cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

strategic buyers and exclusionary contracts this paper characterizes equilibrium exclusionary contracts between buyers an incumbent firm and a potential entrant when buyers can either vertically integrate or contract with the outside entrant in this setting exclusionary contracts are generally shown to be efficient and to deter inefficient entry that would otherwise occur with multiple unorganized buyers equilibrium contracts are shown to take a divide and conquer form and in some cases to deter some efficient entry in such cases efficient contracting can be restored by a policy that prohibits price discrimination and gives agents free reign to sign exclusionary agreements copyright 1994 by american economic association

the competitive effects of vertical agreements for many years there were few distinctions drawn between horizontal and vertical agreements both were considered anticompetitive and subject to per se condemnation under the antitrust laws recently however this approach has come under attack and what was once the conventional wisdom is no longer so indeed there is growing acceptance of the view that vertical agreements can rarely have anticompetitive consequences per se legality would then be the appropriate standard in this paper we investigate the competitive implications of a particular vertical agreement the imposition of exclusive dealing requirements by a manufacturer on his distributors however to maintain the focus of the analysis we do not consider ultimate welfare gains or losses in an early application of economic analysis to this practice aaron director and edward levi 1956 suggest that exclusive dealing would be anticompetitive if it raised entry costs for rivals our object following this conjecture see their p 293 is to examine the market conditions under which exclusive dealing impedes entry howard marvel 1982 dealt with the practice of exclusive dealing he provides an efficiency rationale for exclusive dealing ignores the prospect that anticompetitive effects may follow and concludes that exclusive dealing ought therefore to be treated as legal per se p 25 this paper examines the possible anticompetitive effects neglected by marvel i market conditions for exclusive dealing

r d policies trade and process innovation we set up a simple trade model with two countries hosting one firm each the firms invest in cost reducing r d and each government may grant r d subsidies to the domestic firm we show that it is optimal for a government to provide higher r d subsidies the lower the level of trade costs even if the firms are independent monopolies if firms produce imperfect substitutes policy competition may become so fierce that only one of the firms survives international policy harmonization eliminates policy competition and ensures a symmetric outcome however it is shown that harmonization is not necessarily welfare maximizing the optimal coordinated policies may imply an asymmetric outcome with r d subsidies to only one of the firms

breaking up a research consortium inter firm r d collaborations through contractual arrangements have become increasingly popular but in many cases they are broken up without any joint discovery we provide a rationale for the breakup date in r d collaboration agreements more specifically we consider a research consortium initiated by a firm a with a firm b b has private information about whether it is committed to the project or a free rider we show that under fairly general conditions a breakup date in the contract is a second best optimal screening device for firm a to screen out free riders with the additional constraint of renegotiation proofness a can only partially screen out free riders entry by some free riders makes sure that a does not have an incentive to renegotiate the contract ex post we also propose empirical strategies for identifying the three likely causes of a breakup date adverse selection moral hazard and project non viability

pass through of exchange rates and tariffs in brazil u s tobacco trade this paper examines the extent to which exchange rate and tariff changes are passed through in u s import prices of unmanufactured tobacco from brazil the model used considers the possibility of market imperfections in international trade and the potential effects of strategic trade policies the results indicate that agricultural prices may not be as flexible as commonly thought furthermore exchange rate and tariff changes are not fully passed through to u s tobacco import prices which indicates that firms selling brazilian tobacco may use trade strategies to maintain or even increase their trade shares in the u s tobacco market

industrial policy and politics abstract recognizing the uncontrollable nature of the political system in a fine tuning way we derive simple constitutional rules for industrial policies which take into account simultaneously the inefficiencies of the political system and informational asymmetries of regulators we apply this methodology to the regulation of natural monopolies we consider a two type political system with the majority rule we study how the chosen cost reimbursement rules and pricing rules which characterize regulation are affected by constitutional choices such as public ownership or privatization creation of incentives for regulators or not price discrimination or not

