is free trade in the interest of exporting countries when there is ecological dumping abstract given conditions of oligopolistic competition the coordinated ban of direct export promoting policies e g in the eu or by gatt increases the income of exporting countries however in the presence of environmental distortions free trade can lead to ecological dumping in exporting countries the question arises if free trade is still in the interest of exporting countries we show that welfare maximizing governments of exporting countries prefer free trade even if countries subsidize their local industries indirectly via ecological dumping the existence of further national policy instruments does not make free trade agreements obsolete

the beveridge curve and labour market dynamics in turkey this article investigates the dynamics of unemployment and vacancy rates in turkey during the period 1951 to 2008 by means of a beveridge curve bc the time series analysis of unemployment and vacancies as well as two other relevant labour market variables real wages and real labour productivity strongly suggests inefficiency in the turkish labour market a stable long run relationship between unemployment rate and vacancy rate is found for turkey that is the existence of a negatively sloped bc is verified the estimated turkish bc reflects the structural problems and lack of flexibility in the labour market the modified bc with real wages and labour productivity reveals that labour productivity has no significant effect on unemployment rate whereas wages have positive and significant effects on the same variable

multiregional oligopoly with capacity constraints we develop a model of cournot competition between capacity constrained firms that sell a single good to multiple regions we provide a novel characterization for the unique equilibrium allocation o

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

strategic labour contracts labor contracts affect a firm s cost function and for this reason they can be used as a recommitment device to gain a strategic advantage against other firms in a model that is otherwise neutral it is found that if firms compete in prices then strategic considerations alone yield results similar to those obtained by c azariadis 1983 workers are underemployed and worse off in more adverse states of nature on the other hand if firms compete in quantities then the equilibrium contracts resemble those of j green and c kahn 1983 workers are overemployed and better off in more adverse states

welfare aspects of technological adoption with learning abstract this paper considers the welfare implications of adoption of a new technology when this technology is characterized by costs of adaptation and some localized learning effects a two period model is developed to represent the adoption game between firms in a duopolistic framework optimal social patterns of adoption are compared with private patterns emerging as equilibria of the game it is shown that differences between the two patterns are due first to the shape of the demand function of the product sold on the duopolistic market and secondly to strategic interaction effects between the adopting firms

optimum discriminatory tariffs under oligopolistic competition this paper attempts to present a simple cournot model to determine the optimal discriminatory tariff rates when the international market is a homogeneous heterogeneous product market in the model there are two foreign firms located in two different countries competing for sales in a local market when the firms sell a homogeneous product and the home country can impose differential tariffs on imports from different countries then the tariff on the low cost producer should be hgher in particular with constant marginal costs the tariff difference should equal half the cost difference on the other hand if the firms sell differentiated products with symmetric linear demands and technologies then the weaker the degree of product differentiation the greater is the tariff difference compared with the cost difference

protection lobbying and market structure abstract we look at a model of lobbying by oligopolistic industry where firms allocate resources between lobbying and internal cost reducing activities we ask the following questions i if firms differ with respect to comparative advantage in lobbying what is the equilibrium allocation of resources between lobbying and cost reducing activities ii can lobbying opportunities reverse the profitability ranking among firms iii under what condition is the conventional wisdom that highly concentrated industries tend to obtain more protection valid the answers depend on various measures of comparative advantage in lobbying and on the demand curve

self enforcing employment contracts and business cycle fluctuations abstract this paper incorporates risk sharing employment contracts into an economy in which matching frictions characterize the labour market and in which agents cannot commit in equilibrium the terms of ongoing contracts are affected by those being negotiated in the job market because contracts must be self enforcing in this context risk sharing implies that hours worked and wages are negatively related while enforcement considerations imply the converse overall the sign of this relationship is ambiguous therefore the existence of such contracts may explain why movements in hours worked appear weakly related to those in real wages in u s aggregate data

an analysis of preemptive behavior in the titanium dioxide industry abstract much of the recent theoretical work on oligopoly theory focuses on preemptive capital expansion this paper continues this work by testing whether dupont s behavior in the titanium dioxide industry was consistent with the capital commitment model between 1972 and 1977 this is different from previous empirical papers analyzing preemptive capital expansion because it focuses on strategic behavior in a specific industry and because the hypothesis tests in this paper are based on a formal model of firms optimizing behavior the results lend support to the conclusion that dupont committed capital to preempt the smallest five firms in the industry between 1972 and 1977

can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes abstract in this paper we show that commodity exporting countries may obtain a higher welfare under revenue maximizing export taxes than under welfare maximizing export taxes this result cannot be obtained in the traditional two country models

