existence of equilibrium and comparative statics in differentiated goods cournot oligopolies abstract we show that under horizontal differentiation pure symmetric cournot equilibria exist if firms react to a rise in competitors output in such a way that their market price does not rise this condition is related to strategic complementarity but not to convexity or differentiability we rule out multiple equilibria under some additional conditions and discuss stability and regularity of equilibria with ordinal methods following entry equilibrium price decreases only if competitors outputs enter inverse demand aggregated into a single number otherwise it may increase even in stable equilibria the comparative statics of quantities and profits for all equilibria are given

why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

on the existence of cournot equilibrium this paper examines the existence of n firm cournot equilibrium in a market for a single homogeneous commodity it proves that if each firm s marginal revenue declines as the aggregate output of other firms increases which is implied by concave inverse demand then a cournot equilibrium exists without assuming that firms have nondecreasing marginal cost or identical technologies also if the marginal revenue condition fails at a potential optimal point there is a set of firms such that no cournot equilibrium exists the paper also contains an example of nonexistence with two nonidentical firms each with constant returns to scale production

an economic or political kuznets curve this paper examines two closely related empirical hypotheses an economic kuznets curve and a political kuznets curve we find a robust inverted u relationship between income inequality and political development but not one between income inequality and economic development exploring the cross section aspect of the panel data we find that the economic kuznets curve is sensitive to different control specifications and to different functional specifications but the political kuznets curve is robust using dynamic panel data estimation we find that the economic kuznets curve does not hold up intertemporally while the political kuznets curve does

oligarchy democracy inequality and growth abstract this paper analyses the dynamics of inequality democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation in a context with imperfect capital markets we investigate the incentives for an educated oligarchy to subsidize the poor s education and to initiate a democratic transition we characterize the equilibrium patterns of political institutions income distribution and growth as a function of the initial income and inequalities in particular we identify circumstances under which the elite promotes the endogenous emergence of a middle class for purely political economy reasons a simple linear infinite horizon framework is then presented in this setting we discuss the importance of historical dependence for long run social stratification and redistribution

adjustment dynamics and rational play in games when a given strategic situation arises repeatedly the possibility arises that equilibrium predictions can be justified by a dynamic adjustment process we examine myopic adjustment dynamics a class that includes replicator dynamics from evolutionary game theory simple models of imitation models of experimentation and adjustment and some simple learning dynamics we present a series of theorems showing conditions under which behavior that is asymptotically stable under some such dynamic is strategically stable in the sense of kohlberg and mertens this behavior is thus as if the agents in the economy satisfied the extremely stringent assumptions that game theory traditionally makes about rationality and beliefs journal of economic literature classification number c72

estimating labor supply of farm households under nonseparability empirical evidence from nepal abstract this paper examines the labor supply of farm households in nepal using a recently developed methodology that accounts for the simultaneity between production and consumption decisions of the households estimates of marginal products of male and female labor or shadow wages are obtained from an agricultural production function an instrumental variable approach is then used to recover the household s structural labor supply from variations in the shadow wages and income as well as other household characteristics the findings reveal that both male and female total labor supply are sensitive to changes in shadow wages and income human capital embodied in education is found to exert a significant positive effect on output but has no statistically significant impact on total labor supply of individuals the results also rejects the existence of efficient labor markets in rural nepal

overcoming coordination failure in a critical mass game strategic motives and action disclosure abstract we study whether coordination failure is more often overcome if players can disclose their actions at a lower cost in an experiment subjects first choose their action and then choose whether to disclose this action to other group members and disclosure costs are varied between treatments we find that no group overcomes coordination failure when action disclosure costs are high but half of the groups do so when the costs are low simulations with a belief learning model can predict which groups will overcome coordination failure but only if it is assumed that players are either farsighted risk seeking or pro social to distinguish between these explanations we collected additional data on individual preferences and the degree of farsightedness we find that in the low cost treatment players classified as more farsighted more often deviate from an inefficient convention and disclose this action while the effect of risk and social preferences is not significant

sunk costs and strategic commitment a proposed three stage equilibrium dixit s i980 paper in this journal the role of investment in entry deterrence has attracted considerable interest from economists concerned with constructing a modern theory of strategic behaviour towards entry in fact the paper has spawned quite an industry of commitment models in which the equilibrium payoffs in some final period game can be influenced by strategic commitments made by the players in an earlier period for similar models with important insights into strategic entry deterrence see eaton and lipsey i980 i98i schmalensee i98i the purpose of this note is to argue that when the instrument of stragetic commitment takes the form of sunk costs which both entrant and incumbent have to bear as it does in dixit s paper and in many other examples a three stage model rather than the two stage model presented by dixit is required although the proposed equilibrium differs from dixit s its qualitative features are the same it may or may not be profitable to deter entry and if it is the first mover may still prefer to play an accommodation strategy and allow entry to take place following dixit we restrict our attention to the asymmetric case in which one firm the incumbent makes the first move the two stage game involves the first mover sinking part of its costs in advance so that in the second stage equilibrium it will have a current cost advantage over the entrant which must incur the full cost of producing any desired output level the second period cost asymmetry ensures the incumbent a lar ger share of the post entry market which may be sufficient to deter entry altogether the problem with the two stage game lies in the nature of sunk costs sunk costs by definition are committed before the production period takes place if they were expended as a flow simultaneously with production they would not be sunk the installation of capacity is the natural example employed by dixit and well illustrates the point if installed capacity is a sunk cost which it must be for the incumbent to acquire any strategic advantage at all then the entrant s installed capacity is equally sunk and must also be committed before the production period takes place given this observation the post entry final period equilibrium should not be modelled as if the entrant were simultaneously incurring both variable and sunk costs but the incumbent only incurs variable costs this implies too great an asymmetry in favour of the incumbent the final period equilibrium should involve both firms incurring only variable