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

targeted export promotion with several oligopolistic industries abstract we study export promotion policies in situations where several oligopolistic industries compete for the services of a sector specific factor of production the partial equilibrium argument for strategic subsidies must be modified to incorporate general equilibrium effects working through the factor market we find that these effects generally weaken the case for profit shifting subsidies in a benchmark case with symmetric exporting industries fixed coefficients technologies and an inelastic supply of the specific factor free trade is shown to be optimal

networks of collaboration in oligopoly abstract in an oligopoly prior to competing in the market firms have an opportunity to form pair wise collaborative links with other firms these pair wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms we study the incentives of firms to form links and the architecture of the resulting collaboration network we find that incentives to form links are intimately related to the nature of market competition our analysis also suggests that collaborations are used by firms to generate competitive advantage and that strategically stable networks are often asymmetric with some firms having many links while others have few links or are isolated specifically we show that networks with the dominant group architecture stars and inter linked stars are stable we also present some results on the architecture of socially efficient networks

the competitive effects of vertical agreements comment recent economic analyses of vertical restraints and integration emphasize the circumstances under which these arrangements are socially efficient efficiency claims have proven contentious however for exclusive dealing a vertical restraint that prohibits any outlet carrying a manufacturer s product from stocking substitute brands this paper analyzes the impact of exclusive dealing on competition and allocative efficiency opinions expressed on the impact of exclusive dealing range from the extreme view that it is invariably anticompetitive to the view that it is always procompetitive the u s supreme court has concluded that in hundreds if not thousands of communities where there is a single retailer for a product

the competitive effects of vertical agreements comment in a recent paper comanor and frech 1985 cf claim that a manufacturer enjoying a product differentiation advantage could impose exclusive dealing on distributors while also raising its wholesale price the two consumer groups in the model would then pay higher prices than under nonexclusive dealing cf also suggest that exclusive dealing is more likely to emerge when product differentiation is relatively strong cf s analysis does not carefully incorporate the constraints imposed by dealer rationality doing so within cf s model i reach opposite conclusions exclusive dealing will be accepted only if the manufacturer reduces its wholesale price to dealers relative to nonexclusive dealing price rises to one group of consumers but falls to the other moreover exclusive dealing is more likely to emerge when product differentiation is relatively weak

on the dampening of competition effect of exclusive dealing the authors compare and contrast the profit and welfare effects of exclusive dealing sales through a common retailer and vertical integration as did y j lin 1990 the authors find that imperfectly competitive manufacturers prefer to impose exclusive dealing on their retailers unlike lin the authors find that welfare is higher under exclusive dealing than when products are sold through a common retailer this finding suggests a new interpretation of the standard stations v united states 1949 antitrust case copyright 1993 by blackwell publishing ltd

non equivalent pass through of anti dumping duties countervailing duties and import tariffs we directly compare the short run pass through of tariffs anti dumping ad duties and countervailing cv duties into us import prices consistent with the theoretical predictions we find clear pattern of non equivalence in import price reaction to the three duty types with the most notable difference detected between ad duties and tariffs according to our estimates a tariff rate would have to be approximately two times higher than an ad duty rate in order to have the same effect on the delivered import price

the competitive effects of exclusive dealing evidence from the u s beer industry abstract several recent theoretical articles have modeled the effects of exclusive dealing contracts that restrict dealers to selling a single brand yet detailed empirical analysis of the impact of exclusivity on actual market outcomes has been lacking i analyze a unique set of firm level data on nearly 400 beer distributors in the united states the impacts of economies of scale and restrictions on distributor promotional activities on the use of exclusive dealing are measured as well as the effects of exclusivity on costs prices and output the results support the view that exclusive dealing serves to minimize manufacturer dealer incentive conflicts and enhances social welfare