protection versus free trade lobbying competition between domestic and foreign firms this article considers how political interaction between policymakers and domestic and foreign firms endogenously determines tariff rates we show that because of lobbying competition between foreign and domestic firms even a less competitive foreign firm can successfully elicit a tariff reduction under reasonable conditions moreover lobbying competition may also increase the level of aggregate domestic welfare when the market powers of the competing firms are sufficiently alike

exchange rate economics 1986 in the past fifteen years key exchange rates have moved in larger and more persistent ways than advocates of flexible rates in the late 1960s would have left anyone free to imagine certainly there was no expectation of constancy for nominal exchange rates but real exchange rate movements of 30 or forty percent were definitely not suggested as a realistic possibility moreover where these large movements did occur they did not obviously appear to be connected with fundamentals and hence seemed difficult to explain in terms of the exchange rate theories at hand the persistence of rate movements was as surprising as the rapid unwinding of apparent misalignments when they did ultimately occur the past fifteen years provide a natural dividing line between the keynesian and monetary approaches of the 1960s and the more recent analysis that takes into account exchange rate expectations and portfolio issues which took off in the early 1970s as well as the brand new approaches that concentrate on partial equilibrium microeconomics to review these ideas the paper starts with a brief look at the u s experience with flexible exchange rates from there it proceeds to the mundell fleming model as a comprehensive framework of analysis the following sections deal with persistent effects of policy disturbances links between exchange rates and prices the political economy of exchange rate movements and the question of policies toward excess capital mobility this abstract was borrowed from another version of this item

tax evasion and strategic behaviour of the firms abstract the purpose of this paper is to analyze the optimal tax evasion decision in the context of an oligopolistic market with quantity setting firms it is shown that the optimal amount of tax evasion for each firm depends not only on the degree of collusion in the market but also on the relative market shares of the firms increasing collusion however leads to a larger amount of tax evasion in the market it is proved that with constant probability of detection separability between shifting and evasion decisions holds whereas it might fail to hold if the probability of detection is a function of the declared tax base in this case a probability function which decreases with the declared tax base will lead to lower evasion and lower shifting

endogenous r d symmetry in linear duopoly with one way spillovers a duopoly model of cost reducing r d cournot competition is extended to study the endogenous timing of r d strategic investment under the assumption that r d spillovers only flow from the r d leader to the follower sequential and simultaneous play at the r d stage are compared in order to assess the role of technological externalities in stimulating or attenuating endogenous firm asymmetry the only timing structure of the r d stage sustainable as subgame perfect nash equilibrium involves simultaneous play and zero spillovers

collusive behavior with heterogeneous firms in a repeated duopoly with heterogeneous firms i ask which enforceable collusive arrangement is likely to prevail i propose the equilibrium at which both firms are just indifferent between colluding and defecting for discount factors not exceeding a critical level i show this equilibrium is pareto optimal possibly even the unique pareto optimum i then apply bargaining theory and show that the proposed equilibrium is the likely outcome of explicit negotiations finally i argue that the proposed equilibrium is an obvious focal point on which firms may tacitly coordinate the proposed equilibrium promises to be useful for comparative statics analysis of collusive oligopoly

environmental standards and cournot duopoly a stability analysis in this paper the dynamic effects of public environmental policies are investigated in a cournot duopoly with both heterogeneous and homogeneous expectations in a context of limited rationality it is shown that the increase in upper limits to emissions always tends to destabilise markets and generate a chaotic market dynamics in both cases the policy implication of this result is that the use of environmental policies may favour market stability it is also shown that higher costs of abatement technology entail a higher likelihood of stability loss although in the heterogeneous expectations case also a decrease in costs may destabilise

cost heterogeneity industry concentration and strategic trade policies abstract we show that if domestic firms do not have identical unit costs then the interplay between the herfindahl index of concentration and the elasticity of the slope of the demand curve is of major importance in the determination of optimal trade policies in some cases the direction of optimal policy is reversed

volatility of short term capital flows and private investment in emerging markets abstract using micro level panel data the paper analyses the impacts of short term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets argentina mexico and turkey the empirical results including sensitivity tests suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms accordingly a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1 1 7 2 3 15 and 1 per cent in argentina mexico and turkey respectively

the tax they pay may be your own promotion taxes and labour supply a model of labour supply is formulated in which increased effort results in an increase in the probability of promotion a simple benchmark model is extended in two directions the first emphasizes the link between labour supply and saving decisions the other takes account of the interaction between workers via contests for promotion a general insight that emerges from the analysis is that when studying the effects of wages and taxes on incentives to work it is sometimes the after tax incomes of other workers in particular senior workers who have already been promoted which are of crucial importance