alternative models of spatial competition the concept of a spatial price equilibrium underlies most studies of spatial movement and competition however this concept is based upon a notion of perfectly competitive markets that is often unrealistic for many markets such as the markets for oil and coal and ignores the existence of local spatial monopolies this paper presents alternative economic models of spatial competition and shows how all of these models can be solved with essentially the same solution algorithm specifically after reformulating the classical spatial price equilibrium model and two extensions of takayama and judge s monopoly model we state and analyze a cournot nash model and discuss solution algorithms we then generalize these models and algorithms to multiple commodities and networks with transshipment nodes we conclude with a brief discussion of possible extensions of this class of models and associated algorithms

spend it like beckham inequality and redistribution in the uk 1983 2004 a main activity of the state is to redistribute resources standard political economy models predict that a rise in inequality will lead to more redistribution this paper shows that for the uk in the period 1983 2004 a plausibly exogenous rise in income inequality has not been associated with increased redistribution we explore this example of the paradox of redistribution using attitudinal data we show that standard political economy models of the individual demand for redistribution do have explanatory power but that other attitudes and beliefs are also very important moreover these attitudes and beliefs change quite quickly so are very important in explaining variation in the demand for redistribution

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

why vote for losers voting theory generally concludes that in first past the post elections all votes should go to effective candidates duverger s law and parties should adopt a similar platform median voter theorem however such predictions are not always met in practice we show why divergence and vote dispersion is a natural outcome when a parties are opportunistic b there is uncertainty on the position of the median voter and c elections are repeated voting for losers increases the informational content of elections and may induce mainstream parties to relocate towards extremists as a result to maximize their probability of being elected they do not adopt median

imperfect competition in the international energy market a computerized nash cournot model this paper describes the conceptual structure properties and solution approach of a computerized model of the international energy market the model treats energy producers as players in a multistage noncooperative game the goal of each player or cartel of players is assumed to be maximization of discounted profit subject to technical political and resource constraints the model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss the open loop nash equilibrium the model integrates the theory of exhaustible resources due to hotelling and the theory of oligopoly due to nash and cournot although useful as a teaching device to illustrate theoretical results its main function is to facilitate analysis of real world resource problems the model is flexible allowing the user to specify not only cost demand and reserve information but also assumptions about who belongs to what coalition two shortcomings deserve note t

computing cournot nash equilibria this paper examines convergence criteria of an algorithm for the computation of cournot nash economic equilibria the method is based on formulating the equilibrium problem as that of finding a solution to a nonlinear complementarity problem solved by sequential linearization and lemke s algorithm conditions for local and global convergence are developed and the technique is applied to homogeneous segmented and differentiated product markets

dynamic analysis of discontinuous best response with innovation abstract starting from the static analysis in eckert et al 2017 we study a cournot duopoly where firms can decide to incur fixed costs in activities that improve their competitiveness i e product development or process innovation innovation costs generate discontinuities in the firms quantity best response functions and in turn a variety of equilibrium configurations including multiple equilibria we provide a dynamic global analysis of the equilibria and show the way in which firms initial expectations regarding the rivals level of output are crucial in defining the configuration of the long run equilibrium

u shaped female labor participation with economic development some panel data evidence abstract using a panel data of about 130 countries from 1950 to 1980 we use dynamic panel data estimation to demonstrate that the u shaped relationship between feminization of the labor force and real gdp per capita holds up as an intertemporal relationship

modelling the impact of world bank policy based lending the case of malawi s agricultural sector this article uses a multi market agricultural pricing model to analyse the impact of the world bank s three structural adjustment loans sals to malawi on the smallholder agricultural sector three price policy scenarios are simulated on the model representing zero partial and full compliance with the bank s sal price policy conditionality these scenarios are analysed in terms of their impact on the government budget smallholder real incomes maize production exportable cash crop production and the balance of payments critiques of the bank s programme and the government and bank bargaining strategies are assessed in the light of the modelling results

horizontal mergers and collusive behavior abstract in the industrial organization literature it is generally felt that mergers hurt consumers not only because of the increased industrial concentration they effect but also because collusion becomes more likely in this paper we show that at least in one important case this intuition is misguided if a tacitly collusive agreement enforced by trigger strategies is not initially sustainable mergers will tend to reduce the chance that it becomes sustainable in the future this is so because the threat point implicit in the agreement becomes more favorable for outsiders

