Monopoly | EPFL Graph Search

A monopoly (from Greek mónos and pōleîn), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a specific person or enterprise is the only supplier of a particular thing. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly and duopoly which consists of a few sellers dominating a market. Monopolies are thus characterised by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit. The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices, which is ass

Essays on the Economics of Innovation: Incentives, Diffusion, and Disparity

Ling Zhou

As an important policy instrument for guiding innovation, the patent system involves a long-standing tension between creating economic rewards for the original innovators and stifling subsequent R&D activities. The availability of new data allows us to provide unique sights into understanding how effective patents are in providing incentives for innovation and how firms' disclosure of proprietary assets affects the dissemination of knowledge. On the other hand, innovation per se is the fruit of human intellect. The knowledge workforce is, therefore, a crucial component of a country's innovative capacity. The persistent gap in the participation in innovative activities between men and women reflects a misallocation of talented human capital and leaves opportunities for policy implementation. This dissertation ties the questions mentioned above and presents novel evidence on the incentives, diffusion, and disparity in innovative activities. The first essay (chapter 2), in collaboration with Gaétan de Rassenfosse, provides empirical evidence on the real effect of patent expiration on monopoly prices and explores how this effect varies with product market competition. We compile a novel dataset that links patents to consumer products and retail prices for these products from Amazon.com. We find that patent expiration leads to a 7--8 percent drop in product prices. This effect is heterogeneous by patent type and importance and starts one year in advance. We also find a more substantial decline in prices in product markets where competition is intense, consistent with evidence from the pharmaceutical industry. We argue that incumbent innovators lower prices preemptively in the face of generic competition. The second essay (chapter 3), in collaboration with Gaétan de Rassenfosse, studies how firms' disclosure of innovative assets affects the diffusion of inventions. We focus the empirical setting on firms' provision of constructive notice through virtual patent marking (VPM) and exploit patent-level variation in the marking dates. With data collected on marked patents from the VPM web documents of 16 firms, we find an overall effect of VPM is small. However, conditional firms' strong reliance on patents as an appropriability regime, our findings suggest that while VPM induces firms to build subsequent internal inventions on the ones that are commercially valuable, it fends off diffusion to external firms and reduces similarity between inventions. Last but not least, in the third essay (chapter 4), collaborated with Mary Kaltenberg, we explore the role of family policies in closing the innovation gender gap. By matching inventor data to web-scraped inventor age information, we exploit the staggered passage of maternity leave policies across the U.S. and evaluate its impact on the retention and productivity of female inventors. Our findings suggest that maternity leave policy supports women of reproductive ages stay longer in patenting but has little impact on their productivity.

EPFL2021

The link between innovation and finance

Cristiano Zazzara

This thesis comprises three essays on the relationship between innovation and finance. Although previous research has acknowledged the multi-faceted nature of innovation, this thesis unpacks its constituent elements, compares alternative drivers of innovation — focusing on the role of financial variables —, and explores when each of these drivers is important relative to the others. Evidence is based on survey data on Italian manufacturing firms over the years 1995-2003. The main contribution of this dissertation is to show how innovation at the firm level varies across different dimensions, documenting several robust empirical regularities, which must be accounted for. The first essay explores the determinants of various characteristics on the propensity to innovate in the Italian manufacturing sector. First, we concentrate on firms characteristics, and include in the study age of firm, size of firm, export shares of revenues and group membership. Second, we examine industry characteristics, such as type of industry in terms of technology level and market concentration. We also test the impact of characteristics of the firm's geographical area, including an indicator of financial development for the firm region. We finally extend our model including financial variables at the firm level in order to evaluate the association between profitability & risk and innovation. The second essay further examines the determinants of innovation, focusing on why firms develop product innovations rather than process innovation, or product and process innovations simultaneously. Empirical studies have highlighted the different impact of product and process innovation on various factors (such as, for example, international competitiveness, the level of employment and the types of skills used, and on the profit rate of firms). However, little is known from either a theoretical or an empirical point of view about the determinants of these different types of innovation. The third essay examines the question of whether access to credit is empirically more difficult for innovative firms than for those undertaking traditional investment projects. The idea that market financing of innovative projects is likely to encounter severe obstacles is not new. Indeed, it dates back at least to Schumpeter's defence of monopoly power since it not only guarantees that innovative firms can internalise the benefits of their innovations, but also provides funding for future innovative projects. Testing this proposition requires information on the innovative content of a given firm and on the limits to borrowing it encounters. Using the above mentioned survey data, we are able to identify credit constrained firms and use this information to make inferences on bank's lending strategies towards firms whose investment projects differ according to expected return and riskiness.

EPFL2008

The triangular value of patents

Albina Khairullina

This thesis addresses the question of a patent value from three different angles. It comprises three papers on the patent valuation methods. The patent valuation issues are well-known to the world of research and practice. However, the debates over what the patent contributes to the business and the economy overall remain open. The main contribution of my dissertation is that I present novel ways of addressing the value of patents from both micro- and macroeconomic perspectives. I bridge the theoretical modeling with real-world estimations, which sheds light on the legitimacy of certain hypothetical assumptions in patent valuation. In the first paper, I develop a factor model to value patents in a corporate patent portfolio. According to the results, the patent value is determined by five factors, such as forward and backward citations, family size, the number of oppositions received, and the number of claims. I contribute to the literature by introducing an interaction of a quantitative measure of a patent value with its qualitative assessment derived from a survey of patent managers. The results show that model estimates are weakly consistent with an expert opinion on the value of patents. In the second paper, we collaborate with a large multinational company and analyze internal and highly confidential data on product sales, revenues, and other corporate performance measures by tracing each patent down to its product market. To establish causality, we design a randomized controlled trial together with the management of the company, in which some randomly chosen patents are dropped from the portfolio, while others are kept for the duration of the study. To our knowledge, this is the first study that conducts a randomized controlled trial to measure the real market effect of patent protection. In the third paper, we study whether the regulator expands production possibilities of the economy by assigning a standard-essential status to patents. As we show, the innovatorsâ risk of losing the standard-setting game ex-ante attenuates the anticipation of a larger market share. Secondly, since the discovery of new technologies is typically slower than the discounting rate for the monopoly profits, standards with a positive contribution to productivity tend to be growth-reducing. Our results have significant policy implications. Regulators impose Fair, Reasonable, And Non-Discriminatory (FRAND) pricing on standard-essential technologies to compensate for the larger market-share the innovators get. We demonstrate how FRAND regulation of mark-ups has an unambiguously negative effect on growth and long-term growth-destroying consequences.

EPFL2020