computing cournot equilibrium through maximization over prices abstract this paper presents a characterization of internal cournot equilibrium based on first order conditions corresponding to profit maximization over prices this characterization may yield significant computational advantage as demand functions need not be inverted and simple first order conditions are obtained

compatibility and bundling of complementary goods in a duopoly this paper presents a simple model of compatibility and bundling in industries where consumers assemble several necessary components into a system that is close to their ideal the authors show that for a wide range of parameters firms will choose to produce compatible components but will offer discounts to consumers who purchase all components from the same firm however firms would be better off if they could commit not to provide such discounts furthermore the equilibrium tends to involve socially excessive bundling finally mixed bundling strategies tend to increase the range of parameters over which socially excessive standardization occurs copyright 1992 by blackwell publishing ltd

understanding the family gap in pay for women with children as the gender gap in pay between women and men has been narrowing the family gap in pay between mothers and nonmothers has been widening one reason may be the institutional structure in the united states which has emphasized equal pay and opportunity policies but not family policies in contrast to other countries that have implemented both the authors now have evidence on the links between one such family policy and women s pay recent research suggests that maternity leave coverage by raising women s retention after childbirth also raises women s levels of work experience job tenure and pay

flooded with debt this study explores if natural disasters are able to trigger a sovereign debt default natural disasters make the debt of a country less sustainable as they worsen the public finances of a country the main findings from our empirical analysis clearly indicate that large scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage points it turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide this will limit the debt servicing opportunities of a country in the future

decomposing the macroeconomic effects of natural disasters a national income accounting perspective abstract there is an unresolved debate as to whether natural disasters present true obstacles to a country s economic growth and development given that the empirical evidence is rather heterogeneous in this paper we explore whether aggregate analyses are likely to mask different responses of the components export and import government consumption investment and private consumption of gross domestic product gdp to this end we assembled a panel data set of hurricane strikes and national income accounting data for 21 caribbean countries for the period 1970 2011 we used a panel vector autoregressive varx model to take account of the direct impact of the storm shocks and any feedback mechanisms our results suggest that the responses on each gdp component differ widely where we find some effects on export import public consumption investment and private consumption however the differences in timing and directions of these impacts demonstrate why it may be difficult to find any clear and large net aggregate impact of hurricanes and natural disasters in general on gdp

bundling as an entry barrier in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to credibly defend both products without having to price low in each the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist although price discrimination provides a reason to bundle the gains are small compared with the gains from the entry deterrent effect i introduction in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to defend both products without having to price low in each while it is still possible to compete by offering a rival bundle a monopolist can significantly lower the potential profits of a one product entrant without having to engage in limit pricing prior to entry we also show that bundling continues to be an effective pricing tool even if entry deterrence fails or if there is already an existing one product rival a company with a monopoly in product a and a duopoly in product b makes higher profits by selling an a b bundle than by selling a and b independently leveraging market power from a into b and accepting some one product competition against the bundle is better than using the monopoly power in good a all by itself since bundling mitigates the impact of competition on the incumbent an entrant can expect the bundling strategy to persist even without any commitment the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist see stigler 1968 adams and yellen

are external shocks responsible for the instability of output in low income countries external shocks such as commodity price fluctuations natural disasters and the role of the international economy are often blamed for the poor economic performance of low income countries the author quantifies the impact of these different external shocks using a panel vector autoregression var approach and compares their relative contributions to output volatility in low income countries vis a vis internal factors he finds that external shocks can only explain a small fraction of the output variance of a typical low income country internal factors are the main source of fluctuations from a quantitative perspective the output effect of external shocks is typically small in absolute terms but significant relative to the historic performance of these countries

effects of tax reform on labor supply investment and saving the u s tax system received two major overhauls during the 1980s the tax cuts of 1981 and the tax reform act of 1986 supporters of both reforms argued that major changes in tax policy could boost saving investment labor supply and entrepreneurship eventually it was argued such changes could reverse the slowdown in economic growth that began in the early 1970s and spur improvements in american living standards the aim of this paper is to assess whether the goals of increased labor supply and capital formation were achieved

