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

mergers and acquisitions between risk averse parties abstract this paper evaluates mergers and acquisitions ma however it may yield a higher price for the consumer moreover we show that a decentralized supply chain can be more beneficial for the parties than a centralized supply chain formed by acquisition

perfection the infinite horizon and dominance abstract consideration of time and independence brought into focus by the example of perfection in the infinite horizon leads the author to a modified contraction by dominance solution for game theory

vertical relationships an introduction this short essay introduces a special issue of the journal of industrial economics on vertical relationships including both vertical integration and vertical restraints in the last few years there has been a resurgence of theoretical and empirical work on vertical relationships and they are central to major current issues in industrial policy in this introduction the authors briefly describe the contribution by the papers that make up this special issue copyright 1991 by blackwell publishing ltd

the effects and incentive of vertical mergers an analysis from the view of om abstract we investigate the effects and incentive of vertical mergers in a supply chain with three types of firms i e suppliers manufacturers and integrated firms integrated firms can sell both intermediate and final goods while suppliers and manufacturers can sell only intermediate or final goods respectively whether selling intermediate goods to other manufacturers is introduced as the integrated firms endogenous decisions we find that a vertical merger always decreases the price of final products both the production quantity and the profits of each unintegrated manufacturer and integrated firm and most of the time leads to a drop in the total profit of the supply chain while it always results in a rise in the quantity of final products and social welfare second we find that market foreclosure only happens when competition among integrated firms is weak and vertical mergers occur only when competition among unintegrated manufacturers is weak finally we provide a theoretical explanation for the phenomenon of merger waves with the aid of our model

the effect of vertical integration on consumer price in the presence of inventory costs abstract this paper investigates the effect on consumer price of a vertical merger between a monopolist manufacturer and his retailer when inventory costs are taken into consideration we find that the traditional result lower prices remains true only when inventory costs are sufficiently small the direction of the price change also depends on the market size

the british electricity experiment the privatization of the electricity supply industry esi in britain which began 1990 is in itself an unremarkable event much of the esi is privately owned in several european countries and in the united states and the u k privatization program has embraced utilities since 1984 when british telecom was privatized the thing that is remarkable about recent policy toward the industry is the radical nature of the regulatory reform accompanying privatization a vertically integrated administered generation and transmission structure was replaced overnight on march 31 1990 by one that is deintegrated and market based generation and transmission have been separated and there has been an attempt to establish competition in generation a number of countries have been moving gradually in the direction of encouraging competition but nowhere else have such dramatic changes been implemented so quickly

inequality and poverty economists tend to be quite egalitarian in their evaluation of social issues according to one survey 71 percent of american economists believe the distribution of income in the united states should be more equal and 81 percent feel that redistribution of income is a legitimate role for government support for these positions is even stronger among economists with academic affiliations and stronger still among economists with elite academic affiliations of course as economists we also have a healthy regard for economic efficiency we are concerned with the size of the economic pie as well as with its distribution borrowing from the title of alan blinder s recent book 1 economists can be characterized as having hard heads and soft hearts hardheaded in our emphasis on efficiency and soft hearted in our concern with equality the hard headed soft hearted approach is familiar to economists who argue that it is reasonable to sacrifice a bit of efficiency in return for greater equality in principle this position seems unobjectionable but i intend to argue that we may have gone too far in attempting to promote economic equality through government policies in taking this position i run the risk of being labeled hard hearted and perhaps soft headed as well an important part of my argument however is based on distinguishing between economic inequality within the large nonpoor part of the population and the poverty that afflicts a small portiop of our population i fav9r a role for government in helping the truly needy but i will attempt to show that extending that role to permit redistribution among the general population is often counterproductive

