increasing dominance with no efficiency effect abstract i uncover a new force towards increasing dominance the property whereby in dynamic games the leader tends to increase his or her lead in expected terms the new effect results from the strategic choice of covariance in races i assume that players must choose not the amount of resources to spend but how to allocate those resources i show that in equilibrium the laggard chooses a less promising path in effect trading off lower expected value for lower correlation with respect to the leader this results in increasing dominance and holds true even if no joint payoff or efficiency effect is present journal of economic literature classification numbers c7 l1

reallocation and learning over the business cycle abstract this paper shows how cyclical aggregate shocks can stimulate structural reallocation activities which in turn amplify the effect of the shock it analyses the informational aspects of restructuring activities and their interplay with aggregate shocks a model is developed in which production units are uncertain about the value of staying in the market and learn about it over time in a bayesian fashion in addition to their own private assessment they can also learn from observing other units decisions given that adjusting is costly each unit has an incentive to delay action and wait for other players to act in order to make a better informed decision if delay is more costly in a downturn a negative aggregate shock can break the inertia and induce the most pessimistic agents to exit the information released by such actions will induce more action thus generating a burst in restructuring activities that reinforces the initial effect of the aggregate shock this process of information accumulation and revelation offers both a powerful amplification mechanism of relatively modest aggregate shocks and a potential explanation of why restructuring tends to be concentrated in recessions

the birth of a new market the authors consider a sequential decision model in which entrepreneurs decide on whether to enter a potential new market individual entrepreneurs have private expectations about the new market s viability over time they learn about its viability from their own experience as well as that of earlier entrepreneurs the distribution of the private expectations is said to be heterogeneous if external prior beliefs about the market s viability exist the authors show that heterogeneity of expectations cuts both ways while it facilitates the birth of viable markets it also generates via the existence of extremal beliefs excessive entry in nonviable markets copyright 1994 by royal economic society

learning from others outcomes i develop a simple model of social learning in which players observe others outcomes but not their actions a continuum of players arrives continuously over time and each player chooses once and for all between a safe action which succeeds with known probability and a risky action which succeeds with fixed but unknown probability depending on the state of the world the actions also differ in their costs before choosing a player observes the outcomes of k earlier players there is always an equilibrium in which success is more likely in the good state and this alignment property holds whenever the initial generation of players is not well informed about the state in the case of an outcome improving innovation where the risky action may yield a higher probability of success players take the correct action as k in the case of a cost saving innovation where the risky action involves saving a cost but accepting a lower probability of success inefficiency persists as k in any aligned equilibrium whether inefficiency takes the form of under adoption or over adoption also depends on the nature of the innovation convergence of the population to equilibrium may be non monotone

quality and accountability in health care delivery audit study evidence from primary care in india we present unique audit study evidence on health care quality in rural india and find that most private providers lacked medical qualifications but completed more checklist items than public providers and recommended correct treatments equally often among doctors with public and private practices all quality metrics were higher in their private clinics market prices are positively correlated with checklist completion and correct treatment but also with unnecessary treatments however public sector salaries are uncorrelated with quality a simple model helps interpret our findings where public sector effort is low the benefits of higher diagnostic effort among private providers may outweigh costs of potential overtreatment

miracle on sixth avenue information externalities and search after a long dormant period lower sixth avenue in new york has undergone a rapid revitalisation we show that a simple search theoretic model with information spillovers can explain both the period of underuse and the rapid turnaround the model reduces to a simple equation which allows us to do comparative statics on the duration of vacancies we show how the solution reacts to changes in market structure and changes in search technology the model is suggestive of difficulties that may occur in many markets in which there are changes over time in the optimal use of resources at one time lower sixth avenue was one of the most fashionable retail centres in manhattan but the area collapsed as a retail centre when the affluent moved further uptown and to the suburbs today sixth avenue is in the midst of a rapid turnaround as reported in the sunday new york times by claudia

politics and public goods in developing countries evidence from the assassination of rajiv gandhi abstract this paper employs an instrumental variables strategy to identify the effect of party ideology on policy outcomes exogenous variation in party representation is generated by the assassination of the leader of the congress party which occurred midway through india s national elections in 1991 and dramatically increased the probability of congress victory for a subset of constituencies representation by the congress party leads to a substantial increase in the provision of public goods favored by the poor consistent with the party s expressed populist agenda among the salient changes are increases in the availability of drinking water and primary education and declines in agricultural and industrial electrification and telephone coverage i compare these effects to those obtained using a regression discontinuity design and find that the latter yields little effect of congress representation on public goods allocations

