought by consumers. With this in mind, the dissertation aims to find out the reasons of the scarcity of consumer cases in the land of private antitrust enforcement in Spain, in order to palliate this situation.

To this end, this dissertation surveys some of the most successful models in delivering redress across the world, such the US-style of class action or the Dutch Settlement-only opt-out mechanism for mass torts, as well as the proposals recently made in the UK, with the ultimate aim of learning the appropriate measures that can effective and efficiently deliver redress to consumers harmed as a result of anti-competitive practices. In the light of those successful modes, it is noted, argued and concluded that the debate has focused on encouraging group litigation rather than on articulating efficient mechanisms, such as ADR tools, to deliver redress with the involvement of the National Competition Authorities. Based on this premise, two proposals are made: redress schemes voluntarily implemented and certified by the Spanish Competition Authorities on a voluntary basis, and a Public Prosecutor-led collective action articulated on opt-out basis.

August 17, 2016 | Permalink | Comments (0)

The Power of Arbitral Tribunals to Raise Public Policy Rules Ex Officio: The Case of EU Competition Law

Damien Geradin, TILEC, George Mason, Edge Legal discusses The Power of Arbitral Tribunals to Raise Public Policy Rules Ex Officio: The Case of EU Competition Law.

ABSTRACT: Whether arbitral tribunals should be allowed to adjudicate disputes on the basis of legal grounds different from those submitted by the parties is a question that is subject to considerable debate in the international arbitration community. On the one hand, arbitration is a creature of contract and arbitral tribunals should be careful not to exceed the mandate that has been extended to them by the parties. On the other hand, there may be circumstances where the ignorance of certain legal regimes may be fatal to the validity and enforceability of the award, and where the tribunal may thus well be advised to raise the applicability of such regimes even if the parties failed to do so. In order to illustrate the type of circumstances in which arbitral tribunals may be well advised to raise legal grounds on an ex officio basis in order to ensure the validity and enforceability of the award, I refer to contractual disputes where the agreement under scrutiny, which one of the parties is seeking to enforce, may breach EU competition law, which according to the Eco-Swiss judgment of the CJEU belongs to public policy. This paper argues that whether arbitral tribunals should raise EU competition rules on their own motion largely depends on the circumstances of each case and arbitral tribunals should be guided by pragmatism rather than theoretical considerations.



August 17, 2016 | Permalink | Comments (0)

Tuesday, August 16, 2016

The Antitrust and Intellectual Property Intersection in European Union Law

Nicolas Petit, University of Liege provides an overview of The Antitrust and Intellectual Property Intersection in European Union Law.

ABSTRACT:  In European legal scholarship, many articles discuss the equilibrium reached in the case-law of the Court of Justice of the European Union (“CJEU”) when the EU antitrust prohibitions apply to, and restrain, the free and ordinary use of intellectual property rights (“IPRs”). We call this the antitrust-IP intersection. The most interesting feature of this literature is perhaps the common assumption that a unifying substantive perspective, vision or theory on IPR underpins the intersection point reached by the antitrust case-law. Whilst the theory of “absolutism” can be quickly disposed of, several other theories like inherency, exceptionalism or complementarity have been described as the lynchpin of the antitrust-IP intersection. Our paper offers a different reading of the case-law. It submits that the antitrust-IP intersection does not rest on any unitary theory which, in turn, bespeaks the Court’s vision of the social function of IPRs. Instead, the main feature of the CJEU case-law is that a specific methodology is applied to antitrust cases with IPR ramifications. The CJEU deals with most of such cases under a rule-based approach, instead of a standard-based approach. By rule-based approach, we refer to the ex ante setting of structured tests of liability, by opposition to ex post case-by-case resolution on grounds of a pre-determined, general standard (e.g., reasonableness, competition on the merits, efficiency, fairness, equity, etc.). As will be seen below, this approach has many virtues, not least in terms of legal certainty. But it also has a major qualification. Whilst the Court has consistently formulated rules of liability and justifiability at the antitrust and IP intersection, it has at the same time often embedded abstract standards within those rules. The implications of this mixed approach are unclear.



August 16, 2016 | Permalink | Comments (0)

Exclusive Dealing with Costly Rent Extraction

Giacomo Calzolari, University of Bologna, Vincenzo Denicolo, University of Leicester, and Piercarlo Zanchettin, University of Leicester identify Exclusive Dealing with Costly Rent Extraction.

