sequential formation of coalitions in games with externalities and fixed payoff division this paper analyzes a sequential game of coalition formation when the division of the coalitional surplus is fixed and the payoffs are defined relative to the whole coalition structure gains from cooperation are represented by a valuation which maps coalition structures into payoff vectors i show that any core stable coalition structure can be attained as a stationary perfect equilibrium of the game if stationary perfect equilibria may fail to exist in general games a simple condition is provided under which they exist in symmetric games furthermore symmetric stationary perfect equilibria of symmetric games generate a coalition structure which is generically unique up to a permutation of the players a general method for the characterization of equilibria in symmetric games is proposed and applied to the formation of cartels in oligopolies and coalitions in symmetric majority games journal of economic literatureclassification numbers c78 c71 1996 academic press inc

the political dynamics of economic growth summary we argue that an understanding of the political drivers of economic growth needs an explanation of the political dynamics around the transition from one growth phase to another and that the political drivers of early stage growth accelerations are different from that of growth maintenance informal institutions are likely to play a role in growth acceleration while formal institutions of credible commitment the provisioning of public goods and the overcoming of co ordination failures will be more important in growth maintenance we present empirical evidence drawn from country case studies and cross country econometric analysis that provides support to our theoretical propositions

entry deterrence externalities and relative firm size most models of entry deterrence through preemptive investment consider either a monopolist or a cartel this suppresses an important question how does threat of entry affect capital choices of several noncolluding incumbents there are two opposing forces expanding capital to deter entry generates a public good to other incumbents but also increases the expanding firm s share of market output we address the trade off in a model of sequential entry with foresight where in the first stage capital choices are made sequentially and in the second stage the output interaction is cournot or competitive under competitive interaction we prove that the first entrant either admits all other potential entrants or deters all it never allows partial entry under cournot we find using simultaneous some rather surprising patterns easier entry can make the first entrant s capital larger or smaller the first entrant can be smaller than the second but is never less profitable the first entrant s profit is always reduced by increased entry threat but profits of other entrants can be increased

endogenous sequential entry in a spatial model revisited abstract this article reexamines sequential entry of firms in a hotelling model of spatial product differentiation as analyzed by neven neven d j 1987 endogenous sequential entry in a spatial model international journal of industrial organization 5 419 434 i show that the pattern of locations is generally asymmetric in the case of a duopoly profits are non monotonic in market size even in the range where the number of firms does not change the firm that bears the burden of entry deterrence gains from lower barriers to entry as long as entry deterrence is possible equilibrium profits of all firms may be larger in situations in which more firms are active

do binding agreements solve the social dilemma we investigate whether binding agreements can provide a solution to the social dilemma that arises in the presence of pure public goods by signing a binding agreement players can prevent free riding by the contributors to a public good however a well known theoretical result is that the outcome of the endogenous formation of agreements is not necessarily efficient in our setting the individual level of contribution to the public good increases with the size of the coalition reaching an agreement and the global coalition is always the socially optimal structure agreements form sequentially and the equilibrium outcome is an asymmetric structure which consists of two coalitions our experiment therefore lends force to the theoretical result that outcomes may be inefficient in fact we observe an outcome which is even less efficient than that predicted by the equilibrium agreement structure however it seems that when subjects reach agreements they do so with the intention of cooperating rather than free riding furthermore it seems that they learn to cooperate over time and reach the global agreement more often towards the end of sessions keywords

challenges of existing in a market as a small low quality producer this paper explores the strategy of a small firm entering a monopolist s market thereby creating a duopoly market the small firm avoids competing with the larger incumbent firm by producing a lower quality product at a lower price the model here establishes an equilibrium under a specific set of assumptions and examines how exogenous factors affect prices qualities and profits although the strategy might allow the firm to enter and earn a profit the market conditions may make this position much less desirable to that of the large firm for several reasons in the case explored here where tastes for the product are uniformly distributed the small firm s profit is about six percent of that of the larger firm the smaller firm is more severely threatened by the entrance of a third firm furthermore even if the smaller firm can cut costs its position is not well suited for exploiting such increases in efficiencies