food aid impacts in rural kenya assessing the potential role of food aid in economic development requires that analytical attention be given to both household production and consumption consequences of food aid projects effects of a food for work ffw project in rural kenya are assessed using a peasant household firm model which incorporates a linear programming model and an almost ideal demand system the results indicate that program participants have net returns 52 percent higher than nonparticipants most of which is due to induced effects of capital formation on own farm production greater capital formation increases the opportunity cost of participants time encouraging a transition over time from ffw activities to greater own farm production ffw increases food demand employment and marketable surplus

new ways of looking at old issues inequality and growth abstract the paper uses new cross country data on income and asset land distribution to show that i there is a strong negative relationship between initial inequality in the asset distribution and long term growth ii inequality reduces income growth for the poor but not for the rich and iii available longitudinal data provide little support for the kuznets hypothesis policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction

the cournot oligopoly and competitive equilibria as solutions to non linear complementarity problems abstract the cournot oligopoly and competitive equilibria are identified with solutions to non linear complementarity problems which leads to integration of the existence and stability proofs of these equilibria

the bayesian foundations of solution concepts of games abstract we transform a noncooperative game into a bayesian decision problem for each player where the uncertainty faced by a player is the strategy choices of the other players the priors of other players on the choice of other players the priors over priors and so on we provide a complete characterization between the extent of knowledge about the rationality of players and their ability to successively eliminate strategies which are not best responses this paper therefore provides the informational foundations of iteratively undominated strategies and rationalizable strategic behavior b d bernheim econometrica 52 1984 1007 1028 d pearce econometrica 52 1984 1029 1050 sufficient conditions are also found for nash equilibrium behavior and a result akin to r j aumann econometrica 55 1987 1 18 on correlated equilibria is derived with different hypotheses

on adjustment costs and the stability of equilibria in practice one does not expect conflicting agents to move instantaneously to an equilibrium instead the final equilibrium is often the consequence of disequilibrium dynamics this paper through the use of local game theory introduces a general framework for disequilibrium dynamics based on the existence of adjustment costs the analysis is presented within the context of oligopoly theory and shows that the existence of adjustment costs will in many cases result in a unique equilibrium at which market shares are inversely proportional to these costs this paper also introduces two new solution concepts for n person normal form games

agricultural supply response a survey abstract this paper surveys the literature on agricultural supply response to prices in developing countries empirical estimates of elasticities depend both on the methodology adopted and on country specific factors relating to technology economic structure and macro constraints the paper seeks to establish some general conclusions on supply responsiveness within these limitations supply response to output prices at the aggregate and at the crop levels is considered first crop specific acreage elasticities range between zero and 0 8 in the short run while long run elasticities tend to be higher between 0 3 and 1 2 yield elasticities are smaller and less stable than acreage elasticities clearly inter crop pricing can be relied upon to effect shifts in the commodity composition of agricultural output evidence also suggests that supply elasticities vary systematically with such factors as price and yield risks multiple cropping the importance of the crop farm incomes farm size tenancy and literacy the most controversial and important aspect of supply response is the effect on aggregate agricultural output of agriculture s terms of trade conventional time series estimates range from 0 1 to 0 3 a major cross country study reports an aggregate elasticity as high as 1 66 it is argued that cross country estimates are apt to exaggerate aggregate responsiveness while time series studies underestimate it somewhat for ldcs a tentative range of 0 4 to 0 5 seems plausible hence the distributive effects of the terms of trade are likely to be more significant than the allocative effects asian evidence shows that only a third of the inter country differences in fertilizer use can be attributed to fertilizer price policies provided new technologies and infrastructure are in place fertilizer subsidies can help in technology diffusion and in over coming credit constraints the choice between price supports and input subsidies will depend on a variety of country or situation specific factors nevertheless a significant general factor favoring price supports is that they can more easily be coupled with price stabilization goals than input subsidies though sparse the available evidence on the response of marketed surplus suggests that price policy is not a reliable instrument for regulating inter sectoral trade

dynamic duopoly with adjustment costs a differential game approach abstract this paper develops a differential game model of duopoly in which firms incur costs associated with how fast they change their level of output the analysis solves for a subgame perfect equilibrium to the model in which the steady state level of output lies strictly between the static cournot and perfect competition solutions furthermore we demonstrate that the limit game in which the speed of adjustment parameter approaches zero does not tend toward the static cournot equilibrium

a model of an agricultural household in a multi crop economy the case of korea it is the purpose of this paper to describe one method of extending the empirical applicability of the theory of the farm household to multi crop economies by integrating the econometric and linear programming models already available in the literature section i introduces the subject in section ii the theoretical model is presented in section iii korean data are used to assess the quantitative significance of the approach by calculating and comparing household response to changes in input and output prices for two different specifications of the models first the household is analyzed from the consumption side on the assumption that farm profits are exogenous this corresponds to the standard approach in consumer demand theory and second results are presented for a model in which consumption and production responses are integrated in a theoretically consistent fashion and farm profits are allowed to reflect production responses to price changes the results from this and other studies that use an integrated approach to production and consumption decisions highlight the need to change perceptions concerning agricultural household response to economic incentives in developing countries and to revise the design of economic projects and policies accordingly

an evolutionary dynamic of revolutions it has been argued that rational choice theory is unable to explain the occurrence of social revolutions this paper argues that if social revolutions are modeled in an evolutionary setting it is possible to predict when revolutions occur it is shown that revolutions are expected to occur when regimes lose their determination to punish revolutionary activity early and severely in the process of constructing the model some results about public good provision are generalized

