carbon tax and opec s rents under a ceiling constraint we study the markov perfect nash equilibrium mpne of a game between oil importing countries who seek to maintain the atmospheric carbon concentration under a given ceiling and oil exporting countries the oil importing countries set a carbon tax and the oil exporting countries control the producer price we obtain implicit feedback rules and explicit non linear time paths of extraction carbon tax and producer price consumers are always able to reap some share of the scarcity and monopoly rents whereas producers partially pre empt the carbon tax only if the marginal damage under the ceiling is small we compare the mpne to the efficient open loop and cartel without tax equilibria

capacity constraints and voluntary output cutback in dynamic cournot competition abstract this paper considers cournot competition in which duopolists play a quantity setting game with sticky prices and capacity constraints a feedback subgame perfect equilibrium is derived and analyzed with sufficient differentiability the paper shows the existence and the uniqueness of symmetric feedback equilibrium we show that there arises a range of constraints defined by two threshold values in which the firms outputs are below the constraint level in the steady state yet the outputs depend nontrivially on the constraint for outside observers the constraint does not seem to be binding but the constraint is binding in that a marginal change in the level of capacity constraint affects firms steady state outputs the result implies that under this constraint the firms cut back their steady state outputs voluntarily more than stipulated by the constraint we also show that the procedure to construct a constrained solution from an unconstrained solution by truncation may not always be appropriate this paper s analysis utilizes the concept of connectable points associated with the solutions to the auxiliary equation of the hamilton jacobi bellman equation since the concept of connectable points and their characterization does not directly rely upon the linear quadratic structure of this game the method can be modified and applied to other differential games with restrictions on the control space s

dynamic nonpoint source pollution control policy ambient transfers and uncertainty when a regulator cannot observe or infer individual emissions corrective policy must rely on ambient pollution data assuming this kind of environment we study a class of dierential games of pollution control with prot functions that are polynomial in the global pollution stock given an open loop emissions strategy satisfying mild regularity conditions an ambient transfer scheme is exhibited that induces it in markov perfect equilibrium mpe proposed transfers are a polynomial function of the dierence between actual and desired pollution levels moreover they are designed so that in mpe no tax or subsidy is ever levied their applicability under stochastic pollution dynamics is studied for a symmetric game of polluting oligopolists with linear demand we discuss a quadratic scheme that induces agents to adopt markovian emissions strategies that are stationary and linearly decreasing in total pollution total expected ambient transfers are non positive and their magnitude is linearly increasing in physical volatility the size of the economy and the absolute value of the slope of the inverse demand function however if the regulator is interested in inducing a constant emissions strategy then in expectation transfers vanish the total expected ambient transfer is compared to its point source equivalent

a dynamic general equilibrium analysis of deviations from the laws of one price abstract using disaggregated west german prices this study documents movements in relative export and producer prices and in relative import and producer prices which are variable and highly autocorrelated this suggests the presence of time varying persistent deviations from the laws of one price perfect competition monopoly and monopolistic competition with constant mark up pricing are inconsistent with the variability in relative export and producer prices furthermore cournot oligopoly is inconsistent with the variability in relative import and producer prices a dynamic general equilibrium model with differentiated oligopolistic competition and strategic pricing is shown to generate variable and persistent movements in both measures of relative prices

common ground between free traders and environmentalists we use a north south model with property right differences and resource dynamics to study the effects of trade on resource use and welfare autarky is likely to pareto dominate free trade in the long run when the environment is quite fragile and the result is reversed when the environment is quite resilient trade may cause an environmentally poor country to drag down its richer trading partner when they degrade their stocks which would be preserved under autarky it may enable the environmentally richer country to pull up its partner when they preserve their stocks which would be degraded under autarky

does affirmative action reduce productivity a case study of the indian railways summary our objective is to shed empirical light on a claim often made by critics of affirmative action policies that increasing the representation of members of marginalized communities in jobs comes at the cost of reduced productive efficiency we undertake a systematic empirical analysis of productivity in the indian railways the world s largest employer subject to affirmative action in order to assess whether higher proportions of affirmative action beneficiaries in employment have reduced efficiency in the railway system we find no evidence for such an effect indeed some of our results suggest that the opposite is true