pricing and financial resources an analysis of the disk drive industry 1980 88 this paper empirically examines the long purse hypothesis formalized by patrick bolton and david scharfstein 1990 that incumbents may drive out entrants through aggressive pricing the author analyzes the pricing of 733 disk drives between 1980 and 1988 drives that are adjacent to those manufactured by thinly capitalized undiversified rivals are priced lower than other drives during the later years in the sample when little equity financing was available to these firms the results are robust to controls for alternative hypotheses and to other specifications of the hedonic regression copyright 1995 by mit press

substituting for the state institutions and industrial development in eastern nigeria abstract this article examines the recent dynamic industrialization experience in one town nnewi part of eastern nigeria s industrial axis the article suggests that insights from institutional economics can be used to help explain the case of dynamic industrialization in an unpromising economic environment nnewi industrialists have successfully filled the gaps left by failures of both the market and the state in particular by using both international linkages and alternative culturally based networks they have reduced information uncertainties and principal agent problems lowering the transaction costs faced by other would be industrialists in nigeria

the economics of predation what drives pricing when there is learning by doing predatory pricing a deliberate strategy of pricing aggressively in order to eliminate competitors is one of the more contentious areas of antitrust policy and its existence and efficacy are widely debated the purpose of this paper is to formally characterize predatory pricing in a modern industry dynamics framework that endogenizes competitive advantage and industry structure our framework encompasses important phenomena such as learning by doing network effects switching costs dynamic demand and certain types of adjustment costs due to its prominent role in legal cases involving alleged predation we examine learning by doing in more detail we first show that predation like behavior arises routinely in our learning by doing model equilibria involving predation like behavior typically coexist with equilibria involving much less aggressive pricing to disentangle predatory pricing from mere competition for efficiency on a learning curve we next decompose the equilibrium pricing condition and develop alternative characterizations of a firm s predatory pricing incentives we finally measure the impact of these incentives on industry structure conduct and performance we show that forcing a firm to ignore the predatory incentives in setting its price can have a large impact and that this impact stems from eliminating equilibria with predation like behavior along with the predation like behavior however a fair amount of competition for the market is eliminated

endogenous cartel formation with heterogeneous firms in the context of an infinitely repeated capacity constrained price game we endogenize the composition of a cartel when firms are heterogeneous in their capacities when firms are sufficiently patient there exists a stable cartel involving the largest firms a firm with sufficiently small capacity is not a member of any stable cartel when a cartel is not all inclusive colluding firms set a price that serves as an umbrella with non cartel members pricing below it and producing at capacity contrary to previous work our results suggest that the most severe coordinated effects may come from mergers involving moderate sized firms rather than the largest or smallest firms

a simple theory of predation abstractwe propose a simple theory of predatory pricing based on incumbency advantages scale economies and sequential buyers or markets the prey needs a critical scale to be successful the incumbent or predator has an initial advantage and is ready to make losses on earlier buyers to deprive the prey of the scale it needs thus making monopoly profits on later buyers several extensions are considered including cases in which scale economies exist because of demand externalities or two sided market effects and in which markets are characterized by common costs conditions under which predation may or may not take place in actual cases are also discussed

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

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

social security eligibility and the labor supply of older immigrants the employment rate of native born men falls at a much faster rate than that of immigrants as the two groups approach the age of retirement the author draws on u s census data from 1960 2000 to examine how the eligibility requirements for social security benefits affect immigrants decisions to leave the labor market as they near retirement age because a person needs to have worked in the united states for at least ten years to qualify for benefits newly arrived immigrants may not yet have accumulated the requisite employment credits to do this and thus have greater employment rates than other comparably aged persons the probability that an older immigrant is employed falls once the ten year work rule is satisfied the implication of this finding is that immigration may affect the increase in retirement benefits that will inevitably occur as the baby boom generation retires

oligopoly limit pricing we expand milgrom and roberts 1982 limit pricing model to allow for multiple incumbents each incumbent is informed as to the level of an industry cost parameter and selects a preentry price while a single entrant observes each incumbent s preentry price we find that incumbents are unable to coordinate deception which results in a separating equilibrium in which preentry prices are not distorted further introducing the refinement of unprejudiced beliefs we show that the no distortion equilibrium is the only refined separating equilibrium plausible pooling equilibria fail to exist or involve downward distortions in preentry prices

