Cross-border merger and domestic welfare

We consider the welfare effect of cross-border merger in presence of international R&D competition. Cross-border merger increases domestic welfare if the bargaining power of the foreign firm and the slope of the marginal cost of R&D are sufficiently low. Otherwise, domestic welfare is lower under cross-border merger.

Knowledge spillover, licensing and patent protection

This paper investigates the effect of different patent regimes on R&D investment and social welfare in a duopoly market with uncertain R&D process. We find that strong patent protection increases R&D investment of at least one firm but whether both firmsí R&D investment will be more under strong patent protection is ambiguous. While ex-ante welfare is more likely to be higher under strong patent protection, ex-post welfare may be higher under strong patent protection. Whether the possibility of licensing increases both firms' R&D investment is also ambiguous. Licensing with up-front fixed-fee can increase policy dilemma by increasing the possibility of higher ex-ante welfare under strong patent protection but higher ex-post welfare under weak patent protection. However, the results may be different for licensing contract with per-unit output royalty.

Advantageous or Disadvantageous Semi-collusion Licensing in a Vertically Separated Industry

This paper compares profits and consumer surplus under non-cooperation and collusion in the product market when the firms have the option for R&D before production. We show that whether R&D investment would be higher under non-cooperation or product market collusion depends on the R\&D productivity. If the market size is sufficiently small then firms are always better off under product market collusion. If the market size is moderate (relatively large) then the firms are better off under non- cooperation (semi-collusion) for sufficiently lower pre-innovation costs of production. We also show that in case of moderate (relatively large) market size, firms are better off under non-cooperation for relatively lower (higher) R&D productivity. However, we find that consumer welfare is always higher under non-cooperation in product market compared to collusion in product market.Entry,Consumer surplus, Collusion, Profit, Uncertain R&D

Excessive entry in a bilateral oligopoly

In a bilateral oligopoly, Ghosh and Morita (‘Social desirability of free entry: a bilateral oligopoly analysis, 2007, IJIO) show that entry is always socially insufficient if the upstream agents have sufficiently strong bargaining power. We show that this conclusion is very much dependent on the use of “efficient bargaining” model in their analysis. Using a “right-to-manage” model, we show that, even if the upstream agents have full bargaining power, entry is excessive in a bilateral oligopoly if the cost of entry is not very high. Hence, whether the anti-competitive entry regulation is justified under bilateral oligopoly depends on the bargaining structure between the upstream and the downstream agents.Bilateral oligopoly; Excessive entry; Free entry; Insufficient entry

Licensing and the Incentive for Innovation

Previous literature has mostly considered R&D and licensing activities separately. In this paper we examine the effect of licensing on R&D and social welfare. We show that the effect of licensing on the incentive for doing R&D is ambiguous and depends on the costs of doing R&D. We also show that the possibility of licensing can change the identity of the innovating firm. However, we find that social welfare is non- decreasing in presence of licensing.Licensing, R&D, Welfare

Optimal licensing contract in an open economy

Empirical evidences show that technology licensing contracts differ significantly and may consist of only up-front fixed-fee, only output royalty or the combinations of fixed-fee and output royalty. We explain these possibilities under international technology transfer. The trade-off between the incentive for saving the transportation cost of exporting and the incentive for reducing competition after licensing is responsible for the results. Our explanation differs from the existing studies where imitation and product differentiation are responsible for different licensing contracts.

Note on a generalized wage rigidity result

Considering Cournot competition, this note shows that, if the firms differ in labor productivities, the equilibrium wage rates under a centralized labor union are not independent of the number of firms and product differentiation if the labor union charges a uniform wage rate. However, if the centralized labor union can discriminate wage rate between the firms, the equilibrium wage rates do not depend on the number of firms and product differentiation. Hence, whether the wage rigidity result of Dhillon and Petrakis (2002) holds with asymmetric firms depends on the wage setting behavior of the labor union. The effects of the number of firms and product differentiation on the equilibrium wage rate are also shown.Asymmetry

Price discrimination in oligopoly with asymmetric firms

We generalize the analyses of Hazledine (2006, “Price discrimination in Cournot-Nash oligopoly”, Economics Letters) and Kutlu (2009, “Price discrimination in Stackelberg competition”, Journal of Industrial Economics) with asymmetric cost firms. We show that the main result of Hazledine, which shows that the average revenue is not dependent on the extent of price discrimination, remains under cost asymmetry but at the industry level. However, the main result of Kutlu, which shows that the Stackelberg leader does not price discriminate at all, does not hold under cost asymmetry. Both the leader and the follower discriminate price under cost asymmetry.Cost asymmetry; Cournot competition; Price discrimination; Stackelberg competition

Product market competition, external economies of scale and unionized wage

Although empirical evidence shows that higher product market competition increases unionized wage, the theoretical literature did not pay much attention to this aspect. We show that the positive relation between product market competition and unionized wage may occur in the presence of external economies of scale. In this respect, the labor productivity and the effects of the external economies of scale may play important roles.competition, external economies of scale, unionized wage