on the effects of downstream entry we study the effects of entry in a downstream market where firms e g compaq and ibm cvs and safeway buy an input e g microprocessor grocery items from an upstream supplier e g intel procter gamble and sell their output to consumers we show demand conditions where contrary to conventional wisdom entry of a new downstream firm lowers the downstream market output and increases the consumer price thus consumers may be better off with fewer sellers in such markets we also show that this entry may cause the profit of each incumbent downstream firm to i remain unchanged ii decrease or iii even increase also for a class of widely used demand conditions the supplier s optimal price is shown invariant to the entry exit of its downstream buyer firms we classify all possible effects of downstream entry in terms of fundamental market demand conditions

discretionary disclosure in the presence of dual distribution channels a prevailing view in the disclosure literature is that firms who learn favorable market information are reluctant to disclose it fearing it will attract new rivals in this paper we demonstrate that the presence of dual distribution arrangements wherein consumers can purchase products either from traditional retail firms or directly from suppliers can notably alter disclosure incentives as under prevailing views a retailer disclosing positive news risks entry by competitors however entry shifts the incumbent supplier retailer relationship the presence of new competitors leads the supplier to treat its retailer more as a strategic partner translating into lower wholesale prices this in turn can lead the retailer to willingly share favorable news since such disclosure invites entry precisely when the retailer stands to benefit most from price concessions our results suggest that as dual distribution continues to increase in prominence firms may be more willing to voluntarily disclose sensitive financial information particularly that which points to high demand for its products

promotion of the agricultural sector and political power in austria in most industrialized countries farmers as a small and well orgnized group are ableto influence government decisions to get rent creating proposals enacted two different viewsare presented to explain why the chicagoan view efficient redistribution hypothesis and the virginian view inefficient outcome of political bargaining a vertically structuredempirical model of the austrian farm sector is employed to test both hypotheses quantitativeresults of the welfare transfers from consumers taxpayers to farmers and agribusiness firmsare derived and the political weights of these groups are presented

political economy of u s sugar policies this article examines political economic decision making with respect to u s sugar policies it evaluates the responsiveness of target prices and import quotas levels to changes in a the economic surpluses of market participants and b the federal budget deficit results indicate a weak linkage between sugar producer surplus and subsequent target prices levels but a strong linkage between the federal budget deficit and subsequent import quota levels the influences of sugar users corn sweetener producers and foreign countries are also examined

a global vector autoregression model for the analysis of wheat export prices food commodity price fluctuations have an important impact on poverty and food insecurity across the world conventional models have not provided a complete picture of recent price spikes in agricultural commodity markets and there is an urgent need for appropriate policy responses perhaps new approaches are needed to better understand international spill overs the feedback between the real and the financial sectors as well as the link between food and energy prices in this article we present the results from a new worldwide dynamic model that provides the short and long run impulse responses of the international wheat price to various real and financial shocks

developing country interests in agricultural trade reform this paper examines whether developing countries as a group would be better off in the absence of agricultural protection in the industrial north and if so whether they should support reforms negotiated between the major players in the uruguay round results from the tyers anderson gls model of world food markets suggest that the net effect of industrial country agricultural protection is beneficial to developing countries though by only a small margin even if its removal were to stimulate accelerated technical change in developing countries the same is found to be true of partial reforms which are more palatable politically such as quotas to reduce oversupply in the ec of course many developing countries including those which are members of the cairns group are badly hurt by protection in the north unfortunately however they and the other members of that group stand to gain comparatively little from the reduction of oversupply in the ec through quotas

overwork and the slow convergence in the gender gap in wages despite rapid changes in women s educational attainment and continuous labor force experience convergence in the gender gap in wages slowed in the 1990s and stalled in the 2000s using cps data fr

trouble in the tails what we know about earnings nonresponse thirty years after lillard smith and welch earnings nonresponse in household surveys is widespread yet there is limited knowledge of how nonresponse biases earnings measures we examine the consequences of nonresponse on earnings gaps and

