movements towards free trade and domestic market performance with imperfect competition this paper studies the response of a dominant domestic oligopoly to the reduction in the rate of a protective tariff the issue here is whether domestic market performance is improved through a movement toward free trade alone put another way is free trade always a substitute for competition policy we find that the lower tariff may lead to inferior domestic market performance the direction of the change and its magnitude are functions of the shape of the import supply function the degree of competition between oligopolists and whether or not entry is possible thus there is reason to believe that a strong competition policy may in some markets be complementary to freer trade

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

alliance strategies of small firms the paper concludes that small firms follow one of two alliance strategies when the firms are small relative to their rivals and to their market they tend to use alliances to gain economies of scale and scope when they are large in relative terms they avoid alliances this behavior is consistent with alliance usage by large firms the paper also analyzes the sources of profit for a small firm that uses a constellation of allies to compete in a scale intensive industry its profits depend on a combination of the group based advantages generated by the constellation and the share of these profits that the firm can appropriate from the group small firms face particular hazards in this regard when their bargaining power within their constellation is weak the paper illustrates these arguments with data froma small survey with case studies from the computer industry and with a simple mathematical model

plant closings and exit behaviour in declining industries the plant closing and exit strategies of firms operating in a declining industry are examined a dynamic game theoretic model is utilized the perfectness criterion is used to restrict the set of nash equilibria there are two key equilibrium results first when firms have the same number of plants high cost plants close before lower cost plants second a larger firm i e a firm operating more plants begins closing plants before a smaller firm as long as cost differences are not large copyright 1988 by the london school of economics and political science

trade liberalisation and plant exit in new zealand manufacturing data on new zealand manufacturing plants are used to examine the impact of trade liberalization on plant exit recent theories suggest that the prospect of a declining market might cause firms to adopt strategic behavior that causes low cost plants to exit first this hypothesis is generally unsupported surviving plants were larger lower cost and were owned by specialized firms with few plants plant costs were more important than firm size for explaining the plant closing behavior of single plant firms diversified multiplant firms were more likely to close plants and were influenced by plant size but not plant costs copyright 1996 by mit press

cost differences and survival in declining industries a case for picking winners abstract in this paper we examine the relationship between firms cost structures and the order of exit from declining industries we distinguish between two fundamental causes of demand decline namely a shrinkage of the consumer base and a decrease in consumers willingness to pay we show that it is not necessarily best to be small and flexible the order of exit in a market driven outcome depends on the manner in which demand shrinks we find that from a welfare perspective the order of exit determined by market forces is not necessarily desirable however simple rules for picking winners based on current unit cost profitability or productive efficiency do not provide sound guidance for policy

an investigation of the determinants of profitability in new zealand manufacturing industries in 1986 87 the empirical investigation of the structure condust performance relationship has had to grapple with the problem that higher than usual profitability might arise from superior production efficiency or alternatively from markets subject to lower competitive pressures as such the nature of investigation has evolved over time to include the market power efficiency debate and the new industrial organisation emphasis on the joint determination of profitability and market structure the purpose of this paper is to present some new zealand evidence with a unique feature being to include a measure of firm level efficiency in a disaggregated model estimated using firm level data the results suggest both market power and efficiency play a role in determining profitability although efficiency dominates

