Essays on market competition and law enforcement

  • Yanchen WANG

Student thesis: PhD Thesis (Lingnan)


My Ph.D. dissertation contains both theoretical and empirical studies on market competition and law enforcement. The first study, entitled “Piracy, Counterfeiting, and Market Competition”, is a theoretical study and investigates the economic consequences of intellectual property law enforcement by looking at two types of intellectual property infringement, piracy and counterfeiting. To investigate how the market power changes in the presence of piracy, we start with a static model made up of two horizontally and vertically differentiated goods, genuine product and pirated product. The representative consumer's utility is a function of the consumption of the two goods. The consumer can choose to buy one out of the two differentiated goods but faces a potential legal cost if he purchases the pirated product. The legal cost is exogenous and decided by the policy maker. We show that, as the level of law enforcement enhances, the substitutability between genuine product and pirated product decreases, and the market power of the genuine product producer increases. This makes the two products less likely to belong to the same antitrust relevant market, confirming the conjecture raised by Lin (2018). Next, we explore how anti-counterfeiting efforts under the intellectual property law affect market competition, by setting up a two-stage game made up of four firms: two branded firms and two counterfeiters. In the first stage, each branded firm can take anti-counterfeiting effort independently and simultaneously, which only affects its corresponding counterfeiter. In the second stage, four firms compete in the Cournot’s framework. We show that two branded firms’ decision variables are strategic substitutes, and the negative externality exists for branded firm to take anti¬-counterfeiting efforts. Due to the negative externalities, we confirm that the private anti-counterfeiting efforts chosen by branded-good producers are higher than the industrial optimum. The second study, entitled ^The Volcker Rule, Bank Stability and Bank Liquidity^, is an empirical study and focuses on the latest bank regulation, the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, we focus on section 619of Dodd-Frank Act, which is commonly known as “Volcker Rule” and imposes restrictions on banks’ ability to engage in proprietary trading activities. Using the passage of the Volcker Rule as an exogenous shock, we employ the difference-in¬differences analysis to investigate the effect of Volcker Rule on bank risk and liquidity creation. We find a significant reduction on proprietary trading among regulated bank holding companies (BHCs). In the meantime, we find that the enforcement of Volcker Rule induces a significant increase in liability-side liquidity creation and a decrease in the off-balance sheet liquidity creation. Our findings shed light on the trade-off of Volker Rule implementation in the United States.
Date of Award16 Aug 2018
Original languageEnglish
Awarding Institution
  • Lingnan University
SupervisorPing LIN (Supervisor) & Jan Piaw Thomas VOON (Co-supervisor)

Cite this