IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/104137.html
   My bibliography  Save this paper

The effect of design protection on price and price dispersion: Evidence from automotive spare parts

Author

Listed:
  • Herz, Benedikt
  • Mejer, Malwina

Abstract

The design right is a widely used but poorly understood intellectual property right that allows the protection of products’ aesthetics and outer appearances. We study the influence of design right protection on price by exploiting cross-country differences in the scope of protection in the European automotive spare parts market: In some countries, repair parts are exempted from design protection, while in others they are not. Based on detailed price data, our difference-in-differences estimates imply that design protection increases prices by about 5–8%, with large differences between carmakers. We then link our findings to the literature on deviations from the law of one price. We document large cross-country price deviations for identical spare parts and provide evidence that a part of these price deviations can be explained by the lack of harmonization of design right protection in combination with carmakers’ pricing-to-market strategies.

Suggested Citation

  • Herz, Benedikt & Mejer, Malwina, 2020. "The effect of design protection on price and price dispersion: Evidence from automotive spare parts," MPRA Paper 104137, University Library of Munich, Germany, revised 01 Nov 2020.
    • Handle: RePEc:pra:mprapa:104137
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/104137/1/MPRA_paper_104137.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    3. Jean M. Imbs & Haroon Mumtaz & Morten O. Ravn & Hélène Rey, 2010. "One TV, One Price?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 753-781, December.
    4. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
    5. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    6. Janet Ceglowski, 2003. "The law of one price: intranational evidence for Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 373-400, May.
    7. Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2005. "Understanding European Real Exchange Rates," American Economic Review, American Economic Association, vol. 95(3), pages 724-738, June.
    8. Scherer, F.M., 2000. "The pharmaceutical industry," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 25, pages 1297-1336, Elsevier.
    9. Ina Simonovska, 2015. "Income Differences and Prices of Tradables: Insights from an Online Retailer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(4), pages 1612-1656.
    10. Galasso, Alberto & Schankerman, Mark, 2015. "Patents and cumulative innovation: causal evidence from the courts," LSE Research Online Documents on Economics 61614, London School of Economics and Political Science, LSE Library.
    11. Herz, Benedikt & Mejer, Malwina, 2019. "Effects of the European Union trademark: Lessons for the harmonization of intellectual property systems," Research Policy, Elsevier, vol. 48(7), pages 1841-1854.
    12. Imke Reimers, 2019. "Copyright and Generic Entry in Book Publishing," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 257-284, August.
    13. Castanheira, Micael & Ornaghi, Carmine & Siotis, Georges, 2019. "The unexpected consequences of generic entry," Journal of Health Economics, Elsevier, vol. 68(C).
    14. Moultrie, James & Livesey, Finbarr, 2014. "Measuring design investment in firms: Conceptual foundations and exploratory UK survey," Research Policy, Elsevier, vol. 43(3), pages 570-587.
    15. Crucini, Mario J. & Shintani, Mototsugu, 2008. "Persistence in law of one price deviations: Evidence from micro-data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 629-644, April.
    16. Stuart J. H. Graham & Alan C. Marco & Amanda F. Myers, 2018. "Monetizing marks: Insights from the USPTO Trademark Assignment Dataset," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(3), pages 403-432, September.
    17. Parsley, David & Wei, Shang-Jin, 2008. "In search of a euro effect: Big lessons from a Big Mac Meal?," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 260-276, March.
    18. Bruno van Pottelsberghe, 2008. "The London Agreement and the cost of patenting in Europe," Working Papers 264, Bruegel.
    19. Nigel F.B. Allington & Paul A. Kattuman & Florian A. Waldmann, 2005. "One Market, One Money, One Price?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
    20. Heikkilä, Jussi & Peltoniemi, Mirva, 2019. "Great expectations: Learning the boundaries of design rights," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    21. Allington, Nigel FB & Kattuman, Paul A & Waldmann, Florian A, 2005. "One Market, One Money, One Price?," MPRA Paper 835, University Library of Munich, Germany.
    22. repec:oup:ecpoli:v:19:y:2004:i:39:p:347-384 is not listed on IDEAS
    23. Pinelopi Koujianou Goldberg & Frank Verboven, 2004. "Cross-country price dispersion in the euro era: a case study of the European car market [‘The Law of One Price in Scandinavian duty-free stores’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(40), pages 484-521.
    24. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    25. Charles Engel & John H. Rogers, 2004. "European product market integration after the euro [‘The law of one price in Scandinavian duty-free stores,’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(39), pages 348-384.
    26. Dan, Sujan M. & Spaid, Brian I. & Noble, Charles H., 2018. "Exploring the sources of design innovations: Insights from the computer, communications and audio equipment industries," Research Policy, Elsevier, vol. 47(8), pages 1495-1504.
    27. Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, vol. 56(4), pages 757-776.
    28. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April.
    29. Blackman, M. J. R., 1996. "Designs as a searchable intellectual property right," World Patent Information, Elsevier, vol. 18(4), pages 193-204, December.
    30. Emilio Calvano & Giacomo Calzolari & Vincenzo Denicolò & Sergio Pastorello, 2019. "Algorithmic Pricing What Implications for Competition Policy?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 155-171, August.