endogenous price policies and international wheat prices comment in a 1983 article in this journal sarris and freebairn claim to model international wheat prices as cournot equilibrium prices resulting from the interaction of national excess demand functions national pricing policies are determined so as to maximize a domestic welfare function specified as a weighted sum of producer and consumer surplus government revenue and a price variability measure the function is maximized subject to the pricing policies of all other countries in the sarris and freebairn model each country assumes that any pricing policy which it implements such as the imposition of a tariff will not affect the world price we contend that this assumption is not consistent with the usual determination of a cournot equilibrium in the cournot oligopoly model each firm takes account of the price implications of the output it sets therefore we reformulate sarris and freebairn s model to account for the impact of policies on the world price and recalculate the implicit welfare weights for wheat trading countries in the traditional cournot oligopoly model each firm takes account of production levels set by it and other firms although each naively expects no response from its rivals the cournot nash equilibrium is a point at which no trader acting unilaterally can do better than playing its optimal strategy given that all other traders are playing their optimal strategies interaction between the traders leads to convergence to an equilibrium from which none would want to move in contrast to the traditional model sarris and freebairn derive their solution on the simplifying assumption that every trading country takes the world price as given this implies that each country is concerned with domestic objectives and is not concerned with other countries reactions to its policies in other words we posit a cournot oligopoly problem p 215 in fact sarris and freebairn posit zero conjectural variations i e each trader conjectures that its rivals will not vary their policies as in a cournot model but assume no effect on world prices this latter assumption is not consistent with a cournot model in a cournot nash model traders assume that rivals do not respond to their policies although these zero conjectures are subsequently found to be incorrect although unanticipated retaliation does occur and by imposing the assumption of a given world price and that market power remains unused sarris and freebairn are led to conclude that with equal weights on all components of the welfare function the optimal policy for the country is a free trade one p 216 this conclusion is consistent with the simplifying small country assumption however it is unlikely that countries with market power will ignore it in setting tariffs after dropping this assumption our calculations presented in table 1 show that the optimal policies are nonzero even if weights are equal the method used here for obtaining the cournot nash solution involves calculating the firstorder conditions to maximize a weighted welfare function for each country the reaction functions showing how each country reacts to tariffs imposed by others can then be derived the functions can be solved simultaneously to obtain the cournotnash solution 2 consider a homogenous product traded between n countries with linear demand and supply curves

endogenous price policies and international wheat prices vanzetti and kennedy s herein vk comment on our earlier paper sarris and freebairn gives us the opportunity first to clarify the differences in the models to present a generalization of the analysis that includes their results as well as ours as special cases and then to point out some salient features of our model that seem to have been unnoticed by them consider our model of a homogenous commodity produced consumed and traded by n countries which are characterized by the following linear demand and supply curves notation follows vk except that we maintain the additive random variables and hence keep the time subscript

a game theoretic model of endogenous public policies public policies are the equilibrium outcome of a cooperative game among interest groups and the policy maker this study stresses the interdependence between policies and players bargaining strengths and derives their comparative statics with respect to a changing economic environment it also provides a specification of behavioral equations consistent with the underlying bargaining process an analysis of the political economy of food and agricultural price policies in senegal illustrates the proposed framework

us dairy policy alternatives under bovine somatotropin a dynamic optimal control model is constructed to study us dairy policy alternatives under bovine somatotropin bst the results indicate that the adoption of bst might be slower than that indicated by the early surveys even if adoption is widespread the government can have the potentially large milk surplus problems under control with a combination of price support generic milk advertising and a cow buy out with bst adoption the government would set lower support prices and would increase assesment for milk advertising compared with the no bst case the higher adoption rates the lower the support prices and the higher the advertising assesments it is found that bst adoption is socially beneficial consumers gain at the expense of producers the government can however help produces by giving a larger policy weight to producers in setting the optimal levels of policy variables finally it is found that the current levels of generic advertising are too low and the allocation of advertising bet

oligopolistic behavior by public agencies in international trade the world wheat market a model of the world wheat market is presented which treats public policies as endogenous the oligopolistic nature of international wheat trade is captured by assuming policy makers form conjectures on the slope of the excess demand function they face and use that information to determine domestic and trade policies the policies reflect differing influences of political interest groups a u s crop shortfall scenario illustrates the different results with endogenous policies compared to the traditional model

rain agriculture and tariffs this paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector in a model of strategic trade policy the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous depending on the weight placed by the domestic policy maker on tariff revenue profits and the consumer surplus the more weight placed on domestic profits the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs these findings are robust to alternative assumptions about market structure and the timing of the game using detailed panel data on applied tariffs and rainfall for 70 nations the authors find robust evidence that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports

a note on holding excess capacity to deter entry in a labour managed industry in this paper j zhang s 1993 investigation on whether an established labor managed firm carries capacity that would be left idle if entry did not occur is reconsidered to analyze the use of excess capacity as an entry deterrent the author presents an extended model with a general constant returns to scale production function instead of the leontief production function assumed by zhang it is shown that the result of zhang that the labor managed firm lmf carries excess capacity also holds for the constant returns to scale production function furthermore the author examines the global stability of the labor managed firm postentry nash equilibrium

impact of the us ec price war on major wheat exporters shares of the chinese market abstract china is both the world s largest producer and consumer of wheat in an attempt to gain a larger slice of the important chinese market both the european community and the united states have offered china subsidised wheat in addition other exporters have offered attractive credit arrangements to china the objective of this paper is to measure the overall impact of these policies on each exporter s share of the chinese market to that end an improved version of the constant market shares model is applied to data on chinese wheat imports in the 1980 s the results indicate that the united states has been outperforming the other exporters since subsidised us wheat sales were authorised for china in 1987 the implications of the analysis for the smaller exporters and international wheat trade are discussed