understanding the reductions in us corn ethanol production costs an experience curve approach the us is currently the world s largest ethanol producer an increasing percentage is used as transportation fuel but debates continue on its costs competitiveness and energy balance in this study technological development of ethanol production and resulting cost reductions are investigated by using the experience curve approach scrutinizing costs of dry grind ethanol production over the timeframe 1980 2005 cost reductions are differentiated between feedstock corn production and industrial ethanol processing corn production costs in the us have declined by 62 over 30 years down to 100 2005 tonne in 2005 while corn production volumes almost doubled since 1975 a progress ratio pr of 0 55 is calculated indicating a 45 cost decline over each doubling in cumulative production higher corn yields and increasing farm sizes are the most important drivers behind this cost decline industrial processing costs of ethanol have declined by 45 since 1983 to below 130 2005 m3 in 2005 excluding costs for corn and capital equivalent to a pr of 0 87 total ethanol production costs including capital and net corn costs have declined approximately 60 from 800 2005 m3 in the early 1980s to 300 2005 m3 in 2005 higher ethanol yields lower energy use and the replacement of beverage alcohol based production technologies have mostly contributed to this substantial cost decline in addition the average size of dry grind ethanol plants increased by 235 since 1990 for the future it is estimated that solely due to technological learning production costs of ethanol may decline 28 44 though this excludes effects of the current rising corn and fossil fuel costs it is also concluded that experience curves are a valuable tool to describe both past and potential future cost reductions in us corn based ethanol production

excess capacity and rationalisation in the west european synthetic fibre industry this paper examines the process of rationalisation in an international oligopoly confronted by persistent excess capacity and losses in particular it analyses the pattern of capacity reduction plant closures and product area withdrawals as the firms strove to restore their profitability it compares the actual pattern of rationalisation achieved between 1975 and 1981 with the predicted patterns of rationalisation based on theory both under a cartel with government intervention and in a competitive solution free from such intervention the paper is divided into four sections the first contains a brief outline of developments in the industry 1967 80 the second section examines the producer cartel and government intervention framework the third section is devoted to the development of a predicted competitive pattern of rationalisation finally the fourth section examines the actual pattern of rationalisation and compares this with both the cartel plus government intervention and the competitive pattern predictions

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

exit and inefficiency the effects of ownership type this study uses data on hospital closures to examine the relation between exit and inefficiency in an industry where for profit not for profit and government firms coexist the likelihood of hospital exit over the period 1986 91 is estimated as a function of hospital relative inefficiency ownership type and other factors where hospital relative inefficiency is measured using residuals from estimation of a stochastic frontier cost function we find that less efficient hospitals were more likely to exit when ownership was for profit or not for profit but that relative inefficiency did not have a significant effect on the probability of exit for government hospitals

a hybrid fuzzy satisfying optimization model for sustainable gas resources allocation abstract energy resources allocation continues to be a hot topic and has attracted more attention in recent years in iran as one of the richest countries in the world in terms of hydrocarbon resources energy resources allocation is a multi criteria decision making problem in which a great deal of input information cannot be expressed precisely in this paper we propose an integrated satisfying optimization approach based on fuzzy goal programming fgp and logarithmic fuzzy preference programming lfpp the goal of which is to handle effectively the uncertainties and vagueness of input data and different importance preferences among fuzzy constraints and weights of objectives due to the above mentioned problem the proposed model is applied to a real case study of sustainable gas resources allocation in iran the solutions provide gas resources allocation to different sub sectors at macro level taking various criteria into consideration the results show that reasonable solutions that have been found are useful for supporting adjustment of the existing demand and supply patterns of gas resources and also for coordination of conflict interactions among economic security and environmental aspects of gas resources allocation

a review of the ecological and socioeconomic effects of biofuel and energy policy recommendations abstract many countries have attached great emphasis on biofuel because it is universally acknowledged renewable and sustainable however there remain doubts regarding biofuel s renewability cleanliness and ecological friendliness in addition its impacts on income employment and food security have been widely discussed therefore the effect of developing biofuel as an important method of resolving the energy crisis and climate change is questioned based on the rocketing concern on the multiple effects of biofuel this paper provides a comprehensive and updated review of the literature on biofuel s ecological effects and socioeconomic effects the literature included in this paper is selected english language papers being published since 2004 we find that existing studies have not arrived at a consensus regarding the ecological or the socioeconomic effects of biofuel there remain uncertainty and doubts toward biofuel s renewability and cleanliness biofuel s impacts on water and biodiversity are also questioned although biofuel is widely regarded to have positive impacts on income and employment many studies prove that biofuel influences food security negatively besides biofuel s economic cost is likely to be the barrier to its promotion because of the uncertainty of biofuel s impacts this study recommends cautious attitude toward biofuel development especially for those countries where biofuel development would be inappropriate and suggests that policy makers engage in demand side management instead of unsustainable supply side management