the build up of cooperative behavior among non cooperative selfish agents abstract we develop a theoretical model in which each individual is in some ultimate sense motivated by purely egoistic satisfaction derived from the goods accruing to him but there is an implicit social contract such that each performs duties for the others in a way that enhances the satisfaction of all we introduce a state variable that acts as a proxy for social capital of trustworthiness and that we call the stock of cooperation we show that non cooperative agents might condition their action on this state variable agents build up the society s stock of cooperation and gradually overcome the free riding problem in a game of private contribution to a public good we assume that there are neither penalties in the sense of trigger strategies nor guilt and that each individual is rational

the acid rain differential game this paper considers an acid rain differential game countries emit sulphur which is partly transferred to other countries depositions above critical loads ultimately destroy the soil countries face a trade off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers because of the transboundary externalities the outcome will depend on whether the countries cooperate or not this paper presents the cooperative outcome and the open loop and markov perfect nash equilibria of the acid rain differential game it will be shown that the depositions always converge to the critical loads but the steady state levels of the buffer stocks differ the theory is used to analyse the acid rain differential game for sulphur between great britain and ireland finally some results are given for the whole of europe

open loop and feedback models of dynamic oligopoly abstract a simple method of estimating the degree of oligopoly power in dynamic markets using either open loop or feedback subgame perfect strategies is developed new theoretical results are presented for families of oligopoly models differences between discrete time and continuoustime models and open loop and feedback models are demonstrated the effects of increasing the number of firms or adjustment costs are examined

durable goods oligopoly abstract this paper models a durable goods oligopoly as a differential game two cases are treated sales where firms cannot lease but must sell the good in question and leasing where firms do not sell but only rent in the sales case firms face increasing marginal cost of production and the good in question depreciates for this case a rational expectations feedback nash equilibrium is constructed for which monopoly or oligopoly output is less than the efficient level this gap between oligopoly and competitive output diminishes as the number of firms increases when firms can only lease the good the good is assumed not to depreciate and the monopoly level of steady state output is compared with the level of steady state output for a feedback equilibrium duopoly for this case the duopoly equilibrium has steady state output that is less than the corresponding efficient level but greater than the monopoly level the leasing model is shown to be isomorphic to the adjustment cost duopoly model of driskill and mccafferty journal of economic theory 49 1989 324 338

intrafamiliar consumption and saving under altruism and wealth considerations this paper introduces a non cooperative and dynamic framework of intrafamiliar decisions where the partners obtain utility from own consumption account for the partner s benefit from consumption altruism and appreciate wealth stationary wealth and thus stationary consumption decreases with respect to altruism under cooperation but increases in the subgame perfect equilibrium in linear markov perfect strategies moreover non cooperation reduces savings and altruism mitigates this effect however altruism is an imperfect substitute for commitment and of course for cooperation because open loop strategies although independent of altruism result in greater wealth

a dynamic model of conflict and appropriation abstract this paper presents an extension of a static model of economic conflict analyzed by hirshleifer 1991 1995 and skaperdas 1992 to an infinite horizon differential game our aim is to highlight the strategic role of appropriation among a smaller group of agents in an intertemporal context the model yields the conclusion that there exists a unique linear nonlinear markov perfect equilibrium strategy even when strategies are defined over the entire state space we demonstrate that partial cooperation can be seen as a long run response to conflict moreover a decrease in the effectiveness of appropriation the depreciation rate of a common pool stock the rate of time preferences or an increase in the degree of noise improves the degree of partial cooperation and thus welfare in an anarchic society

nonlinear strategies in dynamic duopolistic competition with sticky prices abstract we discuss nonlinear strategies in an infinite horizon duopoly game with sticky prices where firms maximize their discounted sum of profit we construct a stationary feedback equilibrium without guessing value functions and feedback strategies that solve the hamilton jacobi equation for this purpose we study the auxiliary equation that is derived from the hamilton jacobi equation we show that the domain of the state space plays an crucial role in characterizing feedback equilibria and discuss several implications of this observation in particular we find that when the upper bound of the state space is not very high previously unknown feedback equilibria emerge

