This paper revisits the standard analysis of licensing a cost reducing innovation by an outside innovator to a Cournot oligopoly. We propose a new mechanism that combines elements of a license auction with royalty licensing by granting the losers of the auction the option to sign a royalty contract. The optimal new mechanism eliminates the losses from exclusionary licensing without reducing bid...

Financing constrains on investment are mainly important for small privately owned firms. Yet most of the investment literature focuses on the financing constraints of large publicly owned firms. This paper develops a financing constraints test based on a variable capital investment equation. Because it does not require the information about marginal q, the test can be easily applied to small fi...

This version of January 26, 2007. German chemical manufacturing industry experienced a major downsizing during 1992–2004. On the average, size of the firm almost halved. Using modern frontier efficiency analysis, this paper investigates technical and scale efficiency of firms. Based on reliable census data, analysis suggests that firms were not primarily concerned with improving technical effic...

A budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by quality and sellers have private reserve prices for their items. Sellers quote prices strategically, inducing a knapsack game. The buyer’s problem is to select a subset of maximal quality. We propose a buying mechanism which can be viewed as a game theoretic extension of Dantzig’s greedy heuri...

In our paper targets, by setting a reserve price, screen acquirers on their (expected) ability to generate merger-specific synergies. Both empirical evidence and many common merger models suggest that the difference between highand low-synergy mergers becomes smaller during booms. This implies that the target’s opportunity cost for sorting out relatively less fitting acquirers increases and, he...

Two major methods of explaining economic institutions are compared for the case of a homogenous quadratic duopoly market. In the indirect evolutionary approach, sellers may evolve to care for sales, in addition to profit. In the strategic delegation approach, sellers may design incentives so that their agents care for sales. The two approaches model different phenomena, but both allow certain k...

This paper investigates the relationship between the cooperative behavior of manufacturing establishments in a region and the efficiency of their R&D activities using data for eleven European regions. Some significant differences in the attitude towards R&D cooperation, as well as with regard to the efficiency of R&D activities between the regions can be found. However, these two issues appear ...

This paper considers why "rms often ban monetary exchange between their employees, while encouraging these trades through other means, such as through the reciprocation of favours or barter. Despite classical ine$ciencies associated with non-monetary exchange, we illustrate two themes as to why non-monetary trade may be preferred to allowing money. First, the use of non-monetary trade may a!ect...

This paper aims at assessing the optimal behavior of a firm facing stochastic costs of production. In an imperfectly competitive setting, we evaluate to what extent a firm may decide to locate part of its production in other markets different from which it is actually settled. This decision is taken in a stochastic environment. Portfolio theory is used to derive the optimal solution for the int...

We study an oligopoly model of banking that allows us to evaluate the two leading explanations for banks’ ability to earn rents. In the model, banks can either invest in information acquisition, or in market power (through product differentiation). The two versions generate different predictions that are tested using panel data on Finnish local banks. We find that banks’ investments in branch n...