demand side bidding agents modeling and simulation problems such as price volatility have been observed in electric power markets demand side participation is frequently offered as a potential solution by promising to increase market efficiency when hockey stick type offer curves are present however the individual end consumer will surely value electricity differently which makes demand side participation difficult as a group and at a bus in this paper demand is categorized into two groups one that highly values reliability and one that does not the two types are modeled separately and a new optimal bidding function is developed and tested based on this model

a test for moral hazard in the labor market contractual arrangements effort and health moral hazard plays a central role in many models depicting contractual relationships involving worker effort the authors show how time series information on worker health consumption and work time can be used to measure the effort effects of payment schemes estimates from longitudinal data describing farming rural households indicate that time wage payment schemes and share tenancy contracts reduce effort compared to piece rate payment schemes and on farm employment the evidence also indicates consistent with moral hazard that the same workers consume more calories under a piece rate payment scheme or in on farm employment than when employed for time wages copyright 1994 by mit press

plant closings and exit behaviour in declining industries the plant closing and exit strategies of firms operating in a declining industry are examined a dynamic game theoretic model is utilized the perfectness criterion is used to restrict the set of nash equilibria there are two key equilibrium results first when firms have the same number of plants high cost plants close before lower cost plants second a larger firm i e a firm operating more plants begins closing plants before a smaller firm as long as cost differences are not large copyright 1988 by the london school of economics and political science

endogenous market structure and competition in the 19th century american brewing industry abstract this study examines market structure and competition in the brewing industry in american frontier states around 1880 although comprehensive firm level data are unavailable available data provide information about the presence of firms in western frontier markets and characteristics of those markets the analysis uses these data in a discrete dependent variable econometric model to estimate the size of a market needed to support a certain number of breweries and the impact of market characteristics on market structure in addition the estimated market sizes needed to sustain different numbers of firms provide information about the competitive effects of entry in the early brewing industry the results indicate that the presence of second and third brewing firms significantly increased competition in a market implying that duopoly markets were not perfectly competitive moreover these findings suggest that brewing firms were not engaged in collusive behavior

dynamic entry and exit with uncertain cost positions abstract we study the dynamics of entry and exit based on firms learning about their relative cost positions each firm s marginal cost of production is its own private information thereby facing ex ante uncertainty about its cost position the inelastic market demand can accommodate only a fraction of firms to operate and thus only firms with relatively lower costs are viable in the long run some firms in the market will exit if excessive entry or overshooting occurs we derive the unique symmetric sequential equilibrium the equilibrium properties are consistent with empirical observations i entry occurs gradually over time with lower cost firms entering earlier than higher cost firms ii exiting firms are among the ones that entered later indeed in the last period moreover equilibrium overshooting probability is shown to always be positive and decreasing over time

race and gender discrimination in bargaining for a new car more than three hundred paired audits at new car dealerships reveal that dealers quoted significantly lower prices to white males than to black or female test buyers using identical scripted bargaining strategies ancillary evidence suggests that the dealerships disparate treatment of women and blacks may be caused by dealers statistical inferences about consumers reservation prices but the data do not strongly support any single theory of discrimination copyright 1995 by american economic association

learning and capacity expansion under demand uncertainty a competitive dynamic model of entry into a new industry is set up and both its positive and normative aspects are studied the main assumptions are that entry is sequential that it occurs under imperfect information on the size of the market and that better information becomes available as time goes on the gradual improvement in information is due to the fact that later waves of entrants are able to observe the profitability of earlier entrants the major results reported here under suitable restrictions are that the equilibrium rate of entry is monotonically decreasing over time and that at any given point in time it is smaller than the socially optimal one when a new market opens as a result of a product being newly invented for instance or when an existing market starts to expand uncertainty with respect to its size is likely to prevail as a result of this uncertainty entry of firms into such markets typically will occur in waves some firms will enter initially while others will wait to see the consequences of that initial entry if the experience of early entrants is favourable entry will continue otherwise entry will cease hence with the introduction of a new product two phases are associated the growth phase typified by positive operating profits for existing firms and expansion of productive capacity due to entry of new firms and the mature phase typified by erosion of profits and fixed total productive capacity empiricists estimating the time pattern of investments during the growth phase have found an s shaped diffusion curve see mansfield 1986 and gort and klepper 1982 the purpose of the present paper is to theoretically characterize these time patterns and to investigate their welfare properties any attempt to model the type of entry described above must account for differences in both entry dates and resultant earnings in other words the theory must explain why the realized earnings of different cohorts of firms are not equal often such ex post differences are reconciled by assuming heterogeneity with respect to some latent underlying characteristic managerial ability for instance and attributing differences in earnings to differences in that characteristic in this paper instead earning differentials are attributable to luck only ex ante all firms are technologically identical and equally capable of forecasting market prospects and rationally acting upon those forecasts ex post some firms turn out to have entered at the right time and are for that reason more profitable the model developed in this paper analyzes a parametric example of a sequential entry problem in which the uncertainty over market size is gradually resolved over time in a bayesian setting in an environment of perfect competition and constant returns toscale a free entry equilibrium concept is introduced and the aggregate implications of the time path of investments are derived i then compare this actual time path to the optimum this comparison is interesting because the equilibrium is analysed under the