feedback nash equilibria for non linear differential games in pollution control abstract dynamic problems of pollution and resource management with stock externalities often require a differential games framework of analysis in addition they are represented realistically by non linear transition equations however feedback nash equilibrium fbne solutions which are the desired ones in this case are difficult to obtain in problems with non linear quadratic structure we develop a method to obtain numerically non linear fbne for a class of such problems with a specific example for shallow lake pollution control we compare fbne solutions by considering the entire equilibrium trajectories with optimal management and open loop solutions and we show that the value of the best fbne is in general worse than the open loop and optimal management solutions

energy prices and carbon taxes under uncertainty about global warming this paper extends the strategic interactions between producers of fossil fuels concerned about their profits and a taxing government concerned about the consumers welfare for uncertainty global warming follows an ito process stochasticity requires to differentiate between reversible and irreversible emissions in contrast to the deterministic version the unconstrained reversible case allows for a closed form solution but not the more realistic and constrained case nevertheless interesting analytical properties e g about when to stop emissions implicit conservation due to monopolistic supply are derived and complemented by a numerical example

labor adjustment and gradual reform when is commitment important we analyze a model in which a government uses a second best policy to affect the reallocation of labor following a change in relative prices we consider two extreme cases in which the government has either unlimited or negligible ability to commit to future actions we discuss the factors that determine the importance of commitment ability and provide numerical examples the degree of commitment ability can alter the equilibrium policy both quantitatively and qualitatively in both extreme cases the dying sector is protected during the transition to a free market in order to decrease the amount of unemployment

the closed loop effect and the profitability of horizontal mergers we study the profitability of horizontal mergers in a dynamic competition context with sticky prices it is shown that when firms use open loop strategies a merger is profitable only if the share of the market that merges is significant enough in the case where firms use closed loop strategies we provide a method to conduct analytically the study of the profitability of horizontal mergers we first prove the existence of an equilibrium of the game when a subset of firms merges when firms use feedback strategies mergers are profitable even when the share of the market that

timing of childbearing and economic growth abstract this paper incorporates the timing of childbearing into a growth model with endogenous fertility it analyzes a model in which individuals human capital stock depends positively on their education and parental human capital and in which producing and raising children and acquiring human capital are time intensive the model highlights how changes in the human capital stock interact with individuals timing of childbearing in affecting the evolution of the economy it shows that increases in the human capital stock raise the opportunity cost of having children while young and induce individuals to delay childbearing that in turn accelerates human capital accumulation in the future the model also demonstrates that early childbearing may lead to a development trap with low human capital

the politics of public good provision evidence from indian local governments this paper uses village and household survey data from south india to examine how political geography and politician identity impacts on public good provision we provide evidence that the nature of this relationship varies by type of public good for high spillover public goods residential proximity to elected representative matters in contrast for low spillover public goods sharing the politician s group identity is what matters jel d78 h40

can carbon tax eat opec s rents abstract we consider the optimal emission tax for a stock pollutant when the pollutant flow is also regulated by a resource exporting cartel we consolidate clarify and generalize a set of previous results to obtain clear isolation of the pigouvian and trade policy components of the tax because of the trade policy component the tax can shift more rents from the cartel than the pollution causes damage related costs this leads to the possibility that the pollution problem accompanied by the coordination of taxation can bring about net benefits at the expense of the cartel