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

joint determination of food consumption and production in rural sierra leone estimates of a household firm model abstract this paper investigates the determination of food consumption for rural households in sierra leone that produce the foods which they consume a household firm model is estimated with seven commodities including five foods non foods and labor as compared to three commodities in past studies such food disaggregation permits tracing of the effects of socioeconomic variables on household nutrient availability household specialization in production is such that censored data is a problem a tobit approach is used to correct for this for most crops the own price effects on consumption remain negative when a price change is allowed to shift the budget constraint by effecting the profits from home production elasticities of calorie availability with respect to toal expenditure are found to be sizeable varying little by expenditure group the price elasticities of calorie availability are generally positive however an important exception occurs for price of the staple food rice this exception has several important policy implications which are explored

peasant household behaviour with missing markets some paradoxes explained a model of peasant household behavior under varying degrees of household specific food and labor market failures is constructed to show that these structural features can explain several well known patterns of peasant response which have often been attributed to peculiar motives presumed specific to peasants the model explains sluggish response to cash crops prices and high instability in perceived food and labor scarcities the key role of manufactured consumer goods prices in stimulating peasants effort in cash crops production the effectiveness of taxation as opposed to incentives in stimulating cash crops production and the key role of technological change in food production to enhance cash crop production results are obtained analytically in the case of one market failure and by numerical simulation with more than one

does oil corrupt evidence from a natural experiment in west africa abstract this paper explores the oil discovery announcements in sao tome and principe 1997 1999 to assess the role of natural resources in determining corruption for this purpose we use a natural experiment framework which contrasts sao tome and principe to cape verde a control west african country sharing the same colonial past and important recent economic and political shocks our measurement is based on tailored household surveys we conducted in both island countries the unique survey instrument was retrospective and used personal histories to elicit memories from the respondents we analyze changes in perceived corruption across a wide range of public services and allocations we find clearest increases on vote buying education namely in the allocation of scholarships and customs ranging from 31 to 40 of the subjective scale we interpret these findings as symptoms of increased competition for core state resources

separability in farm household economics an experiment with linear programming abstract the assumption of separability between farm household production and consumption facilitates analysis but entails several important restrictions the implications of assuming separability are discussed here in relation to the modelling of a representative tongan farm household econometric estimation of household demand is coupled with a linear programming lp model of farm household production when analysing consumer demand separable farm household economics is undoubtedly preferable to ignoring the production consumption linkages entirely however the restrictions which must be imposed on the production side of the separable model are such that a realistic lp solution is unlikely to be obtained this is likely to be a major deterrent to adopting the separable approach for studies in which the main focus is on production rather than consumption

the effect of market conduct on international steam coal trade abstract this paper is concerned with the determinants of international steam coal trade most quantitative work in explaining such trade has been stymied by the apparent failure of the competitive model to account for observed and anticipated trade flows in general authors have sought institutional explanations for this failure the hypothesis explored by this paper is that the exercising of market power by certain agents in the market can lead to trade patterns consistent with those observed and anticipated this hypothesis is explored through a simple model of imperfect market equilibrium in addition to perfect competition we examine cournot nash monopoly south africa duopoly south africa australia and duopoly monopsony south africa australia japan with a competitive fringe of producers us canada poland china colombia using the equilibrium model of coal trade we examine these market structures and evaluate the extent to which they can explain existing and anticipated trade patterns

the gains from merger or collusion in product differentiated industries a merger in an industry with differentiated products increases the market power of the merging firms to the extent that their products are close substitutes and that other firms produce only more distant substitutes such a merger makes the residual demand curve of each partner steeper by shifting each in the direction of the industry demand curve 2 the extent of this increase in market power depends upon the own elasticity of demand for each merging firm s product as well as the cross elasticity of demand for each with all other firms products as a result evaluating the effect of a merger between two firms with n 2 other competitors would seem to require the estimation of at least n2 parameters all of the price elasticities of demand a formidable task that extremely difficult estimation task is unnecessary however the necessary information is contained in the slopes of the two single firm residual demand curves before the merger and the extent to which the merged firm will face a steeper demand curve for example suppose a merger between two u s brewing firms say pabst and anheuser busch were proposed it is not particularly important to determine whether it is competition from miller or competition from stroh or from heileman or which puts the most effective brake on anheuser busch s pricing only the total effect of these other firms and the particular effect of competition from pabst are of interest this paper proposes econometric procedures for estimating the demand system that merger partners will face based only on pre merger data the key to the procedures is that the effects of all other firms in the industry are summed together formally we start with a model of an n firm product differentiated industry manipulation of the model removes the prices and quantities of all but two firms this reduces the dimensionality of the problem to manageable size rather than an n firm demand system we estimate a two firm residual demand system in this way the technique extends our econometric method for