the economics of credence goods an experiment on the role of liability verifiability reputation and competition credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies such as under and overtreatment or market breakdown we study in a large experiment with 936 participants the determinants for efficiency in credence goods markets while theory predicts that liability or verifiability yield efficiency we find that liability has a crucial but verifiability at best a minor allowing sellers to build up reputation has little influence as predicted seller competition drives down prices and yields maximal trade but does not lead to higher efficiency as long as liability is violated jel d12 d82

the learning curve predation antitrust and welfare an economic definition of predation is applied to a dynamic model of duopoly competition with learning curves it is shown that rational predation occurs in equilibrium although below cost pricing is neither a necessary nor a sufficient indicator of predation a conceptual framework for antitrust analysis of predation shows that a prohibition of predation might help or harm consumer welfare depending on details of market structure although the informational requirements of fashioning an effective legal rule against harmful predation are formidable

submarket dynamics and innovation the case of the us tire industry beginning in 1922 the rate of exit of us tire producers increased sharply and the industry began a severe and protracted shakeout just 5 years earlier the tire industry experienced a surge in entry that led to a rise of over 80 in the number of producers we propose an explanation for this episode based on the idea of industry submarkets which we incorporate in a model of shakeouts we test this theory and alternative explanations for the surge in entry and exit and the shakeout using a novel data set on patenting in tires and production in the early 1920s of the cord tire a key innovation we feature in our theory our analysis suggests that the development of a new submarket can open up opportunities for entry but also stimulate innovation and in the process reinforce the advantages of the leading incumbents accentuating the shakeout of producers copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

comprehensive bidding strategies with genetic programming finite state automata this research is an extension of the authors previous work in double auctions aimed at developing bidding strategies for electric utilities which trade electricity competitively the improvements detailed in this paper come from using data structures which combine genetic programming and finite state automata termed gp automata the strategies developed by the method described here are adaptive reacting to inputs whereas the previously developed strategies were only suitable in the particular scenario for which they had been designed the strategies encoded in the gp automata are tested in an auction simulator the simulator pits them against other distribution companies distcos and generation companies gencos buying and selling power via double auctions implemented in regional commodity exchanges the gp automata are evolved with a genetic algorithm so that they possess certain characteristics in addition to designing successful bidding strategies whose usage would result in higher profits the resulting strategies can also be designed to imitate certain types of trading behaviors the resulting strategies can be implemented directly in online trading or can be used as realistic competitors in an off line trading simulator

the learning curve market dominance and predatory pricing sufficient conditions for id and iid are given in the case of two step learning in which a firm reaches the bottom of its learning curve after just two sales however examples are also constructed for the two step learning case in which neither id nor iid holds it is also shown that in equilibrium iid implies that learning is privately disadvantageous although it is socially advantageous finally introducing avoidable fixed costs and possible exit into the model yields a new theory of predatory pricing based on the learning curve hypothesis

genetic algorithm evolution of utility bidding strategies for the competitive marketplace this paper describes an environment in which distribution companies discos and generation companies gencos buy and sell power via double auctions implemented in a regional commodity exchange the electric utilities profits depend on the implementation of a successful bidding strategy in this research a genetic algorithm evolves bidding strategies as gencos and discos trade power a framework in which bidding strategies may be tested and modified is presented this simulated electric commodity exchange can be used offline to predict whether bid strategies will be profitable and successful it can also be used to experimentally verify how bidding behavior affects the competitive electric marketplace

exit with multiplant firms using an extension of ghemawat and nalebuff s 1985 model i analyze the outcome of industry decline when firms have multiplant operations the analysis reveals that no natural generalization of their strong empirical prediction that the larger of two single plant duopolists exits first holds in a multiplant setting the results also highlight a number of factors that affect the pattern of capacity removal during industry decline and lead to a discussion of the strategic implications of firms plant size choices in general the factors determining the pattern of capacity reduction can be quite complex and prediction in such settings often requires intimate knowledge of industry structure