fiscal policy public debt stabilisation and politics theory and uk evidence this paper presents a two party model of fiscal and debt policy in which the parties do not care about policy outcomes when out of office unlike other models of this type our model has predictions that are largely consistent with existing empirical findings about partisan and electoral effects on government expenditure tax revenue and debt it also yields new predictions about how the feedback of fiscal policy on lagged debt may depend on partisan and electoral effects these new predictions are not rejected by a test of the model on uk data in multi party democracies the motives of the party in power undoubtedly affect fiscal and monetary policy many economists and political scientists believe that economic policy makers are driven by two not mutually exclusive motives first they wish to remain in office as long as possible the survival or opportunistic motive second they wish to benefit their constituencies partisan motive the effects of these motives may show up in two ways in the data first there may be effects of ideological differences of the parties in power on fiscal and monetary policy so called partisan effects for example we might expect left wing governments to tax and spend more and possibly accumulate more debt second there may be attempts by the incumbent party to use fiscal and monetary policy to bribe the electorate prior to elections e g by cutting taxes and interest rates so called electoral effects recent econometric work has established some interesting stylised facts which are broadly consistent with these predictions several studies report evidence of electoral effects on various fiscal policy instruments for the united states tufte i978 for transfers bizer and durlauf i990 for taxes and macdonald i99i for state level public expenditure more recently alesina et al i 992 i 993 have found evidence of electoral effects on government debt in a panel study of oecd countries evidence of partisan effects on fiscal policy is scarcer alesina et al i 993 report partisan effects on debt and roubini and sachs i989 report in a study of oecd democracies that countries with a higher percentage of left wing governments have significantly higher longrun government spending to gnp ratios concurrently with the accumulation of this evidence a theoretical literature notably alesina and tabellini 1990 rogoff 1990 and rogoff and sibert i 988 has provided new explanations of observed electoral effects on

are emily and greg more employable than lakisha and jamal a field experiment on labor market discrimination we study race in the labor market by sending fictitious resumes to help wanted ads in boston and chicago newspapers to manipulate perceived race resumes are randomly assigned african american or white sounding names white names receive 50 percent more callbacks for interviews callbacks are also more responsive to resume quality for white names than for african american ones the racial gap is uniform across occupation industry and employer size we also find little evidence that employers are inferring social class from the names differential treatment by race still appears to still be prominent in the u s labor market jel j71 j64

affirmative action in education evidence from engineering college admissions in india abstract this paper examines an affirmative action program for lower caste groups in engineering colleges in india we study both the targeting properties of the program and its implications for labor market outcomes we find that affirmative action successfully targets the financially disadvantaged the upper caste applicants that are displaced by affirmative action come from a richer economic background than the lower caste applicants that are displacing them targeting by caste however may lead to the exclusion of other disadvantaged groups for example caste based targeting reduces the overall number of females entering engineering colleges we find that despite poor entrance exam scores lower caste entrants obtain a positive return to admission our estimates however also suggest that these gains may come at an absolute cost because the income losses experienced by displaced upper caste applicants are larger than the income gains experienced by displacing lower caste students limited sample sizes in our preferred econometric specifications however prevent us from drawing strong conclusions from these labor market findings

why environmentalists resist trade liberalization we build a two country differential game model of polluting oligopoly to consider the effects of trade liberalization as in static models the opening of trade promotes competition but expands global pollution characterizing open loop and feedback strategies we derive a sufficient condition for losses from trade this losses from trade proposition could provide a rationale for persistent resistance to globalization by environmentalists

dynamic duopolistic competition with sticky prices the authors study duopolistic competition in a homogeneous good through time under the assumption that its current desirability is an exponentially weighted function of accumulated past consumption this implies that the current price of the good does not decline by as much to accommodate any given level of current consumption our an alysis is conducted in terms of a differential game it is found that the equilibrium price corresponding to the open loop nash equilibriu m strategies approaches the static cournot equilibrium price while th e equilibrium price corresponding to the closed loop nash equilibrium strategies which are subgame perfect approaches a price below it copyright 1987 by the econometric society

provision of a public good with multiple dynasties carbon emissions create externalities across countries and generations these externalities depend on the degree of contemporaneous cooperation and intergenerational altruism i study the relative importance of these features in determining equilibrium climate policy by imbedding an olg framework with intergenerational altruism into a differential game among dynasties each representing a coalition of nations there is an isomorphism between pure and paternalistic altruism i illustrate the multiplicity of equilibria using an analytic linear in state model equilibrium steady states are more sensitive to small changes in cooperation than altruism consideration of large changes in altruism and cooperation can reverse this ranking