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

regulated price and stock policies abstract setting administered domestic prices according to just c i f of f o b border price is advisable only if the direction of trade is certain and all groups interests are weighted equally if the good randomly may be imported of exported prices and stocks should be determined simultaneously on the basis of domestic demand and supply conditions as well as border prices a framework is proposed for testing which optimizing model an ldc government employs when administering price and stock levels the framework suggests zimbabwe policy makers have treated maize as an export crop weighting consumers interests moderately below those of producers and government

employee bargaining power inter firm competition and equity based compensation abstract we develop a model to illustrate that equity based compensation for non executive employees and product market decisions are related when the product market is competitive and employees have low bargaining power the unique equilibrium is for each firm s owners to offer equity based compensation to their employees in this setting equity based compensation leads to a lower wage rate which makes each firm more competitive with its rival however this unique equilibrium is a prisoner s dilemma for the firms original owners our results are consistent with several empirical regularities and provide predictions on when firms will offer equity based compensation to their employees

determinants of the u s wheat producer support price do presidential elections matter the paper s focus is on the determinants of the u s wheat producer support price the results of the time series analysis suggest that this price is largely determined by the previous price the expected u s share in world exports and expected program costs presidential elections also influence u s wheat price policies all other things being equal the support price tends to be lower in election years than in other years this suggests that small interest groups relative political economic power may be less pronounced in election years if they do not succeed in positioning themselves on the political economic market such that they contain the potentially decisive voter

wage gaps large and small author affiliation barry t hirsch barry t hirsch is the w j usery chair of the american workplace department of economics andrew young school of policy studies georgia state university atlanta ga 30302 3992 and research fellow iza bonn germany bhirsch gsu eduthis presidential address was presented at the annual meeting of the southern economic association new orleans la on november 20 2007 acknowledgment i thank the many economists with whom i have interacted or coauthored over the years in particular john addison chris bollinger bill breit bill johnson dave macpherson and ed schumacher barry t hirsch w j usery chair of the american workplace department of economics andrew young school of policy studies georgia state university 2007 president of the southern economic association figure omitted see article image 1 introductionin the wealth of nations adam smith posited theory and institutional explanations for why wages differ modern labor economics has retained a focus on wage differentials although much of the literature is unabashedly empirical it is informed by theory neoclassical economics including human capital theory remains the principal approach although labor economists recognize the role played by human nature workplace incentives institutions and public policy in wage determination in this address i highlight several topics i have studied all involving wage gaps 1 these include census imputation methods union premiums product market regulation wages in male and female jobs the wage effects of military service and interarea wages and cost of living the purpose is not to trumpet my work although it may appear as such but to draw broader conclusions about labor economists understanding of wage determination 2 equalizing differentials and the law of one wagethe theory of equalizing differentials states that in competitive labor markets workers with similar skills working in similarly attractive jobs and locations should receive similar compensation long run wage differentials are explained by differences in skill and job disamenities with a single price wage conditional on worker and job attributes 2 the law of one wage equal compensation for equivalent workers and jobs follows naturally from competitive theory empirical studies attempt to test the law of one price in product markets industrial organization economists focus on a narrow set of homogeneous goods in markets with low cost information and similar transportation costs i e purchases of electronics and books at internet sites international economists test for purchasing power parity for homogeneous goods i e big mac prices across countries for a recent paper see parsley and wei 2007 even in these markets there is considerable deviation from the law of one price one does not see an equivalent literature in labor economics yes there is a vast literature on wage gaps but authors rarely characterize such work as a test of a law of one wage because there is little expectation that there should be wage equality even conditional on controls why not first as emphasized in personnel economics pay schemes that maximize profits often involve wages deviating from spot marginal products thus creating competitive wage differences across similar workers in similar jobs lazear and oyer 2007 second unions or other institutions can affect wages third there are rigidities in labor markets owing to imperfect mobility say from information and search costs firm specific training personal job attachment or tied household decisions regarding jobs location and housing manning 2003 mortensen 2003 fourth are problems of measurement leading to apparent variation in wages even when there is none and fifth even if data are error free we cannot hope to measure all the multitude of worker and job attributes that influence wages

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

labor market returns to the ged using regression discontinuity analysis we evaluate returns to general educational development ged certification for high school dropouts using state administrative data we apply a fuzzy regression discontinuity method to account for test takers retaking the test for women we find that ged certification has no statistically significant effect on either employment or earnings for men we find a significant increase in earnings in the second year after taking the test but no impact in subsequent years ged certification increases postsecondary school enrollment by 4 8 percentage points our results differ from regression discontinuity approaches that fail to account for test retaking

agricultural trade negotiations as a strategic game abstract this study views multilateral trade negotiations as a strategic game among nations or regions including taxpayer consumer and producer components payoffs are calculated from an intermediate run international trade model initialized with 1989 data for the public at large the nash equilibrium and socially optimal outcome is liberalization of trade unilateral or multilateral maintenance of the status quo of market distortions costing the world billions of dollars each year is rational only if producer payoffs are sovereign so that strategies optimal for producers are considered optimal for nations remedial policies are discussed including opportunities for economic education political system reform and less incentives for producers to scuttle multilateral trade negotiations