do physicians financial incentives affect medical treatment and patient health we investigate whether physicians financial incentives influence health care supply technology diffusion and resulting patient outcomes in 1997 medicare consolidated the geographic regions across which it adjusts physician payments generating area specific price shocks areas with higher payment shocks experience significant increases in health care supply on average a 2 percent increase in payment rates leads to a 3 percent increase in care provision elective procedures such as cataract surgery respond much more strongly than less discretionary services non radiologists expand their provision of mris suggesting effects on technology adoption we estimate economically small health impacts albeit with limited precision

on doctors mechanics and computer specialists the economics of credence goods most of us need the services of an expert when our apartment s heating or our washing machine breaks down or when our car starts to make strange noises and for most of us commissioning an expert to solve the problem causes concern this concern does not disappear even after repair and payment of the bill on the contrary one worries about paying for a service that was not provided or receiving some unnecessary treatment this article studies the economics underlying these worries under which conditions do experts have an incentive to exploit the informational problems associated with markets for diagnosis and treatment what types of fraud exist what are the methods and institutions for dealing with these informational problems under which conditions does the market provide incentives to deter fraudulent behavior and what happens if all or some of those conditions are violated

building resilient health systems experimental evidence from sierra leone and the 2014 ebola outbreak this paper experimentally examines efforts aimed at improving health worker performance in the context of the 2014 15 west african ebola crisis roughly two years before the outbreak in sierra leone the study randomly assigned two accountability interventions to government run health clinics one focused on community monitoring and the other gave status awards to clinic staff the findings show that prior to the ebola crisis both interventions led to improvements in utilization of clinics patient satisfaction with the health system and child health outcomes during the crisis the interventions led to higher reported ebola cases as well as lower mortality from ebola particularly in areas with community monitoring clinics the paper explores the potential mechanisms and the findings provide evidence consistent with the following mechanism by building trust and confidence in health workers and improving the perceived quality of care provided by clinics prior to the outbreak the interventions encouraged patients to report and receive treatment the results suggest that accountability interventions not only have the power to improve health systems during normal times but also can make health systems resilient to crises that may emerge over the longer run

on industry life cycles delay entry and shakeout in beer brewing abstract this paper proposes a new explanation for industry shakeout an event evident in the life cycle of many industries in which the number of firms drops significantly in a short interval of time based on an in depth analysis of the shakeout in the united states beer brewing industry between 1880 and 1890 we propose that industry shakeouts naturally follow periods of mass entry by firms similar patterns are evident in two other industries we briefly examine the us automobile and tire industries while entry rates fluctuate broadly in all these industries we find that the timing of exit for a given cohort of entrants is remarkably similar over time the exit hazard rate is peaked in the first two years of every cohort s life and drops dramatically to low and stable levels for subsequent ages in this sense mass exit follows mass entry and does not require a deep explanation it is the mass entry evident in the data for these industries that requires an explanation we propose a theoretical model of information accumulation to explain entry into an industry entrepreneurs are uncertain about the profitability of the industry and this uncertainty is resolved through sufficient accumulation of information regarding the fortunes of incumbent firms delay in entry occurs solely due to the fact that it takes time to accumulate sufficient information to support more entry the resulting entry pattern from simulations of the model looks much like that observed in the industries we study

what drives taxi drivers a field experiment on fraud in a market for credence goods credence goods are characterized by informational a symmetries between sellers and consumers that invite fraudulent behavior by seller s this paper presents the results of a natural field experiment on taxi rides in athens g reece set up to measure different types of fraud and to examine the influence of passengers p resumed information and income on the extent of fraud results reveal that taxi drivers c heat passengers in systematic ways passengers with inferior information about optimal routes are taken on longer detours while asymmetric information on the local tariff system l eads to manipulated bills higher income seems to lead to more fraud