leviathan governments and carbon taxes costs and potential benefits abstract this paper addresses positive aspects of the global warming debate that so far has been concerned by and large with normative issues the paper considers a consumers government that appreciates tax revenues as such leviathan in addition to conventional measures of welfare i e carbon taxes serve the dual purpose of correcting for externalities here global warming or more generally a stock externality from energy use and of raising revenues this government faces either a competitive or a perfectly cartelized supply the major findings are 1 i consumers may benefit from a leviathan government that appropriates some of the monopoly rent by deterring preemption to some extent 2 ii the leviathan motive raises initial taxes and thereby lowers initial emissions but increases the long run stock externality in a play with linear strategies 3 iii there exists a continuum of equilibria in nonlinear markov strategies which are however pareto inefficient compared with the linear strategies 4 iv but in case of a binding resource constraint nonlinear strategies are the only feasible ones

indeterminacy and history dependence of strategically interacting players this paper considers a finite number of agents populating krugman s 1991 labor market the objective is to investigate whether the much emphasized indeterminate outcome is due to the assumption of uncountable many agents each of measure 0 it is shown that this result extends to n players each with strategic leverage if the social reference includes the own action this multiplicity results in an open loop setting which renders in almost all other cases a unique intertemporal nash equilibrium finally the cooperative solution exhibits non standard features the possibility of converging to the stationary inferior agricultural equilibrium and that is due to an unstable node while an unstable spiral can render the unique outcome of full industrialization

a dynamic conjectural variations model in the private provision of public goods a differential game approach abstract the purpose of this paper is to provide a reasonable microfoundation to justify the concept of a conjectural variations equilibrium which is often used in the literature on private provision of public goods with the help of the differential game by interpreting the steady state conjectures in a dynamic contribution game as the conjectural variations in the corresponding static game we derive explicit forms of nash or non zero conjectural variations depending on the choice of the strategy spaces furthermore we find that there may be uncountable many conjectural variations and the possibility of matching behavior i e positive conjectural variations when non linear markov perfect strategies are used and when the domain of a state variable is appropriately restricted

nonpoint source pollution taxes and excessive tax burden if a regulator is unable to measure firms individual emissions an ambient tax can be used to achieve the socially desired level of pollution with this tax each firm pays a unit tax on aggregate emissions in order for the tax to be effective firms must recognize that their decisions affect aggregate emissions when firms behave strategically with respect to the tax setting regulator under plausible circumstances their tax burden is lower under an ambient tax relative to the tax which charges firms on the basis of individual emissions firms may prefer the case where the regulator is unable to observe individual firm emissions even if this asymmetric information causes the regulator to tax each firm on the basis of aggregate emissions

a differential oligopoly game with differentiated goods and sticky prices we investigate a dynamic oligopoly game where goods are differentiated and prices are sticky we study the open loop and the closed loop memoryless nash equilibrium and show that the latter equilibrium entails a larger level of steady state production as compared to the former both equilibria entail a larger level of production in steady state than the static game we also study the effects of price stickiness and product differentiation upon the steady state equilibrium allocation and profits the per firm equilibrium output is increasing in both product differentiation and price stickiness while profits are increasing in both product differentiation and the speed of price adjustment the steady state social welfare monotonically increases in the speed of price adjustment and the overproduction entailed by dynamic competition has beneficial effect from a social standpoint

duopoly can be more anti competitive than monopoly abstract we prove two results on feedback equilibria under dynamic renewable resource duopoly the linear feedback output is smallest which sharply contrasts to the existing literature where it is largest moreover prices in two feedback equilibria are higher than under monopoly

current issues in the economics of groundwater resource management the issue of groundwater management remains a practical concern in many regions throughout the world while water managers continue to grapple with the question of how to manage this resource in this article we attempt to bring the most advanced and appropriate tools to bear on the issue of resource allocation involving groundwater our objective is to demonstrate the state of the art in the literature on ways to think about this complex resource and to deal with the important economic issues emanating from its complexity we present the conceptual framework within which economists examine the elements interacting in the management of groundwater resources indicate why the role of the market is limited with respect to the price of this very complex resource and point to the mechanisms that can pull competitive groundwater price and quality graded quantity of groundwater in line with their equilibrium levels in particular we critically review economic models of groundwater use examine the potential for groundwater management discuss the difficulties encountered in the estimation of the relevant control variables of such models and identify the advantages and limitations of the instruments devised for the efficient use allocation of this resource finally we argue that devised regulatory schemes usually ignore the information and knowledge needed for their implementation and we suggest a core of conditions necessary for successful groundwater management reforms