bridging behavioral and economic theories of decline organizational inertia strategic competition and chronic failure this paper is another plea for bridging behavioral and economic approaches to the study of competition in markets and strategy making by firms the arguments focus on a specific case in point the behavioral theory of organizational decline and the economic modeling of immediate exit the arguments come in three steps first the literature on organizational decline is reviewed by organizing a framework that summarizes arguments from varying economic and organizational perspectives that have for the most part developed independently observations from empirical and theoretical studies are combined in order to investigate the causes conditions courses and consequences of organizational downturn second a theoretical argument is developed that explains voluntary exit and chronic failure by introducing a proxy of organizational inertia in a model of strategic cournot duopoly the key assumptions which have a behavioral flavour that seemingly contradicts orthodox economics are grounded in the theoretical and empirical literatures the results of the model support the claim that pure profit maximizing behavior may be at the expense of organizational survival d aveni 1990 p 135 third by formulating two hypotheses and presenting tentative evidence from the chemical industry the paper hopes to convincingly argue that such integrative models lead to empirical testing of interesting hypotheses a key finding here is that inefficient firms may outlast their efficient rivals cf d aveni 1989a

exit with multiplant firms using an extension of ghemawat and nalebuff s 1985 model i analyze the outcome of industry decline when firms have multiplant operations the analysis reveals that no natural generalization of their strong empirical prediction that the larger of two single plant duopolists exits first holds in a multiplant setting the results also highlight a number of factors that affect the pattern of capacity removal during industry decline and lead to a discussion of the strategic implications of firms plant size choices in general the factors determining the pattern of capacity reduction can be quite complex and prediction in such settings often requires intimate knowledge of industry structure

biomass price developments inhibit biofuel investments and research in germany the crucial future role of high yields abstract the competitiveness of conventional and advanced second generation biofuels is a critical issue for the implementation of a sustainable transport strategy we model biofuel competition under different feedstock cost development scenarios assessing what costs and cost developments can be expected for energy crops in germany and how these feedstock cost developments affect the competitiveness between biofuels perennial poplar was found to be the least cost energy crop with non perennial silage maize being strongly competitive at increasing feedstock price developments assuming increasing feedstock costs for the future neither conventional biodiesel from rape seed nor advanced biodiesel were found to be competitive in the long run feedstock costs were found to overshadow all other factors leading to costs for advanced biodiesel to be between 27 0 and 53 6 gj 1 in 2030 which is above most expectations of the advanced biofuels only synthetic natural gas was cost competitive under some circumstances but biomethane from silage maize and bioethanol from sugar beet were the strongest options as they combine high yields with high conversion efficiencies while avoiding the high upfront costs of advanced biofuels and the risk of switching to perennial crops however such a transition leads to less mobile feedstocks being used than presently and in the case of gaseous fuels requires stimulation of the demand side in order to function the high dependence on and increasing relevance of feedstock costs is characteristic for the biobased renewables only and is detrimental and inhibiting for investments and research and development efforts in contrast to for e g wind and solar photovoltaics and must be considered when designing policy for any sector of the bioeconomy

trade liberalization in oligopolistic industries the quota case abstract this paper analyzes the short and long run effects on domestic price and output of partially liberalizing quota restrictions in a general model of oligopolistic interactions it is shown that perverse outcomes are possible in a number of cases including that of rational conjectures a larger quota may result in an increase in domestic output in the short run and a higher price in the long run the relationship between oligopolistic conjectures and the number of firms in the industry is critical in determining the long run outcome

