Introduction

Toshihiro Matsumura*, The University of Tokyo

Payoff interdependence and the multi-store paradox

Kosuke Hirose* and Toshihiro Matsumura, The University of Tokyo, Japan

Abstract
We solve the multi-store paradox by introducing interdependent payoffs between the firms. We show that firms set up multiple stores unless the degree of payoff interdependence is low. We also show that multiple equilibria, namely intertwined and neighboring location equilibria, exist if the degree of payoff interdependence is intermediate.

Discriminatory vs. uniform tariffs with international technology licensing

Ray-Yun Chang, Chinese Culture University, Taiwan
Hong Hwang, National Taiwan University and Academia Sinica, Taiwan
Cheng-Hau Peng*, Fu Jen Catholic University, Taiwan

Abstract
This paper introduces technology licensing between rival firms into a three-country model to examine how an international technology licensing may upset the welfare ranking between a discriminatory tariff policy and a uniform tariff policy. It is found that a discriminatory tariff policy is inferior to a uniform tariff policy in terms of the social welfare of the importing country or the welfare of the world as a whole if the cost disadvantage of the licensor firm is high. This result is robust even if the licensor firm can engage in R&D investment in the long-run.

Technology licensing with asymmetric absorptive capacity

Chih-Wei Chang, National Central University, Taiwan
Yan-Shu Lin, National Dong-Hwa University, Taiwan
Ming-Fang Tsai*, Tamkang University, Taiwan

Abstract
This paper establishes a duopoly model to investigate the impacts of asymmetric absorptive capacity and asymmetric production cost on international technology licensing by an outside patent-holder. We find that, irrespective of fixed fee and royalty licensing, the patent-holder may adopt exclusively licensing if the difference in the absorptive capacity of two firms is large enough; otherwise, it will license to both firms. Surprisingly, such international licensing may be welfare-reducing if the difference in absorptive capacities between two licensees is large enough.

Intellectual property rights, international licensing and foreign direct investment

Kuang-Cheng Andy Wang, Chang Gung University, Taiwan
Yi-Jie Wang and Wen-Jung Liang*, National Dong Hwa University, Taiwan

Abstract
This paper develops a North-South trade model to examine the effect of the enforcement of intellectual property rights (IPR) in the South on inward foreign direct investment (FDI) by taking into account international licensing and the informational advantage of FDI. The focus of this paper is on the strategic influence of international licensing on the optimal entry mode of firm N. The main findings of this paper are as follows. First, the optimal entry mode for firm N in the absence of IPR protection is FDI when the innovation size is large but the variance of demand and the fixed setup cost are small, while selecting exporting otherwise. Second, the enforcement of IPR in the South can promote FDI when the innovation size is small, while discouraging FDI when the innovation size is moderate and large. Third, the enforcement of IPR protection will most likely decrease the total output and the welfare level in the South under international licensing, while the reverse may occur as a result of changing the firm N’s entry mode from FDI to exporting.

Sequential mergers under general symmetric product differentiation with four firms

Takeshi Ebina, Shinshu University, Japan
Daisuke Shimizu*, Gakushuin University, Japan

Abstract
This paper studies the types of sequential mergers that emerge and how they emerge when goods produced by firms in an industry are differentiated. In particular, we employ the most general differentiation setting with four firms by introducing a new parameter describing the highest degree of differentiation. We analyze how the degree of product differentiation affects the emergence of sequential mergers and find that when the value of this new parameter decreases, sequential mergers are more likely to emerge. Furthermore, we also provide welfare and numerical analyses to discuss the product differentiation ranges that would or would not lead to sequential mergers or no mergers in equilibrium. Consequently, policymakers can use this new parameter as a rule-of-thumb parameter in predicting the future merger structure.

Keywords: Sequential mergers, merger waves, product differentiation, three differentiation levels, merger policy

Infinite horizon oligopoly with asynchronous moves: Cournot-Bertrand reversal

Dan Sasaki*, The University of Tokyo, Japan

Abstract
In an infinite-horizon oligopoly game, if moves are not synchronised across firms, sustainability of tacitly collusive equilibria becomes substantially distinct from that in a classical simultaneous-move supergame. In linear duopoly, the critical discount factor becomes higher in Bertrand than in Cournot, yet for a low discount factor with which collusion is unsustainable the equilibrium discounted streams of non-collusive profits are higher in a Bertrand game than in a Cournot game. These features are contrary to the well-known observation in synchronous-move supergames, reflecting the tendency that once a deviation path is initiated, then an asynchronous-move Cournot game converges to a competitive outcome more quickly than an asynchronous-move Bertrand game.

Taxation on a mixed oligopoly in the presence of foreign ownership

 Chia-Chi Wang, Tatung University, Taiwan
Jiunn-Rong Chiou*, National Central University, Taiwan

Abstract
This paper analyzes the optimal taxation policy in a mixed duopoly when the private firm is jointly owned by domestic and foreign investors. The optimal policy is tax if the foreign shareholding is high enough; otherwise, it should be subsidy. Besides, to obtain a higher welfare, the taxation policy is superior to the privatization policy only when the private firm is mainly domestically owned. However, when full foreign shareholding of the private firm is allowed, the taxation and privatization can obtain the same level of social welfare regardless of the public firm’s marginal cost.

Ownership, trade, and productivity in Vietnam’s manufacturing firms

Chia-Hui Huang*, Aletheia University, Taiwan
Chih-Hai Yang, National Central University, Taiwan

Abstract
This paper examines the interrelations among ownership, trade, and firm productivity in Vietnam, a developing transition economy. Based on a firm-level panel data for the period 2000–2008, the empirical results show that foreign-owned enterprises (FOEs) experience higher productivity than do their domestic counterparts, whereas private firms (POEs) are not expected to outperform state-owned enterprises (SOEs) in productivity. Trade executes a productivity-enhancing effect for Vietnamese firms, but this effect only applies for FOEs and POEs, and not for SOEs. Vietnam access to the WTO produces tough competition and improves SOEs’ productivity. Various robustness checks support our findings.