equilibrium pollution taxes in a two industry open economy abstract this paper involves strategic implications of environmental policy in case of two international oligopolies when countries take part in an international environmental agreement and have agreed on national target levels for a global pollutant this set up permits an analysis of the design of optimal emission taxes across domestic producers by differentiating taxes between industries with different abatement cost demand and number of domestic firms governments are in a position to raise national net foreign rents it is argued that a single national emission trading programme encompassing all domestic producers cannot provide the equivalent strategic policy design

the relationship between unemployment and vacancies in australia the paper addresses the existence of an equilibrium unemployment vacancies uv relationship in australia cointegration test results suggest that no bivariate long run uv relationship exists moreover this finding fails to support the basic model of labour job search however a modified beveridge curve is proposed where it is found that a number of trivariate equilibrium relationships exist between unemployment vacancies and one other variable the replacement ratio the proportion of long term unemployed or the real wage the existence of an equilibrium relationship in the multivariate framework is due to the endogenous modelling of the un employment flows which are assumed to be exogenous in the bivariate framework of the beveridge curve

customer markets credit market imperfections and real price rigidity according to standard theory an increase in demand should raise prices of goods given factor prices empirically however prices appear to be unaffected by short run variations in demand this paper suggests an explanation of this observation if customers react slowly to price changes and credit markets are imperfect prices may be unchanged or even fall when demand increases the reason is that when demand is high profits are high and firms can compete more intensely for customers without increasing their borrowing copyright 1991 by the london school of economics and political science

market structure and organizational form this paper studies the determinants of a firm s organizational form in the context of an imperfectly competitive industry there are two kinds of organizational forms the multi divisional form m form and the unitary form u form an m form firm suffers from ignorance of demand externalities among different products and double marginalization is eliminated in contrast in a u form firm demand externalities are taken into consideration and double marginalization exists a firm s optimal choice of organizational form depends on the market structure

comparative statics for integrable nash equilibria abstract this paper derives comparative statics results for stable nash equilibria in integrable concave orthogonal games application of these results to cost curve shifts in the asymmetric cournot oligopoly immediately uncovers some apparently new comparative statics results

measuring technical progress in matching models of the labour market technical progress in matching models of the labour market has not received serious attention this article examines the impact on the results of these models when an attempt is made to allow time to enter in a realistic fashion and finds that recently published results on the possibility of multiple equilibria are overturned also different parametric representations of the matching technology are compared with problems of more general forms not satisfying regularity conditions being identified while the possibility of pareto improving government intervention due to multiple equilibria arising out of increasing returns to scale cannot be supported the results suggest a role for government intervention in the labour market

share tenancy as strategic delegation abstract the paper develops a new explanation of sharecropping based on the idea of an incentive equilibrium it considers a set up in which a few landlords in a village confront the choice of cultivating their farms by adopting different tenurial arrangements ranging from owner operation through the fixed rental system to sharecropping these landlords are the only sources of employment in the village and compete in the wages they pay to their workers in such an environment sharecropping is explained as a form of strategic delegation where a landlord gets extra benefit by having a share tenant and giving him suitable incentives

not your grandfather s imf global crisis productive incoherence and developmental policy space the response by the international monetary fund imf and developing country national governments to the current global financial crisis represents a moment of what i term productive incoherence which has displaced the constraining neoliberal coherence of the past several decades productive incoherence refers to the proliferation of inconsistent and even contradictory strategies and statements by the imf that to date have not congealed into any sort of new organised regime those who see continuity at the imf emphasise the reassertion of the imf s authority the reiteration of pro cyclical policy adjustment and the maintenance of existing governance patterns within the institution in contrast evidence of discontinuity includes a world now populated by increasingly autonomous states in the south the normalisation of capital controls and fund conditionality programmes that are inconsistent in key respects in the face of this evidence it is best to understand the current conjuncture as an interregnum that is pregnant with new development possibilities

cost manipulation games in oligopoly with costs of manipulating we analyze a class of two stage games where rival firms incur real resource costs in manipulating their marginal costs so as to influence the outcome of the game they want to play in stage two marginal costs may be manipulated by various means such as redistribution of productive assets choice of location or creation of an internal input market a general formulation of the game is provided and several applications are analyzed we show that the optimal allocation of resources within an oligopoly can be asymmetric even for ex ante symmetric firms this is an additional explanation of heterogeneity in oligopoly

international technology transfer under potential threat of entry a cournot nash framework abstract this paper analyses the possibility of technology transfer from a technologically advanced foreign firm to a domestic firm of a less developed country when the product market is characterized by cournot nash competition the foreign firm is not allowed to enter the home market by a prohibitive tariff but the backward firm may not face any such resistance in the foreign markets this means that technology transfer under this situation involves potential threat of competition from the latecomer it is shown that by designing a suitable payment policy the host country government can induce the foreign firm to transfer the best technology however there are possible equilibria where worse than the best technologies are transferred

