scholarly journals R&D Activities in Oligopoly and Social Welfare

2015 ◽  
Vol 46 (1) ◽  
pp. 134-146 ◽  
Author(s):  
Jacek Prokop ◽  
Bartłomiej Wiśnicki
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Product Market ◽  
Cournot Competition ◽  
Production Costs ◽  
Cost Functions ◽  
Firm Competition ◽  
Research Level ◽  
The Impact ◽  
Total Welfare

Abstract This paper analyzes the impact of R&D activities in an oligopoly on consumer surplus and social welfare. We use a two-stage model to analyze the behavior of duopolists at the research level, and in the final-product market, under the assumption of linear and quadratic cost functions. Three options for firm competition are considered: 1) Cournot competition at both stages; 2) cooperation at the R&D stage and Cournot competition in the final-product market; and 3) cooperation at both stages. Numerical simulations for various levels of R&D spillovers are conducted to analyze the welfare effects of firm decisions. We conclude that for high levels of technological spillovers, total welfare is highest when firms engage in cooperation at the R&D stage, and compete in the final product market, independent of the shape of cost functions. However, the functional form of production costs has a qualitative impact on welfare when firms fully compete.

scholarly journals R&D Networks: Theory, Empirics, and Policy Implications

2019 ◽  
Vol 101 (3) ◽  
pp. 476-491 ◽  
Author(s):  
Michael D. König ◽  
Xiaodong Liu ◽  
Yves Zenou
Keyword(s):  
Nash Equilibrium ◽  
Product Market ◽  
Complete Characterization ◽  
Production Costs ◽  
Policy Implications ◽  
Alliance Networks ◽  
Subsidy Program ◽  
The Impact ◽  
Total Welfare

We analyze a model of R&D alliance networks where firms are engaged in R&D collaborations that lower their production costs while competing on the product market. We provide a complete characterization of the Nash equilibrium and determine the optimal R&D subsidy program that maximizes total welfare. We then structurally estimate this model using a unique panel of R&D collaborations and annual company reports. We use our estimates to study the impact of targeted versus nondiscriminatory R&D subsidy policies and empirically rank firms according to the welfare-maximizing subsidies they should receive.

scholarly journals Trading Away Wide Brands for Cheap Brands

2013 ◽  
Vol 103 (6) ◽  
pp. 2554-2584 ◽  
Author(s):  
Swati Dhingra
Keyword(s):  
Product Innovation ◽  
Innovation Policy ◽  
Product Variety ◽  
Production Costs ◽  
Foreign Competition ◽  
Welfare Gains ◽  
Firm Competition ◽  
Product And Process Innovation ◽  
Product And Process ◽  
The Impact

Firms face competing needs to expand product variety and reduce production costs. Access to larger markets enables innovation to reduce costs. Although firm scale increases, foreign competition reduces markups. Firms' ability to recapture lost markups depends on the interplay between within-firm competition and across-firm competition. Narrowing product variety eases within-firm competition but lowers market share. I provide a theory detailing the impact of trade policy on product and process innovation. Unbundling innovation provides new insights into welfare gains and innovation policy. Product innovation increases welfare beyond standard gains from trade. The relative returns to innovation policy change with trade liberalization. (JEL D24, F13, O31)

scholarly journals Green Innovation and Competition: R&D Incentives in a Circular Economy

Games ◽  
2021 ◽  
Vol 12 (3) ◽  
pp. 68
Author(s):  
Giovanna Bimonte ◽  
Maria Grazia Romano ◽  
Maria Russolillo
Keyword(s):  
Circular Economy ◽  
Product Market ◽  
Production Costs ◽  
Cournot Model ◽  
Green Innovation ◽  
Innovation Project ◽  
Rival Firms ◽  
The Impact ◽  
D Investment ◽  
Disposal Cost