the effects of progressive taxation on labor supply when hours and wages are jointly determined this paper extends a standard intertemporal labor supply model to account for progressive taxation as well as the joint determination of hourly wages and hours worked we show that these two factors can have implications for both estimating labor supply elasticities as well as for using these elasticities in tax analysis failure to account for wage hours ties and progressive taxation may cause the hours response to marginal tax rate changes to be understated by 5 to 30 percent for men

strategic and welfare implications of bundling abstract a standard oligopoly model of bundling shows that bundling by a firm with a monopoly over one product has a strategic effect because it changes the substitution relationships between the goods among which consumers choose bundling in appropriate proportions is privately profitable reduces rivals profits and overall welfare and may drive rivals from the market

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

the interrelated dynamics of unemployment and low wage employment this paper examines the extent of state dependence in unemployment and the role played in this by intervening low wage employment a range of dynamic random and fixed effects estimators are compared low wage employment is found to have almost as large an adverse effect as unemployment on future prospects and the difference in their effects is found to be insignificant evidence is presented that low wage jobs act as the main conduit for repeat unemployment and considerably increases its probability obtaining a higher wage job reduces the increased risk of repeat unemployment to insignificance

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

on the efficiency of bertrand and cournot equilibria with product differentation in a differentiated products setting with n varieties it is shown under certain regularity conditions that if the demand structure is symmetric and bertrand and cournot equilibria are unique then prices and profits are larger and quantities smaller in cournot than in bertrand competition and as n grows both equilibria converge to the efficient outcome at a rate of at least 1n if bertrand reaction functions slope upwards and are continuous then even with an asymmetric demand structure given any cournot equilibrium price vector one can find a bertrand equilibrium with lower prices in particular if the bertrand equilibrium is unique then it has lower prices than any cournot equilibrium

a strategic motivation for commodity bundling the analytical literature on commodity bundling explains the practice of selling two or more differentiated products in a single package as a surrogate for direct price discrimination in contrast this paper shows that imperfect competition creates a strategic incentive to bundle the profitability of bundling whether it adversely affects rival producers and whether it yields an overall efficiency gain depends inter alia on the nature of product market competition the role of complementarity in explaining why firms bundle is also explored copyright 1990 by blackwell publishing ltd

the fiscal implications of hurricane strikes in the caribbean abstract this paper empirically traces the fiscal impacts of hurricane strikes to this end a hurricane damage index is derived from a physical wind field model for a panel of caribbean countries over 36 years results based on panel var and impulse response functions analysis show that overall hurricane strikes exert a short term impact indeed the study finds that the response of government spending is positive and significant while public investment debt and tax revenue do not appear to respond significantly to hurricane strikes moreover the study finds that governments respond to hurricane strikes by engaging in short term deficit financing

a future of lousy jobs the changing structure of u s wages politicians journalists and the public have expressed rising concern about the decline or percieved decline in middle class jobs the u s work force is viewed as increasingly divided between a prosperous minority that enjoys ever rising wages and a less affluent majority that struggles harder each year to make ends meet to determine whether and why this view of the job market is accurate labor market economists anaylze trends in the distribution of jobs and wages over the past two decades and attempt to forecast the future course of american earnings inequality mckinley l blackburn david e bloom and richard b freeman assess the reasons behind the deterioration of earnings and job opportunities among less skilled men they consider the impact of changes in industrial structure declines in unionization and trends in the level and quality of schooling for men who have limited skills and education gary burtless examines the effect of the business cycle within and across different regions of the united states on earnings inequality and analyzes the effects of demographic change on inequality over the past twenty years rebecca m blank studies the rise of part time employment and its impact on wages fringe benefits and the quality of jobs linda dachter loury focuses on the effect of the baby boom and baby bust on demand for schooling among new labor market entrants if young entrants are discouraged from seeking college training by the high cost or low payoff of schooling the long term impact will be a gradual decline in the skills of the u s work force robert mofitt analyzes the effect of welfare state programs on the growth of low wage jobs and the extent towhich the welfare reforms of the eighties have affected low income workers

