Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Hoernig scientific seminar discussion jeanjean_2017

790 views

Published on

Discussion of Jeanjean: Technical progress in the Relationship between Competition and Investment

  • Be the first to comment

  • Be the first to like this

Hoernig scientific seminar discussion jeanjean_2017

  1. 1. Discussion of : Jeanjean, Technical Progress in the Relationship between Competition and Investment Steffen Hoernig FSR C&M Scientific Seminar March 24th, 2017
  2. 2. Idea • The paper attempts to show that maximum investment in markets with strong technical progress is achieved under low competitive intensity • This is captured in a model where the level of product differentiation that maximizes discounted investment cost shifts downwards with a larger innovation (cost reduction)
  3. 3. Adequacy of the Model • The research question is pertinent and important, but the theory model employed does not seem capable of capturing the policy-relevant aspects • The “size of the investment” in the model is discounted cost for a given innovation, thus higher discounted cost, ceteris paribus, is a bad not a good • The “amount of investment” in the policy debate relates to outcomes such as coverage, bandwidth, FTTH vs FTTC etc • The game is about timing, not investment cost: higher investment costs are equivalent to earlier investment • The main result of the paper is thus: “larger (more profitable) innovations lead to earlier investments” • What the paper should focus on is how socially optimal investment relates to competitiveness; the amount of investment cost as such is not interesting
  4. 4. Assumptions • The paper has too many assumptions, many of which are hard to justify • Some are not even numbered but simply mentioned in the text • A decisive one is 𝑓 . > 𝑔 . : this does not follow from (1); rather it is essentially the assumption that profits 𝜋 are submodular • Recommendation: try simpler model where “amount of investment” means quality or coverage, i.e. has a positive effect on welfare

×