ABSTRACT:  We analyze the impact of exclusive contracts on the intensity of competition among firms that supply substitute products. Exclusive contracts would be neutral if firms priced at marginal cost and extracted buyers' rent by means of non distortionary fixed fees. We focus instead on the case in which rent extraction is costly, and hence firms distort marginal prices upwards. We show that in this case exclusive contracts are anti-competitive when the dominant firm enjoys a large enough competitive advantage over its rivals, and are pro-competitive, or neutral, when the competitive advantage is small. These effects appear as soon as marginal prices are distorted upwards, irrespective of which specific factors impede perfect rent extraction.



August 16, 2016 | Permalink | Comments (0)

The Disclosure of Evidence under the ‘Antitrust Damages’ Directive 2014/104/EU

Anca D. Chirita, Durham University, Durham Law School mentions The Disclosure of Evidence under the ‘Antitrust Damages’ Directive 2014/104/EU.

ABSTRACT: The primary aim of this contribution is to reflect on the principles underpinning the disclosure of evidence under the Directive 2014/104/EU (hereinafter mentioned as the ‘Directive’), namely, the principles of proportionality, effectiveness, equivalence and consistency. Its secondary aim is to review the legislative techniques that the above directive has used in order to codify the previous case law of the European Union (EU) Courts and discuss several recent rulings, including Carglass, Pilkington, Evonik Degussa, Axa Versicherung and others.

The contribution seeks first to locate the scope of the disclosure of evidence by clarifying the meaning and the importance of such evidence and by examining the categories of evidence. It goes on to examine the established rule on the disclosure of evidence in the light of the principle of transparency and its legal exceptions.

Finally, the author draws conclusions on the adequacy of the achieved codification of the previous case law on the disclosure of evidence and access to such evidence, as well as on its potential implications for the Member States.



August 16, 2016 | Permalink | Comments (0)

Complexity of the Effects of Cross Border Merger on Internal Market Under Both Company Law and Competition Law

Charlotte Valentine Ene, Bucharest Academy of Economic Studies notes the Complexity of the Effects of Cross Border Merger on Internal Market Under Both Company Law and Competition Law.

ABSTRACT: The purpose of this paper is to provide an insight into the legal regime of the effect s of cross-border merger on internal market assessed from Company Law and Company law provisions.

On the other hand merger may be analyzed as abuse of market power which affect European trade, qualified as a dominant position by the European Commission and the European Union Court of Justice. Therefore, competition provisions purpose also to remove the barriers to European internal market arising from actions of powerful of single undertakings which enjoy a dominant position in a particular market for good and services. However, the new European legislation would make it easier and much cheaper for undertakings (companies with share capital) to merge with enterprises in other Member States.

August 16, 2016 | Permalink | Comments (0)

Monday, August 15, 2016

Kudos to the 7th Circuit in Clorox for cleaning up bad old Robinson Patman case law

The Robinson Patman Act has been a blemish on US antitrust since its passage.  Luckily, the courts have pushed back on Robinson Patman enforcement for some time (now finding that Robinson Patman Act, like the Sherman Act requires an antitrust injury and also must protect consumers rather than competitors) and neither federal antitrust agency enforces it.  Every once in a while there is a successfully brought Robinson Patman case.  Luckily, on Friday the 7th Circuit in Clorox reversed a bad Robinson Patman district court decision.  Kudos to Judge Diane Wood for a well written opinion that helps clean up some bad case law from the 1940s and 1950s.   

August 15, 2016 | Permalink | Comments (0)

Chinese State Capitalism and Western Antitrust Policy

Nicolas Petit, University of Liege describes Chinese State Capitalism and Western Antitrust Policy.

ABSTRACT:  Enthused by China’s conversion to the free market system in 1978 and its adoption of Western-style market institutions, the world has spent the last few decades turning a blind eye to China’s real “governance” problem: that a shadow Party-State system permeates all branches of the economy. Whatever Washington-consensus style institutions are put in place, whatever State Owned Enterprise (“SOE”) reform is introduced, corporate and market governance occur under the rule of the Chinese Communist Party (“CCP”). And the CCP’s guidebook is the Leninist command that the whole of society shall be run as “single country-wide State syndicate”. This paper contends that China’s syndicated economic organization is akin to a “supertrust”, and that this creates conditions that are conducive to antitrust problems to which the Western world must awaken. In this context, this paper advances that the antitrust regulators of North America, Europe and elsewhere should take two simple, pragmatic steps under merger control and antitrust rules. In merger review, antitrust agencies should treat all SOEs and Privately Owned Enterprises (POEs) with a CCP cell as one unitary group and undertake a thorough competitive assessment of transactions on this basis. In addition, antitrust cases involving Chinese firms should be investigated on the default assumption that there is an underlying coordination scheme among them.