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

the great divide ruralisation of poverty in russia using data from the russian longitudinal monitoring survey for the period 2000 2004 we investigate poverty trends in russia we find that urban poverty declines at twice the rate of rural poverty so that by 2004 poverty in russia had become a largely rural phenomenon for the first time since transition began this finding does not stem from changing population characteristics or shares is not dependent on the use of a particular poverty line nor is it driven by the rapid expansions that have occurred in moscow st petersburg or other urban areas our findings flesh out those of ravallion and colleagues who in contrast to other regions find signs of a ruralisation of poverty in eastern europe and the former soviet union we attribute some of the differential to the labour market

hedging and vertical integration in electricity markets this paper analyzes the interactions between competitive wholesale spot retail and forward markets and vertical integration in electricity markets we develop an equilibrium model with producers retailers and traders to study and quantify the impact of forward markets and vertical integration on prices risk premia and retail market shares we point out that forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares we show that they differ in their impact on prices and firms utility because of the asymmetry between production and retail segments vertical integration restores the symmetry between producers and retailers exposure to demand risk whereas linear forward contracts do not vertical integration is superior to forward hedging when retailers are highly risk averse we illustrate our analysis with data from the french electricity market this paper was accepted by wei xiong finance

an example of a dominance approach to rational expectations abstract dominance and independence produce an alternative approach to rational expectations in a simple stationary overlapping generations model dominance and independence delimit rational behaviour but predict a range of rational choice rather than a single rational choice in particular a coherent interpretation of multiple rational expectations equilibria is provided

equilibrium vertical foreclosure the authors formulate a complete but analytically simple equilibrium model of vertical mergers to evaluate the logic of standard vertical foreclosure claims and the criticisms made of those claims the model includes incentives of the integrated firm and unintegrated input suppliers to exclude rivals and the potential holdout problem in this fully specified model vertical foreclosure can emerge in equilibrium copyright 1990 by american economic association

vertical integration with endogenous contract leadership stability and fair profit allocation abstract this paper studies vertical integration in serial supply chains with a wholesale price contract we consider a business environment where the contracting leader may be endogenously changed before and after forming the integration a cooperative game is formulated to normatively analyze the stable and fair profit allocations under the grand coalition in such an environment our main result demonstrates that vertical integration is stable when all members are pessimistic in the sense that they are sure that they will not become the contracting leader if they deviate from the grand coalition we find that in this case the grand coalition s profit must be allocated more to the retailer and the members with higher costs nevertheless we also show the conditions under which the upstream manufacturer can have strong power as in traditional supply chains

vertical mergers and market foreclosure ythe model in this paper illustrates three effects of vertical mergers when both stages are oligopolistic and vertically integrated and unintegrated producers coexist first the merging firm increases its final good output second the resulting backward shift in the residual demand curve facing unintegrated final good producers ylowers their demand for the intermediate good third the merged firm withdraws from the intermediate good market the increased concentration pushes the intermediate good price upward which effect dominates depends on market structure under some conditions a vertical merger causes the price of the final good to increase

vertical integration variable proportions and successive oligopolies this paper investigates the problem of how the effect of vertical integration upon the final product price is related to the production and or market structures some ambiguous results of the previous models are shown to involve the compound effect of vertical an d horizontal merger this model considers purely vertical integration and shows that the lerner index of monopoly remains unaffected before and after merger vertical integration is shown accordingly to yield an unambiguous decrease in the final product price an increase in consumer welfare implications for antitrust laws are also discussed copyright 1988 by blackwell publishing ltd

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

urban income inequality in china revisited 1988 2002 abstract using newly available spatial price deflators this paper shows that inequality evaluations in the literature overstate the magnitude of inequality and inequality changes in china as well as the role played by regional differences in the recent inequality rise

consumption smoothing and vulnerability in russia applying bootstrapped quantile regression to the russian longitudinal monitoring survey rlms data we examine the channels through which individuals experience and seek to cope with changes in consumption we find that married individuals living in small households with educated heads in urban areas are better equipped to smooth consumption investigating the impact of idiosyncratic shocks we find that the labour market is an important transmission mechanism allowing households to smooth their consumption but also exposing them to risk mainly through job loss outside of pension payments the formal social safety net does not facilitate consumption smoothing thus heightening the importance of informal coping institutions it transpires that both support from relatives friends and home production act as important insurance mechanisms for the most vulnerable