The present paper provides theoretical insights regarding the determinants of firms’ incentives to invest in a Circular Economy. The analysis relies on a Cournot model disaggregating the disposal cost in the production function. In a non-simultaneous sequential game, two risk-neutral firms are endowed with a green innovation project that, if successful, would reduce the overall production costs and implement a Circular Economy. Firms are plagued by asymmetric information about the exact value of the other firm’s innovation. In this setting, the R&D investment in a Circular Economy, by affecting the distribution of production and disposal costs, influences the production decisions of both the innovating and the rival firms. The sign of the impact depends on the firms’ strategy in the product market. Furthermore, the analysis points out that cooperation in R&D of firms competing in the product market reinforces incentives to invest in green innovation. This suggests that governments aimed to advance a Circular Economy should encourage firms’ cooperation.

scholarly journals Dual-Channel Green Supply Chain Decision-Making and Coordination considering CSR and Consumer Green Preferences

2021 ◽  
Vol 2021 ◽  
pp. 1-18
Author(s):  
Xiaochun Chen ◽  
Rui Zhang ◽  
Bo Lv
Keyword(s):  
Supply Chain ◽  
Social Welfare ◽  
Rapid Development ◽  
Consumer Surplus ◽  
Green Supply Chain ◽  
Supply Chain Performance ◽  
Dual Channel ◽  
Green Preferences ◽  
Corporate Social ◽  
The Impact

With the rapid development of the Internet and changes in consumer buying habits, many manufacturers are increasingly relying on online channels to sell their products as opposed to traditional retail channels. In this study, we innovatively investigate the impact of corporate social responsibility (CSR) and consumer green preferences (CGP) on supply chain performance and product green level in the dual-channel green supply chain (DCGSC). Specifically, four models of DCGSC (centralized, independent CSR, cooperative CSR, and collaboration contract) are investigated. Next, we use game theory to investigate the optimal product green level, online and offline selling prices, social welfare, profits of supply chain enterprises, and the whole supply chain under the four models. We give numerical examples to demonstrate the effectiveness and viability of the four models. We find several interesting conclusions. First, increasing the attention to both CSR and CGP by supply chain enterprises is conducive to stimulating innovation and improving product green level. Second, when supply chain enterprises actively execute their CSR, they can reasonably control online and offline selling prices and increase consumer surplus and the profits of whole supply chain and social welfare are increased. Third, it is beneficial to increase the value of supply chain enterprises to enhance CSR within a certain threshold, but when CSR is higher than the threshold, the profitability of supply chain enterprises is weakened. Finally, collaboration contracts are capable of coordinating DCGSC and guaranteeing the profitability of supply chain enterprises.

scholarly journals Pengaruh globalisasi terhadap ketahanan pangan nasional

Agro Ekonomi ◽  
2016 ◽  
Vol 10 (1) ◽  
pp. 1
Author(s):  
Sri Widodo
Keyword(s):  
International Trade ◽  
Food Security ◽  
Social Welfare ◽  
Trade Policy ◽  
Consumer Surplus ◽  
Price Policy ◽  
Domestic Price ◽  
International Trade Policy ◽  
Long Run ◽  
The Impact

The problem on food security in Indonesia began to be interested since the economic crisis as one component of the social security net. Sustainable food security covers: availability of food, accessibility, utilization, stability, self reliance (autonomy) and sustainability. . Hirarchically food security can be at global order, regional, national, local, household and individual. The higher order offbod security is a necessary condition but not sufficient condition for the lower order.Economic theory indicate that there are gains to be made from free trade. increase the efficiency ufresource allocation, and increase welfare of all countries. However, all government, without exception, intervene to varying degrees in the working of natural market prces, with the reason the need to protect infant industry, to ensure food security, to redistribute income, and to enhance income of small producers.The liberalization initiatives culminated in UR agreement and WTO, among others, dismantling of quantitative restriction and subsidies as well as other nontariff barriers, but there were several new thing of antidumping tariff, sanitary and phytosanitary, technical barrier to trade,environment, and genetically modified organism.The impact of trade liberalization on exporter countries, in general, would benefit the producers, decrease the consumer surplus, and increase social welfare except large populated as India and China. The impact of importer countries depend on the policy of each country. Malaysia and Indonesia by decreasing import tariff policy would increase consumer surplus and social welfare but sacrificing the producers/farmers.National food policies consist of international trade policy domestic price policy, and policy on production efficiency. The international trade policy means to protect producers, consumers, and social welfare from the uncertainty of international market especially in the long run. The stabilization of domestic price policy needs inter department coordination and STE to implement. Protection could result inefficiency but it is needed for commodities those are not ready to compete and to protect from unfair trade, to protect farmers and long run food security.

