Giorgio Matteucci

A mechanism for supporting collective innovation: the open contract-based challenge

The paper proposes a multi-attribute combinatorial auction-based mechanism, called open contract mechanism (OCM), which allows an organization or an individual (seeker) to dynamically and simultaneously bargain the features of distinct innovation contracts with other organizations and individuals (solvers), in general collective innovation environments. In such contexts, a seeker does not possess specific skills and technical knowledge which are crucial for an innovation or for a part of a new product development project, while some solvers might be willing to provide their relevant know-how to the seeker. To induce collaboration between the seeker and solvers, voluntary and legally enforceable agreements need to be formulated, where a fair evaluation of the intellectual property rights of any party is guaranteed, and all technical and economic aspects are detailed. Therefore, OCM allows the seeker to involve solvers in defining a collection of open contract schemes, related to the supply of the required specific skills and technical knowledge. The solvers must submit offers in terms of contract versions of these contract schemes. In such a way, OCM aims at partially extracting from the solvers their multidimensional private information regarding economic and technical issues, in order to reduce the occurrences of pre- and post-contractual opportunistic behaviours.

Broadband investment and welfare under functional and ownership separation

We study how the vertical industry structure affects investment in network quality and social welfare, with a focus on the prospective deployment of high-speed broadband access networks (the so-called NGA). We model pros and cons of vertical separation, namely, pro-competitive effects and loss of some efficiencies of vertical integration, and distinguish functional separation from ownership separation. Our findings challenge the presumption that (compared with vertical integration) vertical separation reduces investment incentives and involves a trade-off between promoting consumer surplus and ensuring investment. While investment is higher under ownership rather than functional separation, the latter may yield the highest social welfare among vertical industry structures. Furthermore, the incumbent may voluntarily opt for functional separation, but in some of these cases, prohibiting separation improves welfare.

Un modello per la determinazione del costo standard nei servizi di trasporto pubblico locale su autobus in Italia

We estimate the standard costs in the Italian local bus transport system by means of a top down approach. Commercial speed results the most important cost driver, while economies of scale are low and only present in the case of small transport operators. Medium sized and large operators exhibit diseconomies of scale. We find a positive correlation between investments in bus fleet and service cost. The model aims at introducing policy criteria for the allocation of public funds earmarked to the local public transit sector among Italian regions.

Developing Web-Based Dynamic Negotiation towards Collective Innovation: the Open Contract Mechanism

The scope of this chapter is to propose the design and the implementation of an innovative web-based tool, the Open Contract Mechanism (OCM). OCM allows client companies and suppliers to dynamically and simultaneously bargain the clauses and the characteristics of distinct innovation contracts in general open innovation and collaborative crowdsourcing environments. The OCM can be implemented inside open innovation web-based platforms for evaluating offers and determining the winning one, and therefore guaranteeing valuable binding contract clauses.

Drug innovation, price controls, and parallel trade

We study the long-run welfare effects of parallel trade (PT) in pharmaceuticals. We develop a two-country model of PT with endogenous quality, where the pharmaceutical firm negotiates the price of the drug with the government in the foreign country. We show that, even though the foreign government does not consider global R&D costs, (the threat of) PT improves the quality of the drug as long as the foreign consumers’ valuation of quality is high enough. We find that the firm’s short-run profit may be higher when PT is allowed. Nonetheless, this is neither necessary nor sufficient for improving drug quality in the long run. We also show that improving drug quality is a sufficient condition for PT to increase global welfare. Finally, we show that, when PT is allowed, drug quality may be higher with than without price controls.

Facility management outsourcing through multi-attribute auctions

We introduce a multi-attribute auction-based mechanism with an endogenous score as a means to innovate the procurement of facility management (FM) activities in private and public sectors. The mechanism allows the procurer to request bids on several measurable technical and economic attributes of the supply of FM services. The procurer also assigns weights to such features to signal their importance to the sellers, while the score obtained with respect to each attribute is endogenously determined on the basis of the submitted offers for the attribute. The proposed mechanism mitigates the most relevant drawbacks due to the lack of skills and of crucial information on the outsourced non-core activities, while requiring the procurer very little auction design effort. On the one hand, the mechanism can extract from suppliers valuable private technical knowledge as well as the information on the supply cost. On the other hand, it saves the procurer from detailing ex ante both the score which will be assigned to any possible bid for every attribute and the exact value to require for any technical feature of the supply.

Uniform Pricing and Product Innovation

Abstract We consider the rationale for imposing uniform pricing (UP) on a monopolist in a two-market model with endogenous quality. In contrast to the literature, we find that UP may yield higher quality than third-degree price discrimination (PD). This occurs when the demand dispersion between markets is sufficiently decreasing with quality. A simple test for a higher quality under UP is to check whether an increase in quality reduces the price differential between markets under PD. In this case, a higher quality under UP is an effective substitute for PD to extract consumer surplus. When the demand dispersion is small enough, a higher quality under UP increases social welfare relative to PD.

Vertical Control and Parallel Trade under Asymmetric Information

Parallel trade (PT) is a practice related to arbitrage operations in international trade. We provide a rationale for PT as an opportunistic behaviour by an international wholesaler who is privately informed about market demands in two countries where a multinational firm operates. This alternative theory of PT contributes to an explanation of why PT has gained considerable importance in various industries, and why it has not yet resulted in price convergence across relevant countries. Indeed, we find that asymmetric information enlarges the scope for PT, relative to complete information, and possibly increases crosscountry differences in prices. The European Commission supports PT as a means to achieve the integration of national markets, to the benefit of all citizens. However, under asymmetric information, consumers benefit from PT only with a high volume of parallel imports (e.g., when arbitrage costs are low); otherwise competition among wholesalers can be an effective substitute for PT. Furthermore, an important implication of PT is the transfer of profits from the manufacturer to the wholesaler. Therefore, in R&D-intensive industries, such as pharmaceuticals, policy makers should anticipate the likely consequences of PT under asymmetric information on the long-run incentives to innovate.

Can access regulation promote broadband investment and consumer welfare

A facility-based firm invests in network quality and sells wholesale local access to two competing downstream firms, which offer vertically differentiated value-added services. We show that, contrary to common wisdom, access price regulation may simultaneously improve consumer welfare and foster investment incentives compared with regulatory forbearance. This result is robust to a number of different model specifications: (i) the bottleneck owner is vertically integrated, and: (a) the regulator can commit before the investment stage, or: (b) there are first-mover advantages, such as consumer switching costs; (ii) the bottleneck owner is vertically separated. We also show that, under access price regulation, consumer welfare and network quality may be higher under vertical separation than under vertical integration.

Controllo verticale ed integrazione dei mercati. Un'analisi del commercio parallelo

This paper provides a rationale for parallel trade as an opportunistic behaviour by an international wholesaler having private information about local demands in two distinct markets where a multinational firm operates. This issue is illustrated in a screening game where the wholesaler signals on market sizes through the purchased quantities, that are selected from the menu of contracts proposed by the multinational firm. It is shown that asymmetric information enlarges the scope for parallel trade compared with complete information, that is, international arbitrage is made profitable by a lower (intermediate) price differential between the two countries. The perfect Bayesian equilibria of the game indicate that the prevailing effect of parallel trade is transferring profits from the multinational (generally, an innovative firm) to the wholesaler (a non innovative firm). It is also shown that the static welfare effects of parallel trade are ambiguous. In fact, parallel imports may enhance or reduce consumer surplus compared to market segmentation, depending on the costs of international arbitrage and the downstream market structure.