imperfect competition functional forms and the size and distribution of research benefits abstract the effects of functional forms for supply and demand on the size and distribution of the returns to research are examined under a range of forms of competition under perfect competition the choice of functional form is relatively unimportant for the estimation of research benefits under imperfect competition the combination of the choice of functional forms for supply and demand and the nature of the research induced supply shift can have profound implications for the results functional form plays a much more important role than in the competitive model the most important contrast is between the constant elasticity model and the linear model along with various cases of a generalized linear model these findings are illustrated using a combination of analytical results and numerical simulations

abuse of eu emissions trading for tacit collusion in this paper we show that loopholes in eu emissions trading law foster tacit collusion that impacts oligopolistic product markets the abuses originate from the covert misuse of eu emissions trading institutions such as pooling or project based mechanisms we analyse two types of these loopholes by means of game theoretical methods to show how oligopolistic firms establish output restrictions even if those firms are price takers on the permit market which might actually be the case for the majority of obligated firms in the eu the identified misuse of emissions trading law increases firms profits decreases the consumers surplus and has negative effects on social welfare for specified parameter ranges consequently public authorities should not allow emissions trading s overall good reputation based upon its efficient abatement of pollution to blind them to options in european emissions trading legislation that would eventually restrict competition

an empirical model of mark ups in a quality differentiated export market abstract this paper develops an empirical model to allow for imperfect competition in the market for traded goods a simultaneous equation model incorporating the demand for and supply of taiwanese footwear exports to the united states is specified and estimated the model allows the identification of two separate sources of mark ups in export prices the first comes from the u s imposed quantitative restriction on these exports the second comes from imperfect competition in the international market for these exports the results suggest competitive behavior by taiwanese footwear exporters the quantitative restriction resulted in a 16 9 percent mark up of prices over marginal cost

comparative statics for oligopoly a generalized result we perform comparative statics for a general model of asymmetric oligopoly and derive a concise formula for the response of one firm to a marginal change in its rival s strategic variable taking into account the responses of all other firms we obtain the conditions under which the sign of this response coincides with that of the mixed second order partial derivative of the firm s payoff function we then propose a distinction between gross and net strategic relationships i e strategic substitute and complement

tax incidence under imperfect competition comment abstract delipalla and o donnell 2001 contains a formula for the incidence of specific and ad valorem taxes in a conjectural variation oligopoly model with potentially asymmetric firms the formula is incorrect we derive the correct formula and provide a discussion of the error and its implications for empirical studies of pass through

the effect of farm supply shifts on concentration and market power in the food processing sector in this paper we examine the marginal impact of changing farm supply on the market structure of the downstream food processing sector we develop a theoretical model that allows for cost differences among processors and endogenizes downstream entry and exit comparative statics results are consistent with several well established trends in the food processing sector in particular the analysis demonstrates that increasing concentration in the food processing sector is consistent with decreasing market power indeed we find that when the farm supply curve shifts outward an increase in concentration can only occur when there is a decrease in market power

capital structure and interaction among firms in output markets theory and evidence i develop a simple model that examines the relations between the extent of competitive interaction among firms in output markets their capital structures and the aggressiveness of their operating strategies a firm s optimal leverage is related to the degree to which its operating strategy affects its rivals value functions and resulting optimal output market choices this relation is positive regardless of whether the competition in output markets is in strategic substitutes or in strategic complements i test the model s prediction using two proxies for the extent of competitive interaction among firms the empirical evidence provides support for the model

conjectural variations and the nature of equilibrium in rent seeking models in a symmetric two person rent seeking game it is shown that nonzero conjectural variations can be incorporated to yield a larger class of solutions than has been hitherto analyzed the author shows that the fraction of rents dissipated as expenditures by seekers depends on the conjectural variation which is assumed and that posner s assertion of full dissipation in his model only holds under a bertrand conjecture all admissible constant conjectural variations which are held by both players yield conjecturally consistent equilibria but the result no longer holds if the game has a systematic bias toward one player

comparative statics of altruism and spite abstract the equilibrium outcome of a strategic interaction may depend on the weight players place on other players payoffs or more generally on some social payoff that depends on everyone s actions a positive negative or zero weight represents altruism spite or complete selfishness respectively as it turns out even in a symmetric interaction the equilibrium level of social payoff may be lower for a group of altruists than for selfish or spiteful groups in particular a concern for others payoffs may paradoxically lower these payoffs however this can only be so if the equilibrium strategies involved are unstable if they are stable the social payoff can only increase or remain unchanged with an increasing degree of altruism in these results stability stands for a general notion of static stability which includes a number of established ones such as evolutionarily stable strategy as special cases

