INDUSTRIAL ORGANIZATION AND
THE ECONOMICS OF BUSINESS STRATEGY
Raymond DE BONDT and Jan VANDEKERCKHOVE
Industrial organization (IO) has an important role to play in inspiring the competition and regulation policies of the government. At the same it can be used to clarify the economics of business strategies. The idea here is not to give a comprehensive review, but to draw attention to some striking tendencies, prospects and problems of the field of IO as a source of inspiration for competitive strategies. A first focus will be on credible market strategies and asymmetric information, with implications for internal organization, vertical foreclosure and markets with switching costs. A second point will look at detection of not so obvious possibilities, as there are lower prices with cooperation, disadvantageous mergers, positive side effects for rivals, and disadvantageous price discrimination. Finally some approaches will be discussed to problems concerning high requirements on rationality and lack of robustness. An example will be discussed of a search for robustness in strategic investment models in oligopoly settings with leaders and followers.
Keywords: Industrial Organization, Business Strategies, Asymmetric Information
The Consensus Value for Games in Partition Function
This paper studies a generalization of the consensus value (cf. Ju, Borm and Ruys (2004)) to the class of partition function form games. The concepts and axioms, related to the consensus value, are extended. This value is characterized as the unique function that satisfies efficiency, complete symmetry, the quasi-null player property and additivity. By means of the transfer property, a second characterization is provided. Moreover, it is shown that this value satisfies the individual rationality under a certain condition, and well balances the tradeoff between coalition effects and externality effects. By modifying the stand-alone reduced game, a recursive formula for the value is established. A further generalization of the consensus value is discussed. Finally, two applications of the consensus value are given: one is for oligopoly games in partition function form and the other is about participation incentives in free-rider situations.
JEL classification codes:C71; C72; D43; D62.
Keywords:partition function form games; coalition structure; Shapley value; consensus value
Coordinating R&D Race through Patent Licensing
This paper explores the extend to which patent licensing can internalize the externalities in patent race models which causeexcessive R&D expenditures”. In a variation of Lee and Wilde  model with both ex ante and ex post licensing, the following results are obtained: (i) with ex ante licensing agreement, the Nash equilibrium of the R&D race coincides with the cooperative rate of R&D; (ii) ex ante licensing can occur even when it reduces the collective profits of the licenser and the licensee ex post; and (iii) ex post licensing always speeds up innovation relative to the case of no-licensing.
Keywords: R&D race, Patent Licensing
Banking industry liberalization, franchise values and deposits mobilization: evidence from international panel data
Banking industry liberalization in China has gained pace. The theoretical underpinning of this policy approach is the McKinnon-Shaw hypothesis, which contends that a liberalized financial sector will maximize the quantity of deposits mobilized and optimize the efficiency with which these funds are allocated amongst competing investments. However,disparate country experiences with the process of financial liberalization have prompted the emergence of alternative theoretical paradigms. One theory that has been proposed argues that through reducing bank franchise values, liberalization may have the effect of reducing the quantity of deposits mobilized. Drawing on an extensive international panel data set, the empirical analysis conducted in this paper suggests that, contrary to this hypothesis, bank franchise values are either unrelated, or negatively related, to deposits mobilization. Nevertheless, the process of banking industry liberalization still poses immense challenges for policy-makers in China, and the extent to which these challenges are adequately met will go a long way to determining whether the transition to a market economy is successfully completed.
Key words– Financial Liberalization, Franchise Values, Deposits Mobilization
International Infrastructure: Neglected at Our Peril
This paper describes the constellation of factors affecting infrastructure investments and utility operations. Independent regulatory commissions exercise most direct control over two factors: governance (agency design and processes) and regulatory policies (or incentives). Other factors are generally outside the regulatory domain but may influence or be influenced by regulatory governance and policies. These other factors include institutional conditions, national experience, perceptions of risk, and industry conditions—as they affect the structure, behavior, and performance of utilities. In addition, corporate governance determines the way private and public suppliers provide information and respond to incentives. Ultimately, the legitimacy and credibility of the regulatory system depends on how closely infrastructure performance matches realistic national objectives. Weak performance does not bode well for global security in the future.