exclusive dealing limiting outside activity and conflict of interest exclusive dealing is one of a number of non price vertical restraints that have become the subject of considerable scrutiny and rethinking both in the courts and in the academic literature 2 8 10 17 because of its association with antitrust law the emphasis of the exclusive dealing literature 3 7 13 16 21 has been on whether exclusive dealing can enhance or protect a firm s market power exclusive dealing and related restrictions on agent activities however are far more widespread than can credibly be attributed to antitrust considerations or interfirm strategic behavior the range of instances where exclusive dealing broadly construed applies is quite large including the familiar manufacturer retailer relationship as well as other situations where there may be a conflict of interest the decision to hire a worker to do a job or to have the job done by an independent contractor could be interpreted as the decision whether a firm wants its workers to exclusively deal their labor the exclusivity question arises in less formal or familiar settings as well should one for example permit a babysitter to have friends visit or should her attention be exclusively directed toward one s children should a university permit its faculty to engage in outside consulting or non university sponsored research or should it lay down rules restricting the time available for outside activities or the types of outside research that can be carried out antitrust courts and legal commentators over the past ten years especially since sylvania 4 have come to view non price vertical restraints more benignly than in the past 2 299 304 15 17 18 20 benign neglect however offers no help to a firm wondering whether to institute exclusive dealing not only may the costs and benefits of doing so be subtle but the decision may be controversial among the affected parties in the conventional exclusive dealing case retailers may not want a major supplier to cut them off if they continue to sell another manufacturer s product and will likely demand to be compensated for their lost business opportunities exclusive dealing may be viewed as the limiting version of a policy to limit outside activities by agents the purpose of this paper is to set out a very general neoclassical choice framework to discover conditions in which exclusive dealing or limitations on outside activities to mitigate conflicts of interest can enhance the operating efficiency of a vertical relationship a specific goal

subsidizing research programs with if and when uncertainty in the face of severe informational constraints we study government optimal subsidy policies for research programs in the face of servere information asymmetry when firms have private information about the likelihood of project viability but the government cannot form a unique prior belief about this likelihood the paper makes two contributions first we show that the way in which rd under r d competition the first best outcome can also be achieved through a simple combination of a matching subsidy and an unrestricted subsidy if the shadow cost of public funds is positive an ex post equilibrium in general does not exist either under monopoly or competition we then consider two alternative policy decision criteria that are appropriate for belief free games rationalizability and max min criteria we argue that the max min criteria is preferable in our context and by way of doing so establish that the set of max min subsidy policies under either monopoly or competitive r d consists entirely of simple pure matching subsidies we further establish that allowing firms to form an r d consortium reduces the matching rate for the highest max min subsidy suggesting that cooperative r d has the potential to economize on the shadow costs of public funding of subsidies

optimal technology policy under asymmetric information in a research joint venture abstract we analyze the optimal technology policy to solve a free riding problem between the members of an rjv assuming that government intervention is subject to an additional adverse selection problem caused by its inability to distinguish the value of the potential innovation although subsidies and monitoring may be equivalent policy tools to solve firms free riding problem they imply different social losses if the government is not able to distinguish perfectly the value of the potential innovation the advantage of monitoring tools relative to subsidies is proved to depend on which type of information the government can obtain about firms r d performance

flexible exchange rates and commodity price changes the case of japan although agricultural commodities are often assumed to have flexible prices little has been done to estimate exchange rate pass through perfect commodity arbitrage opportunities imply complete pass through imperfect opportunities could lead to incomplete pass through analysis of commodity price and exchange rate adjustments for five commodities exported to japan by the united states reveals that during the 1970s commodity prices were generally flexible during the 1980s when the dollar was rising price stickiness on the part of exporters importers contributed to inflexible prices and asymmetric exchange rate response specifically an exchange rate increase was passed through for some commodities but not a decline

downstream vertical foreclosure and upstream innovation i examine a link between downstream foreclosure and upstream innovation the crucial ingredient of the model is the presence of dynamic economies of scale upstream in the form of competition in r d the reason an upstream supplier has a captive buyer is to force rival suppliers to incur the disadvantages of low scale production and discourage them from innovating the downstream buyer is offered favorable terms and is convinced to sign an exclusive supply contract and accept captivity in this context downstream foreclosure may reduce consumer welfare

pass through of exchange rates and tariffs in greek us tobacco trade abstract the paper examines the extent to which exchange rate and unit tariff changes are passed through in us import prices of unmanufactured greek oriental tobacco the results indicate partial pass through of exchange rates and tariffs exchange rate pass through is about 0 272 and tariff pass through about 0 185 one possible reason for the partial pass through is oligopoly in tobacco exporting oligopoly would imply that depreciation of the drachma relative to the us dollar benefits tobacco exporters operating in greece a second possible reason is a possible correlation between exchange rates premiums paid to tobacco exporters in previous agricultural policies an important implication of this possible correlation is that greek tobacco prices may be more sensitive to exchange rate changes under the current agricultural policy

r d cooperation in smes the direct effect and the moderating role of human capital abstractwe analyse the determinants of r d cooperation for smes in italy we introduce in the literature human capital as one of the main determinants of r d cooperation concentrating on its moder