the effect on income distribution of development the growth rate and economic strategy abstract an analysis of cross section and time series data for 83 countries confirms some and contradicts other work on income distribution new findings include a dualistic socio political system is highly unfavorable for equality neither the extent of government intervention in the economy nor the rate of manufactured exports are systematically related to income distribution the analysis confirms that there is no systematic relationship between equality and the rate of economic growth educational participation and a reduction in the share of primary exports in gdp are both favorable for equality there is some support for the kuznets hypothesis that inequality increases as per capita income rises to about 400 and then declines with further income increase but the empirical support is not strong and may be weakening over time these findings lead to more optimistic conclusions then other work that rapid growth in a mixed economy is quite consistent with unchanged or even improved income distribution even at early stages of development

a game theoretic mathematical programming analysis of cooperative phenomena in oligopolistic markets this paper investigates cooperative behavior in an industry that supplies a homogeneous product and consists of oligopolistic firms the analysis is conducted within a game theoretic framework in which each firm is viewed as a player whose strategy is its level of production by defining a suitable characteristic function that evaluates the worth of each possible coalition we attempt to quantify the individual and collective bargaining powers of firms in order to predict merger or contractual agreements and production strategies in particular we define three games via three characteristic functions each of which is based upon some assumed market behavior on the part of the players for each game we investigate whether the firms would choose to remain separate or form a grand coalition or some other coalition structure for some insightful special cases we are able to establish the resulting outcome and assert whether a core allocation of profits among members of an emerging coalition exists and whether the shapley value allocation belongs to the core in the more general case we use the u s copper industry as an example to illustrate how shapley values may be used to determine possible emerging coalition structures

rational actors tit for tat types and the evolution of cooperation abstract evolutionary models in economics have often been criticized for failing to allow for rational maximizing behavior the present paper represents a step toward correcting this deficiency by introducing rational actors into an evolutionary model of the finitely repeated prisoners dilemma at the same time the model endogenizes the uncertainty postulated in the classic model of kreps et al 1982 thus explaining cooperation by rational actors in the finitely repeated prisoners dilemma a testable implication of the model is that the level of voluntary cooperation in a society will be relatively high where geographical mobility is relatively low

soil erosion and smallholders conservation decisions in the highlands of ethiopia abstract soil erosion is one of the most serious environmental problems in ethiopia coupled with growing populations falling per capita food production and worsening poverty loss of productive land due to land degradation undermines rural livelihoods and national food security despite their awareness of the erosion problem peasants investments in land have been limited we use an applied nonseparable model to simulate conservation decisions pervasive market imperfections poverty and high rates of time preference seem to undermine erosion control investments lack of technologies which provide quick returns to subsistence constrained peasants also seem to deter such investments lower private incentives to internalize the intertemporal land degradation externality may require public intervention

disadvantageous syndicates and stable cartels the case of the nucleolus abstract this paper considers a bilateral market with two complementary commodities and gives a rationale for aumann s paradox the relationship between the notion of strong stability of a syndicate i e the property that no group of players wants to exit or to enter the syndicate and the notion of disadvantageous syndicates is summarized in two results if the two sides of the market are balanced in terms of endowments every syndicate is strongly stable if the two sides of the market are not balanced in terms of endowments then being advantageous in aumann s definition is necessary and sufficient for a syndicate to be strongly stable

collective action cascades an informational rationale for the power in numbers self interested individuals pursue their goals rationally taking into account the constraints imposed by their environment and best responding to the strategic behavior of other individuals when applied to collective action economic theory predicts undersupply meanwhile the behavior of masses of people is described as excitable emotional irrational suggestible hypnotic disorderly and unpredictable in practice it seems collective action is oversupplied and erratically so the contagious and volatile dynamics of collective action appear to defy rationalization i conceptualize a social movement as a dynamic informational cascade turbulencies emerge endogenously from rational individual behavior disorderly mass behavior is a by product of a powerful decentralized mechanism of information aggregation

rational expectations and macroeconomic forecasts the article presents extensive results from testing for bias and serially correlated errors in a collection of time series of quarterly multiperiod forecasts for six variables including real gnp growth inflation and unemployment the analysis covers responses by 79 frequent participants in economic outlook surveys conducted regularly since 1968 it shows much greater incidence of apparently systematic errors for inflation than for the other variables also the tests are more favorable to composite group forecasts than to most of the individual forecast sets

a multiple leader stackelberg model and analysis this paper presents a new multiple leader follower model that is a consistent extension of stackelberg s leader follower duopoly the development contrasts with other existing extensions by demonstrating how the leader firms can utilize the true reaction curve of the follower firms it also provides sufficient conditions for some useful convexity and differentiability properties of this function for the proposed model we conduct a static analysis and discuss the existence uniqueness and computation of an equilibrium solution as well as study certain issues regarding the relative profits of leader and follower firms since the cournot oligopoly and the stackelberg leader follower models are special cases of this model the analysis in this paper hopefully provides some further insights about these types of models