iterative computation of cournot equilibrium abstract in a homogeneous coumot model with quasi concave profit functions the problem of determining an equilibrium can be posed as one of solving an equation in one real variable total sales if the response functions are monotone or firms are identical then a certain iterative process based on averaging converges to an equilibrium such iterations have the interpretation that every firm responds to the average of sales by other firms in brevious periods

export orientation and domestic merger policy theory and some empirical evidence abstract recent open economy industrial organization literature finds export orientation enhances the weight of post merger international competitive gains favouring lenient domestic merger policy however mergers seldom generate the significant synergies supportive of international competitive gains since a joint economies of production effect suggests domestic mergers tend to generate international competitive losses not gains export orientation favours strict not lenient domestic merger policy we show how non synergistic domestic mergers in the presence of international sales might reduce national welfare and incur stringent merger reviews a panel data set of u s merger policy by manufacturing sector 1990 2001 empirically supports export orientation leading to strict merger policy jel classification l40 f10

airline network rivalry in this paper the effects of the strategic interaction between deregulated airlines on their network choice are analyzed the authors examine whether switching from a linear to a hub spoke network confers a strategic advantage because it saves costs and improves service quality they find that if hubbing lowers total cost which includes both airline and passenger inconvenience costs the pursuit of strategic advantages usually intensifies the extent of hubbing even if hubbing raises total cost it might be pursued by the airline either because hubbing is a dominant strategy in an oligopolistic setting or because hubbing will be useful in deterring entry

tax incidence under oligopoly a comparison of policy approaches abstract this paper presents a methodological approach for the analysis of tax incidence that encompasses familiar forms of taxation in a general and analytically convenient model in oligopolistic industries the performance of a tax depends on the sensitivity of the unit tax rate to changes in industry output output elastic tax schedules are less likely to be over shifted and have superior welfare properties relative to regulatory instruments that are less responsive to the equilibrium market quantity for revenue neutral tax reforms the finding of delipalla and keen 1992 that ad valorem taxes welfare dominate specific taxes under oligopoly is derived as a special case of this general result

firm heterogeneity imitation and the incentives for cost reducing r d effort i develop and test a model of strategic r d investments where innovating and non innovating firms compete on the basis of their ability to reduce costs and imitate rivals i find that a larger proportion of non innovating rivals stimulates cost reducing investments and attenuates the disincentive effect of imitation by innovators on firm level r d key model properties are verified by estimating the first order condition for the optimal choice of r d using the 1994 carnegie mellon survey of u s industrial r d results also suggest that r d and size are simultaneously determined with r d being proportional to size as predicted by the theoretical model

the combined effect of salary restrictions and revenue sharing in sports leagues i introduction invariance principles are the golden eggs of economics franco modigliani merton miller and ronald coase were awarded nobel prizes for their formulations of important invariance principles a predecessor of the famous coase theorem is rottenberg s invariance proposition according to rottenberg 1956 the distribution of playing talent between clubs in professional sports leagues does not depend on the allocation of property rights to players services el hodiri and quirk 1971 fort and quirk 1995 and vrooman 1995 extend this invariance proposition to gate revenue sharing based on their models they claim that revenue sharing does not change the level of competitive balance within a league this form of invariance proposition has become one of the most heavily disputed issues in sports economics because its centerpieces revenue sharing and the uncertainty of outcome hypothesis represent two of the most important idiosyncrasies in the professional team sports industry according to the uncertainty of outcome hypothesis fans prefer to attend games with uncertain outcomes and enjoy close championship races unlike toyota which benefits from weak competitors in the automobile industry real madrid and the new york yankees need strong competitors to maximize their revenues in sports a weak team produces a negative externality on its stronger competitors revenue sharing arrangements have been introduced as a measure to improve the competitive balance by partially internalizing this externality if the invariance proposition held revenue sharing would be worthless current revenue sharing schemes vary widely among professional sports leagues all over the world in north america the most prominent is possibly that operated by the national football league nfl where the visiting club secures 40 of the locally earned television and gate receipt revenue in 1876 major league baseball mlb introduced a 50 50 split of gate receipts that was reduced over time since 2003 all the clubs in the american league have put 34 of their locally generated revenue gate concession television etc into a central pool which is then divided equally among all the clubs the national basketball association nba and the national hockey league nhl also operate with a pool sharing arrangement moreover in the australian football league afl gate receipts were at one time split evenly between the home and the visiting team this 50 50 split was finally abolished in 2000 other measures to increase competitive balance are salary caps and floors a salary cap floor puts an upper lower bound on a club s payroll since most leagues compute their salary caps and floors on the basis of the revenues of the preceding season caps and floors can be treated as fixed limits the nba was the first league to introduce a salary cap for the 1984 1985 season for the 2008 2009 season the soft salary cap is fixed at us 58 7 million today salary caps are in effect in professional team sports leagues all over the world in the nhl for example each team had to spend between us 34 3 million and 50 3 million on player salaries in the 2007 2008 season in the nfl the salary cap in 2009 is approximately us 128 million per team whereas the salary floor was 87 6 of the salary cap which is equivalent to us 112 1 million the afl also operates with a combined salary cap and floor for 2009 the salary cap was fixed at a 7 69 million the floor at 7 12 million another australian league the national rugby league nrl has implemented a salary cap and floor system which forced each team to spend between a 3 96 million and 4 4 million in 2009 in europe salary caps are in effect in the guiness premiership in rugby union and the super league in rugby league 1 in most industries payroll caps would be regarded as an exploitation of market power and would be prohibited by anti trust authorities