non linear strategies in a linear quadratic differential game abstract we study non linear markov perfect equilibria in a two agent linear quadratic differential game in contrast to the literature owing to tsutsui and mino 1990 nonlinear strategies in dynamic duopolistic competition with sticky prices journal of economic theory 52 136 161 we do not associate endogenous subsets of the state space with candidate solutions instead we use the catching up optimality criterion to address the possibility of infinitely valued value functions applying sufficiency conditions for existence based on those in dockner et al 2000 differential games in economics and management science cambridge university press cambridge yields the familiar linear mpe and a condition under which a continuum of non linear mpes exists these include as their limit a previously unreported piecewise linear mpe the condition relaxes with increasing patience allowing more efficient steady states thus suggesting a folk theorem for differential games as the lower state and control bounds go to the non linear strategies are eliminated

depreciation erodes the coase conjecture if a durable good monopolist produces at constant marginal costs and the good depreciates there exists a family of strong markov perfect equilibrium smpe one member of this family entails instantaneous production of the level of stock produced in a competitive equilibrium this is consistent with the coase conjecture other smpe in the family entail steady state production at a stock level lower than in the competitive equilibrium there may be a jump to these steady states or they may be approached asymptotically monopoly profits are positive in these equilibria and the coase conjecture fails

multiple equilibria in dynamic rational expectations models a critical review abstract multiple equilibria are a ubiquitous feature of dynamic rational expectations models researchers have been divided on the implications of this phenomenon some have viewed this as a reflection of reality and a possible explanation of a wide range of economic phenomena others have suggested various selection criteria for choosing one among the many equilibria this paper reviews the major selection criteria that have been proposed and through application to three well known models shows under what circumstances one might expect them to choose the same or different equilibria in addition this paper proposes a new criteria based on the limit of finite horizon equilibria and investigates its relation to the other criteria

the existence of nash equilibria in reaction functions for dynamic models of oligopoly consider cournot s stability analysis of his mineral spring duopoly cournot 1838 each of the two firms believes that its rival s output in the next period will simply equal that observed currently profit maximization yields reaction functions which are explicitly dynamic and are assumed to govern the actual evolution of the system cournot proved that the system is asymptotically stable in this simplest case cournot s result was shown by theocharis 1960 not to generalize to three or more firms fisher 1961 discusses more general cost and demand functions than those used by cournot even in the case considered by cournot however there is an obvious conceptual objection each firm s output will generally vary from one period to the next flagrantly violating its rival s conjecture some of james friedman s work especially 1968 1973 1976 and 1977 might best be viewed as an attempt to eliminate this delusional quality from dynamic models of oligopoly consider a typical duopoly scenario with two firms making repeated simultaneous quantity determinations friedman more commonly discusses price setting models but these are straightforwardly analogous each firm believes that the other firm s behavior is determined only by the quantity pair selected in the previous period in friedman s work as distinct from cournot s these beliefs are ultimately required to be consistent with the other firm s actual behavior for example firm 2 believes that firm l s output in the current period is given as

feedback equilibria in a dynamic renewable resource oligopoly pre emption voracity and exhaustion abstract we revisit a recent literature on productive asset exploitation describing a differential oligopoly game of resource extraction under static linear feedback and nonlinear feedback strategies where we explicitly allow for the possibility of resource exhaustion we show that i feedback rules entail resource exhaustion for a finite number of firms and ii feedback strategies are more aggressive than static ones as long as the resource stock is large enough in accordance with the acquired view based on the traditional pre emption argument associated with feedback information