economic theory and farm politics what can economics offer in the explanation of politics the first accomplishment is to reduce the subject to a maximization problem analogous to others encountered in economic theory a second accomplishment is to make this problem interesting to make it really illuminating about politics both steps are difficult and the accomplishments have been only partial viewing politics as maximization may seem unreasonably austere and narrow but it is what distinguishes the contribution of economics from that of political scientists or more general social observers empirical work by economists on farm politics typically brings in these broader concerns but this paper attempts instead to justify the narrower approach and to explore its implications its organization is first to spell out details of the contribution of economic theory to explaining politics second to review work on agricultural policies in relation to this theory and finally to discuss implications for positive versus normative economics in policy analysis

schools skills and synapses american society is polarizing proportionately more american youth are graduating from college than ever before at the same time american born youth are graduating from high school at lower rates than 40 years ago this paper reviews and interprets these trends the origins of inequality are examined and policies to alleviate it are analyzed families play a powerful role in shaping adult outcomes the accident of birth is a major source of inequality recent research by cunha and heckman 2007a 2008b shows that about half of the inequality in the present value of lifetime earnings is due to factors determined by age 18 compared to 50 years ago relatively more american children are being born into disadvantaged families where investments in children are smaller than in advantaged families policies that supplement the child rearing resources available to disadvantaged families reduce inequality and raise productivity

match bias from earnings imputation in the current population survey the case of imperfect matching this article examines match bias arising from earnings imputation wage equation parameters are estimated from mixed samples of workers reporting and not reporting earnings the latter assigned earnings of donors regressions including attributes not used as imputation match criteria e g union are severely biased match bias also arises with attributes used as match criteria but matched imperfectly imperfect matching on schooling age flattens earnings profiles within education age groups and creates jumps across groups assuming conditional missing at random a general analytic expression correcting match bias is derived and compared to alternatives reweighting a respondent only sample proves an attractive approach

is earnings nonresponse ignorable abstract earnings nonresponse in the current population survey is roughly 30 in the monthly surveys and 20 in the march survey if nonresponse is ignorable unbiased estimates can be achieved by omitting nonrespondents little is known about whether cps nonresponse is ignorable using sample frame measures to identify selection we find clear cut evidence among men but limited evidence among women for negative selection into response wage equation slope coefficients are affected little by selection but because of intercept shifts wages for men and to a lesser extent women are understated as are gender gaps selection is least severe among household heads

a political economic analysis of u s rice export programs to japan and south korea a game theoretic approach the uruguay round agreement on agriculture ur has contributed to the increase in u s and world rice trade since 1994 despite this the japanese and korean rice markets continue to be characterized by high levels of trade intervention this paper attempts to analyze both import markets incorporating econometric estimates and public choice theory in a game theoretic framework various scenarios are analyzed the results show that the overall nash equilibrium occurs with a 4 tariff reduction for japan and korea under the u s market development program which includes the market access program and foreign market development program

outsourcing vertical integration and price vs quantity competition abstract we show that standard conclusions about duopoly competition can be reversed when the production of key inputs is outsourced to a vertically integrated retail competitor with upstream market power under such outsourcing bertrand competition can produce higher prices higher industry profit lower consumer surplus and lower total surplus than cournot competition in addition to limiting the intensity of retail competition bertrand competition can limit the extent of wholesale competition by reducing the incentive of retail providers to produce key inputs themselves

a stochastic version of a stackelberg nash cournot equilibrium model we consider a stochastic version of the stackelberg nash cournot model proposed by murphy et al 1983 ln the first stage the leader chooses and announces his production level taking into account the reaction of the followers the decision of the leader is taken when market demand is uncertain in the second stage the followers knowing the leader s output react to this level according to the cournot assumption at this stage demand is known we study the extension of the murphy et al model and give a numerical illustration of this model using the european gas market

a critical assessment of the political preference function approach in agricultural economics abstract the policy preference function ppf approach has become popular with economists seeking to explain the origin of government policies in this paper a distinction between positive and normative work with the ppf concept is made positive work is shown to suffer from a variety of shortcomings including the misspecification of traditional ppfs and the failure to consider the importance of institutions constraints and the interaction between different commodity policies these weaknesses are reflected in the counter intuitive results of a simple ppf model designed to reflect the interaction between the ec s wheat and barley policies furthermore it is demonstrated that ppf weights change as a result of both political preferences and market parameters hence changes in ppf weights cannot be attributed to changes in preferences alone test of the axioms of revealed preference theory are used to demonstrate that even though ppf weights derived for the ec s wheat and barley markets have fluctuated considerably since the early 1970s we are not able to conclude that there has been a shift in political preferences the paper concludes with some comments about the use of ppfs in a normative framework the underlying assumption that policy makers optimise seems not surprisingly often to lead practitioners to the conclusion that observed policies are not so bad after all economists should also beware of the tendency to overlook possible differences between the ppf and the social welfare function