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

the impact of classes of innovators on technology financial fragility and economic growth in this article we study innovation processes and technological change in an agent based model by including a behavioral switching among heterogeneous innovative firms the model is able to replicate via simulations well known industrial dynamic and growth type stylized facts the main original element of the model is that firms are allowed to endogenously change among three different classes namely single innovators collaborative innovators and imitators moreover our analysis focuses on the impact of these three innovation categories on micro meso and macro aggregates we find that collaborative companies are those having the highest positive impact on the economic system furthermore we have paid particular attention to the role of credit market in promoting smart growth for this purpose we analyze the role of banks as sources of external funds for innovative entrepreneurs our results suggest a trade off between short term profit maximization and long term efficiency which prevents banks to foster investment in r d and technological progress the model is then used to study the effect that different innovation policies have on macroeconomic performance

equilibrium and optimal size of a research joint venture in an oligopoly with spillovers this paper analyzes a simple oligopoly model with information spillovers firms spend on r d to affect their costs of production the main finding is that depending on the magnitude of the spillover the market may not provide enough incentives for the optimum degree of cooperation to take place it is shown that the equilibrium size of a research joint venture is usually less than the optimum size which requires all firms to participate in the research joint venture the policy implications of this result are that there should be encouragement for firms competing in high technology industries to form industry wide cooperative agreements copyright 1995 by blackwell publishing ltd

differentiated products and supply controls in the analysis of agricultural policy reform the case of tobacco abstract with a multi market model of the u s tobacco and cigarette industries we analyze the impact of a reduction in the assistance to u s tobacco producers by relaxing production quotas with nonbinding price support and by lowering tariffs on tobacco imports the results show the importance of incorporating differentiated product and supply control assumptions into agricultural policy analysis

innovative strategic groups in multinational industries abstract differences in innovative strategies between groups of domestic and multinational enterprises are analyzed within a two stage game model that incorporates the asymmetries in transaction costs between the two species of enterprises nash and cooperative behaviour is shown to result in different equilibrium r d strategies with the multinational companies doing typically more r d for larger markets and domestic companies focusing on specific market segments survey data from companies operating in eleven high tech multinational industries in belgium provide support for these strategic differences and show how they are related to company performance

the sensitivity of strategic and corrective r d policy in oligopolistic industries abstract we evaluate the case for r d subsidies in export sectors when the outcome of r d is uncertain and the product market is oligopolistic when r d reduces expected costs in the particular sense of first order stochastic dominance a national strategic basis for r d subsidies exists whether firms choose prices or quantities this must be balanced against a corrective incentive to tax r d whenever the number of domestic firms exceeds one however when r d increases the riskiness of the cost distribution as well the results may switch there emerges a strategic incentive to tax and a corrective incentive to subsidize r d

strategic aspects of vertical delegation abstract this paper offers an overview of the strategic aspects of situations where either institutionally or contractually a firm delegates some of its decisions to another firm a subsidiary an internal division etc delegation may have several kinds of strategic benefits in the short term it may improve the competitive position of the firm or induce a more lenient behavior from its competitors in the long run it may be used to deter the entry of potential competitors to foreclose market access or to induce actual competitors to exit the paper analyzes the trade off between these possible benefits and the agency costs of delegation and emphasizes the key issues of credibility and commitment

empirically testing the law of one price in an international commodity market a rational expectations application to the natural rubber market abstract the law of one price lop is an important ingredient in theories of international trade and exchange rate determination an important shortcoming of the existing empirical literature is that parity is typically assumed to hold contemporaneously this overlooks the fact that international commodity arbitrage takes place over time as well as across spatially separated markets recognizing this fact we expect to see parity holding for expected prices a model which incorporates the expectations of commodity arbitragers is constructed and used to test the lop in the natural rubber market results indicate that the inclusion of expectations may be of value when considering the lop

