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FEC Articles Express: 2017 September Issue-Special Issue on Industrial Economics and Innovation
September 20, 2017
Frontiers of Economics in China (FEC)

Special Issue on Industrial Economics and Innovation

2017 September Issue (Free Full-Text Download)

Huagang Li, Guofu Tan
Hidden Reserve Prices with Risk-Averse Bidders

Nicolas Boccard, Patrick Legros
Audit Competition in Insurance Oligopolies        

Yinxing Hong, Yao Lu, Jianghuai Zheng
Industrialized Innovation: The Connection of Science & Technology Innovation with Industrial Innovation

Heinz D. Kurz
Technical Progress and the Diffusion of Innovations: Classical and Schumpeterian Perspectives

Zhiqi Chen
Product Market Competition and Innovation: What Can We Learn from Economic Theory?

Cheng-Zhong Qin, Shengping Zhang, Dandan Zhu
A Model of Endogenous Cross-Holdings in Oligopoly

Stéphane Caprice
Private Label Positioning and Product Line

Hidden Reserve Prices with Risk-Averse Bidders
Huagang Li
GE Capital
Guofu Tan
Department of Economics, University of Southern California

Abstract: In this paper, we provide an alternative explanation for why auctioneers often keep the reserve price hidden or secret. We consider a standard independent private values environment in which the buyers are risk-averse and the seller has private information about her valuation of the object to be auctioned. The seller uses a first-price sealed-bid auction mechanism combined with either an announced reserve price or a hidden reserve price. We compare the seller’s ex ante expected profits under these two policies and find that the optimal hidden reserve price policy generates higher expected profits for the seller when the buyers are fairly risk-averse under particular restrictions on buyers’ preferences and the distributions of private values. As the number of the buyers increases, the hidden reserve price is more likely to dominate. Numerical methods are used to demonstrate the generality of our main results.

Audit Competition in Insurance Oligopolies
Nicolas Boccard
Economics Department, Universitat de Girona
Patrick Legros
Economics Department, Northeastern University

Abstract: We provide a simple framework for analyzing how competition affects the choice of audit structures in an oligopolistic insurance industry. When the degree of competition increases, fraud increases but the response of the industry in terms of investment in audit quality follows a U-shaped pattern. Following increases in competition, the investment in audit quality will decrease if the industry is initially in a low competition regime while it will increase when the industry is in a high competition regime. We show that firms will benefit from forming a joint audit agency only when the degree of competition is intermediate; in this case, cooperation might improve total welfare and we analyze the effects of contract innovation on the performance of the industry.

Industrialized Innovation:
The Connection of Science & Technology Innovation with Industrial Innovation

Yinxing Hong, Yao Lu, Jianghuai Zheng
School of Economics, Nanjing University

Abstract: In light of the relationship and the current disconnection between science & technology (S&T) innovation and industrial innovation in China, it is necessary to put forward and emphasize the concept of industrialized innovation. Industrialized innovation is the bridge and intermediation between S&T innovation and industrial innovation, which is not only a concept, but also a mechanism and combination force. There are two ways to achieve industrialized innovation: through industry-university-research coordination and through technology entrepreneurship. The meaning of industry-university-research coordination is not about coordination among industry, university and research sectors in an institutional sense; rather it is about the coordination of the functions of cultivation and development in new industries, new technologies, and new talents of industrialized innovation. The incentive mechanism for industrialized innovation should motivate not only innovation but also coordination. Technology entrepreneurship is the industrialization of new technology through business start-ups, which occurs beyond the stage of incubation and development of new technology. The capital of technology entrepreneurship is the set consisting of knowledge capital manifested through technological innovation, human capital manifested through entrepreneurs, and physical capital in the form of venture capital. While physical capital is indispensable, knowledge capital and human capital play the decisive role in technology entrepreneurship. The industrialization of technological innovation involves two requirements: one is to enable the new technology industry to achieve a large scale rapidly, and the other is to fully realize the potential value of the new technology. Both requirements are reliant on effective innovation in business models.

Product Market Competition and Innovation:
What Can We Learn from Economic Theory?

Zhiqi Chen
Department of Economics, Carleton University

Abstract: By means of a literature review, this paper strives to provide some clarity on the much-debated relationship between product market competition and firms’ incentives to innovate. It shows that in the literature there does not exist a robust relationship between competition and incentives to innovate. Therefore, it would be futile to continue the debate over whether competition stimulates or hinders innovation. A more useful approach is to make a distinction between pre-innovation competition and post-innovation competition, as it provides a way for reconciling many of the seemingly contradictory findings from the literature. Another important insight from the literature is that the relationship between competition and innovation depends on the source of increased competition.

A Model of Endogenous Cross-Holdings in Oligopoly

Cheng-Zhong Qin
Department of Economics, University of California
Shengping Zhang
Guanghua School of Management, Peking University
Dandan Zhu
Department of Economics, University of California

Abstract: A network approach is proposed to analyze the formation of cross-holdings and anti-competitive implications. Our approach is motivated by the bilateral arrangement of passive ownership between Microsoft and Apple in 1997. We provide a complete characterization of pairwise stable cross-holdings for a model of Cournot oligopoly with a homogeneous product. Our results strengthen the competitive implications of endogenous cross-holdings in Cournot oligopoly found in the literature.

About the journal:
    Frontiers of Economics in China (FEC) is a quarterly peer-reviewed journal edited by Institute for Advanced Research, Shanghai University of Finance and Economics, and published by Higher Education Press.  Established in 2006 and with Guoqiang Tian as the Editor, the journal has a strong Editorial Advisory Board (with several Nobel Prize winners as board members), as well as a dedicated Co-Editors’ team and an Editorial Board comprised of leading overseas and domestic Chinese economists.
    Issued quarterly and distributed worldwide, the FEC is available both online and in hard-copy.  With more than 600 institutional subscribers worldwide and indexed in more than 10 databases including ESCI, EconLit, RePEc and SCOPUS, the journal was ranked as one of “The Highest International Impact Academic Journals of China” in 2016.
    The FEC welcomes submissions of theoretical and empirical papers from all fields of economics, particularly those with an emphasis on the Chinese economy and other emerging, developing or transition economies.  While the journal is primarily interested in original research papers, it also welcomes submissions of opinion articles, literature surveys, and book reviews.  Full-text papers are free for download at:

Editor: Guoqiang Tian, Texas A&M University; Shanghai University of Finance and Economics
Executive Editor: Zhiqi Chen, Carleton University
Chunrong Ai, University of Florida
Kevin X.D. Huang, Vanderbilt University
Neng Wang, Columbia University
James Wen, Trinity College, USA

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