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Theoretical issues

Theoretical issues. Primary aim: Principal perspectives on ip-analysis in view of Industrial Economics. Industrial Economics:. Mainstream micro-eonomic theory applied to ip Recent improvement : The New Institutional Economics based on Coase’s and Williamsons Tranasaction Cost Approcah

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Theoretical issues

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  1. Theoretical issues Primary aim: Principal perspectives on ip-analysis in view of Industrial Economics

  2. Industrial Economics: • Mainstream micro-eonomic theory applied to ip Recent improvement: The New Institutional Economics based on Coase’s and Williamsons Tranasaction Cost Approcah Controversies concerning the industrial dynamics: Evolutionary economics a new field

  3. The New Industrial Economics’ contributions to IP: • Models of perfect competition not realistic – Competition Policy • By means of game theory and theory of imperfect competition a neo-classical foundation of the SCP-paradigm

  4. The SCP-paradigm: Per- for- mance Basic Conditions Market Struc-ture Con- duct • Criticism of the SCP-paradigm: • Technological change exogenous (“Basic condition”) • Trade-off between allocative and technical efficiency • The causality

  5. Other critics of the SCP-paradigm: • Strategic Trade Policy • Assumption about imperfect competition • Perspective altered from ‘sector’ to ‘firm’ • Strategic choices by the firm • Competitive advantages (“barriers”) created through IP

  6. Porter’s Diamond

  7. Evolutionary Economics: • Controversies between Industrial Economics (IE) and Evolutionary Economics (EE) - While IE focuses on price competition, advocates of EE argue that firms compete with new technology and innovation (Schumpeterian competition) - In EE premises such as perfect information, knowledge and foresight are misleading (critical to the understanding of ‘monopoly’)

  8. The Austrian School (Schumpeter) • Procedural rationality – The rationality of the firms varies with information and ability to interpret information • The market – A continuous process of discovering, coordination and change • The entrepreneur – alert to new market opportunities by creating information, knowledge and development • Entrepreneurial profit – is eliminated as innovations are imitated.

  9. Transaction-cost theory of organization (The new institutional economics) • Organizational development (transactions inside firms or through markets) is optimized: • Minimize (production + transaction costs) • subject to • - Incomplete contracts • - Opportunistic behavior (self-interest, incorrect • information) • - Preferences are given

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