the american high school graduation rate trends and levels abstract this paper applies a unified methodology to multiple data sets to estimate both the levels and trends in u s high school graduation rates we establish that a the true rate is substantially lower than widely used measures b it peaked in the early 1970s c majority minority differentials are substantial and have not converged for 35 years d lower post 1970 rates are not solely due to increasing immigrant and minority populations e our findings explain part of the slowdown in college attendance and rising college wage premiums and f widening graduation differentials by gender help explain increasing male female college attendance gaps

bias corrected estimates of ged returns using three sources of data this article examines the direct economic return to general educational development ged certification for both native and immigrant high school dropouts one data source the current population survey cps is plagued by nonresponse and allocation bias from the hot deck procedure that biases the estimated return to the ged upward correcting for allocation bias and ability bias there is no direct economic return to ged certification an apparent return to ged certification with age found in the raw cps data is due to dropouts becoming more skilled over time these results apply to both native born and immigrant populations

non competitive market behaviour in the international coking coal market in this paper a primal dual programming model of international coking coal trade is constructed to test for non competitive market behaviour world trade in 1996 is simulated under perfect competition and various non competitive market structures statistical tests are used to compare simulated trade flows with actual data assuming cournot nash behaviour an all consumer oligopsony market structure is preferred to alternative models under an all consumer oligopsony world coking coal prices and trade are lower than under perfect competition under an oligopsonistic structure welfare gains from productivity increases in australian coal mines might largely accrue to coal buyers

economies of scale and market structure in international grain trade a large body of literature has examined international grain trade in imperfectly competitive models the article develops a two stage duopoly model that considers a private trader and a state trading enterprise ste competing on a foreign market the key difference between the private trader and the ste is their international organization while the ste makes use of external agents to export the private firm may choose to internalize international transactions the game is solved for different modes of competition and under both assumptions of homogeneous and differentiated products in order to assess how these assumptions affect the outcome of the game the results of the game are examined by using numerical examples the analysis shows that external shocks on export markets may result in a change of market structure and consequently of market shares these effects depend on the initial market structure furthermore the degree of product differentiation and the assumed mode of competition significantly affect the relative values of transaction and fixed costs at which the market structure changes

producer consumer trade offs in export cartels the wheat cartel case since the formation of the organization of petroleum exporting countries opec several models of cartel competitive fringe markets for an exhaustible resource have been developed derivations of nash cournot equilibrium price paths under such a regime and insightful behavioral descriptions of limit pricing by monopolists facing potential competition have enriched the literature concerning this market structure salant and gilbert and goldman in addition the gains to producers from cartelization in the oil copper and bauxite industries have been derived empirically pindyck largely in reaction to opec numerous discussions have focused on an important but different commodity than those mentioned above several proposals supported by many producers and consumers have been put forth to form a cartel in wheat among the major exporters the united states canada australia and argentina 1 if such a cartel were organized which group or groups have the most to gain the above studies on exhaustible resources do not distinguish between producer and consumer effects in the exporting countries largely because domestic demand for this type of good is small relative to the total amount exported in oil for example there is little need to distinguish between a producer export cartel which maximizes producer returns and a government cartel which maximizes the welfare of all groups since the solutions would be very similar however this is not necessarily the case for other commodities where domestic demand is an important component of market structure e g in wheat the domestic demand is large relative to total wheat exports 2 the purpose of this paper is to consider a market in which the commodity in question has a relatively large domestic demand component and to demonstrate that a sharp distinction has to be made between a producer export cartel and a government export cartel this paper shows abstracting from implementation issues raised by caves pindyck and mccalla and schmitz that producers actually may lose from a government cartel the conditions under which this can happen are derived theoretically the model is then applied to the world wheat economy and interestingly the empirical results suggest that there is a strong possibility that producers would in fact lose from a government wheat cartel if there are decreasing returns in production unless compensated by a tax on consumers this result raises several important policy issues

modeling strategic investment decisions in spatial markets abstract markets for natural resources and commodities are often oligopolistic in these markets production capacities are key for strategic interaction between the oligopolists we analyze how different market structures influence oligopolistic capacity investments and thereby affect supply prices and rents in spatial natural resource markets using mathematical programming models the models comprise an investment stage and a supply stage in which players compete in quantities we compare three models a perfect competition and two cournot models in which the product is either traded through long term contracts or on spot markets in the supply stage tractability and practicality of the approach are demonstrated in an application to the international metallurgical coal market results may vary substantially between the different models the metallurgical coal market has recently made progress in moving away from long term contracts and more towards spot market based trade based on our results we conclude that this regime switch is likely to raise consumer rents but lower producer rents while the effect on total welfare is negligible

direct marketing indirect profits a strategic analysis of dual channel supply chain design the advent of e commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales the model conceptualizes the impact of customer acceptance of a direct channel the degree to which customers accept a direct channel as a substitute for shopping at a traditional store on supply chain design the customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers here direct marketing is used for strategic channel control purposes even though it is inefficient on its own and surprisingly it can profit the manufacturer even when so direct sales occur specifically we construct a price setting game between a manufacturer and its independent retailer direct marketing which indirectly increases the flow of profits through the retail channel helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization while operated by the manufacturer to constrain the retailer s pricing behavior the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction this combination of manufacturer pull and push can benefit the retailer in equilibrium finally we show that the mere threat of introducing the direct channel can increase the manufacturer s negotiated share of cooperative profits even if price efficiency is obtained by using other business practices