financial constraints competition and hedging in industry equilibrium we analyze the hedging decisions of firms within an equilibrium setting that allows us to examine how a firm s hedging choice depends on the hedging choices of its competitors within this equilibrium some firms hedge while others do not even though all firms are ex ante identical the fraction of firms that hedge depends on industry characteristics such as the number of firms in the industry the elasticity of demand and the convexity of production costs consistent with prior empirical findings the model predicts that there is more heterogeneity in the decision to hedge in the most competitive industries

a structural model of the analysis of retail market power the case of fluid milk we derive a structural model of firm behavior that is composed of the generalized quadratic almost ideal demand system to represent both consumers milk preferences and firm profit maximization conditions that allow for a range of competitive scenarios the importance of this specification is found in its fuller representation of consumer preferences as opposed to the linear approximate almost ideal demand system used in previous analyses we apply this structural framework to investigate retailer conduct in the sale of beverage milk in a u s market using product level data our lerner index estimates show that retailers are not perfectly competitive however this deviation is small copyright 2012 oxford university press

comparative economic performance of conventional and profit sharing firms abstract this paper compares the various economic properties of conventional firms and profit sharing firms the properties contrasted include wage level employment output price total economic rents and industry efficiency the firms operate in an oligopolistic industry with a labor union in general profit sharing firms outperform non sharing firms however there exist counterexamples in which non sharing firms can outperform sharing firms to test the robustness of the results the analysis is conducted for a variety of oligopolistic industries quantity setting pricesetting and joint collusion

intra industry trade and strategic interaction theory and evidence abstract we conduct a theory based empirical study of intraindustry trade in homogeneous products we derive an oligopolistic model of intra industry trade which is an extension of the segmented market model of trade initially proposed by brander j a 1981 intra industry trade in identical commodities journal of international economics 11 1 14 the empirical implementations of the model are investigated in the context of the petrochemical industry our analysis employs a unique data set containing detailed product and location specific data on the petrochemical industries in germany and the united states allowing for different empirical specifications we find that cross product variations in bilateral intra industry trade of petrochemicals are well explained by the variables suggested by the theoretical model

paternalism and tax competition when consumers make mistakes the government may wish to use paternalistic taxation as a corrective measure we analyse the extent to which tax competition undermines the feasibility of paternalistic taxation we show that the paternalistic component of a tax on a harmful good is reduced when there is cross border shopping but it does not disappear altogether in a model with tax competition between two countries only one of which has a paternalistic objective we show that a minimum tax rate requirement can be pareto improving despite the divergence in policy objectives tax harmonization however reduces welfare in the non paternalistic country

cost reducing r d in oligopoly abstract this paper provides a conjectural variations model to explore competition in cost reducing r d and the nature of the inter firm externalities it is shown that 1 r d investment in a market with price competition becomes optimal if firms expect that changes in their own r d investment are followed by the rival firms 2 the optimal r d subsidies are positive in collusive oligopolies but negative in competitive oligopolies 3 joint r d ventures in oligopoly could reduce total surplus by causing underinvestment and 4 promoting price competition reduces welfare if firms are not collusive in their r d decisions