August 15, 2016 | Permalink | Comments (0)

Competition in Retail Electricity Markets: An Assessment of Ten Year Dutch Experience

Machiel Mulder, University of Groningen - Faculty of Economics and Business and Bert Willems, Tilburg University - Department of Economics - CentER & TILEC explore Competition in Retail Electricity Markets: An Assessment of Ten Year Dutch Experience.

ABSTRACT: This paper examines a decade of retail competition in the Dutch electricity market and discusses market structure, regulation, and market performance. We find a proliferation of product variety, in particular by the introduction of quality-differentiated green-energy products. Product innovation could be a sign of a well-functioning market that caters to customer’s preferences, but it can also indicate a strategic product differentiation to soften price competition. Although slightly downward trending, gross retail margins remain relatively high, especially for green products. Price dispersion across retailers for identical products remains high, as also across products for a single retailer. We do not find evidence of asymmetric pass-through of wholesale costs. Overall, the retail market matured as evidenced by fewer consumer complaints and higher switching rates. A fairly intensive regulation of mature energy retail markets appears to be needed to create benefits for consumers.



August 15, 2016 | Permalink | Comments (0)

Competition Law and Enforcement Priorities - UCD Sutherland School of Law Friday, 16 September 2016

The Competition Law Scholars Forum (CLaSF) and UCD Sutherland School of Law (BLREG)

Workshop-“Competition Law and Enforcement Priorities”

At UCD Sutherland School of Law (Belfield, Dublin 4)

on Friday, 16 September 2016



Mandatory prior registration by 9th September at



09:30 – 10.00: Registration

10.00: Introduction: Prof Barry Rodger (CLaSF), Mary Catherine Lucey (UCD BLREG)


Keynote Speaker –Professor William E. Kovacic, George Washington University Law School ’Prioritization, Project Selection and Agency Effectiveness’

10.45-11.15 Coffee


Prioritisation and Article 102:- Chair: Patrick Kenny, Member CCPC

‘Enforcement priorities Paper on Article 102 TFEU: Is a Title Enough to Overtake Constitutional Rules and Fundamental Rule-Of-Law Principles?’, Konstantinos Sidiropoulos, DPhil Candidate, Oxford University; ‘Far Beyond Meaningless: the non-enforcement of exploitative excessive prices’, Carmen Rodilla Marti, PHD Candidate, University of Valencia


Prioritising Enforcement: Commitments and State aid complaints:- Chair: Professor Barry Rodger

‘Commitments: Guidance for a New Enforcement Style’, Stavros Makis, PHD Candidate, Department of Law, EUI, Florence; ‘Prioritisation in state aid control: Filtering out “unwanted” complaints’ Oskar Van Maren, The Asser Institute, the Hague

13:15-14:30 LUNCH

14:30- 15.45

Priorities in Enforcement: A Global and EU Perspective:- Chair: Judge John Cooke

‘Goals, Values and Priorities of Competition Agencies: A View from Practice Around the World’ Julian Nowag, details, Maria Ioannidou details, Prof Ariel Ezrtachi details; ‘The Actual Role of Boosting the EU Competition Law Enforcement powers of NCAs: In Need of a Reframed Formula’ Catalin S. Rusu, Associate professor of European law, Radboud University, Nijmegen

15.45-16:00 Coffee Break


Enforcement priorities in Scotland and Ireland:- Chair: Isolde Goggin, Chairperson CCPC

‘Is there a case for a Scottish Competition Authority? Contrasting Old, New and Regional Competition Enforcement Priorities in large, small and regional EU Economies’ Aiste Selezeviciute, PHD candidate, Edinburgh law School and Zeno Frediano, Solicitors, S and W Edinburgh; ‘An Analytical Review of the Choices/priorities made by Ireland’s Competition Authority/Competition and Consumer Protection Commission 1991-2016’ Dr Vincent Power, Partner, A & L Goodbody, Dublin



17:10-17:30 Closing Address

Dr John Temple Lang

17:30 Closing remarks:

Professor Imelda Maher MRIA, Sutherland Professor of European Law

UCD Sutherland School of Law

Prof Barry Rodger (Clasf)

17.45 Taxis to Central Dublin for bar/restaurant for speakers and participants

Mandatory prior registration by 9th September at

August 15, 2016 | Permalink | Comments (0)

Banking Competition and Economic Stability

Ronald Fischer; Nicolas Inostroza; and Felipe J. Ramirez study Banking Competition and Economic Stability.