effectiveness and effects of attempts to regulate the uk petrol industry this paper evaluates the impact that investigation and regulation of the uk petrol industry has had on the profitability of the companies using a gross margin for petrol we estimate a series of variable parameter autoregressive processes the results demonstrate that the 1979 monopolies and mergers commission investigation into the industry caused a long term decline in profit margins in the industry despite the fact that no recommendations or undertakings were made this cannot however be said for subsequent investigations

some calculations of lifetime tax incidence this paper reports a set of lifetime tax incidence calculations using a life cycle simulation model for canada due to davies 1979a 1982 a repeatedly stated qualification to annual calculations in the empirical tax incidence literature is that it would be more satisfactory to make calculations on a lifetime basis even though it is acknowledged that lifetime tax incidence could well differ from annual it is widely believed that data and other difficulties make such calculations next to impossible indeed the widespread acceptance of the data problems of lifetime calculations seems also to have inhibited speculation about how lifetime tax incidence might differ from annual as a result redistributive tax policy judgments continue to be based on annual incidence calculations in spite of the reservations many have about their usefulness our paper is intended to reorient discussion towards lifetime tax incidence by providing some initial null hypotheses about the shape of lifetime tax profiles our main finding is that under the standard competitive assumptions common in the incidence literature lifetime and annual incidence calculations both produce mild progression in tax rates across household deciles ignoring the bottom decile in the annual calculation while the income tax is less progressive in lifetime than in annual calculations other taxes are for the most part less regressive also lifetime incidence calculations are much more robust to alternative shifting assumptions than annual calculations in the lifetime context key distributions such as earnings transfer payments and consumption are less heavily concentrated in particular percentiles of the population than is true in annual data as a result changing the allocative series for any particular tax does not have the large effect on incidence results found in annual calculations each component of the tax system is allocated to households grouped by lifetime income using particular distributive series following a procedure similar to that employed in annual incidence calculations for example richard musgrave et al 1974 joseph pechman and benjamin okner 1974 edgar browning and william johnson 1979 w irwin gillespie 1980 in the process we are able to compare lifetime and annual incidence calculations using the same data set in both lifetime and annual calculations we allocate five groups of taxes among households using distributive series which come partly from the 1971 statistics canada survey of consumer finances scf and partly from our life cycle simulation model the scf data are used to construct synthetic longitudinal lifetime profiles of earnings and transfer payments for a sample of 500 households the latter are assigned inheritances by simulating patterns of mortality and bequest these data are then used in the life cycle model to generate lifetime consumption profiles and bequests the earnings transfer and inheritance data plus the model output provide the distributive series on which alternative incidence calculations are based while the incidence calculations presented in this paper use canadian data results would likely be similar for the united states

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

competition and structure in serial supply chains with deterministic demand supply chains often consist of several tiers with different numbers of firms competing at each tier a major determinant of the structure of supply chains is the cost structure associated with the underlying manufacturing process in this paper we examine the impact of fixed and variable costs on the structure and competitiveness of supply chains with a serial structure and price sensitive linear deterministic demand the entry stage is modeled as a simultaneous game where the players take the outcomes of the subsequent post entry cournot competition into account in making their entry decisions we derive expressions for prices and production quantities as functions of the number of entrants at each tier of a multitier chain we characterize viability and stability of supply chain structures and show using lattice arguments that there is always an equilibrium structure in pure strategies in the entry game finally we examine the effects of vertical integration in the two tier case altogether the paper provides a framework for comparing a variety of supply chain structures and for studying how they are affected by cost structures and by the number of entrants throughout the chain

economies of integration versus bureaucracy costs does vertical integration improve performance this study tested links between vertical integration cost structure and performance at the line of business level of analysis major findings were 1 vertical integration results in economies ev