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

research joint ventures and the cost paradox abstract we consider the impact of the cost paradox on the likelihood of cooperative firms to use a cost reducing research joint venture rjv to increase research levels when spillovers are large the cost paradox cp occurs whenever industry wide cost reductions would lead to such intense competition that profits would fall we give a restriction on cost reducing research which guarantees that an rjv will prefer marginal reductions in research to the noncooperative levels whenever cp would arise and spillovers are less than perfect in such cases firms use an rjv to lessen competition rather than to lower costs

managing capital accounts in emerging markets lessons from the global financial crisis abstract the global financial crisis forcefully highlighted the importance of curbing the impact of large and volatile capital inflows on growth and financial stability in developing countries it led the imf to reconsider its long standing rejection of capital controls yet its new macroeconomic policy first approach has to be reconciled with the hybrid nature of banking activity and its role in transmitting global shocks a consideration of dominant actors and strategies of intermediating capital inflows offers distinct policy options ranging from carefully designed central bank strategies to institutional changes that realign bank incentives towards longer horizons and sustainable growth models

profit sharing and welfare in an export subsidy game abstract this paper studies an export subsidy game in a duopoly in which one firm engages in sharing profits with its union in a non cooperative equilibrium of an export subsidy game without any cost advantage of firms the export subsidy to the profit sharing firm is smaller than the export subsidy to the non sharing firm and the output of the profit sharing firm is smaller than the output of the non sharing firm thus in an export subsidy game a profit sharing contract reduces the welfare in the country

comparative statics for oligopoly demand shift effects when demand rises in an imperfectly competitive industry price output profits consumer surplus and welfare may individually rise or fall the possibilities are thus broader than with either a demand shift under competition or a cost shift in either typ e of industry systematic relationships are established showing howe ver that the pattern of effects cannot be arbitrary imperfect compe tition is necessary for profits to fall when demand rises profits alw ays rise with either perfect competition or perfect collusion this a gain contrasts with the cost shift case where imperfect competition is not necessary for perverse profit effects copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

frontier estimation and firm specific inefficiency measures in the presence of heteroscedasticity the purpose of this article is to illustrate a straightforward and useful method for addressing the problem of heteroscedasticity in the estimation of frontiers a heteroscedastic cost frontier model is developed and estimated using bank cost data similar to that used by ferrier and lovell our results show dramatic changes in the estimated cost frontier and in the inefficiency measures when accounting for heteroscedasticity in the estimation process we find that the rankings of firms by their inefficiency measures is affected markedly by the correction for heteroscedasticity but not by alternative distributional assumptions about the one sided error term

real exchange rate levels and economic development theoretical analysis and econometric evidence according to the development approach to exchange rates competitive currencies have been a key factor in most east and southeast asian successful growth strategies there is also today an important empirical literature that relates overvaluations to low per capita growth rates while the econometric literature on this issue is relatively rich theoretical analysis of channels through which real exchange rate levels could affect economic development are very scarce this paper intends to contribute to the debate by bringing more theoretical elements and providing new econometric evidence to the connections between real exchange rate levels and development

a free lunch in the commons we derive conditions under which raising costs through a regulatory constraint or a fully expropriated tax can increase the profits arising from a common pool resource the basic model assumes a fixed number of identical agents with linear costs selling in a single period at an exogenous price a necessary and sufficient condition for a cost increase to be profitable is that aggregate output from the resource be locally convex in aggregate effort we also show that cost increases can be profitable even if price is endogenous agents are heterogeneous entry is costless or agents are playing a markov perfect equilibrium of a dynamic game we also discuss more general welfare implications of the result along with its relation to existing results for a cournot oligopoly

measuring information in the market an application to physician services ever since stigler s 47 seminal piece on the economics of information there has been a great deal of research investigating equilibrium in markets with imperfect information while most of this research has been concerned with theoretically establishing the conditions under which there exists a distribution of prices in equilibrium the field now contains a small but growing body of empirical research this work has followed the suggestion of stigler and utilized the dispersion of prices usually the variance as a measure of incomplete information about price such as stigler 47 stigler and kindahl 49 pratt wise and zeckhauser 44 carlson and pescatrice 12 marvel 34 mathewson 35 cox deserpa and canby 13 dahlby and west 14 van hoomissen 51 and lach and tsiddon 29 there are two disadvantages to using the variance or another measure of dispersion such as the range of prices as a measure of incomplete information about price the first disadvantage recognized by stigler and others is that price can vary for many reasons other than incomplete information thus dispersion is not a pure measure of incomplete information about prices the second disadvantage which has not been commonly recognized in the empirical literature is that price dispersion encompasses incomplete information both on the part of buyers and sellers as indicated by rothschild 45 axell 4 butters 9 and telser 50 and hence fails to distinguish between these two components in this paper we propose a method for measuring incomplete information about price which

the estimation of frictional unemployment a stochastic frontier approach this paper reports an estimate of the frictional unemployment rate in u s manufacturing that is derived from a parametric statistical method for estimating stochastic frontiers the steady state perfect foresight solution to an estimated employment growth frontier provides a locus of technically efficient frictional rates of unemployment the mean frictional unemployment rate during the sample period is estimated to be 3 7 percent of the manufacturing labor force this estimate conforms closely to an estimate of 3 5 percent that is derived from manufacturing sector data presented by david m lilien 1980 for roughly the same time period copyright 1991 by mit press