strategic behaviour in international metallurgical coal markets abstract this paper analyses whether prices and trade flows in the international market for metallurgical coals were subject to non competitive conduct in the period 2008 to 2010 to do so i develop mathematical programming models a stackelberg model two varieties of a cournot model and a perfect competition model for computing spatial equilibria in international resource markets results are analysed with various statistical measures to assess prediction accuracy of the models the results show that real market equilibria cannot be reproduced with a competitive model however real market outcomes can be accurately simulated with the non competitive models suggesting that market equilibria in the international metallurgical coal trade were subject to strategic behaviour of coal exporters

least cost cheap food policies some implications of international food aid abstract many low income countries pursue cheap food policies in which consumers pay subsidized prices for bread rice and other staples this paper addresses the issue of why different governments select different food subsidy policies using multiple instruments rather than a simple across the board subsidy to provide consumers with access to cheap food it examines the optimal structure of cheap food policies in the context of a partial equilibrium model in which the country may be large in trade and is able to combine import subsidies or tariffs and output taxes or subsidies to transfer income to consumers through the market the model allows for a marginal opportunity cost of government revenues greater than one dollar in addition in the model food aid from overseas may be either given away to the consumer or given to the government for subsequent sale in the domestic market the results indicate that only by happenstance will a country choose to use a pure consumption subsidy or a pure import subsidy to transfer income to consumers in addition an increase in international food aid does not necessarily lead the government to reduce producer and consumer prices for a commodity

assessing market structures in resource markets an empirical analysis of the market for metallurgical coal using various equilibrium models abstract the prevalent market structures found in many resource markets consist of high concentration on the supply side and low demand elasticity market results are therefore frequently assumed to be an outcome of strategic interaction between producers common models to investigate the market outcomes and underlying market structures are games representing competitive markets strategic cournot competition and stackelberg structures that take into account a dominant player acting first followed by one or more players we add to the literature by expanding the application of mathematical models and applying an equilibrium problem with equilibrium constraints epec which is used to model multi leader follower games to a spatial market using our model we investigate the prevalent market setting in the international market for metallurgical coal between 2008 and 2010 whose market characteristics provide arguments for a wide variety of market structures using different statistical measures to compare model results with actual market outcomes we find that two previously neglected settings perform best first a setting in which the four largest metallurgical coal exporting firms compete against each other as stackelberg leaders while the remainders act as cournot followers second a setting with bhpb acting as sole stackelberg leader

the competitive structure of u s agricultural exports the competitive structure of u s agricultural exports is examined using a model of exporter behavior based on pricing decisions across destination markets market power is revealed in the adjustment patterns of export prices in response to exchange rate movements the results reject the hypothesis that the export pricing decisions by u s firms are consistent with price discrimination across destination markets for cotton corn and soybeans the strongest evidence against the competitive market structure is obtained for international trade in wheat where results indicate that the two largest importers soviet union and prc may exert market power to obtain lower prices

are government transfers efficient an alternative test of the efficient redistribution hypothesis the efficient redistribution hypothesis says that no available government policies are pareto superior to observed government policies efficient redistribution from government policy is a central tenet of much recent theoretical and applied political economy literature in this paper limitations of previous attempts to test the efficient redistribution hypothesis are discussed and an alternative test of the efficient redistribution hypothesis that uses vector optimization theory and bootstrap methodology is presented

the grain sector of the european community policy formation price determination and implications for trade a coresponsibility levy was added to high domestic prices and export subsidies in the ec levels for policy instruments could result from negotiations which favor producers but are acceptable to the public higher domestic prices and levies but lower export subsidies would occur if levy exemptions cover domestic marketings if exemptions are excluded low domestic prices producer subsidies and export taxes would occur with exemptions improved farm income and treasury surpluses would be achieved without injury to the public exemptions might be excluded because producers are better off and public cost is about the same with either program but producer subsidies require expanded public financing export reductions would occur under either program given prevailing market conditions

endogenous supranational policy decisions the common agricultural policy of the european community the analysis of the supranational ec decisions on the cap indicates that they are endogenous and could largely be explained by past income growth and the development of budgetary expenditures prevailing at the time of the price decisions the empirical results corroborate the hypothesis that monetary compensatory amounts are integral part of common price decisions agricultural income growth could be explained by past price policy decisions whereas budget expenses are determined by u s world market prices and the exchange rate of the ecu against the u s

estimation of price policies in senegal an empirical test of cooperative game theory abstract a game theoretic framework rationalizes the political economy of food and agricultural price policies in senegal policies are the outcome of a cooperative bargaining process among three archetypal players a farmer growing cash and staple crops an urban consumer buying imported cereals and a government marketing board intervening in agricultural markets the game is estimated and the bargaining strength of the players is recovered the axioms underlying the game are tested to discriminate among various bargaining game solutions the symmetry and efficiency axioms are rejected