capacity investment preemption and commitment in an infinite horizon model the commitment value of capacity is analyzed in an infinite horizon duopoly model the paper focuses on the role of alternative behavioral assumptions about the ability of firms to commit to investment paths each firm s investment strategy in a feedback nash equilibrium is shown to be a decreasing function of its rival s current capacity this creates an incentive for a firm to expand its capacity to preempt subsequent rival investment in a precommitment equilibrium there are no incentives to invest preemptively as a consequence steady state capacity levels are greater in a feedback nash equilibrium than in a precommitment equilibrium copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on continuous reaction function equilibria in duopoly supergames with mean payoffs abstract continuous reaction function equilibria are studied in supergames in which the stage game resembles a standard duopoly game and the evaluation relations are according to the limit of the means it is proven that collusive i e single period game non nash equilibrium stationary outcomes are supported in subgame perfect equilibrium by linear reaction function pairs conversely it is shown that linear reaction equilibria are in essence typical in the class of subgame perfect continuous reaction equilibria further the multiple equilibrium problem of the folk theorem is shown to be significantly diminished in restricting attention to subgame perfect linear reaction equilibria

sticky prices in a dynamic oligopoly an investigation of s s thresholds abstract the strategic implications of costly price adjustment are investigated empirically i assume that managers are engaged in a state space game and ask if the dynamic considerations that arise when they condition their choices on the state cause prices to be more or less rigid than when players use more myopic pricing rules the answer to this question depends on a parametric specification of the problem that lends itself to empirical assessment the micro panel data used to investigate this issue consist of weekly prices sales costs and promotional activity for three brands of saltine crackers sold by four chains of grocery stores in a small us town i find that in this market strategic behavior exacerbates price rigidity the thresholds are wider and the time between changes is longer than would be observed in a more myopic setting

durability and strategic trade are there rents to be captured abstract this paper analyzes strategic trade policy when home and foreign duopolists produce a durable good that is either sold or leased in a third country durability is important for two reasons it characterizes most of the products discussed in the strategic trade literature and it also calls for explicit dynamic modeling for duopolists who sell their product in a third country market this paper finds the optimal policy to be a tax on domestic output for duopolists who lease the good in a third country market though the optimal policy is a subsidy

prisoner s dilemma on behavioral choices in the presence of sticky prices farsightedness vs myopia abstract when making decisions in a dynamic environment myopic supply chain members tend to ignore the future effects of their decisions on the evolution of state dynamics by contrast far sighted decision makers consider about the impacts of current decisions on both current profits and future profits in order to study how behavioral choices affect the operation decisions and profits of supply chain members we develop a differential game with sticky prices where one manufacturer purchases components from one supplier and makes final products for end customers the supplier decides on its wholesale price while the manufacturer sets its production quantity either of supply chain members has two behavioral choices myopia and farsightedness we derive and compare equilibrium solutions under four different behavioral combinations our analysis shows that there always exists a prisoner s dilemma caused by behavioral choices farsightedness is a dominant strategy for either the supplier or the manufacturer but both to act myopically makes both of them better off furthermore comparing with other scenarios the whole supply chain obtains the highest profit when both players are myopic in addition we introduce a revenue sharing contract with static wholesale price to mitigate the adverse impacts of the prisoner s dilemma

international pollution problems unilateral initiatives by environmental groups in one country abstract international pollution involving two groups of countries is modelled as a two player game each country is characterized by specific preferences for consumption goods and the environment both countries produce a single consumption good with a given technology that determines pollution per unit output each country is economically isolated except for the presence of a global pollutant within a static framework m hoel j environ econom management 20 55 70 1991 shows that unilateral actions to reduce harmful emissions advocated by environmental groups in one country may result in higher total emissions i characterize cooperative and noncooperative emission strategies for the two countries using welfare functions that within a static framework yield total emissions without cooperation always higher than those with cooperation when both governments choose linear closed loop strategies and one country is not sensitive to the environmental condition the unique equilibrium exhibits less pollution than the cooperative equilibrium only if the other country cares a great deal about the well being of future generations and has relatively low bargaining power in the negotiations equilibria that result from nonlinear closed loop strategies are also characterized

optimal institutional arrangements for transboundary pollutants in a second best world evidence from a differential game with asymmetric players abstract this paper uses a dynamic model with asymmetric players to explore the question in a second best world should environmental regulations for transboundary pollutants be carried out locally or centrally we find that combined payoffs are larger with decentralized control if payoffs are sufficiently heterogeneous and initial pollution stocks are sufficiently small this result is obtained because the central authority applies one shadow price to pollution i e it uses uniform standards whereas local authorities use different shadow prices and therefore different standards