The Unsound Theory Behind the Consumer (and Total) Welfare Goal in Antitrust

2018 ◽  
Vol 63 (4) ◽  
pp. 455-493 ◽  
Author(s):  
Mark Glick
Keyword(s):  
Law And Economics ◽  
Consumer Surplus ◽  
Consumer Welfare ◽  
Business Strategies ◽  
Individual Level ◽  
Compensation Principle ◽  
Original Argument ◽  
The Individual ◽  
The Impact ◽  
Total Welfare

This is the first installment of a two-part commentary on the New Brandeis School (the “New Brandeisians”) in Antitrust. In this first part, I examine why the New Brandeisians are correct to reject the consumer welfare standard. Instead of arguing, as the New Brandeisians do, that the consumer welfare standard leads to unacceptable outcomes, I argue that the consumer or total welfare standard was theoretically flawed and unrigorous from the start. My basic argument is that antitrust law addresses the impact of business strategies in markets where there are winners and losers. For example, in the classical exclusionary monopolist case, the monopolist’s conduct is enjoined to increase competition in the affected market or markets. As a result of the intervention, consumers benefit, but the monopolist is worse off. One hundred years of analysis by the welfare economists themselves shows that in such situations “welfare” or “consumer welfare” cannot be used as a reliable guide to assess the results of antitrust policy. Pareto Optimality does not apply in these situations because there are losers. Absent an ability to divine “cardinal utility” from observations of market behavior, other approaches such as consumer surplus, and compensating and equivalent variation cannot be coherently extended from the individual level to markets. The Kaldor-Hicks compensation principle that is in standard use in law and economics was created to address problems of interpersonal comparisons of utility and the existence of winners and losers. However, the Kaldor-Hicks compensation principle is also inconsistent. Additional problems with the concept of welfare raised by philosophers, psychologists, and experimental economists are also considered. In light of this literature, the New Brandeisians are correct to reject Judge Bork’s original argument for adoption of the consumer welfare standard, but for deeper reasons than they have expressed thus far.

scholarly journals Shared Manufacturing in A Differentiated Duopoly with Capacity Constraints

2022 ◽  
Author(s):  
Junlong Chen ◽  
Chaoqun Sun ◽  
Jiali Liu
Keyword(s):  
Social Welfare ◽  
Market Share ◽  
Product Differentiation ◽  
Consumer Surplus ◽  
Cournot Competition ◽  
Capacity Constraints ◽  
Excess Capacity ◽  
Stackelberg Competition ◽  
Duopoly Model ◽  
Negative Role

Abstract This study sets up a differentiated duopoly model considering capacity constraints and shared manufacturing, investigates the equilibrium results, examines the effects of product differentiation and capacity constraints in three scenarios, and compares the equilibrium outcomes in three cases under Cournot and Stackelberg competition. We find that capacity constraints affect the relationships among product differentiation, equilibrium results, and the market share of enterprises. Shared manufacturing impacts the degree of excess capacity, profits, consumer surplus, and social welfare; however, it may sometimes play a negative role in alleviating excess capacity. Moreover, Cournot competition is a better choice for enterprises with capacity constraints compared to Stackelberg competition.

Ad Blocking

2021 ◽  
Author(s):  
Aleksandr Gritckevich ◽  
Zsolt Katona ◽  
Miklos Sarvary
Keyword(s):  
Consumer Surplus ◽  
Lower Content ◽  
Content Quality ◽  
Advertising Intensity ◽  
Negative Effect ◽  
The Impact ◽  
Positive Effect ◽  
Different Levels ◽  
Total Welfare