ABSTRACT: We study banking competition and stability in a 2-period economy. Firms need loans to operate, and in case of a real shock, a fraction of firms default. Banks bound by capital adequacy constraints lend less and amplify the initial shock. The magnification depends on the intensity of bank competition. The model admits prudent and imprudent equilibria, where banks collapse after shocks. We find existence conditions for a prudent equilibrium. Competition increases efficiency but leads to higher second period variance and makes imprudent equilibria more attractive. We examine the moderating effect of regulation and forbearance. 

August 15, 2016 | Permalink | Comments (0)

Assessing Banking Sector Competition in Zimbabwe Using a Panzar-Rosse Approach

Sanderson Abel & Pierre Le Roux are Assessing Banking Sector Competition in Zimbabwe Using a Panzar-Rosse Approach.

ABSTRACT: This paper assesses the level of competition in Zimbabwe’s banking sector using the Panzar-Rosse H-statistic. The H-Statistic has been assessed, using the total revenues regression equation, and applying the panel least square regression model with fixed effects. The H-statistics is estimated at 0.56, which result is confirmed, using bank random effects and the General methods of moments, yield similar results. The H-statics obtained from the two methods are 0.54 and 0.51 for the random effect and generalised methods of moments, respectively. The results confirm the presence of a monopolistic competition. On an annual basis, the results show that the Zimbabwean banking sector is evolving towards perfect competition. The increased competition was evident through aggressive promotions, increased marketing of banking products, and increased tenure of loans from one year to three years for individuals as banks tried to outclass each other. The study re! commends that the government should desist from tampering with market forces as this reduces the amount of competition.

August 15, 2016 | Permalink | Comments (0)

Do Preferences for Pop Music Converge Across Countries? - Empirical Evidence from the Eurovision Song Contest

Oliver Budzinski, Ilmenau University of Technology and Julia Pannicke, Ilmenau University of Technology ask Do Preferences for Pop Music Converge Across Countries? - Empirical Evidence from the Eurovision Song Contest.

ABSTRACT:  The combination of the digitalization of cultural goods and facilitated cross-border availability through the internet fuels a globalization process that is often said to cause a homogenization of demand across countries, in particular, for entertainment goods as music and movies. In the markets for music, this implies that the same hits and the same artists should be popular across countries and cultures. In order to test this hypothesis, we analyze historical voting data of the Eurovision Song Contest, the worldwide biggest live broadcasted international music competition between all countries of the European Broadcasting Union. It covers the period from 1975-2016 where digitalization and internet availability were invented and evolved into mass phenomena. Consequently, according to the outlined theory of homogenization of preferences, voting should have become more concentrated on the leading artists and less focused on regional differences in taste. For the purpose of detecting concentration trends in the points allocation, we employ different indicators for measuring concentration. First, we calculate a concentration ratio, representing the accumulated total number of points of the top three, five and ten-placed countries in each year of the contest. Second, we calculate the Herfindahl-Hirschman-Index (HHI) and, third, the Gini-Coefficient for each year. Furthermore, we test trendlines for statistical significance. The results show, that our analysis cannot support the thesis of preference homogenization. We find no significant trend towards preference convergence. In contrast, some of the employed indicators and methods point towards significant, albeit weak, deconcentration trends in voting behavior for the contest.



August 15, 2016 | Permalink | Comments (0)

Saturday, August 13, 2016

FTC and DOJ Seek Views on Proposed Update of the Antitrust Guidelines for Licensing of Intellectual Property

From the FTC website:

The Federal Trade Commission and the Department of Justice’s Antitrust Division seek public comment on a proposed update of the Antitrust Guidelines for the Licensing of Intellectual Property, also known as the IP Licensing Guidelines. The IP Licensing Guidelines, which state the agencies’ antitrust enforcement policy with respect to the licensing of intellectual property protected by patent, copyright, and trade secret law and of know-how, were issued in 1995 and are now being updated.

