Georg Götz

Strategic timing of adoption of new technologies under uncertainty: A note

Abstract This note clarifies the circumstances under which ex ante identical firms will choose different dates for the adoption of new technology. In particular, conditions under which “diffusion” will arise in both open-loop and closed-loop games are identified. Furthermore, it is shown that the rents of nonidentical firms are not equalized, even if pre-emptive adoption is possible. Finally, an example is given in which the reduction of the uncertainty associated with the implementation of new technology leads to a postponement of the adoption by the late adopter.

Market Size, Technology Choice, and Market Structure

Abstract We introduce technology choice into a model of monopolistic competition and analyze the structural effects of changes in market size. A larger market leads to the adoption of a large-scale technology. If a technology switch occurs, the number of firms decreases, and a rationalizing effect arises: individual and aggregate output increases; prices fall. This need not benefit consumers since a technology switch is associated with a decrease in product variety.

Do Pay-as-Bid Auctions Favor Collusion? Evidence from Germany's Market for Reserve Power

We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction’s pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them.

Market Size, Technology Choice, and the Existence of Free-Entry Cournot Equilibrium

This article adds technology choice to a free-entry Cournot model with linear demand and constant marginal costs. Firms can choose from a discrete set of technologies. This simple framework yields the nonexistence of (pure-strategy) equilibrium and the existence of multiple equilibria and equilibria in which ex ante identical firms choose different technologies, as possible outcomes. The (non)existence problem disappears if the vertical market size is large. Nonexistence is largely a small-number phenomenon. Asymmetric equilibria emerge either because of indivisibilities or because of similarity of different technologies in the average costs realized.

Public Budget Contributions to the European Rail Sector

Abstract This paper provides an analysis of the funding structure of the railways in eight European countries. It updates and expands the well-known database on public contributions to rail, which has initially been published by [NERA (2004) Study of the Financing of and Public Budget Contributions to Railways: A Final Report for European Commission, DG TREN. London: NERA National Economic Research Associates.]. The analysis shows that there are large differences concerning the focus of granted funds which can be explained by different policy objectives, differences in the level and degree of network access charges and different cost coverage ratios of public transport services. We identify a tendency towards two main financing models. In our data-set countries either focus their support payments on the operation of the infrastructure, which implies lower network charges and thus a lower amount of necessary Public Service Compensations, or they focus on the support of transport services with a higher degree of cost coverage of network charges and thus a lower amount of operating contributions paid to the infrastructure manager. The structure of funds, different approaches of infrastructure financing and differences in the treatment of historical debt are likely to have an influence on the performance of the investigated railway systems.

Exclusionary practices in two-sided markets: The effect of radius clauses on competition between shopping centers

This paper analyzes exclusionary conduct of platforms in two-sided markets. Motivated by recent antitrust cases against shopping centers introducing radius restrictions on their tenants, we provide a discussion of the likely positive and normative effects of exclusivity clauses, which prevent tenants from opening outlets in other shopping centers covered by the clause. In a standard two-sided market model with two competing shopping centers, we analyze incentives to introduce exclusivity clauses and the likely effects on social welfare. We show that exclusivity agreements are especially profitable for shopping centers and detrimental to social welfare if competition is intense between the two shopping centers. We argue that the focus of courts on market definition is misplaced in markets determined by competitive bottlenecks.

R&D Cooperation with Unit-Elastic Demand

The present paper shows that R&D cooperation leads to the monopoly outcome in terms of price and quantity if demand is unit-elastic. If the demand function exhibits an upper bound for the willingness to pay, R&D cooperation is inferior to a scenario in which firms cooperate both in their R&D and their output decision.

Reply to: Need for improvements in reported cost-effectiveness of adalimumab in rheumatoid arthritis

We thank Sergej Weber, Georg Pongratz, Matthias Schneider and Ralph Brinks for acknowledging the relevance of health economic modeling for biologic treatments for rheumatoid arthritis. We take this opportunity to comment on some health economic concepts that ourmodel is based on: 1. Concerning transition probabilities: We set up an individual patient sampling model that simulates each patient individually based on the treatment algorithms and the specific treatment duration parameters as specified or cited in the paper’s “Model and methods” section. The model does not rely on fixed transition probabilities. 2. Concerning switching between the two study arms (adalimumab arm, control arm): The purpose of having a control arm is the ability to attribute clinical and economic effects to the introduction of adalimumab with the smallest possible bias. Switching is impossible by design. 3. Concerning Weber and colleagues’ request for further discussion of various aspects in their 7500+ character letter: The journal deserves our gratitude for taking into consideration our 30,000+ character manuscript despite its 25,000 character limit. We honored the journal’s brevity requirements as much as possible and we stuck to citations whenever possible. 4. Concerning quality of life: Contrary to Weber and colleagues’ suggestion, the absolute levels of quality of life, which they estimated from [1], cannot be compared to the relative gains of quality of life in our model.

Special Issue on “Financing, Regulation and Performance of the European Rail Sector”

Rail transport does not seem to live up to its potential in terms of the contributions it could make to satisfy the transport and mobility needs in the EU and in other economies; this concerns in particular the significant contribution it could make to the decarbonization of transport.1 The latter holds despite substantial government funding of the railway sector. In May 2017, a workshop on “Financing, Regulation and Performance of the European Rail Sector” brought together academics and stakeholders at Justus Liebig University Giessen to discuss these topics from various angles. This special issue presents selected contributions from the workshop to provide both academia and practitioners from the sector with a state of the art overview of railway funding and financing as well as on selected policy debates and recent regulatory changes ranging from the setting of access charges to the optimal (vertical) structure of the sector. Chris Nash surveys “Railway Finance in Europe” and provides both a general overview of the possible justifications for subsidies to the rail sector and an evaluation of how these subsidies are given in practice as well as how efficient use of these subsidies could be ensured. Jan Schäfer and Georg Götz complement this survey with the presentation of a detailed database on the public funding structure in eight European countries. They highlight that some countries like Germany and France mainly fund the provision of (regional) passenger train services via Public Service Obligations, which to a large degree cover high track access charges, while other countries like the UK directly finance the operation of the infrastructure. Lorenzo Casullo focuses his discussion of the funding

Results of a Survey in Germany, Austria, and Switzerland on How to Prevent Violations of Competition Laws

This report presents the results of a survey on competition law compliance in Germany, Austria, and Switzerland in which 86 large companies participated. The study shows that 80 % of the firms have implemented measures to identify and mitigate the risks of violating competition laws. The majority of firms and measures concentrate on legal risks (e.g. insufficient awareness of the content and scope of competition laws), whereas risks related to changes in the economic environment (e.g. entry into the market, competition by imports, and more intense competition) are rarely addressed. Risk mitigation heavily relies on competition law training, even though these measures hardly seem sufficient. This is obvious from the fact that 71 % of the firms whose employees had violated competition laws in the past had already trained these employees before the misconduct occurred. We conclude from our study that those measures should be improved that help to detect cartelisation risks at an early stage. Furthermore, sanctions imposed by the firms on the offenders of competition laws require a clearer design and more systematic communication.