Product Innovation Incentives: Monopoly vs. Competition

Arrow (1962) showed that a secure monopolist (unconcerned with preemption) has a weaker incentive than would a competitive firm to invest in a patentable process innovation. This paper shows that the ranking can be reversed for product innovations. Only the innovator sells the new product, a differentiated substitute for the old. Under alternative market structures considered, the old product is sold only by that same firm (two-product monopoly), only by a different firm (post-innovation duopoly), or in perfect competition. In an asymmetric Hotelling model, the innovation incentive under monopoly is greater than under duopoly if and only if the new product has the higher quality, and is always greater than under perfect competition.

Intercommection Incentives of a Large Network Facing Multiple Rivals

This paper extends Cremer, Rey and Tirole’s analysis of whether a firm with the most installed-base customers, in a market exhibiting network externalities, gains by degrading interconnection with rivals that compete with it for new customers. We allow any number of rivals and consider both tipping equilibria and interior equlibria. Degrading interconnection can yield tipping away from the largest network even if its installed-base share exceeds one half. For all parameter values (including those that admit interior equilibria), a share above one half is necessary but not sufficient to ensure degradation is profitable. Greater scope for market expansion—a lower marginal cost or smaller installed-base relative to potential additional demand—makes profitable degradation less likely.Interconnection, Network Externalities, Exclusion

Beyond price discrimination: welfare under differential pricing when costs also differ

We extend the analysis of monopoly third-degree price discrimination to the empirically important case where marginal costs also differ between markets. Differential pricing then reallocates output to the lower-cost markets, hence welfare can increase even if total output does not, unlike under pure price discrimination. To induce output reallocation the firm varies its prices but---again, unlike under pure price discrimination---with no upward bias in the average price. Due to this price dispersion, differential pricing motivated solely by cost differences will increase consumer surplus (and total welfare) for a broad class of demand functions. We also provide sufficient conditions for beneficial differential pricing in the hybrid case where both demand elasticities and marginal costs differ

Beyond price discrimination: welfare under differential pricing when costs also differ

We extend the analysis of monopoly third-degree price discrimination to the empirically important case where marginal costs also differ between markets. Differential pricing then reallocates output to the lower-cost markets, hence welfare can increase even if total output does not, unlike under pure price discrimination. To induce output reallocation the firm varies its prices but---again, unlike under pure price discrimination---with no upward bias in the average price. Due to this price dispersion, differential pricing motivated solely by cost differences will increase consumer surplus (and total welfare) for a broad class of demand functions. We also provide sufficient conditions for beneficial differential pricing in the hybrid case where both demand elasticities and marginal costs differ

Competitive differential pricing

This paper analyzes welfare under differential versus uniform pricing across oligopoly markets that differ in costs of service. We establish necessary and sufficient conditions on demand properties---cross/own elasticities and curvature---for differential pricing by symmetric firms to raise aggregate consumer surplus, profit, and total welfare. The analysis reveals intuitively why differential pricing is generally beneficial though not always---including why profit can fall, unlike for monopoly---and why it is more beneficial than oligopoly third-degree price discrimination. When firms have asymmetric costs, however, differential pricing can reduce profit or consumer surplus even with `simple' demands such as linear

Phase II Study of Sorafenib in Patients With Advanced Hepatocellular Carcinoma

Purpose This phase II study of sorafenib, an oral multikinase inhibitor that targets Raf kinase and receptor tyrosine kinases, assessed efficacy, toxicity, pharmacokinetics, and biomarkers in advanced hepatocellular carcinoma (HCC) patients. Methods Patients with inoperable HCC, no prior systemic treatment, and Child–Pugh (CP) A or B, received continuous, oral sorafenib 400 mg bid in 4-week cycles. Tumor response was assessed every two cycles using modified WHO criteria. Sorafenib pharmacokinetics were measured in plasma samples. Biomarker analysis included phosphorylated extracellular signal regulated kinase (pERK) in pretreatment biopsies (immunohistochemistry) and blood-cell RNA expression patterns in selected patients. Results Of 137 patients treated (male, 71%; median age, 69 years), 72% had CP A, and 28% had CP B. On the basis of independent assessment, three (2.2%) patients achieved a partial response, eight (5.8%) had a minor response, and 46 (33.6%) had stable disease for at least 16 weeks. Investigator-assessed median time to progression (TTP) was 4.2 months, and median overall survival was 9.2 months. Grade 3/4 drug-related toxicities included fatigue (9.5%), diarrhea (8.0%), and hand–foot skin reaction (5.1%). There were no significant pharmacokinetic differences between CP A and B patients. Pretreatment tumor pERK levels correlated with TTP. A panel of 18 expressed genes was identified that distinguished "nonprogressors" from "progressors" with an estimated 100% accuracy. Conclusion Although single-agent sorafenib has modest efficacy in HCC, the manageable toxicity and mechanisms of action support a role for combination regimens with other anticancer agents

Power, justice, and trust: a moderated mediation analysis of tax compliance among Ethiopian business owners

We explored the moderating roles of legitimate and coercive power held by the tax authority in the relationship between procedural justice, trust in the tax authority, and voluntary tax compliance. Drawing from fairness heuristic theory and the slippery slope framework of tax compliance, we predicted that procedural justice fosters voluntary tax compliance, particularly when legitimate power of the tax authority is low and when coercive power of the authority is high. Moreover, we predicted that these interactive effects are mediated by (cognition-based) trust. Finally, we predicted that coercive power of the tax authority is positively related with enforced tax compliance. The results of a field study among Ethiopian business owners supported most predictions. This research is among the first to integrate social-psychological and deterrence-related factors to understand tax compliance behavior in a developing country