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

last in first out oligopoly dynamics this paper extends the static analysis of oligopoly structure into an infinite horizon setting with sunk costs and demand uncertainty the observation that exit rates decline with firm age motivates the assumption of last in first out dynamics an entrant expects to produce no longer than any incumbent this selects an essentially unique markov perfect equilibrium with mild restrictions on the demand shocks sequences of thresholds describe firms equilibrium entry and survival decisions bresnahan and reiss 1993 empirical analysis of oligopolists entry and exit assumes that such thresholds govern the evolution of the number of competitors our analysis provides an infinite horizon game theoretic foundation for that structure

co evolution of firms and consumers and the implications for market dominance consider a setting in which rms randomly discover new ideas that a ect their products or services and implement favorable ones at the same time that rms are adapting their o erings consumers are searching among rms for the best match it is shown that implicit in these dual dynamics is an increasing returns mechanism which can result in one rm dominating the market in the long run the conditions under which there is sustained market dominance are characterized

business to business electronic commerce just as the industrial revolution mechanized the manufacturing functions of firms the information revolution is automating their merchant functions four types of potential productivity gains are expected from business to business b2b electronic commerce cost efficiencies from automation of transactions potential advantages of new market intermediaries consolidation of demand and supply through organized exchanges and changes in the extent of vertical integration of firms the article examines the characteristics of b2b online intermediaries including categories of goods traded market mechanisms employed and ownership arrangements and considers the market structure of b2b e commerce

dealer price discrimination in new car purchases evidence from the consumer expenditure survey this paper documents the variation in dealer discounts for new cars using transactions price data from the consumer expenditure survey consumer specific characteristics fail to explain dealer discounts whereas model market specific and purchase transaction variables e g first time purchase trade in and financing through dealer do explain them the results contradict earlier findings of race and gender discrimination based on a controlled experiment this contradiction is reconciled by examining the higher moments of the empirical discount distribution while mean and median markups do not vary by race and gender minority purchases are characterized by higher dispersion this may rationalize the disparate treatment of minorities by dealers documented in the controlled experiment

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

the devil is in the details the successes and limitations of bureaucratic reform in india abstract using a biometric technology to monitor the attendance of public health workers in india resulted in a 15 percent increase in staff presence particularly for lower level staff the monitoring program led to a reduction in low birth weight babies highlighting the importance of improving provider presence but despite the government initiating this reform there was ultimately a low demand by the government to use the higher quality attendance data available in real time to enforce their existing human resource policies e g leave or salary deductions due to logistical challenges and a not unrealistic fear of generating staff discord or increase in staff attrition especially among doctors who showed the least improvement in attendance while we observed some gains from this type of monitoring program technological solutions by themselves will not improve attendance of government staff without a willingness to use the data generated to enforce existing penalties

the aggregate effect of school choice evidence from a two stage experiment in india we present experimental evidence on the impact of a school choice program in the indian state of andhra pradesh that provided students with a voucher to finance attending a private school of their choice the study design featured a unique two stage lottery based allocation of vouchers that created both student level and market level experiments which allows us to study the individual and the aggregate effects of school choice including spillovers after two and four years of the program we find no difference between test scores of lottery winners and losers on telugu native language math english and science social studies suggesting that the large cross sectional differences in test scores across public and private schools mostly reflect omitted variables however private schools also teach hindi which is not taught by the public schools and lottery winners have much higher test scores in hindi furthermore the mean cost per student in the private schools in our sample was less than a third of the cost in public schools thus private schools in this setting deliver slightly better test score gains than their public counterparts better on hindi and same in other subjects and do so at a substantially lower cost per student finally we find no evidence of spillovers on public school students who do not apply for the voucher or on private school students suggesting that the positive effects on voucher winners did not come at the expense of other students jel codes c93 h44 h52 i21 o15

testing between competing models of sharecropping the marshallian approach assumes a prohibitively high cost of monitoring the sharecropper s activities while the monitoring approach argues that landlords stipulate and effectively monitor sharecroppers activities i present new evidence using detailed data collected from eight indian villages most tenants own some land of their own this provides a controlled environment in studying the impact of contractual arrangements the differences in input and output intensities on owned minus sharecropped land of the same household are found to be sizable and significant suggesting a rejection of the monitoring approach and supporting the notion of the marshallian productive inefficiency of sharecropping

comparative analysis of firm demographics and survival evidence from micro level sources in oecd countries in this paper we present cross country evidence on firm size distribution firm demographic and post entry performance for 10 oecd countries we use harmonized firm level data drawn from business registers or social security records these data enable international comparisons and the identification of idiosyncratic country effects while average firm size differs across countries due to both sectoral specialization and within sector characteristics we find similar degrees of firm churning across countries in most of them about 20 of firms enter and exit most markets every year and about 20 40 of entering firms fail within the first 2 years of life however post entry growth of successful entrants is much higher in the usa than in europe which may be indicative of barriers to firm growth as opposed to barriers to entry