aspects of r d subsidization it is well known that the market fails to provide the socially optimal level of r d expenditure because of the public properties of information see arrow 1963 and usher 1964 in the frictionless perfectly competitive market with no barriers to the use of information the market will provide no r d investment one widely used policy approach to deal with this appropriability problem is patent protection which temporarily assigns the property right to the patented information for some period of time investment in r d can be further stimulated through subsidization though issues in patent protection have been extensively discussed in the literature see nordhaus 1967 1972 scherer 1972 stiglitz 1969 and romano forthcoming the economics of r d subsidization have been largely ignored in spite of its frequent use as a policy tool 1 the purpose of this paper is to explore the usefulness of r d subsidization in markets where patent protection is available with the opportunity to secure a patent firms will have an incentive to invest in r d however only in exceptional circumstances will the market produce the socially optimal r d outlay subsidization can be a useful supplemental policy tool the usefulness of r d subsidization depends on a number of variables including the length of the patent life the character of competition for the patent and on the extent of any excess burdens associated with subsidization our focus is on how optimal subsidization is affected by these variables it is shown that when there is monopoly in the research market the optimal subsidy is always positive no matter how long is the finite patent life or how high is any finite excess burden associated with subsidization in contrast when there are no barriers to entering the research market the optimal subsidy is zero if the patent life is long or the excess burden is high moreover

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

cigarette taxes and smoking restrictions impacts and policy implications the effects of recently proposed increases in cigarette excise taxes and smoking restrictions on tobacco prices and quantities quota lease rates and revenues to tobacco producing areas are analyzed the price elasticity of demand for u s cigarette exports is estimated proportionally similar increases in smoking restrictions or cigarette taxes are shown to have effects of similar magnitude on cigarette consumption a policy of reducing price instead of the quantity produced is found to minimize the impact of increased taxes and smoking restrictions on revenues to tobacco producing areas

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

selective contracts foreclosure and the chicago school view abstract i examine a mechanism by which exclusive supply contracts may inefficiently deter entry into the market in the model the incumbent supplier selectively offers contracts only to some buyers and convinces them to consent by guaranteeing them low prices the contracts strengthen the monopoly position of the incumbent supplier and allow it to extract rents from the remaining buyers that were not offered contracts aside from the favorable contract terms buyers have another reason to consent to the exclusivity scheme the latter raises the input costs of rival buyers that were not offered contracts the model has potential applications to the recent microsoft antitrust case 1994 i define exclusive supply contract as an agreement under which an upstream firm becomes the exclusive supplier of a downstream firm the downstream firm is prohibited from buying from other suppliers

effects of an increase in the federal excise tax on cigarettes the economic impact of a cigarette tax increase on the cigarette and tobacco industries depends on market forces and on the u s tobacco program this study uses a log linear equilibrium displacement model parameter estimates from prior studies and recent data to indicate quantitative effects international trade implies that the effect of the tax increase on the price of domestic tobacco will be small even in the case of fixed tobacco quotas however the effects on tobacco producers revenue quota lease rates and producer economic rents can be significant depending on the response of u s tobacco policy to a tax change

optimal r d levels when firm j benefits from firm i s inventive activity abstract we amend the static model of industry structure in dasgupta and stiglitz to include external benefits from a firm s r d now the market can be seen to underinvest in r d relative to the social optimum the work of mansfield suggests that such external benefits are pervasive

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

technology policy and the organization of r d abstract in this study we examine how technology policy in the form of r d subsidies and encouragement of research joint ventures rjvs affects the investment incentives of firms in various types of imperfectly competitive markets we find that joint ventures yield lower research intensities in the absence of subsidies in the presence of optimal subsidy policy higher expected welfare is obtained with rjvs but the optimal policy may also involve a more costly subsidy program the analysis also identifies possible difficulties in implementing socially optimal policies arising from private incentives conflicting with the public interest

social cost of the tobacco program redux economists do not often get the chance to make long run checks on their own predictions fifteen years ago the senior author johnson analyzed the welfare effects of the flue cured tobacco program as it then was operating the somewhat surprising conclusion of that study was that the program s social cost was essentially zero the fact that the united states faced a less than perfectly elastic foreign demand function produced gains to offset the usual welfare triangle loss and the rather large efficiency loss from restricting an input land rather than output at that time the author made several long run predictions a the elasticity of foreign demand would increase as foreign output increased b institutional rigidities that fostered the u s monopoly position would erode c inefficiency losses would increase all of these would put financial and political pressure on the support

upfront payments and exclusion in downstream markets although upfront payments are often observed in contracts between manufacturers and retailers little is known about their competitive effects or the role retailers play in securing them in this article we consider a model in which two competing retailers make take it or leave it offers to a common manufacturer we find that upfront payments are a feature of equilibrium contracts and in all equilibria only one retailer buys from the manufacturer these findings support the claims of small manufacturers who argue that they are often unable to obtain widespread distribution for their products because of upfront payments copyright 2007 rand