    31. Stefano DellaVigna & Matthew Gentzkow, 2019. "Uniform Pricing in U.S. Retail Chains," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 2011-2084.
    32. Marina Glushenkova & Marios Zachariadis, 2016. "Understanding Post‐Euro Law‐of‐One‐Price Deviations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1073-1111, September.
    33. Filitz, Rainer & Henkel, Joachim & Tether, Bruce S., 2015. "Protecting aesthetic innovations? An exploration of the use of registered community designs," Research Policy, Elsevier, vol. 44(6), pages 1192-1206.
    34. Janet Ceglowski, 2003. "The law of one price: intranational evidence for Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 373-400, May.
    35. Alberto Cavallo & Brent Neiman & Roberto Rigobon, 2014. "Currency Unions, Product Introductions, and the Real Exchange Rate," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 529-595.
    36. Blind, Knut & Edler, Jakob & Frietsch, Rainer & Schmoch, Ulrich, 2006. "Motives to patent: Empirical evidence from Germany," Research Policy, Elsevier, vol. 35(5), pages 655-672, June.
    37. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    38. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
    39. Xing Li & Megan MacGarvie & Petra Moser, 2018. "Dead poets' property—how does copyright influence price?," RAND Journal of Economics, RAND Corporation, vol. 49(1), pages 181-205, March.
    40. A. J. Culyer & J. P. Newhouse (ed.), 2000. "Handbook of Health Economics," Handbook of Health Economics, Elsevier, edition 1, volume 1, number 1.
    41. Tian Heong Chan & Jürgen Mihm & Manuel E. Sosa, 2018. "On Styles in Product Design: An Analysis of U.S. Design Patents," Management Science, INFORMS, vol. 64(3), pages 1230-1249, March.
    42. Alberto Galasso & Mark Schankerman, 2015. "Patents and Cumulative Innovation: Causal Evidence from the Courts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 317-369.
    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. Herz, Benedikt & Mejer, Malwina, 2021. "The effect of design protection on price and price dispersion: Evidence from automotive spare parts," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    2. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    3. Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, vol. 56(4), pages 757-776.
    4. Luca Macedoni, 2021. "Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 593-620, April.
    5. Ogrokhina, Olena, 2019. "Persistence of prices in the Eurozone capital cities: Evidence from the Economist Intelligence Unit City Data," Economic Modelling, Elsevier, vol. 76(C), pages 330-338.
    6. Fontaine, François & Martin, Julien & Mejean, Isabelle, 2020. "Price discrimination within and across EMU markets: Evidence from French exporters," Journal of International Economics, Elsevier, vol. 124(C).
    7. Duch-Brown, Néstor & Grzybowski, Lukasz & Romahn, André & Verboven, Frank, 2021. "Are online markets more integrated than traditional markets? Evidence from consumer electronics," Journal of International Economics, Elsevier, vol. 131(C).
    8. Mike Nyawo & Neil Rankin, 2020. "Price adjustment after hyperinflation in Zimbabwe," African Development Review, African Development Bank, vol. 32(2), pages 240-256, June.
    9. Nchake, Mamello A. & Edwards, Lawrence & Rankin, Neil, 2018. "Closer monetary union and product market integration in emerging economies: Evidence from the Common Monetary Area in Southern Africa," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 154-164.
    10. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    11. Ogrokhina, Olena, 2015. "Market integration and price convergence in the European Union," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 55-74.
    12. Alberto Cavallo & Brent Neiman & Roberto Rigobon, 2014. "Currency Unions, Product Introductions, and the Real Exchange Rate," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 529-595.
    13. Dmitry Kulikov, 2015. "Law of One Price in the euro area: an empirical investigation using Nielsen disaggregated price data," Bank of Estonia Working Papers wp2014-10, Bank of Estonia, revised 20 Jan 2015.
    14. Beck, Guenter W. & Kotz, Hans-Helmut & Zabelina, Natalia, 2020. "Price gaps at the border: Evidence from multi-country household scanner data," Journal of International Economics, Elsevier, vol. 127(C).
    15. Hai Long Vo & Duc Hong Vo, 2023. "The purchasing power parity and exchange‐rate economics half a century on," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 446-479, April.
    16. Nikolsko-Rzhevskyy, Alex & Ogrokhina, Olena, 2018. "Behavior of retail prices in common currency areas: The case of the Eurozone," Economic Modelling, Elsevier, vol. 69(C), pages 49-57.
    17. Jaanika Meriküll & Tairi Rõõm, 2015. "One Currency, One Price? Euro Changeover-Related Inflation in Estonia," Journal of Common Market Studies, Wiley Blackwell, vol. 53(4), pages 822-839, July.
    18. Christian Dreger & Konstantin Kholodilin & Kirsten Lommatzsch & JiÅí SlaÄálek & Przemyslaw Wozniak, 2008. "Price Convergence in an Enlarged Internal Market," Eastern European Economics, Taylor & Francis Journals, vol. 46(5), pages 57-68, September.
    19. MarioJ. Crucini & Mototsugu Shintani & Takayuki Tsuruga, 2010. "The Law of One Price without the Border: The Role of Distance versus Sticky Prices," Economic Journal, Royal Economic Society, vol. 120(544), pages 462-480, May.
    20. Messner, Teresa & Rumler, Fabio & Strasser, Georg, 2022. "Cross-country price and inflation dispersion: Retail network or national border," Single Market Economics Papers WP2022/11, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission), Chief Economist Team.

    More about this item

    Keywords

    design right; design patent; repair clause; law of one price; price dispersion; European car market; automotive aftermarket; spare parts;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    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:pra:mprapa:104137. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.