High runoff rates increase the mobility of contaminants from fields and decrease the HRT within the wetland, thus reducing the opportunity for filtering pathogens. Despite variations in several characteristics among the four flow-through wetlands in the case study described earlier, HRT was a consistently good predictor of E. coli removal efficiency. Mean removal efficiency was 69, 79, 82, and 95 percent for wetlands having mean HRTs of 0.9, 1.6, 2.5, and 11.6 days, respectively . Remarkably, an HRT of less than a day can allow for considerable E. coli retention , which means that a relatively small wetland area can treat runoff from a relatively large agricultural area. The relationship between removal and HRT was not so clear for enterococci . In this case, W-1, with an HRT of 2.5 days, demonstrated a lower removal rate than W-2 or W-3, which had HRTs of 0.9 and 1.6 days, respectively . These differences are clear evidence that different organisms can behave differently in wetlands. As discussed above, there are many parameters that can influence the environmental fate of pathogens in wetlands, including vegetation density, design, age, size, contributing area, and depth. The efficiency with which contaminants can be reduced in agricultural water as it passes through a wetland is largely dependent on the extent to which water is evenly distributed across the wetland area. A wetland’s retention capacity is diminished if its design results in stagnant zones that either reduce the effective treatment area or short-circuit longer flow paths, indoor growing trays decreasing the HRT. Efficient wetlands come in a variety of shapes and sizes.
A wetland should be wide enough to allow sufficient trapping of sediment and other particulate materials and long enough to permit sufficient residence time for nutrient removal. Most researchers agree that the surface area of a wetland should be as large as possible in order to maximize its HRT and storage capacity. The even dispersion of water across the wetland, termed hydraulic efficiency, is largely defined by the wetland’s dimensions and the relative locations of input and output channels. Designs with good hydraulic efficiency have a shape that facilitates complete mixing throughout the wetland without the persistence of stagnant zones, or may incorporate barriers that achieve the same effects . The sediment trap is an important design feature in settings where the input water has a high level of suspended solids . Sediment traps are essentially small swales or ponds positioned between the source of the agricultural water and the main wetland to promote the settling of coarse particles before the water is distributed across the wetland. Sediment traps should be located in easily accessible areas where sediment can conveniently be removed on a regular basis. Incorporation of sediment traps in your design will decrease the amount of sedimentation within the wetland, lengthening the time you can go between dredgings. They also prevent the burial of germinating seedlings in the wetland and help limit channelization and short circuiting of flow paths. The amount of microbial pollutants in wetland soils is significantly higher than in the standing water. Bacteria survive longer in soil than in water . Fecal coliforms can persist in sediments for as long as 6 weeks , so the degree to which sediments are deposited in a wetland has a significant effect on the degree to which bacteria are exported in effluent waters, post-wetland. The survival time for pathogens varies widely in agricultural settings, probably as a result of local differences in environmental conditions .
If conditions are conducive to pathogen survival, any of a number of wetland conditions that cause the re-suspension and entrainment of sediment—e.g., high water flow pulses into wetlands, wave action, or channelization—may lead to the release of waters that contain microbial pollutants. If you manage wetlands to allow for alternating episodes of flooding and drying, you may be able to decrease the survival of microbes in the wetland soil. In addition to desiccation associated with episodes of dry wetland soil, fluctuations in wetted surface area and depth can facilitate a diversity of biological and bio-geochemical conditions that optimize wetland function and minimize the duration of pathogen survival . There are two general options to reduce non-point source pollution from agriculture: on-site farm management practices that control the pollution source or limit the application of excess materials and their subsequent loss from farmlands, and off-site practices that intercept non-point source pollutants before they reach downstream waters. Wetlands can be used within a farm scape as either an on-site farm practice or an off-site tool, where downstream flood plains are converted to wetlands to mitigate pollution at the watershed scale. In settings where the attraction of wildlife is of concern, you may want to consider placing the wetland off-site, but at a place where it will intercept the runoff before it enters a natural water body. This may also require re-routing of the agricultural runoff into an off-site wetland.Since the work of Bain , the formation of market structure and its effect on market outcomes has been a central topic in industrial organization. In many industries, market structure is not only about the number of entrants and their respective market shares; there is also an important vertical aspect.