In recent years, ad blocking has become a significant threat to advertising-supported content. Adblockers typically negotiate with publishers, allowing some ads to go through in return for a payment, a practice called (partial) whitelisting in the industry. Ad blocking has a direct positive effect on consumers by reducing advertising intensity. On the other hand, the practice clearly hurts publishers and reduces their incentives to invest in content quality. Lower content quality, in turn has an indirect negative effect on consumers. This paper builds an analytic model to explore the net impact of ad blocking on consumers, how it depends on various market characteristics, and how uniformly it affects consumers. The results show that under a broad set of market conditions, total consumer surplus and even total welfare decline under ad blocking. Whereas some consumers are always better off with an ad blocker, for the average consumer, the impact of quality decline is larger than that of ad reduction. The analysis highlights the detrimental role of ad blockers’ current revenue model—in which value is created for the consumers but it is captured from publishers—in decreasing quality, consumer surplus, and total welfare. Analyzing the impact of varying levels of negotiation power between the ad blocker and publisher reveals that full negotiation power is not preferred by the ad blocker. A lower negotiation power allows the ad blocker to commit to less value extraction from the publisher, thereby leading to higher content quality. Additional model extensions show that the main results are robust. In the case of multiple publishers with different levels of competition between them, the strong negative effect of ad blocking on quality holds. This paper was accepted by Juanjuan Zhang, marketing.

The Effects of a Government’s Subsidy Program: Accessibility Beyond Affordability

2020 ◽  
Vol 66 (7) ◽  
pp. 3211-3233
Author(s):  
Ping Xiao ◽  
Ruli Xiao ◽  
Yitian (Sky) Liang ◽  
Xinlei (Jack) Chen ◽  
Wei Lu
Keyword(s):  
Social Welfare ◽  
Government Regulation ◽  
Large Scale ◽  
Consumer Surplus ◽  
Marketing Channel ◽  
Chinese Government ◽  
Subsidy Rate ◽  
Subsidy Program ◽  
The Government ◽  
The Impact

Rural consumers may face not only the challenge of affordability but also the problem of limited accessibility. Can a government’s subsidy program effectively address these issues? This paper examines the impact of a large-scale subsidy program, “Household electrical appliances going to the countryside,” offered by the Chinese government. The government regulation imposes a price subsidy combined with a price ceiling on products in the program. We consider two effects of the subsidy: the retail price is lowered to make the product more affordable to consumers, and manufacturers are encouraged to expand their distribution coverage to make products more accessible to consumers. We build a dynamic model of oligopoly to study how firms adjust their distribution coverage. Conditional on the model estimates, we evaluate the program’s effects on social welfare, consumer surplus, and firms’ market performance and marketing channel decisions through counterfactual analyses. We find that the subsidy program increases social welfare by CNY 0.209 billion, as a result of a subsidy expense of CNY 0.236 billion. When breaking down the impact, we find it increases consumer surplus by CNY 0.184 billion (50%), manufacturers’ profits by CNY 0.125 billion (53%), and manufacturers’ payoffs by CNY 2.5 million (17%). Specifically, 14% (13.2%) of the consumer surplus (firm profit) increases are from changes in distribution coverage, and the rest is from the subsidy (price changes). The program’s return of investment (i.e., social welfare minus subsidy expense), which is negative, however, could be improved by applying a relatively lower subsidy rate. This paper was accepted by Juanjuan Zhang, marketing.

scholarly journals Resource Allocation Among Competing Innovators

2021 ◽  
Author(s):  
Pin Gao ◽  
Xiaoshuai Fan ◽  
Yangguang Huang ◽  
Ying-Ju Chen
Keyword(s):  
Resource Allocation ◽  
Social Welfare ◽  
Consumer Surplus ◽  
Product Market ◽  
Limited Resources ◽  
Trade Off ◽  
Rent Dissipation ◽  
Specific Target ◽  
For Profit ◽  
Innovative Products

Many innovative products are designed to satisfy the demand of specific target consumers; thus, the innovators will inevitably compete with each other in the product market. We investigate how a profit-maximizing principal should properly allocate her limited resources to support the innovations of multiple potentially competing innovators. We find that, as the available resources increase, the optimal diversification of investment may first increase and then decrease. This interesting nonmonotone pattern is driven by a trade-off between the risk of innovation failure and rent dissipation because of competition. Using this framework, we also analyze a nonprofit principal seeking to maximize the total number of successful innovations, the probability of at least one innovator succeeding, consumer surplus, and total social welfare. A nonprofit principal tends to invest more diversely compared with a for-profit counterpart. This paper was accepted by Sridhar Tayur, entrepreneurship and innovation.

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