empirical entry games with complementarities an application to the shopping center industry abstract the author proposes a strategic model of entry that allows for positive and negative spillovers among firms the model is applied to a novel data set containing information about the store configurations of all u s regional shopping centers and is used to quantify the magnitude of interstore spillovers the author addresses the estimation difficulties that arise due to the presence of multiple equilibria by formulating the entry game as a mathematical problem with equilibrium constraints mpec although this study constitutes the first attempt to use this direct optimization approach to address a specific empirical problem the method can be used in a wide range of structural estimation problems the empirical results support the agglomeration and clustering theories that predict that firms may have incentives to colocate despite potential business stealing effects the author shows that the firms negative and positive strategic effects help predict both how many firms can operate profitably i

the challenge of measuring biofuel sustainability a stakeholder driven approach applied to the french case measuring biofuel sustainability requires dealing with a wide variety of complex and conflicting values at stake consequently the biofuel capacity to contribute to one specific value cannot lead to any absolute conclusion about the overall sustainability of biofuel the scope of the sustainability concept may vary depending on individuals preferences the time scale and the geographical region based on the 5 pillars sustainability concept that includes social economic environmental legal and cultural considerations the present study proposes to assess several biofuel sustainability options for france by 2030 through a stakeholder driven approach rather than seeking to reach a consensus our approach allows us to capture the wide diversity of stakeholders perspectives and preferences french stakeholders perceive 22 different sustainability criteria for biofuels with a very low level of agreement between the different segments of professions feedstock producers biofuel producers refining industry fuel distributors car manufacturers end users government and ngos in order to operationalize the sustainability assessment a set of indicators has been identified with stakeholders that allows us to measure the capacity of biofuels to fulfill each of their criteria seventeen biofuel options were assessed with regards to economic social environmental cultural and legal considerations allowing the identification of the strengths and weaknesses of each biofuel

a model of advertising competition using a dynamic model of advertising rivalry between competitors in a duopoly the author obtains analytical results for the case of pure market share rivalry in a mature market a more general mod

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

tariff limit pricing relative plant scale and the eastman stykolt hypothesis this paper provides a formal basis for the widely held proposition sometimes called the eastman stykolt effect that the interaction of tariff protection and small domestic market size prevents canadian firms from achieving scale efficiency it considers a free entry cournot nash equilibrium in a homogeneous goods industry protected by tariffs the model demonstrates that the tariff limit pricing effect can arise without appeal to collusion or product differentiation moreover it is not appropriate to test for the eastman stykolt effect by simply including the interaction of market size and tariffs in a regression explaining relative plant scale

up the average cost curve inefficient entry and the new protectionism abstract a two country model is developed in which each country produces one good with increasing returns the goods being perfect or imperfect substitutes with cournot nash behavior and free entry certain restrictive trade policies have effects opposite to their favorable effect under noentry assumptions import tariffs and export subsidies lead to inefficient entry that raises rather than decreases the average production cost of and price charge by the domestic industry with negative welfare consequences we argue that these predictions of our model are closely consistent with extensive canadian data on entry exit and firms responses to trade liberalization

a note on capacity reduction and the role of firm size in declining industries declining industries have been explained by game theoretic approaches with size as the determining factor as to who exits first benefits and costs of capacity reduction have been neglected and are discussed here when a strategically behaving firm initially reduces capacity it can force small competitors from the market by internalizing the benefits of capacity reduction the second factor that determines exit refers to transfering capacity to other markets first to exit are those firms that are good at reducing their exit costs by finding new markets for their assets

anatomy of a crisis the causes and consequences of surging food prices although the potential causes and consequences of recent rising international food prices have attracted widespread attention many existing appraisals are superficial and or piecemeal this article attempts to provide a more comprehensive review of these issues based on the best and most recent research as well as on fresh theoretical and empirical analysis we first analyze the causes of the current crisis by considering how well standard explanations hold up against relevant economic theory and important stylized facts some explanations turn out to hold up much better than others especially rising oil prices the depreciation of the u s dollar biofuels demand and some commodity specific explanations we then provide an appraisal of the likely macro and microeconomic impacts of the crisis on developing countries we observe a large gap between macro and micro factors which when identifying the most vulnerable countries often point in different directions we conclude with a brief discussion of what ought to be learned from this crisis