In particular, the role played by vertical integration – the combination of two or more vertically related functions within the same firm – has been a topic of active theoretical research. Authors have recognized the ability of vertical integration to influence market structure formation by deterring or facilitating entry. Vertical integration may also have a direct impact on market outcomes. For instance, two markets with similar horizontal market structures may have different price levels if the firms in one of them have a higher degree of integration into a vertically related activity. While many empirical studies have examined the relationship between vertical integration and market outcomes, with a few exceptions , vertical integration has not been treated explicitly as part of the market structure formation process. Meanwhile, the empirical entry literature has so far focused on horizontal interactions among firms; vertical interactions, including decisions to integrate, have not been explicitly incorporated into the econometric analysis of entry. The present dissertation fills this gap in the literature by combining the analysis of vertical integration with that of market entry. There are two benefits from doing so. First, the incorporation of vertical integration into the analysis of entry behavior lets us obtain a more accurate understanding of the market structure formation process. Second, utilizing an empirical framework based on market entry behavior allows us to investigate the motives for, and effects of, vertical integration in new and useful ways. The two empirical essays in this dissertation analyze market entry and vertical integration in the US generic pharmaceutical industry. Generic pharmaceuticals are drug products that become available to consumers after the expiration of patents and other market exclusivities that protect the original product. The industry provides a good setting for studying vertical market structure formation because it consists of many markets – one for each original drug – made up of two vertical segments. The upstream segment manufactures active pharmaceutical ingredients and the downstream segment processes APIs into finished formulations to sell to final consumers. In each market, multiple generic firms simultaneously choose their entry and vertical integration actions. Therefore, the industry provides a large number of market observations where vertical market structure formation takes place through the simultaneous and collective actions of individual firms. The first empirical essay, Chapter 2, seeks to explain the increased prevalence of vertically integrated entry in the generics industry since the late 1990s. Using a firm-level dataset covering 85 markets that opened up to generic competition between 1999 and 2005, I investigate the determinants of a generic firm’s decision to vertically integrate. I find that a firm has a higher probability of vertically integrating, mobile vertical grow racks conditional on its decision to enter the downstream segment, if it has greater past entry experience in the upstream API segment. This suggests that a firm’s upstream experience lowers its cost of vertical integration. I also find that a firm is more likely to vertically integrate when the average upstream experience among its rivals is higher. This effect can be divided into two parts. First, higher upstream experience among rivals implies a greater incidence of vertical integration in the equilibrium market structure. Second, the expectation of a more vertically integrated market structure raises the incentive for an individual firm to become vertically integrated. The latter effect suggests that vertical integration is characterized by bandwagon behavior. While bandwagon effects have been widely discussed in the theoretical literature, and anecdotal accounts of bandwagon behavior is not difficult to find, this result represents one of the first pieces of empirical evidence on its existence. The analysis also finds that generic firms are more likely to be vertically integrated in markets where they try to enter by filing a “paragraph IV certification” that challenges the patents held by originator pharmaceutical companies.
Generic entrants have an incentive to engage in such patent challenges, because the first-to-file paragraph IV entrant may be awarded a 180-day exclusivity in the generic market. I argue that in markets characterized by paragraph IV patent challenges, upstream investment into API development tends to be relationship-specific. This is because in such markets, the API has a much higher value if it is used by the first-to-file entrant than when it is used by some other firm. Such relationship specificity does not exist in other generic drug markets. Therefore, the higher relationship specificity of upstream investments in paragraph IV markets is likely to explain the higher incidence of vertical integration in such markets. Chapter 3 is another empirical essay. It specifies the formation of vertical market structure in generic drug markets as the outcome of a simultaneous-move vertical entry game. Firms choose their actions from a set containing up to four elements: unintegrated downstream entry, unintegrated upstream entry, vertically integrated entry, and no entry. The actions of rival firms enter the payoff functions of potential entrants so that vertical rival effects are measured. The estimated rival effects are then used to make inferences about the competitive effects of vertical integration. An econometric model of the vertical entry game is estimated using a dataset consisting of 85 markets that opened up during 1993-2005. Markets that are subject to paragraph IV patent challenges are not included in the analysis, because the entry process in such markets is characterized by a race to be first rather than a simultaneous-move game. The estimates suggest that vertical integration by rival entrants has a significantly positive impact on the payoffs of uninte-grated downstream entrants. This implies that vertical integration has strong efficiency effects that spill over to benefit unintegrated downstream firms. I also find that the profit of an unintegrated upstream entrant falls when, in a market structure consisting of two upstream firms and one downstream firm, the other firms become vertically integrated. This finding is also consistent with the existence of efficiency effects. The usefulness of the vertical entry model lies in its ability to accommodate policy simulations based on estimated parameters. In one such simulation, it is found that a policy that bans vertically integrated entry tends to decrease the number of downstream entrants in equilibrium. Combined with the finding that vertical integration has significant efficiency effects, this result supports the notion that vertically integration plays a procompetitive role in the generic drug industry.While vertical integration is a feature of many businesses, its incidence or prevalence varies across industries, across different markets in the same industry, and among firms operating in the same market. Explaining such variation in vertical integration has long been an active area of industrial organization research. The motives for vertical integration identified in the theoretical literature can be grouped into two major categories: improvement of efficiency for the integrating firm and foreclosure of rival firms from the supply of an input or from access to consumers. Each category is further divided into sub-categories. For instance, efficiency motives include the elimination of double margins, the facilitation of relationship-specific non-contractible investments, and the assurance of an input supply. In addition to these primary motives, a firm’s decision of whether or not to vertically integrate may be influenced by the actions of its rivals. For instance, a downstream firm’s incentive to integrate backward may be greater if a larger proportion of its rivals are vertically integrated. This would be the case if vertical integration has a foreclosure effect that raises the input price faced by the downstream firm. Thus, “bandwagon” behavior, where a firm vertically integrates in response to similar action by rivals, may be profitable under some circumstances.