Keywords: Infrastructure Investments, Governance, Regulatory Policies
A Multiple Account Framework for Cost-Benefit Analysis
Harry F. Campbell and Richard P.C. Brown
The paper presents a spreadsheet-based multiple account framework for cost-benefit analysis which incorporates all the usual concerns of cost-benefit analysts such as shadow-pricing to account for market failure, distribution of net benefits, sensitivity and risk analysis, cost of public funds, and environmental effects. The approach is generalizable to a wide range of projects and situations and offers a number of advantages to both analysts and decision-makers, including transparency, a check on internal consistency, and a detailed summary of project net benefits disaggregated by stakeholder group. Of particular importance is the ease with which this framework allows for a project to be evaluated from alternative decision-making perspectives and under alternative policy scenarios where the trade-offs among the project’s stakeholders can readily be identified and quantified.
Key words: Cost-benefit Analysis, Benefit-cost Analysis, Multiple Account, Spreadsheet Evaluation, Public Sector Project, Private Sector Project, Efficiency Analysis, Referent Group Analysis, Income Distribution, Environmental Costs.
JEL Classification: D430，L120，M310
The Product Life Cycle and Interfirm Price Wars
(Guanghua School of Management，Peking University)
Abstract:Economists have been studying price decisions of oligopolies since long time ago. They study interfirm price wars with the tools of repeated games recently, and attribute price wars to uncertainties of demand. This paper presents another perspective of this phenomena and focuses on the product life cycle. It studies oligopolies’ incentives to motivate price wars under a very general setting of repeated game with complete information The author shows: (1) under the assumption of product life cycle, it’s optimal of oligopolies to charge lower prices in the decline stage of product life cycle, even when they collude (2) the collusive price will go up or down during the growth stage of product life cycle when the slope of the demand curve fluctuates and no firm will deviate from collusion when the demand recede slowly (3) the deviator will get positive profit in the decline stage of product life cycle when demand recedes slowly in the beginning of the decline stage. As a result, prices wars should be observed during the decline stage of product life cycle. The author uses some facts of the color TV industry of China to testify his theory in the end part of the paper.
Keywords: Product Life Cycle. Price Wars. Repeated Game
JEL Classification: D430，L120，M310
卜国琴 张耀辉 卢云峰
关键词：产业组织 实验经济学 市场设计市场交易制度
JEL classification: L000, L190, C900
The evolvement of industrial organization theory and the influence of experimental economics
Bu Guoqing Zhang Yaohui Lu Yunfeng
Abstract:For a long time, industrial organization theory has focused on firm structure and firm behavior for research and the main schools in this field have not paid enough attention to market exchange behavior.This will hamper the theoretical understanding of industrial organization and the stipulation of governmental regulations.With the popularization of experimental economics,so many problems relevant to exchange have been solved and so many research achievements have been gained.This progress will change the researching emphases of industrial organization and the application of these achievements will also change the understanding of regulations.As a result,market design and some other concepts have been put forward.This article will resolve the problem of market exchange which is ignored by the mainstream of industrial organization theory by combining experimental economics and industrial organization theory,and strive to make a breakthrough in research objectives and research methods of industrial organization theory in order to promote its transformation to market design.
Keywords: industrial organization,experimental economics,market design,trading institutions
JEL classification: L000, L190, C900
关键字：城市产业结构 产业结构演进 南宁市产业结构
An analysis on the adaptability of the industrial structure theory——Nanning Case
Abstract:in this paper we take the case of Nanning to explore the prevalent applied theory in researches of city industrial development—the theory of stages of industrialization. We also derive some explicit policy advices from our research. In part 1, we generally describe the situation of current industrial structure of Nanning from three different angles: the GDP structure, the employment structure and the investment structure. In part 2, which is the core of the paper, we discuss the adaptability of the industrialization stage theory in the application of city researches. Further, in this part we try to make a plausible and on-the-ground assessment of the current situation of Nanning’s industrial structure. And of course in the end our conclusion and some further discussion.
Keywords:Industrial structure of a city Theory of industrialization stages Adaptability
JEL classification: L000, O000, O180
Industrial Clusters and Industry Competition Capacity
( Tianjin Academy of Social Science , Tianjin， 300191)
Abstract: Industrial Clusters are a sort of cosmopolitan economy phenomenon.The theories of industrial clusters competition capacity are accordingly evolving into systemic system info along with industrial clusters’ development. Whereas the interlace and administrative levels of industrial clusters competition capacity, industrial clusters at once become the key of advancing industry competition capacity. Industrial Clusters are still at the initial stages of its phases,To exalt the industry competition capacity by industrial clusters needs government to do something ,not to do something.
Keywords:Industry ;Industrial Clusters; Industry Competition Capacity;