assessing competition in hospital care markets the importance of accounting for quality differentiation quality differentiation is especially important in the hospital industry where the choices of medicare patients are unaffected by prices unlike previous studies that use geographic market concentration to estimate hospital competitiveness this article emphasizes the importance of quality differentiation in this spatially differentiated market i estimate a random coefficients discrete choice model that predicts patient flow to different hospitals and find that demand responses to both distance and quality are substantial the estimates suggest that patients do not substitute toward alternative hospitals in proportion to current market shares implying that geographic market concentration is an inappropriate measure of hospital competitiveness

what do stochastic frontier cost functions tell us about inefficiency abstract recent studies using the stochastic frontier approach have suggested high levels of inefficiency in nursing home and hospital facilities this paper makes two observations first one could falsely estimate high levels of inefficiency if a statistical assumption zero skewness of the random component of the cost residual is violated second an inefficient industry may be difficult to distinguish either statistically or visually from an industry free of inefficiency if available panel data yields more robust estimates of cost differences among nursing homes or hospitals

modelling production cost scenarios for biofuels and fossil fuels in europe competitive production costs compared to conventional fuels are imperative for biofuels to gain market shares as current tax advantages for biofuels are only temporary comparing production costs of different biofuels with fossil fuels is a challenge due to the complexity of influencing factors the objective of this research paper is threefold 1 to project future bio fuel feedstock prices based on the crude oil price development the price index for agricultural products growth in world population growth in wealth per capita income and change in energy consumption per capita 2 to simulate production costs under consideration of likely economies of scale from scaling up production size and technological learning and 3 to compare different biofuels and fossil fuels by scenario analysis a calculation model for biofuel production is used to analyse projected production costs for different types of biofuels in europe for 2015 and 2020 unlike engineering oriented bottom up approaches that are often used in other biofuel studies the macro economic top down approach applied in this study enables an economic comparison and discussion of various fuel types based on reference scenarios of crude oil prices of 50 100 150 and 200 per barrel depending on the specific raw material prices as well as the conversion costs the analysis delivered a differentiated view on the production costs and thus on the competitiveness of each individual type of fuel the results show that 2nd generation biofuels are most likely to achieve competitive production costs mid to long term when taking into account the effects from technological learning and production scale size as well as crude oil price scenarios between 50 and 200 per barrel for both reference years in all crude oil price scenarios bioethanol from lignocellulosic raw materials as well as biodiesel from waste oil are associated with high cost saving potentials which enable them to outperform fossil fuels and 1st generation biofuels

unionization and plant closure in canada this paper examines for the first time the role of unionization as a determinant of plant closings in canada using the 1999 to 2001 canadian workplace and employee survey the paper contributes to the north american evidence by showing that the share of a plant s workers covered by collective bargaining has a robust positive partial correlation with the probability of larger plants closing for smaller plants the extent of unionization tends to be much lower and its variation plays no role in plant closure the study highlights the theoretical and statistical importance of examining closure separately for large and small plants ce memoire examine pour la premiere fois le role de la syndicalisation en tant que determinant de la fermeture d usines au canada a l aide des resultats de l enquete sur le milieu de travail et les employes de 1999 et de 2001 emte le texte contribue a enrichir le dossier qui montre qu il y a correlation positive partielle robuste entre la portion des travailleurs d usines couverts par une convention collective et la probabilite de fermeture des grandes usines pour les plus petites usines le degre de syndicalisation tend aetre plus faible et sa variation ne joue pas de role dans le processus de fermeture d usines cette etude montre l importance theorique et pratique qu il y a aetudier separement les fermetures des grandes et des petites usines

keeping your enemies closer when market entry as an alliance with your competitor makes sense we present an analytical framework of multimarket competition and supporting empirical analysis to explain why and when competing firms in an existing market may prefer an alliance entry over independent entry into a new market our findings suggest that an alliance entry is more profitable than an independent entry i when the new market is larger relative to the existing market and ii when the competition in the existing market is stronger relative to the new market we compare these key predictions with archival data from the regional shopping center industry in the united states and find that instances of alliance formation in this industry are consistent with our model based predictions data as supplemental material are available at http dx doi org 10 1287 mksc 2016 0988