r d induced industry polarization and shake outs abstract we consider the standard two stage game of r d and cournot competition with ex ante identical firms but depart from the literature in assuming that r d is characterized by mildly instead of strongly decreasing returns to scale we establish that only extreme r d levels are possible at equilibrium and that for a broad range of parameters equilibria are asymmetric in r d levels possibly leading one firm to endogenously exit this provides a simple link between returns to scale in r d and industry polarization including shake outs a novelty is that exit may be triggered by positive opportunities in a strategic setting given the original nature of our r d equilibrium a complete welfare analysis is conducted including a possible role for r d subsidies

is bigger better customer base expansion through word of mouth reputation a model of gradual reputation formation through a process of continuous investment in product quality is developed we assume that the ability to produce high quality products requires continuous investment and that as a consequence of informational frictions such as search costs information about firms past performance diffuses only gradually in the market this leads to a dual process of growth of a firm s customer base and an increase in the firm s investment in quality the model predicts therefore that the longer its tenure as a high quality producer the more a firm invests in quality we relate this finding to empirical work on online commerce as well as on traditional industries

countercyclical pricing in customer markets i present a dynamic model of price determination in customer markets that are subject to exogenous business cycle fluctuations the business cycle is described in terms of a markov process in which market demand alternates stochastically between fast growth boom and slow growth recession phases in the consumers preferred equilibrium outcome 1 prices are below the monopoly level and 2 prices are countercyclical when demand growth rates are positively correlated through time a firm faces a dynamic trade off when making its current price selection while a higher price may raise a firm s profit in the short term it also may diminish the firm s reputation for low prices leading to lower profits in the future

the limits of bureaucratic efficiency bureaucracies tend to be used when consumers cannot be trusted to choose outcomes efficiently but a primary means of bureaucratic oversight is consumer complaints but this can give bureaucrats an incentive to inefficiently accede to consumer demands to avoid a complaint i show that when this incentive is important bureaucracies efficiently respond by i ignoring legitimate consumer complaints ii monitoring more in situations in which it is not needed iii delaying decision making too long and iv biasing oversight against consumers i also show that bureaucracies are used only when consumers cannot be trusted as a result observed bureaucracies are always inefficient

entry dumping and shakeout this paper studies the process of entry dumping and shakeout and the properties of the free trade equilibrium that results in a world in which countries differ in their stock of technological knowledge but not necessarily in their stock of technological capability the model can account for the dumping of products by newly industrializing countries and technological newcom ers at a price that fails to cover average cost in the face of a surge i n world demand for the dumped product a phenomenon that has not been uncommon in recent years copyright 1993 by american economic association

explaining the shakeout process a successive submarkets model this paper explains contemporaneous exit and entry in a new industry with a diffusion process across submarkets it allows a re interpretation of the shakeout process in some industries in a novel way the industry is a collection of initially inactive independent submarkets the timing of their activation is determined by an exogenous aggregate diffusion process new submarket opening attracts new entry however the post entry endogenous sunk investment requirement induced by innovations also forces much exit to follow entry the aggregate market thus has overlapping exit and entry and has a shakeout if the aggregate diffusion process follows a typical s shape

latent submarket dynamics and industry evolution lessons from the us laser industry in its first 35 years the us laser industry was characterized by steady growth in output and the number of producers whereas subsequently the number of producers steadily declined despite continued growth in the industry s output a model of industry evolution that features the creation destruction and fusing of independent submarkets is developed to explain these two eras data on all laser producers are used to test various implications of the model concerning entry exit and innovation the findings suggest that the emergence of an integrative submarket can fundamentally alter an industry s market structure and the character of innovation which is applied to explain historical developments in the evolution of various innovative industries

a profit based unit commitment ga for the competitive environment as the electrical industry restructures many of the traditional algorithms for controlling generating units need modification or replacement previously utilized to schedule generation units in a manner that minimizes costs while meeting all demand the unit commitment uc algorithm must be updated a uc algorithm that maximizes profit will play an essential role in developing successful bidding strategies for the competitive generator simply bidding to win contracts is insufficient bidding strategies must result in contracts that on average cover the total generation costs no longer guaranteed to be the only electricity supplier a generation company s share of the demand will be more difficult to predict than in the past removing the obligation to serve softens the demand constraint in this paper the authors provide a price profit based uc formulation which considers the softer demand constraint and allocates fixed and transitional costs to the scheduled hours the authors describe a genetic algorithm solution to this new uc problem and present results for an illustrative example

the evolution of new industries and the determinants of market structure several empirical regularities concerning firm growth rates and industry firm size distributions have been developed by studying primarily mature industries the primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution to explain these regularities a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity it stresses how chance events and exogenous factors that influence the number of potential entrants to the industry the growth rate of incumbents and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry

dynamic retail price and investment competition we develop a model of retail competition in which retailers select prices and investments in cost reduction an equilibrium is constructed in which several identical firms enter and then engage in a phase of vigorous price competition this phase is concluded with a shakeout as a low price low cost firm comes to dominate the market a central feature of the equilibrium is that low prices are complementary with large investments in cost reduction even though the dominant firm s price rises through time and initially may be below marginal cost we argue that an interpretation of predatory pricing may be inappropriate

entry exit and diffusion with learning by doing early entry has the advantage of higher revenues per unit of output early on late entry has the benefit of learning from the experience of earlier entrants and hence lower production costs the advantages are balanced off in a continuous time perfect foresight equilibrium competition generates s shaped diffusion and staggered entry and exit a monopolist will innovate less than a competitive industry but the innovation that he does do he will do sooner copyright 1989 by american economic association

business as usual market crashes and wisdom after the fact the authors present a three stage model of market dynamics in the first stage routine behavior tends to keep information of common interest trapped in private hands in the second stage private information reaches a threshold that triggers some agents to alter their behavior these actions release information to the market the final stage involves the market s response to this news as other participants react to the initial departure from routine behavior the authors present an application to industry investment they also outline applications to the international debt crisis to bank runs and to political upheavals copyright 1994 by american economic association

shakeouts and market crashes this article provides a microfoundation for the rise in optimism that seems to precede market crashes small young markets are more likely to experience stock price run ups and crashes we use a zeira rob type of model in which demand size is uncertain optimism then grows rationally if traders prior distribution over market size has a decreasing hazard such prior beliefs are appropriate if most new markets are duds and only a few reach a large size the crash occurs when capacity outstrips demand as an illustration for the period 1971 2001 we fit the model to the telecom sector

the generalized war of attrition abstract we model a war of attrition with n k firms competing for n prizes in a natural oligopoly context the k 1 lowest value firms drop out instantaneously even though each firm s value is private information to itself in a standard setting context in which every competitor suffers losses until a standard is chosen even after giving up on its own preferred alternative each firm s exit time is independent both of k and of other players actions our results explain how long it takes to form a winning coalition in politics solving the model is facilitated by the revenue equivalence theorem jel d43 d44 l13 o30

double for nothing experimental evidence on an unconditional teacher salary increase in indonesia how does a large unconditional increase in salary affect the performance of incumbent employees in the public sector this paper presents experimental evidence on this question in the context of a policy change in indonesia that led to a permanent doubling of teachers base salaries the analysis uses a large scale randomized experiment across a representative sample of indonesian schools that accelerated this pay increase for teachers in treated schools the findings show that the large pay increase significantly improved teachers satisfaction with their income reduced the incidence of teachers holding outside jobs and reduced self reported financial stress nevertheless after two and three years the increase in pay led to no improvement in student learning outcomes the effects are precisely estimated making it possible to rule out even modest positive impacts on test scores the results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public sector settings

the devolution of declining industries in declining industries capacity must be reduced in order to restore profitability who bears this burden where production is all or nothing there is a unique subgame perfect equilibrium the largest firms exit first ghemawat and nalebuff 1985 in this paper firms continuously adjust capacity again there is a unique subgame perfect equilibrium all else equal large firms reduce capacity first and continue to do so until they shrink to the size of their formerly smaller rivals intuitively bigger firms have lower marginal revenue and correspondingly greater incentives to reduce capacity this prediction is supported by empirical findings

competition among entrepreneurs i examine a three stage model of schumpeterian competition among entrepreneurs in the initial entry stage entrepreneurs invest in innovation and establish firms in the next stage entrepreneurs choose prices strategically make irreversible investments and compete to serve consumers while faced with asymmetric information about each others innovations in the final creative destruction stage firms with better technologies remain in the market while firms with inferior technologies exit the market the model features strategic pricing by firms and the possibility of heterogeneous technologies remaining in the market the model provides a necessary and sufficient condition for creative destruction copyright 2010 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

the life cycle of a competitive industry firm numbers first rise then later fall as an industry evolves this nonmonotonicity is explained using a competitive model in which innovation opportunities fuel entry and relative failure to innovate prompts exit equilibrium time paths for price and quantity also share features of the data the model is estimated using data from the u s automobile tire industry a particularly dramatic example of the nonmonotonicity in firm numbers