lechatelier samuelson principle in games and pass through of shocks abstract the lechatelier samuelson principle states that as a reaction to a shock an agent s short run adjustment of an affected action is smaller than its long run adjustment when the agent can also adjust other related actions we extend the principle to strategic environments where the long run adjustment also accounts for other players adjusting their strategies we show that the principle holds for supermodular games strategic complements satisfying monotone comparative statics and provide sufficient conditions for the principle to hold in games of strategic substitutes heterogeneity we discuss the principle s implications for cost pass through of multiproduct firms

foreign direct investment under oligopoly profit shifting or profit capturing abstract in this paper a model of taxation of foreign source corporate income is developed when the output market is not perfectly competitive profit shifting policies similar to those in the new trade literature are also present in the case of foreign direct investment fdi there are however important differences to the new trade theory since in case of fdi i corporate taxation and double taxation relief are the policy instruments rather than output or revenue taxes ii countries are not symmetric in the sense that the host country has the first right to tax the multinational s profit and the home country reacts by providing double taxation relief and iii output but not corporate taxation is specific to imperfectly competitive industries it is argued that a variants of a tax credit are analogous to export subsidies b when the home country operates a tax credit system the host country s incentive to capture the multinational s profit is bounded under imperfect competition c when the host country offers a tax holiday the home country should imitate this policy and d in the presence of perfect competitive industries double taxation relief is a good instrument to target imperfectly competitive industries

the effect of emission taxes and abatement subsidies on market structure abstract emission taxes and abatement subsidies are considered to be efficient measures for environment protection the purpose of this paper is to quantify their effects on industry output firm output and on the number of firms in the industry three types of market structure are under discussion perfect competition oligopoly and a dominant firm with a competitive fringe it turns out that emission taxes and abatement subsidies affect the structure of the polluting industry in opposite ways while the effects on industry s emissions are similar in direction but different

strategic foreign exchange management this paper argues that it is possible to advise firms on how to hedge against foreign exchange risks only if one has detailed knowledge of the competitive environment they work in to illustrate this we compare firms hedging requirements in a number of different standard industrial organizations models in particular the cournot model a model with conjectural variations price taking firms and monopolistic competition consider the situation of a firm producing in germany and selling an important part of its total output in the us obviously its profitability may be seriously compromised by an unexpected appreciation of the dm relatively to the the company can react to this uncertainty in two ways either it can assume that the conditions of the modigliani miller theorem are approximately fulfilled and that it best serves the interests of its shareholders by behaving in a risk neutral fashion alternatively the firm may for a variety of reasons behave as a risk averter itself and try to obtain some coverage against exchange rate risk when looking at the amount of insurance taken up by companies on conventional insurance markets one gets the impression that the latter alternative risk averse firms is for many practical cases a realistic assumption the activities of many companies are more easily understood if one admits that they exhibit a certain degree of risk aversion if one accepts this one may go on to ask just how companies should go about insuring themselves against unexpected exchange rate fluctuations more specifically one has to study how much exchange risk the firms should insure against and which exchange rates are of relevance in the example above of a german company selling in the us the answer might at first sight seem obvious the company should obtain coverage against dm fluctuations for an amount approximately equal to its anticipated revenues on brief reflection it immediately appears that this is surely an excessively simplistic answer first the amount of coverage required must be affected by the question of how the price of the product varies when the dm exchange rate shifts second it may be the case that the german company s main competitors are located in say france in this case fluctuations of the

business cycles with costly search and recruiting a business cycle model is developed in which output is traded on lucas phelps islands and labor services on each island are exchanged through costly search and recruiting with transactions externalities the model exhibits persistent involuntary unemployment and inefficient equilibria even though there are no nominal rigidities and no unexploited privately attainable gains from trade it also exhibits employment fluctuations without any real wage fluctuations it yields a lucas aggregate supply curve to a linear approximation it also implies that the natural rate of unemployment depends positively upon the variability and persistence of relative price shocks

regional dependencies in job creation an efficiency analysis for western germany this paper investigates the efficiency of the matching process between job seekers and vacancy posting firms in west germany using variation across labour market regions and across time the results of a stochastic frontier analysis shed new light on the extent of and regional differences in search frictions on potential determinants of frictional inefficiencies and on the consequences of german reunification for the matching process the paper also presents novel evidence on the complex interactions between spatial contingencies among regional labour markets matching efficiency decreases with spatial autocorrelation in hiring implying indirect evidence for crowding externalities