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

discount chains and brand policy retail chains are observed in many industries the question addressed here is whether retail chains can exploit buyer power by excluding some brands in a theoretical model with two differentiated producers and a single retailer we show that a retailer will require exclusivity exclude a brand if the brands are sufficiently symmetric in demand potential exclusivity will increase welfare if the excluded brand is a close substitute for the brand carried by the retailer our theoretical results are also set in relation to some findings from the norwegian grocery industry jel classification l12 l42

dynamic r d competition the authors study a simple two stage stochastic patent race involving two firms they examine the behavior of the participants as they gain the lead or fall behind in the race the authors find that the leader engages in rd 2 a policy of issuing patents for intermediate research results and 3 the effects of research joint ventures whereby the firms coordinate their initial research efforts and share their results copyright 1987 by royal economic society

the economic theory of vertical restraints the types of contracts arising in a typical vertical manufacturer retailer relationship are more sophisticated than a simple uniform price in addition to setting per unit prices manufacturers and retailers also revert to non linear pricing and non price instruments these instruments or contracts are referred to as vertical restraints and can take the form of franchise fees resale price maintenance exclusive dealing exclusive territories and slotting allowances the use and the effects of one type of instrument versus another depend crucially on specific market assumptions upstream and downstream and on the division of bargaining power between manufacturers and retailers this paper surveys the industrial organization literature on retail pricing and shows that vertical restraint instruments have important effects on producer and consumer prices market structure efficiency and welfare

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

equilibrium incentives for exclusive dealing in a differentiated products oligopoly we consider the incentives for oligopolistic manufacturers to adopt exclusive dealing manufacturers producing differentiated brands can choose to distribute through exclusive retail dealerships or nonexclusive dealerships with nonexclusive dealing manufacturers face an interbrand externality because brand enhancing investments made by one manufacturer may benefit the brands of other manufacturers although exclusive dealing eliminates this externality oligopolistic manufacturers may not choose exclusive dealing exclusive dealing enhances the incentive to invest but the promotional investments are a form of competition between manufacturers thus manufacturers might earn higher profits with nonexclusive dealing making lower promotional investments we find cases in which nonexclusive dealing is a dominant strategy we also find cases in which some but not all manufacturers adopt exclusive dealing moreover even if adoption of exclusive dealing by all manufacturers is the equilibrium it can arise from a prisoner s dilemma in that each manufacturer would prefer nonexclusive dealing

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

public policy towards r d in oligopolistic industries the importance of determining optimal policy towards r d cannot be exaggerated given the worldwide interest in fostering r d and given the significant differences between european and u s policies towards interfirm cooperation on r d moreover the problem is an inherently difficult one because of the complex nature of the r d process since r d is a component of fixed costs industries where it is important tend to be concentrated hence r d policy must go hand in hand with competition policy at the same time r d is like any form of investment in that it precedes the production stage hence issues of time consistency and strategic commitment inevitably arise in considering the choice of r d policy finally r d by one firm typically leads to spillovers wbich benefit other firms so that r d exhibits many of the character department of economics university college dublin belfield dublin 4 ireiatid for helpful discussions and comments we are grateful to two anonymous referees to pedro bartos steve martin massimo motta and damien neven and to participants at seminars in birmingham st andrew s and warwick at a cepr workshop on r d spillovers in lausanne at erwit 94 in caslel gandolfo eea 95 in prague the 1996 conference on industrial economics at universidad carlos iii de madrid and a meeting of the dublin economics workshop this paper was produced as part of the international economic performance programme of the centre for economic performance london school of economics supported by the u k esrc an earlier version was circulated as cepr discussion paper no 1243 see alexis jacquemin 1988 and stephen martin 1996 istics of a public good albeit one that is mostly privately produced tbe degree to which such spillovers occur and can be internalized is another crucial influence on the desirable pattem of intervention