information revelation and strategic delay in a model of investment we model investment as an n player game with a pure informational externality each player s payoff depends only on his own action and the state of nature however because a player s action reveals his private information players wait to see what other players will do equilibrium is inefficient because delay is costly and information is imperfectly revealed we characterize the unique symmetric perfect bayesian equilibrium and study the robustness of delay which turns out to be sensitive to the reaction speed and the number of players we establish the following results i when the period length is very short the game ends very quickly and there is a form of herding or informational cascade which results in a collapse of investment ii as the period length increases the possibility of herding disappears iii as the number of players increases the rate of investment and the information flow are eventually independent of the number of players adding more players simply increases the number who delay iv in the limit the time profile of investment is extreme a period of low investment followed either by an investment surge or a collapse

the survival of new plants start up conditions and post entry evolution abstract this paper examines the longevity of entrants we find size to be an important determinant of the chances of survival this being particularly relevant to de novo entrants as compared with entry by established firms current size is also found to be a better predictor of failure than initial size moreover our findings indicate that after controlling for size differences past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period finally new plants are more likely to live longer if they enter growing industries or industries with little entry activity

bertrand competition when rivals costs are unknown the conclusions of the bertrand model of competition are substantially altered by the presence of asymmetric information about rivals costs asymmetric information eliminates the discontinuity in the bertrand model and significantly alters the properties of the market equilibrium in the bertrand nash equilibrium when rivals costs are unknown firms price above marginal cost and have positive expected profit the analysis is extended to franchise competition the market equilibrium is sensitive to market structure and yields incentives for entry copyright 1995 by blackwell publishing ltd

wealth health and health services in rural rajasthan what are the determinants of health and of well being income and wealth are clearly part of the story but does access to health care have a large independent effect as the advocates of more investment in health care such as the world health organization s commission on macroeconomics and health commission on macroeconomics and health 2001 have argued this paper reports on a recent survey in a poor rural area of the state of rajasthan in india intended to shed some light on this issue where there was an attempt to use a set of interlocking surveys to collect data on health and economic status as well as the public and private provision of health care

a dynamic model of entry and exit in a growing industry the potential demand in a new industry evolves over time demand is initially low but advertising by the industry s early entrants can speed up demand growth however there is intrinsic uncertainty of the demand level in each period and uncertainty of the demand evolution path which can be affected by the underlying economic environment we construct a dynamic model that features the stochastically and endogenously expanding demand of a new industry and we investigate the optimal entry and exit behavior of firms as the industry evolves we find that firms incentive to enter early depends critically on the cost that early entrants have to pay in developing the market when the cost is high and the benefit spills over to potential entrants firms have an incentive to wait and the probability of entry can increase with the number of incumbents under certain circumstances firms entry strategy is also influenced by the transition of economic states firms are more likely to enter under a state that shows the prospect of demand taking off soon we also find that in the early stage of an industry higher demand uncertainty can induce faster entry

consolidation by merger the uk beer market this paper examines the determinants of market structure in the uk brewing industry over 1949 1969 sutton sunk costs and market structure price competition advertising and the evolution of concentration 1991 points to technology and advertising races as two key drivers of market concentration this study uses an own built longitudinal data set of the population of firms and breweries and reveals the importance of institutional factors in explaining the dynamics of market structure the practice of tying outlets to brewers and legal restrictions on opening retail outlets together with a permissive policy towards mergers made acquisition of medium sized firms and brewery closure shortly after acquisition the main driving mechanism towards industry consolidation during this period the number of firms and plants fell sharply by 74 and 60 respectively and production rose by about 25 with no firm entry and just one new brewery opening as a result concentration increased and the market transformed from a highly fragmented one into a stable oligopoly

personality traits and performance contracts evidence from a field experiment among maternity care providers in india we study how agents respond to performance incentives according to key personality traits conscientiousness and neuroticism through a field experiment offering financial incentives for improving maternal and neonatal health outcomes to rural indian doctors more conscientious providers performed better but improved less under performance incentives the effect of the performance incentives was also smaller for providers with higher levels of neuroticism our results contribute to a growing body of empirical research on heterogeneous responses to incentives and have implications for worker selection

a diffusion model based supply side offer agent worldwide energy markets have been on a path toward deregulation for several decades these markets have proven to be difficult to design and run because of their repetitive nature and the externalities provided by reliable grid operation in a deregulated market environment our experiments suggest that market participants will pursue their own profit maximizing objective rather than use an objective that reflects social benefit multiagent simulation is useful for gaining insights into market participant behavior under various rules in this way market rules can be tested for efficacy and efficiency in this paper an agent based on a double layer diffusion model developed elsewhere is tested and its effectiveness reported