when can carbon abatement policies increase welfare the fundamental role of distorted factor markets abstract this paper employs analytical and numerical models to assess the welfare effects of a revenue neutral carbon tax and nonauctioned carbon emissions permits taking into account preexisting tax distortions in factor markets the presence of preexisting taxes significantly raises the general equilibrium costs of both policies this cost increase is much greater under emissions permits since this policy does not generate revenues to reduce distortionary taxes under our central estimates emissions permits cannot increase welfare unless environmental damages exceed about 18 per ton of carbon in contrast an appropriately scaled carbon tax is welfare improving so long as environmental damages are positive

globalization trade and income my purpose in this paper is to address two questions that confront our discipline repeatedly these days first what is a useful classification of the symptoms and the determinants of globalization a phase used in a remarkable variety of contexts to economists globalization is generally thought of as the increasing internationalization of the production distribution and marketing of goods and services the term is used less precisely in the popular literature perhaps best exemplified by kenichi ohmae s book the borderless world and when used loosely it invokes a wide variety of political sociological environmental and economic trends that are the concern of media attention almost daily however one defines globalization it is surely a development that is having a profound impact on the subject of economics as a whole and ought to have on the field of international economics in particular my second purpose is to ask how globalization is affecting our profession s view of theory and empirical work in international economics traditional trade theory was concerned with a set of fairly well defined questions regarding the determinants of trade the pattern of trade and the welfare consequences of various trade policy instruments the last two decades and perhaps the last decade in particular has led to a much wider interpretation of what living in an open economy means the change that is occurring on a wide range of economic social scientific and

exit from the hospital industry we study the exit of hospitals from the market for inpatient services more generous hospital reimbursement significantly reduces the probability of exit throughout the 1990s conditional on reimbursement levels hospital efficiency was not a significant determinant in the early 1990s but in the mid to late 1990s less efficient hospitals were significantly more likely to exit throughout the period high tech services increased the probability of survival and for profit hospitals were more likely to exit the role of medicare as a determinant of exit became less important in the latter half of the 1990s

the learning curve and pricing in the chemical processing industries data on 37 chemical products are used to test a number of hypotheses about the learning curve and industrial price behavior the results document a strong and consistent learning effect learning is found to be a function of cumulated industry output and cumulated investment rather than calendar time standard economies of scale appear significant but small in magnitude relative to the learning effect variations in the slope of the learning curve are linked to differences in r d expenditures and capital intensity market concentration is found to be a strong influence on price flexibility and the timing of learningrelated price changes

investigating the cause of death industrial relations and plant closures in australia this is the first study to focus on how unions affect the likelihood of plant closures in australia australia is of special interest in this connection the authors argue because of its unique industrial relations institutions which at the time of the study 1990 95 limited the capacity of established unionized firms to remove unions except through plant closure an analysis of australian workplace industrial relations survey data shows that two of three measures of unionization had a robust positive influence on the probability of plant closure and the third had a weaker positive influence depending on the specification for example a 10 percentage point increase in union density one of the two measures found to have strong influence was associated with a 1 3 1 7 percentage point increase in the probability of plant closure representing a substantial increment since the mean closure probability among these plants was about 16

hospital investment decisions and the cost of capital this study addresses two issues conceptually and empirically how does hospital ownership type affect hospital investment choices how do differences in the way hospitals are paid cost versus charge based reimbursement affect hospital investment the authors compute cost of capital measures for both for profit and not for profit hospitals whether or not hospital dependence on cost based payment stimulates investment depends on the generosity of such payment relative to the economic cost of capital empirically they find that for profit hospital exit entry decisions are guided by the generosity of payment to a greater extent than the not for profits copyright 1989 by the university of chicago