goals and consequences of rice policy in japan 1965 80 the change in welfare of producers and consumers government cost and the deadweight loss arising from the various forms of government interventions into the rice market in order to protect domestic producers in japan are estimated in a partial equilibrium framework results of the quantitative analysis indicate that the motivation of the government was to minimize budget costs in achieving the target level of producer price support while consumer welfare had an insignificant weight in the government s objective function it is aiso found that acreage control is a second best policy to reduce social inefficiency produced from other forms of market distortions

a note on the effects of downstream efficiency on upstream pricing the study of the effects of downstream entry on upstream pricing has revealed the counter intuitive result of the supplier s pricing policy being invariant to a new downstream entry under an isoelastic inverse demand function we show that this counter intuitive result is reversed when a new downstream entry affects downstream efficiency we show that in the presence of increased post entry downstream efficiency the supplier increases the wholesale price by taking advantage of the increased retail efficiency and competition we also investigate the applicability of our results under other types of inverse demand 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

incorporating policy variables in a model of the world soybean rapeseed market policy variables are typically treated as exogenous variables in agricultural commodity models in this paper evidence that policy variables can be successfully endogenized in a world trade model of the soybean rapeseed and products market is presented minimum price support equations are estimated for u s brazilian and japanese soybeans and ec and japanese rapeseed macroeconomic indicator variables are used to capture the impact of nontariff barriers in brazil and japan domestic world price link equations simulation experiments are conducted which indicate that the model with endogenous policy variables performs well in comparison with a model which treats policy exogenously

unique non boundary equilibria in the morishima system abstract in the extensive literature on the morishima system the issue of the uniqueness and positiveness of equilibria has been neglected it is shown that three conditions known to be sufficient for local stability also imply unique non boundary equilibria other implications of these three conditions such as numeraire independence and global stability are also discussed

influence of trade policies on price integration in the world beef market abstract the article develops three hypotheses about how policy interventions in major trading nations influence price integration in the world beef market simple correlation coefficients tests for significant differences between coefficients and granger causality tests are used to test the hypotheses first segmentation between prices in foot and mouth disease fmd free and fmd endemic countries is found but it is much less than previously assumed second european community policies that closed the e c import market have isolated prices in the e c from other markets these policies also led to greater integration among prices in fmd free and fmd endemic market segments by forcing exporters from both segments to compete directly in new import markets third the u s a is found to be the price leader in world beef markets due not only to market size but also to u s policies that allow transmission of price information from the u s market to the world market but not vice versa

implicit policy preferences and the assessment of negotiable trade policy reforms abstract formal multilateral trade negotiations increase the pressure brought to bear on protectionist economies by foreign interests this paper explores the hypothesis that successful negotiations yield mixes of policy reforms which contribute to internationalist objectives but which minimally disturb the prior domestic political market equilibrium this disturbance is measured using weighted objective functions the weights in which embody revealed policy preferences governments are assumed to reflect these preferences in a strategic trade policy formation process which uses empirically based conjectures as to the responses of other governments and private agents the approach is applied to the negotiations on agricultural trade policy and in particular to the protectionist common agricultural policy of the european community

the effect of child health insurance access on schooling evidence from public insurance expansions although a sizable literature analyzes the effects of public health insurance programs on short run health outcomes little prior work has examined their long term effects we examine the effects of public insurance expansions among children in the 1980s and 1990s on their future educational attainment we find that expanding health insurance coverage for low income children increases the rate of high school and college completion these estimates are robust to only using federal medicaid expansions and mostly are due to expansions that occur when the children are not newborns our results indicate that the long run benefits of public health insurance are substantial

existence of competitive equilibria via smith s non linear complementarity result abstract it is well known that competitive equilibria are identified with a solution to a non linear complementarity problem however the standard existence results for this class of problems are overly restrictive in their assumptions on the excess demand functions this note illustrates the use of smith s 1984 existence result to generalize the conditions under which a competitive equilibrium is guaranteed to exist in the non linear complementarity framework

agricultural policy adjustments in the korean rice economy abstract a political preference function is used to endogenize government actions in a simultaneous equation model for south korean rice policy the effects of economic changes on rice pricing decisions through estimated political weights are tested to improve our understanding of policy adjustments in that country and open the way for further research in east asia

the eec s wheat price policies and international trade in differentiated products several features of the ec wheat market are analyzed including the imperfect substitutability between imports and domestic supplies the simultaneous import and export of wheat and the distinct impact of threshold versus intervention policy prices in theory the impact of ec price policies on wheat consumption and net trade are found to be indeterminate a priori empirical results show that intervention prices have a positive impact on ec net exports while increases in threshold import prices have decreased ec net wheat exports competing wheat exporters would prefer the ec to lower the intervention price to world levels but maintain threshold prices

