IDEAS home Printed from https://ideas.repec.org/p/lan/wpaper/352589140.html
   My bibliography  Save this paper

Of Shrimp and Men

Author

Listed:
  • Amanda De Pirro
  • Renaud Foucart

Abstract

Building on a model of competition with endogenous product differentiation and using data from the shrimp aquaculture industry, we show how a cost-reducing innovation can hurt the profit of the innovator by decreasing product diversity and strengthening competition. In the late 1990s, a US governmental program designed a new pathogen-free breed reducing the production cost of white legs shrimp. This innovation gave a temporary boost to the profit of American producers, largely specialized in that variety. However, over time other countries abandoned their native production to adopt the new breed. In this phase of technological catch-up US producers thus not only lost their cost advantage, but also the market power derived from the pre-innovation product differentiation.

Suggested Citation

  • Amanda De Pirro & Renaud Foucart, 2022. "Of Shrimp and Men," Working Papers 352589140, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:352589140
    as

    Download full text from publisher

    File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2022_004.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    2. Asher Wolinsky, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 493-511.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Rachel Griffith & John Van Reenen, 2021. "Product market competition, creative destruction and innovation," IFS Working Papers W21/43, Institute for Fiscal Studies.
    5. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    6. Seade, J., 1985. "Profitable Cost Increases and the Shifting of Taxation: Equilibrium Responses of Markets in Oligopoly," Economic Research Papers 269225, University of Warwick - Department of Economics.
    7. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    8. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September.
    9. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    10. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    11. Philippe Aghion & Xavier Jaravel, 2015. "Knowledge Spillovers, Innovation and Growth," Economic Journal, Royal Economic Society, vol. 0(583), pages 533-573, March.
    12. Swati Dhingra & John Morrow, 2019. "Monopolistic Competition and Optimum Product Diversity under Firm Heterogeneity," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 196-232.
    13. Rabah Amir & Christine Halmenschlager & Malgorzata Knauff, 2017. "Does the Cost Paradox Preclude Technological Progress under Imperfect Competition?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 81-96, February.
    14. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    15. Narajabad, Borghan & Watson, Randal, 2011. "The dynamics of innovation and horizontal differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 825-842, June.
    16. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    17. Foucart, Renaud & Li, Qian Cher, 2021. "The role of technology standards in product innovation: Theory and evidence from UK manufacturing firms," Research Policy, Elsevier, vol. 50(2).
    18. Johan Hombert & Adrien Matray, 2018. "Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?," Journal of Finance, American Finance Association, vol. 73(5), pages 2003-2039, October.
    19. Seade, J, 1985. "Profitable Cost Increases and the Shifting of Taxation : Equilibrium Response of Markets in Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 260, University of Warwick, Department of Economics.
    20. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    2. Steff De Visscher & Markus Eberhardt & Gerdie Everaert, 2017. "Measuring productivity and absorptive capacity evolution," Discussion Papers 2017-11, University of Nottingham, GEP.
    3. Eberhardt, Markus & Everaert, Gerdie & De Visscher, Stef, 2017. "Measuring Productivity and Absorptive Capacity Evolution in OECD Economies," CEPR Discussion Papers 12261, C.E.P.R. Discussion Papers.
    4. Banerjee, Rajabrata & Gupta, Kartick, 2021. "Do country or firm-specific factors matter more to R&D spending in firms?," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 75-95.
    5. Armand, Alex & Mendi, Pedro, 2018. "Demand drops and innovation investments: Evidence from the Great Recession in Spain," Research Policy, Elsevier, vol. 47(7), pages 1321-1333.
    6. Wei Jin & ZhongXiang Zhang, 2014. "Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter," CCEP Working Papers 1401, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    7. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    8. De Visscher, Stef & Eberhardt, Markus & Everaert, Gerdie, 2020. "Estimating and testing the multicountry endogenous growth model," Journal of International Economics, Elsevier, vol. 125(C).
    9. Bretschger, Lucas & Lechthaler, Filippo & Rausch, Sebastian & Zhang, Lin, 2017. "Knowledge diffusion, endogenous growth, and the costs of global climate policy," European Economic Review, Elsevier, vol. 93(C), pages 47-72.
    10. Barge-Gil, Andrés & López, Alberto, 2014. "R&D determinants: Accounting for the differences between research and development," Research Policy, Elsevier, vol. 43(9), pages 1634-1648.
    11. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    12. Marc J. Melitz & Stephen J. Redding, 2021. "Trade and innovation," CEP Discussion Papers dp1777, Centre for Economic Performance, LSE.
    13. Madan Dhanora & Ruchi Sharma & Walter G. Park, 2021. "Technological Innovations and Market Power: A Study of Indian Pharmaceutical Industry," Millennial Asia, , vol. 12(1), pages 5-34, April.
    14. Ugur, Mehmet & Trushin, Eshref & Solomon, Edna & Guidi, Francesco, 2016. "R&D and productivity in OECD firms and industries: A hierarchical meta-regression analysis," Research Policy, Elsevier, vol. 45(10), pages 2069-2086.
    15. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    16. Anja, Breitwieser & Neil, Foster, 2012. "Intellectual property rights, innovation and technology transfer: a survey," MPRA Paper 36094, University Library of Munich, Germany.
    17. Braunerhjelm, Pontus, 2010. "Entrepreneurship, Innovation and Economic Growth - past experience, current knowledge and policy implications," Working Paper Series in Economics and Institutions of Innovation 224, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    18. Damijan, Jože P. & Kostevc, Crt, 2007. "Knowledge Transfer, Innovation and Growth," Papers DYNREG06, Economic and Social Research Institute (ESRI).
    19. Moraga-González, José-Luis & Sun, Yajie, 2022. "Product Quality and Consumer Search," CEPR Discussion Papers 14669, C.E.P.R. Discussion Papers.
    20. Anetta Čaplánová & Rudolf Sivák & John Hudson, 2012. "Vplyv priamych zahraničných investícií na inovačnú činnosť firiem [The Impact of Foreign Direct Investment on Firms´ Innovation Activities]," Politická ekonomie, Prague University of Economics and Business, vol. 2012(6), pages 764-779.

    More about this item

    Keywords

    innovation; cost paradox; product differentiation; shrimp;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lan:wpaper:352589140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Motta (email available below). General contact details of provider: https://edirc.repec.org/data/delanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.