multi source capacitated lot sizing for economically viable and clean biofuel production abstract excessive water usage and co2 emissions resulting from industrial systems and processes have significantly raised environmental concerns although biofuels help to mitigate greenhouse gas emissions the biofuel industry itself consumes a considerable amount of water and produces co2 emissions during ethanol production in this paper we develop a mixed integer linear programming milp capacitated lot sizing model for analyzing the economic and environmental feasibility of ethanol production using multiple biomass sources the model minimizes the cost of ethanol production while penalizing its possible adverse environmental impacts such as co2 emissions and excessive water usage the overall cost of ethanol production includes production setup and inventory holding costs with penalties for environmental impacts minus the income from ethanol tax credits and electricity generated from waste heat we perform a sensitivity analysis and analyze results to improve our understanding of the economic viability of ethanol production and associated environmental effects results show that switchgrass is the most profitable and preferred biomass type when there is an unlimited supply of all biomass sources while wheat and corn become more preferable in the case of a limited biomass supply compared to low and medium demand cases when there is high demand total costs increase significantly due to multiple production setup costs excessive water usage and co2 emissions under limited biomass supply the solution of the proposed model also indicates that if ongoing technology investments in the conversion rate succeed the total cost of ethanol production can decrease by up to 21 percent finally results show that the proposed milp model provides valuable insights and strategies for future investors decision makers and the government to achieve sustainable and economically viable biofuel production using various biomass types

the welfare economics of a biofuel tax credit and the interaction effects with price contingent farm subsidies a framework is developed to analyze the effects of a biofuel consumer tax exemption and the interaction effects with a price contingent farm subsidy ethanol prices rise above the gasoline price by the amount of the tax credit corn farmers gain directly while gasoline consumers only gain from any reduction in world oil prices due to the extra ethanol production domestic oil producers lose historically the intercept of the ethanol supply curve is above the gasoline price hence part of the tax credit is redundant and represents rectangular deadweight costs that dwarf triangular deadweight cost measures of traditional farm subsidies copyright 2007 oxford university press

the devolution of declining industries in declining industries capacity must be reduced in order to restore profitability who bears this burden where production is all or nothing there is a unique subgame perfect equilibrium the largest firms exit first ghemawat and nalebuff 1985 in this paper firms continuously adjust capacity again there is a unique subgame perfect equilibrium all else equal large firms reduce capacity first and continue to do so until they shrink to the size of their formerly smaller rivals intuitively bigger firms have lower marginal revenue and correspondingly greater incentives to reduce capacity this prediction is supported by empirical findings

international bioenergy trade a review of past developments in the liquid biofuel market policies aimed to promote biofuels locally had tremendous effects on global market developments across the past decade this article develops insights into the interaction of these policies and market forces via a comprehensive collection and analysis of international production and trade data it shows that world biofuel production and trade has grown exponentially from below 30 pj in 2000 to 572 pj in 2009 for biodiesel from 340 pj in 2000 to over 1540 pj in 2009 for fuel ethanol the eu has dominated world biodiesel whereas the us and brazil have led fuel ethanol production world net biofuel trade reached 120 130 pj in 2009 and was directed towards the most lucrative markets for biodiesel this has been the eu whose imports rose to 92 pj in 2008 and remained at 70 pj in 2009 regarding fuel ethanol both the us and the eu have been prime destinations for competitively priced exports the vast majority of which originated in brazil international biofuel trade is both supply and demand driven the demand side was shaped by support policies which generally increased the domestic market value of biofuels trade developed wherever these policies prices were not accompanied by respective measures it is found that import duties largely influenced trade volumes whereas trade routes were mainly driven by tariff preferences trade regimes appear to have been designed and adapted unilaterally along national interests causing market disruptions trade inefficiencies and disputes to avoid these it is important to explicitly consider international trade implications of national trade policies a prerequisite is to improve the understanding of the underlying complex and interwoven links within the market the current lack of adequate homogeneous international reporting of biofuel production and trade statistics could be bridged via internationally standardized custom clarifications trade factor interrelations also need to be investigated further