strategic behavior and efficiency in the common property extraction of groundwater groundwater has always been regarded as a common property resource where entry is restricted by land ownership and private exploitation is inefficient in 1980 gisser and sanchez presented a first estimation of this inefficiency cornparing socially optimal exploitation with private competitive exploitation using a model with linear water demand average extraction cost independent of the rate of extraction and linearly decreasing with respect to the water table level they characterized the private exploitation of the aquifer assuming that farmers are myopic and choose their rate of extraction to maximize their current profits whereas optimal exploitation is obtained by maximizing the present value of the stream of aggregate profits their results show that if the storage capacity of the aquifer is relatively large the difference between the two systems is so small that it can be ignored for practical consideration this result has been called the gisser sanchez rule by nieswiadomy 1985 and it has and important policy implication regulation of the resource does not seem justified since the profits it brings are not very high 1

transboundary pollution game with potential shift in damages abstract complex systems exposed to pollution may suddenly and permanently shift to a dangerous regime this paper studies a dynamic game among countries that face the prospect of such a shift each country derives some flow utility from its own emissions which are chosen unilaterally but flow emissions by all countries increase the pollution stock in the world in addition to generating global damages such as global warming the pollution stock may trigger an irreversible and abrupt jump in global damages or catastrophe at an unknown date in the future we ask whether endogenous and exogenous threats of such a jump in damages or catastrophe mitigate the tragedy of the commons and examine their implications on welfare our analysis yields different emission responses to these threats as compared to the related literature that focuses only on the single polluter case for example when the hazard rate is exogenous and countries commit to nonlinear strategies we find that the threat of a possible jump in damages or catastrophe may induce a lower or larger emission level and initial welfare due to multiple equilibria these results are maintained when the hazard rate endogenously depends on emission decisions

dynamic demand and noncompetitive intertemporal output adjustments abstract this paper integrates dynamics on the demand and on the supply side which are characteristic for many goods in particular fuels due to costly adjustments furthermore firms often pursue a quantity strategy and decide on output adjustments additional capacities etc instead of fixing prices e g opec moved from posting prices to adjusting output in 1986 this paper provides a corresponding framework surprisingly ignored in the literature and derives intertemporal market equilibria cooperative and noncooperative in open loop and in markov strategies the equilibrium in markov strategies is different mostly opposite to the much discussed sticky price models the qualitative properties are non trivial and some of them are even surprising e g increased demand sluggishness can raise supply

on the markovian efficiency of bertrand and cournot equilibria we characterize and compare closed loop feedback price and quantity strategies within a full fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset unlike previous papers on the strategic exploitation of productive assets we allow for imperfect product substitutability which enables us to deal with price competition we show that the traditional result that the bertrand equilibrium is more efficient than the cournot equilibrium does not necessarily hold in a markovian environment either in the short run or at the stationary equilibrium or using the discounted sum of welfare as a criterion for relative efficiency

competition in a duopoly with sticky price and advertising abstract this paper develops a differential duopolistic game where price is sticky and firms can invest in market enlarging promotional activities which have a public good nature one finding indicates that advertising and not output as in fershtman and kamien econometrica 55 1987 1151 1164 is responsible for the higher stationary price found in the open loop equilibrium relative to the linear feedback one that is free riding is more intense when firms play linear markov feedback strategies however the collusive outcome can be approximated and opportunism eliminated if firms can engage in preplay negotiations where they select a nonlinear markov perfect strategy for output and advertising achieving the collusive outcome requires as in the folk theorem for infinitely repeated games the discount rate to be sufficiently small

entry deterrence and overexploitation of the fishery abstract two stackelberg game models open access and restricted entry of a poaching fishery situation are proposed only the long run noncooperative solution of managing resource stocks is assumed feasible the optimal stock under open access for poachers is shown to be lower than under restricted entry and the latter to be lower than under exclusive ownership deterrence is completely successful under open access but is partially successful only under restricted entry the game models considered are shown to be equivalent to a constrained ownership fishery control problem or its surrogate