why firms may prefer not to price discriminate via mixed bundling abstract we analyze a simple model of joint purchase discounts using a discrete choice framework to characterize consumer choices the model suggests that mixed bundling is more likely to be associated with monopoly this is due to the benefits reaped via price discrimination in a duopoly environment however only pure components pricing may be offered in equilibrium since firms fear the extra degree of competition inherent in mixed bundling

equilibrium product bundling this article offers an equilibrium theory of product bundling by rival firms in several models where a primary good is produced in a duopoly market and one or more other goods is produced under perfectly competitive conditions bundling is shown to emerge as an equilibrium strategy of one or both of the duopolists for its role as a product differentiation device when the rival firms can commit to bundling sales their profits are higher but social welfare is reduced copyright 1997 by university of chicago press

the growth aftermath of natural disasters this paper provides a description of the macroeconomic aftermath of natural disasters it traces the yearly response of gross domestic product growth both aggregated and disaggregated into its agricultural and non agricultural components to four types of natural disasters droughts floods earthquakes and storms the paper uses a methodological approach based on pooling the experiences of various countries over time it consists of vector auto regressions in the presence of endogenous variables and exogenous shocks varx applied to a panel of cross country and time series data the analysis finds heterogeneous effects on a variety of dimensions first the effects of natural disasters are stronger for better or worse on developing than on rich countries second while the impact of some natural disasters can be beneficial when they are of moderate intensity severe disasters never have positive effects third not all natural disasters are alike in terms of the growth response they induce and perhaps surprisingly some can entail benefits regarding economic growth thus droughts have a negative effect on both agricultural and non agricultural growth in contrast floods tend to have a positive effect on economic growth in both major sectors earthquakes have a negative effect on agricultural growth but a positive one on non agricultural growth storms tend to have a negative effect on gross domestic product growth but the effect is short lived and small future research should concentrate on exploring the mechanisms behind these heterogeneous impacts

the role of human capital in earnings differences between black and white men d uring the past 50 years the earnings of black men have increased substantially both in absolute terms and relative to those of white men as shown in figure 1 in 1940 the black white weekly earnings ratio among men ages 25 34 was 49 percent by 1980 it had increased to 79 percent during the 1980s however the overall black white earnings gap did not narrow and at younger ages the gap actually widened although the 1980s is not the first decade since 1940 in which black men made little or no gains in relative earnings the 1950s was another the lack of progress in the 1980s is nevertheless puzzling and a source of concern this article examines the factors underlying the differential in earnings between black men and white men with a focus on the role of human capital since 1940 successive generations of black men entering the labor force have been increasingly more educated relative to white men both in terms of years of school completed and in the quality of schooling obtained as the education and income levels of black parents increased racial differences in the transmission of human capital in the home were also likely to have narrowed this convergence in educational differences combined with the migration of blacks out of the south contributed to the narrowing in the racial gap in earnings over the 1940 80 period particularly in the first half of the period but human capital factors education and migration were not the only source of convergence in black white differences in earnings the patterns of change in the earnings gap support the contention that declining labor market discrimination against blacks has also contributed to the rise in the black white earnings ratio moreover the acquisition of human capital itself has been strongly affected by societal and governmental discrimination since blacks were long provided with greatly inferior schooling resources

the effects of u s trade laws on poverty in america this study examines the relationship between the application of u s trade laws and the distribution of income and levels of poverty in america specifically we examine the recent use of administered protection by u s industries and compare the experiences of these industries under the trade laws with their associated poverty rates wage levels and rates of unemployment this study seeks to determine whether this protection has served to alleviate or to exacerbate poverty we find an inherent bias in the trade laws toward increasing the incidence of poverty