In the past 20-plus years, the IP Licensing Guidelines have served their intended purpose of providing guidance to businesses and the public regarding potential antitrust issues that may arise in the context of intellectual property licenses. In their 2007 joint report entitled Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition (the “Antitrust IP Report”), the agencies reaffirmed the integral role of the IP Licensing Guidelines in their analysis of antitrust and intellectual property issues. With the IP Licensing Guidelines as an analytical tool, the agencies have accumulated additional antitrust enforcement experience and policy expertise in this area. The proposed update announced today reflects this knowledge. It is intended to modernize the IP Licensing Guidelines without changing the agencies’ enforcement approach with respect to intellectual property licensing or expanding the IP Licensing Guidelines to address other topics and areas that are addressed, for example, in the 2007 Antitrust IP Report.

“Licensing is a cornerstone of a strong system of IP rights because it offers one way that firms can maximize the value of their IP and realize an appropriate return on their investment,” said FTC Chairwoman Edith Ramirez. “These updated Guidelines reaffirm our view that U.S. antitrust law leaves licensing decisions to IP owners, licensees, private negotiations, and market forces unless there is evidence that the arrangement likely harms competition.”

“The IP Licensing Guidelines have been invaluable to the department’s investigative and enforcement efforts since they were issued in 1995,” said Acting Assistant Attorney General Renata Hesse, in charge of the Department of Justice’s Antitrust Division. “They have also guided business planning, and they have been cited by courts, in numerous government briefs, business review letters, and policy documents. Although the Guidelines are sound, it is time to modernize them to reflect changes in the law since they were issued.”

In the agencies’ view, the IP Licensing Guidelines remain soundly grounded, as a matter of antitrust law and economics, in three basic principles:

  • The agencies apply the same antitrust analysis to conduct involving intellectual property as to conduct involving other forms of property, taking into account the specific characteristics of a particular property right.
  • The agencies do not presume that intellectual property creates market power.
  • The agencies recognize that intellectual property licensing allows firms to combine complementary factors of production and is generally procompetitive.

Nevertheless, the agencies have determined that some revisions are in order because the IP Licensing Guidelines should accurately reflect intervening changes in statutory and case law. For example, Congress recently enacted the Defend Trade Secrets Act of 2016, creating for the first time a federal cause of action for misappropriation of trade secrets. Also, the change from a 17-year patent term (from the date of grant) to a 20-year patent term (from the date of filing) effectuated by the Uruguay Round Agreements Act of 1994 was on the verge of taking effect when the IP Licensing Guidelines were issued in 1995. Similarly, copyright terms are longer now than when the IP Licensing Guidelines were issued. The proposed updated IP Licensing Guidelines account for these statutory developments. 

Case law developments include the Supreme Court’s decision in Illinois Tool Works, Inc. v. Independent Ink, Inc., in which the Court subscribed to the agencies’ view in the IP Licensing Guidelines that a patent does not necessarily confer market power on the patentee. Another important development is the Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., which held that resale price maintenance (RPM) agreements should be evaluated under the rule of reason, overturning a nearly century-old view of per se illegality. Although Leegin arose in the context of resale price restrictions on goods sold by retailers, the agencies find that its analysis applies equally to pricing restrictions in intellectual property licensing agreements. The IP Licensing Guidelines therefore have been amended to reflect rule-of-reason treatment of vertical price agreements.

The agencies are also updating the IP Licensing Guidelines’ discussion of general principles to reflect the research in the FTC’s 2011 Evolving IP Marketplace report. The agencies also added language to reinforce their longstanding view that “the antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors, in part because doing so may undermine incentives for investment and innovation.”

In addition, the agencies are updating the analysis of markets affected by licensing arrangements to mirror the approach taken in the 2010 Horizontal Merger Guidelines. The IP Licensing Guidelines’ approach to innovation markets has been revised to reflect the agencies’ actual experience with this mode of analysis. The proposed update retains the concept of “innovation markets,” but refers to them as “Research and Development Markets” to more accurately reflect how these markets have been defined in enforcement actions.

The Commission vote approving issuance of the proposed updated IP Licensing Guidelines for public comment was 3-0.

The agencies are interested in receiving comments on the proposed update from interested parties, including attorneys, economists, academics, consumer groups, and the business community. Interested parties may submit public comments to ATR-LPS-IP Guidelines(link sends e-mail) until September 26, 2016. Submitted comments will be made publicly available on the Agencies’ websites.

August 13, 2016 | Permalink | Comments (0)

Friday, August 12, 2016

Banking Consolidation and Small Firm Financing for Research and Development

Andrew Chang examines Banking Consolidation and Small Firm Financing for Research and Development.

