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This paper analyses the adoption and diffusion of new technology in a market for a differentiated product with monopolistic competition. It is shown that in a noncooperative equilibrium ex-ante identical firms adopt a new technology at different dates. This equilibrium can be described by a simple distribution function. For non-identical firms, the conditions are stated under which a positive relationship between firm size and speed of adoption exists. It is demonstrated that increased competition often promotes diffusion. Diffusion is shown to occur more slowly in the noncooperative solution than in a constrained social optimum.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Executive SummaryUsing bidding data on a firm-level basis which we received from the German Federal NetworkAgency (Bundesnetzagentur) we analyze a drastic price increase in the market for negative secondary reserve power in Germany between 2009 and 2010. As there were no conspicuous movements on the spot market of the European Energy Exchange (EEX) which serves as a substitute market for the owners of generation capacity eligible for producing reserve power, the price increase did not appear to be driven by increased costs. Against the background of several market-design modifications aiming to increase competition and liquidity in Germany's market for reserve power during recent years and an increasing number of market participants the price increase was even more surprising.We study market structures and market power in the first stage and apply common measures like HHI, Concentration Ratios as well as measures developed for electricity markets like Pivotal Supplier Index (RSI) and Residual Supply Index (RSI). We identified a concentrated market with highly pivotal suppliers in an environment with completely price-inelastic demand and high entry barriers. Subsequently we analyzed individual bid strategies with regard to the present pay-as-bid auction design and its "guess the clearing price" principle. Our results suggest that the price increase can be traced back to a reduction in supply of the most dominant supplier and the interaction of the two most dominant suppliers' bidding strategies afterwards. Thereby a spiraling price increase was initiated by repeated pretended "bad guessing" and prices maintained on a higher level even after supply was brought back to its initial volume again.We demonstrate the absurdity of the "guess the clearing price" idea behind discriminatory auctions in an environment with highly pivotal suppliers, inelasticity of demand, repeated auctions and the absence of demand uncertainty. While the first three characteristics can be found in virtually all energy markets, validity of our findings for energy markets in general depends on the degree of demand uncertainty and the frequency of similar market situations. Thus, given regulatory threats, the deemed main advantage of pay-as-bid auctions over uniform price auctions and the popular belief that they reduce dominant suppliers' withholding incentives and diminish their ability to tacitly collude can be rebutted as general rule. In fact, while strategic capacity withholding immediate...

BackgroundThe approval of direct-acting antivirals for Interferon-free treatment revolutionized the therapy of chronic Hepatitis C infection. As of August 2014, two treatment regimens for genotype 1 infection received conditional approval in the European Union: Sofosbuvir and Ribavirin for 24 weeks and Sofosbuvir and Simeprevir with or without Ribavirin for 12 weeks. We aim to analyze the cost-effectiveness of both regimens in Germany.MethodsWe set up a Markov model with a lifetime horizon to simulate immediate treatment success and long-term disease progression for treatment-naive patients. The model analyzes both short-term and long-term costs and benefits from the perspective of the German Statutory Health Insurance. We apply the efficiency frontier method, which was suggested by German Institute for Quality and Efficiency in Health Care for cost-effectiveness analysis in Germany.ResultsThe efficiency frontier is defined by dual therapy and first generation direct-acting antiviral Boceprevir, yielding a maximum of € 1,447.69 per additional percentage point of sustained virologic response gained. Even without rebates, Sofosbuvir/Simeprevir is very close with € 1,560.13 per additional percentage point. It is both more effective and less expensive than Sofosbuvir/Ribavirin.ConclusionsIn addition to higher sustained virologic response rates, new direct-acting antivirals save long-term costs by preventing complications such as liver cirrhosis, hepatocellular carcinoma and ultimately liver transplants, thereby offsetting part of higher drug costs. Our findings are in line with the guidance published by German Society for Gastroenterology, Digestive and Metabolic Diseases, which recommends Sofosbuvir/Simeprevir for Interferon ineligible or intolerant patients.

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