contributions to cournot oligopoly theory abstract this work contributes to a number of questions concerning oligopoly models in particular uniqueness of the cournot equilibrium point is demonstrated under the assumption that either the unit price function is differentiable and the derivative is strictly negative or the cost functions are strictly convex also under the assumption of either strictly decreasing unit price function or strictly convex cost functions it is shown that a the total production level at equilibrium increases with entry of additional players b that cooperation between some of the players necessarily entails profit for the others and c cooperative grouping causes decrease in production levels

biases in macroeconomic forecasts irrationality or asymmetric loss empirical studies using survey data on expectations have frequently observed that forecasts are biased and have concluded that agents are not rational we establish that existing rationality tests are not robust to even small deviations from symmetric loss and hence have little ability to tell whether the forecaster is irrational or the loss function is asymmetric we quantify the exact trade off between forecast inefficiency and asymmetric loss leading to identical outcomes of standard rationality tests and explore new and more general methods for testing forecast rationality jointly with flexible families of loss functions that embed quadratic loss as a special case an empirical application to survey data on forecasts of nominal output growth demonstrates the empirical significance of our results and finds that rejections of rationality may largely have been driven by the assumption of symmetric loss

voting as communicating mandates multiple candidates and the signaling voter s curse abstract in this spatial model of common value elections votes convey citizens private opinions regarding which policies are socially optimal and the winning candidate utilizes this information in choosing policy in equilibrium large margins of victory convey mandates for candidates to make bold policy changes to communicate extreme policy views citizens support extreme parties that may be unlikely to win office to convey moderate views citizens deliberately abstain from voting thereby avoiding the signaling voter s curse of encouraging overextremism in large elections mandates can identify the optimal policy from an entire continuum thereby greatly strengthening condorcet s 1785 classic jury theorem behavioral patterns are consistent with otherwise puzzling empirical features of elections and can also apply to other political activities such as public protests or writing letters to elected officials

n firm oligopolies with production adjustment costs best responses and equilibrium abstract n firm single product oligopolies will be examined without product differentiation and with production adjustment costs the best response functions of the firms will be first determined in terms of the outputs of the rest of the industry and the firm s own outputs of the previous time period this function is always decreasing not necessarily continuous and might have two different values then the best response will be determined when the output of the rest of the industry is replaced by the output of the entire industry we will show that this function might have infinitely many values leading to infinitely many equilibria a complete description of the equilibrium set will also be given the theoretical findings will be illustrated with the case of linear price and linear cost functions

imperfectly competitive equilibria in international commodity markets the simple model of perfect competition in spatial markets has been widely applied in analyzing international agricultural trade yet many markets do not appear to be perfectly competitive this paper offers a new and efficient method for computing spatial equilibrium in oligopolistic or oligopsonistic markets the authors apply the technique to an analysis of several hypotheses of market conduct in the international wheat market that have been put forward by other authors they conclude that a cournot nash duopsony model does not perform well in explaining trade

the as if approach to game theory three positive results and four obstacles abstract the usual justifications of non cooperative solution criteria are rationalistic in nature building on individual rationality and expectation coordination postulates in contrast the as if approach to game theoretic rationality is evolutionary arguing that even if strategically interacting agents do not meet these epistemic conditions their long run aggregate behavior will nevertheless conform with them because of the workings of biological or social selection processes the present essay discusses three implications of evolutionary selection dynamics in favour of the as if paradigm and four potential obstacles to the general validity of these implications

the effects of irreversible investment in durable capacity on the incentive for horizontal merger until recently the literature on horizontal merger had been almost exclusively concerned with two issues the first issue which has long historical roots is the timing of merger activity of particular interest has been to understand the causes of the great merger wave lamoreaux 5 represents the most recent addition to this literature and provides a very good review of past work the second issue is the welfare implications of horizontal merger of which williamson 12 is a case in point with the exception of stigler 8 what had generally not been at issue in this literature was the private incentives for horizontal merger this was true in spite of the insight provided by stigler that the non participants of a merger are typically made better off by a merger than are the participants since the firms which engage in merger reduce supply all firms benefit from the resulting higher price but the non merging firms benefit most because they receive a higher price without having had to reduce supply there is then the potential for a free rider effect in merger activity as each firm wishes it to be the other firms which merge the first suggestion that the private incentives for horizontal merger may not only be weak but that merger may be simply unprofitable arose in a numerical example by szidarovszky and yakowitz 9 in which they show in a three firm cournot model that a merger between two firms is unprofitable then a study by salant switzer and reynolds 7 hereafter s s r examined this issue in considerable detail and found very weak incentives for firms to merge together unless there are considerable savings in terms of fixed costs using the standard linear cournot model s s r show that only merger for monopoly or close to monopoly is privately optimal when there are zero fixed costs the basis for this surprising result is that when the merged firm reduces output below the combined level of its pre merger supply the non merged firms react by expanding output though price goes up in response to the merger the market share of the merged firm declines the latter effect can dominate so that the firms are made worse off by merging in response to this result perry and porter 6 argue that the standard cournot model is inappropriate for analyzing the incentive to merge as mergers are not well defined since firms do