ABSTRACT:  This paper examines the effect of increased market concentration of the banking industry caused by the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) on the availability of finance for small firms engaged in research and development (R&D). I measure the financing decisions of these small firms using a balanced panel of Small Business Innovation Research (SBIR) applications. Using difference-in-differences, I find IBBEA decreased the supply of finance for small R&D firms. This effect is larger for late adopters of IBBEA, which tended to be states with stronger small banking sectors pre-IBBEA.

August 12, 2016 | Permalink | Comments (0)

Competition and Bank Liquidity Creation

Liangliang Jiang ; Ross Levine ; and Chen Lin have a paper on Competition and Bank Liquidity Creation.

ABSTRACT:  Does an intensification of competition among banks increase or decrease liquidity creation? By integrating the dynamic process of interstate bank deregulation that lowered barriers to competition across U.S. states over the 1980s and 1990s with the gravity model of the geographic expansion of banks, we construct time-varying measures of the competitive pressures facing each individual bank. We find that regulatory-induced competition reduced liquidity creation. Consistent with some theories, we also find that the liquidity-destroying effects of competition are mitigated among more profitable banks and heightened among smaller banks.

August 12, 2016 | Permalink | Comments (0)

Evidence production in merger control: The role of remedies

Markus Dertwinkel-Kalt and Christian Wey theorize Evidence production in merger control: The role of remedies.  I saw this paper presented at the CRESSE conference - worth downloading!

ABSTRACT: We analyze evidence production in merger control as a delegation problem under an inquisitorial and an adversarial competition policy system. Agents' incentives to produce evidence depend critically on the action set of the decision maker. In an inquisitorial system, allowing ex ante for a compromising remedy reduces incentives when compared with the case in which the merger can be either approved or prohibited. In an adversarial system, no such unambiguous results can be derived because the remedial option is never a best-fit for one of the parties. Comparison of both systems reveals that an adversarial system creates larger incentives when the conflict of interest between the involved parties is large. We relate our results to merger control in the US and the EU.

August 12, 2016 | Permalink | Comments (0)

Thursday, August 11, 2016

Concurrences Conferences in the US

- 120 Merger Regimes: Multinational Deals in a World of Non-Convergence: US, EU, Brazil, China..., co-organized with GW Law School, on Sept. 19, in DC
- The Global Antitrust Economics Conference, co-organized with Northwestern Pritzker School of Law, on Oct. 7, in Chicago
- Competition and Globalization in Developing Economies, co-organized with NYU School of Law, on Oct. 28, in New York.

August 11, 2016 | Permalink | Comments (0)

Subsidizing new technology adoption in a Stackelberg duopoly: Cases of substitutes and complements

Hattori, Masahiko ; Tanaka, Yasuhito are Subsidizing new technology adoption in a Stackelberg duopoly: Cases of substitutes and complements.


Economic growth requires that firms adopt new technologies. However, it may be insufficient in less competitive industries from the social welfare point of view. In this case, a government subsidy is necessary. We present an analysis of firms' adoption of new technology and government subsidization policy in a Stackelberg duopoly with differentiated goods. The technology itself is free, but each firm must expend a fixed set-up cost, such as training employees. There are several cases related to optimal policies depending on the set-up costs and whether the goods are substitutes or complements. In particular, there are two cases. (1) Social welfare is maximized when only the Stackelberg leader adopts the new technology, but no firm adopts the new technology without a subsidy. Then, the government should subsidize only the leader, which is a discriminatory policy. (Case 5 of Theorem 1 and Case 3-(1)-ii of Theorem 2) (2) Social welfare is maximized when both! firms adopt the new technology, but only the leader adopts the new technology without a subsidy. Then, the government should subsidize only the follower. This policy is not discriminatory because adoption is the dominant strategy for the leader. (Case 2 of Theorem 1)

August 11, 2016 | Permalink | Comments (0)

Quantifying the Effects of Patent Protection on Innovation, Imitation, Growth, and Aggregate Productivity

Pedro Bento (Texas A&M University, Department of Economics) is Quantifying the Effects of Patent Protection on Innovation, Imitation, Growth, and Aggregate Productivity.

ABSTRACT: I develop a general equilibrium model in which patent protection can increase or decrease the costs of sequential innovation, original innovation, and imitation. Depending on these relative effects, protection can in theory increase or decrease markups, imitation, innovation, growth, and aggregate productivity. I discipline the model using data from several different sources, and find that weakening protection in the U.S. would lead to no change in markups and imitation, no change in long-run growth, a more than doubling of the number of firms, and an increase in aggregate productivity of 9 percent.

August 11, 2016 | Permalink | Comments (0)