dynamic games and international trade an application to the world corn market dynamic games are a conceptually useful way of analyzing imperfect markets where both buyers and sellers have potential market power previous analysis of imperfect markets was static and limited to either exporters or importers a dynamic game allows the inclusion of both importers and exporters in a multiperiod framework allowing the derivation of reaction functions a nash noncooperative difference game is applied to the international corn market to explore the plausibility of numerical results the results are reasonable and show that the game approach based on a more comprehensive econometric model has a promising future in policy analysis

friction in related party trade when a rival is also a customer there are many circumstances in which manufacturers provide inputs to wholesale customers only to subsequently compete with these wholesale customers in the retail realm such dual distribution arrangements commonly suffer from excessive encroachment in that the manufacturer s ex post retail aggression is harmful ex ante because it undercuts potential wholesale profits this paper demonstrates that with dual distribution a manufacturer can benefit from decentralized control and the use of transfer prices above marginal cost although these arrangements often create coordination concerns a moderate presence of such concerns permits the manufacturer to credibly convey to its wholesale customer that it will not excessively encroach on its retail territory this in turn permits the manufacturer to reap greater wholesale profits we also note that this force can point to a silver lining in arm s length parity requirements on transfer pricing in that they can solidify commitments to a particular retail posture

brazilian soybean policy the international effects of intervention this paper examines the effects of the complex set of brazilian soybean sector policies on the world soybean and products market brazilian policy makers have intended to encourage domestic crushing of soybeans and exports of processed rather than raw soybeans removal of the brazilian policy set for the period 1960 78 is simulated with an econometric model of the world soybean market the results indicate that the intervention objectives were not achieved moreover the u s soybean industry has benefited from the policies

bundling information aggregation and entry deterrence abstract this paper provides an explanation for bundling based on its information aggregation effect using bundling the monopolist can hide the information of each monopoly market by aggregating information we show that the monopolist chooses bundling in an early period because bundling removes potential competition in the following period

match bias in wage gap estimates due to earnings imputation about 30 of workers in the current population survey have earnings imputed wage gap estimates are biased toward zero when the attribute being studied e g union status is not a criterion used to match donors to nonrespondents an expression for match bias is derived in which attenuation equals the sum of match error rates attenuation can be approximated by the proportion with imputed earnings union wage gap estimates with match bias removed are presented for 1973 2001 estimates for recent years are biased downward 5 percentage points bias in gap estimates accompanying other non match criteria public sector industry etc is examined

do volatile firms pay volatile earnings evidence from linked worker firm data abstractdespite the importance of earnings instability little is known about its correlates or causes this article seeks to better understand earnings instability by studying whether volatile firms pay volatile earnings and is the first to directly test the relationship using us linked employer employee data the article finds a positive and statistically significant relationship using within firm variation in addition this article finds that lower earning workers are passed significantly more volatility from their employing firms than are higher earning workers

biofuel supply chain design under competitive agricultural land use and feedstock market equilibrium abstract the rapid expansion of the biofuel industry diverts a large amount of agricultural crops as energy feedstocks and in turn affects farm land allocation feedstock market equilibrium and agricultural economic development in local areas in this paper we propose game theoretic models that incorporate farmers decisions on land use and market choice into the biofuel manufacturers supply chain design problem a noncooperative bi level stackelberg leader follower game model and a cooperative game model are developed respectively to address possible business partnership scenarios between feedstock suppliers and biofuel manufacturers the models determine the optimal number and locations of biorefineries the required prices for these refineries to compete for feedstock resources as well as farmers land use choices between food and energy using corn as an example of feedstock crops spatial market equilibrium is utilized to model the relationship between corn supply and demand and the associated price variations in local grain markets with linear corn demand functions we develop a solution approach that transforms the original discrete mathematical program with equilibrium constraints dc mpec into to a solvable mixed integer quadratic programming miqp problem based on karush kuhn tucker kkt conditions the proposed methodology is illustrated using an empirical case study of the illinois state the computation results reveal interesting insights into optimal land use strategies and supply chain design for the emerging biofuel economy

an empirical analysis of territorial encroachment within franchised and company owned branded chains franchisees within large branded chains loudly complain of a form of channel conflict known as encroachment or impact encroachment occurs when franchisors add new units of their brand proximately to their franchisees existing units franchisees claim that their revenues have substantially decreased as a result of encroaching same brand entry the topic of encroachment has not only dominated franchisee association agendas and trade journal headlines but has also become a hot topic for politicians and policymakers yet until now evidence of encroachment has been strictly anecdotal this paper provides the first systematic evidence of encroachment using revenue data from the texas lodging industry in the 1990s i find that when franchisors approve new same brand units in the vicinity of incumbent units these new units cannibalize the incumbents revenues in contrast to the result for franchisors the addition of a new unit by company owned brands in the vicinity of same brand units is associated with an increase in the incumbents revenues this contrast suggests that encroaching behavior is caused by incentives that result from the governance form of franchising and is not simply an outcome that accompanies all expansion this finding informs theory on governance forms and exclusive territories implications for practitioners and policy are also discussed