the stability of the cournot oligopoly model a reassessment abstract the stability properties of the cournot oligopoly model are examined for the continuous adjustment process sufficient conditions for instability are established which are shown to be of significance when the number of firms n is small local and global stability are shown under appropriate conditions which for global stability include the restriction n 5 the proof of global stability corrects a well known proof by f hahn rev econ stud 29 1962 329 331 results for the discrete time adjustment process are reported and the restrictiveness of the model s assumptions are discussed

social divisions and institutions assessing institutional parameter variation this paper investigates the hypothesis that the association between property rights institutions and income is weaker in countries with high social divisions it argues that social divisions should have a negative effect on perceived institutional inclusiveness which in turn should depress institutional payoffs absent a property rights indicator that captures the perceived inclusiveness of institutions social divisions should then weaken the observed association between property rights institutions and income the empirical results support this hypothesis and highlight the importance of evaluating whether the institutions measure used captures the institutional framework applying to the population at large

a mathematical programming approach to a nash cournot equilibrium analysis for atwo stage network of oligopolies this paper deals with the existence characterization and computation of equilibrium solutions arising from related mathematical programming problems associated with a particular market structure the generic structure analyzed herein represents a two stage production process in which a set of some firms produces a semifinished product that serves as an input to another set of firms which converts this to a final good in addition there exists a third set of vertically integrated firms these firms perform the operations jointly performed by the other two sets of firms in producing the final product on the demand side an econometrically derived demand curve is specified for the final product the aim of this paper is to characterize the nature of the equilibrium solutions for such problems under various market behavioral structures derive sufficient conditions under which one can claim the existence of these equilibrium solutions and prescribe methods for computing equilibrium solutions the analysis provides a machinery for considering the effects of mergers and integrations on a firms profits and on industry outputs and prices thereby suggesting incentives or otherwise to merge or integrate

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

stackelberg nash cournot equilibria characterizations and computations the supply side of an oligopolistic market supplying a homogeneous product noncooperatively is modeled in this market there is one leader and n followers the followers operate under the cournot assumption of zero conjectural variation and are accordingly called cournot firms the leader called a stackelberg firm specifically takes into account the reaction of the cournot firms to its output for this situation we study the behavior and implications of the joint cournot reaction curve as generated by plausible economic market assumptions in particular we study the existence and uniqueness of a stackelberg nash cournot equilibrium in addition we prescribe an efficient algorithm to determine a set of equilibrating output quantities for the firms

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

long run selection and the work ethic abstract that individuals contribute in social dilemma interactions even when contributing is costly is a well established observation in the experimental literature since a contributor is always strictly worse off than a non contributor the question is raised if an intrinsic motivation to contribute can survive in an evolutionary setting applying stochastic evolutionary dynamics we give conditions for equilibria with a positive number of contributors to be selected in the long run

voluntary export restraints and strategic technology transfers abstract this paper investigates the effects of voluntary export restraints vers in the presence of potential entrants and technology transfers it builds a model of a licensing game in a cournot oligopoly market and examines conditions under which vers induce restrained foreign firms to transfer technologies to potential suppliers i show that a ver can decrease the profit and output of the domestic incumbent by perturbing the no licensing equilibrium reached under free trade and inducing the market to move to a licensing equilibrium

the kuznets process and the inequality development relationship abstract in his classic paper on economic growth and income inequality kuznets discussed the process of population shift from traditional to modern activities as the basis for a theory of distributional change during the course of development in this paper we present a formalization of the kuznets process conduct a general analysis of distributional change under this process and derive the functional forms of and conditions for a turning point in the inequality development relationship for six commonly used indices of inequality the functional form appropriate to each index is then estimated using cross section data on 60 developing and developed countries finally some extensions to the initial formalization of the kuznets process are considered

dynamic oligopoly with capacity adjustment costs abstract the literature on strategic investment emphasized the case of completely irreversible investment this paper considers an oligopoly model in which investment is reversible and capacity is subject to adjustment costs an n player linear quadratic differential game is analyzed existence and characterization results for perfect equilibrium feedback strategies are provided feedback strategies provide incentives for each player to invest strategically so as to preempt subsequent expansion by rivals a larger set of perfect equilibria is constructed by using memory dependent trigger strategies equilibria of this type are shown to support joint value maximization for some initial states and asymmetric steady states

the kuznets curve a reassessment abstract this paper revisits the kuznets hypothesis an extensive data set containing the most recent estimates of income distribution is utilized to test the kuznets hypothesis in addition the data comparability problem with respect to income distribution data when conducting econometric analysis is addressed the results indicate that the data comparability problem is not severe enough to nullify the estimates obtained from pooled regressions the kuznets hypothesis holds for this data set