on hotelling s competition with non uniform customer distributions abstract hotelling s competition in a two stage location price game is examined with increasing densities of consumers towards the centre it is shown that there is a range of rather even distributions for which firms locate at opposite ends of the market as the distribution becomes more concentrated duopolists will tend to move inside the market

why do the free trade gain numbers differ so much the role of industrial organization in general equilibrium a small general equilibrium model calibrated approximately to match the canadian tradeable goods sector is used to examine the implications of a range of assumptions about pricing behaviour and entry barriers for the impact of free trade with the united states it turns out that only a model with an extreme combination of non competitive product market and free entry as well as unexploited scale economies can generate substantial gains from free trade other assumptions modelled include monopolistic competition market share pricing an economist s model and a mainstream industrial organization approach the predicted welfare gains range from zero to more than 7 per cent of gnp pourquoi est ce que les evaluations numeriques des gains derives de l accord de libre echange different tellement le role de l organisation industrielle dans l analyse d equilibre g6neral l auteur utilise un petit modele d equilibre general calibre pour approximer le secteur canadien des biens echangeables avec l exterieur dans son analyse des implications d un ensemble de postulats quant a la tarification et aux barrieres a l entree sur l impact du libre echange avec les etats unis il appert que seul un modele impliquant une combinaison extreme de marches de produit non concurrentiels et d entree libre ainsi que d economies d echelle non exploitees peut engendrer des gains substantiels comme resultat du libre echange on examine aussi d autres postulats concurrence monopolistique tarification pour maintenir une part du marche un modele a saveur economiste et 1 approche standard d organisation industrielle les gains de bien etre qu on predit selon les postulats de base couvrent un eventail de zero a 7 pour cent du pnb

exit with vertical product differentiation abstract this paper presents a duopoly model of exit from a declining industry with vertical product differentiation it extends previous io models on exit that have so far ignored demand effects the model shows how the interplay between demand and technological factors determine the order of exit therefore demand factors are relevant and should be taken into account thus the firm with a longer tenure as a profitable monopolist does not necessarily outlast its rival in addition this paper argues that the low quality firm may find it optimal to stay in the market despite making temporary losses to outlast its rival

spatial pricing with a general cost function the effects of taxes on imports one of the authors of this paper referred some years ago in a somewhat different context to a mislaid maxim in the hope that the maxim in question will not be permanently mislaid greenhut and ohta 1976 p 267 much the same hope can be expressed with respect to one of our objectives in this paper it is a familiar principle in microeconomics that specific or unit taxes act somewhat differently from ad valorem taxes although we would suggest that the full extent of this difference has not been investigated there is also the suggestion in international trade theory that tariff barriers and by implication local sales taxes operate very much like transport costs and so can be analyzed like transport costs in particular just as we might expect spatial price discrimination through freight absorption so we can expect spatial price discrimination through tariff or sales tax absorption what is not made clear is that there is a potential conflict between these two accepted wisdoms determined by whether the tariff or sales tax is specific or ad valorem we examine this conflict in some detail in this paper we shall show that just as the profit maximizing producer can be expected to absorb some proportion of transport costs so we can also expect him to absorb some proportion of the tariffs or taxes to which his goods are subject but the precise nature of tariff absorption depends crucially on the particular tariff barriers that exist only specific tariffs impact the same way as do transport costs ad valorem tariffs will be shown to have a very different effect they will appear at least in part as a change in convexity of the individual demand function a related objective of the paper and one with which we shall deal first in the analysis is to show how an optimal spatial pricing rule can be derived when marginal production costs take a general form the analysis of spatial competition and of spatial price discrimination has relied quite heavily on the assumption of constant marginal production costs it follows naturally from this assumption that the price quantity decisions applicable to a market at location i are independent of the price quantity decisions at location j the optimal discrimination pricing policy over a series of distinct markets under conditions of constant marginal production costs would be the one that maximizes profit at each market point what happens when this assumption is relaxed consider the simple example