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

income distribution development and foreign trade a cross sectional analysis abstract this paper analyses cross sectional evidence on income inequality in developing countries within a consistent theoretical framework where the major explanatory variables are factor endowments their ownership structure and foreign trade distortions the resulting explanation of cross country differences in income distribution is considerably better than what is found in the existing literature endowments in mineral resources land concentration in agricultural exports trade protection and secondary schooling are shown to be major determinants of differences in income inequality across developing countries

a theory of trickle down growth and development this paper develops a model of growth and income inequalities in the presence of imperfect capital markets and it analyses the trickle down effect of capital accumulation moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities three main conclusions are obtained from this model first when the rate of capital accumulation is sufficiently high the economy converges to a unique invariant wealth distribution second even though the trickle down mechanism can lead to a unique steady state distribution under laissez faire there is room for government intervention in particular redistribution of wealth from rich lenders to poor and middle class borrowers improves the production efficiency of the economy both because it brings about greater equality of opportunity and also because it accelerates the trickle down process third the process of capital accumulation initially has the effect of widening inequalities but in later stages it reduces them in other words this model can generate a kuznets curve

import quotas and vers a comparative analysis in a three country framework abstract because a ver is inherently discriminatory the traditional two country analysis comparing it to a quota is inadequate this paper adopts a general equilibrium three country approach to compare tariffs quotas and vers a quota equivalent ver is defined alternatively in terms of quantity or price the welfare of the importing country is higher under a quota and that of the non restricted exporter is higher under a ver the welfare comparison for the ver restricted country is ambiguous a result which is at variance with conventional wisdom

network models of spatial oligopoly with an application to deregulation of electricity generation because of the existence of transmission costs and significant scale economies in power production deregulation of electricity generation would lead to spatial oligopolistic markets this paper uses linear programs to obtain short run spatial price equilibria for a deregulated bulk power market in upstate new york these models unlike most previous models of imperfect competition capture spatial variations in production costs and demand functions we present two models one calculates a nash bertrand equilibrium in which each firm believes that rivals will not react to price changes this equilibrium represents the most intense level of competition to be expected the other model yields limit prices that are designed to discourage new firms from entering the market

when does one bad apple spoil the barrel an evolutionary analysis of collective action this paper studies collective action games in which the production of a public good requires teamwork a leading example is a threshold game in which provision requires the voluntary participation of m out of n players quantal response strategy revisions allow play to move between equilibria in which a team successfully provides and an equilibrium in which the collective action fails a full characterization of long run play reveals the determinants of success these include the correlation between players costs of provision and their valuations for the good the addition of an extra bad apple player can spoil the barrel by destabilizing successful teams and so offers a rationale for limiting the pool of possible contributors copyright 2008 wiley blackwell

explaining international and intertemporal variations in income inequality this paper explores the propositions that income inequality is relatively stable within countries and that it varies significantly among countries a new and expanded data set provides broad support for both propositions drawing on a political economy and capital market imperfection arguments to explain the intertemporal and international variation in inequality the empirical analysis shows that the predicted variables associated with the first argument a measure of civil liberties and the initial level of secondary schooling and the second argument a measure of financial depth and the initial distribution of land are indeed important determinants of inequality this paper explores two propositions regarding income inequality they are first income inequality is relatively stable within countries and second it varies significantly across countries to illustrate note that the gini coefficient in india remained almost constant for forty years 1951 92 with mean 32 6 and standard deviation 2 0 2 in contrast the variation in gini coefficients across countries is large 61 9 in honduras in 1968 compared with 17 8 in bulgaria in 1976 if substantiated these propositions have potentially significant implications for poverty the significance of the first is obvious barring any fundamental socio political change poverty reduction will depend crucially on the rate of economic growth given this the significance of the second is that in inegalitarian economies the poor will enjoy a smaller share of any national increment in income than in more egalitarian ones drawing on a new and expanded data set on inequality deininger and squire 1996a the first of the paper s three sections conducts standard statistical tests of the two propositions the sample comprises 573 observations on the most common measure of inequality the gini coefficient for 49 developed and developing countries covering the period 1947 94 the results broadly confirm our two propositions specifically analysis of variance anova shows that about 90 of the total variance in the gini coefficients

on the use and misuse of profit functions for measuring the price responsiveness of peasant farmers a comment the standard profit function approach has been applied successfully in a number of ldcs to measure the price responsiveness of peasant farmers yet various problems afflict this approach including but not restricted to the existence of non competitive market structures zero valued observations exclusion of relevant variables lack of participation in output and or input markets and endogeneity of input and or output prices the impact of these problems on estimation results however can be minimised through modifications and adaptations of the standard approach better specification of the underlying technology and the use of selected functional forms

estimating consumer demand in korea abstract in this paper time series annual data on five consumer goods for korea are analyzed using the neoclassical model of consumer behavior the approach taken is the indirect utility function and employs a translog form various restrictive specifications of consumer preferences with respect to homotheticity and separability are examined and rejected by the likelihood ratio test income and price elasticities are estimated which appear to be generally high relative to those of developed countries growth in real income is primarily responsible for changes in commodity demand marginal utilities of income and associated income elasticities are calculated which are consistent with normal expectations

growth and poverty evidence for developing countries in the 1980s abstract measures of consumption poverty for a sample of developing countries in the 1980s respond elastically to changes in mean consumption although there is a high variance in poverty outcomes at a given rate of growth there is no sign of systematic effects of growth on inequality

irreversible investment under uncertainty and the threat of bankruptcy abstract the firm level theory of irreversible investment under uncertainty is extended to account for bankruptcy with a sufficiently large risk of bankruptcy firms prefer to defer their investment decision to a later date simulated option values reach as high as 30 percent