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

deconstructing the pioneer s advantage examining vintage effects and consumer valuations of quality and variety several studies have demonstrated an order of entry effect on market share suggesting that pioneers outperform later entrants however other research has pointed out the limitations of these studies and found evidence that many pioneers fail or have low market share given this background the purpose of this research is to understand the conditions under which pioneers are more likely and also less likely to have an advantage we propose a game theoretic model that includes important sources of pioneer advantages as well as disadvantages specifically we incorporate a pioneer advantage due to preemption in markets with heterogeneous tastes in addition we incorporate a potential pioneer disadvantage due to technology vintage effects where later entrants utilizing improved technology can have lower costs and higher quality the model allows us to evaluate the extent of vintage effects necessary to overcome a pioneer s advantage key relationships are found between the magnitude of the pioneer advantage or disadvantage and consumer valuations of product attributes e g variety and quality we empirically validate the model with vintage effect data in 36 product categories and measures of consumer valuations of product variety and quality for 12 of these 36 categories the results show that pioneers do better in product categories wherevariety is more important and worse in categories where productquality is more important pioneers in categories with high vintage effects are shown to have lower market shares and higher failure rates similar results appear when analyzing persistence of market leadership over time further validating our model s major implications we also present two case studies that illustrate key elements of the model

on the contribution of game theory to the study of sovereign debt and default this paper reviews the lessons learned from the application of the tools of game theory to the theoretical study of sovereign debt and default we focus on two main questions first we review answers to the most fundamental question in the theory of sovereign debt given that there is no supranational institution for enforcing the repayment of debts why do countries ever repay their debts second we review theories of the process by which sovereign debts are restructured with a view to answering the following question why does the process of sovereign debt restructuring appear so inefficient the first question raises issues in the design of self enforcing contracts and on the credibility of threats to punish a country in default the second question involves applications of the theory of bargaining in environments where the parties to a bargain cannot commit to honour the terms of the bargain or even commit to enter into negotiations in the first place copyright 2013 oxford university press

entry deterrence and the free rider problem the public good aspect of entry prevention is examined in an industry characterized by an established oligopoly facing a potential entrant although incumbent firms act noncooperatively underinvestment in entry deterrence does not occur and in fact incumbents may find themselves in a pareto dominated arrangement in terms of profits by preventing entry

partial coordination and mergers among quantity setting firms we analyze horizontal mergers in a collusive environment by using an infinitely repeated game where i a subset of collusive firms is exogenously given and ii partially collusive arrangements are allowed for we show that in our model there is no clear relation between the existence of mergers and full collusion at equilibrium however we demonstrate that the presence of mergers generally leads to a price increase also we show that cartel firms have less incentives to merge than firms in a cournot oligopoly and that collusion increases fringe firms incentives to merge 2007 elsevier b v all rights reserved jel classification l13 l40 l41

stable coalition structures with open membership and asymmetric firms i study games of coalition formation with open membership where firms form associations in order to decrease their costs before competing on the market according to previous analyses only the grand coalition forms at the nash equilibrium of such games i show that this result hinges on the assumption of symmetric firms i therefore introduce asymmetric firms in a game where only two associations can form i demonstrate that there exists a coalition proof nash equilibrium coalition structure in this game and that when the equilibrium involves two associations all the members of an association have a higher taste for this association than all nonmembers do journal of economic literature classification numbers c70 c72 l13

a model of agreements in strategic form games abstract because in a strategic form game all the possibilities of communication available to the players must be explicitly listed in the strategy spaces coalitions and coalitional behaviour are not very often taken into account in noncooperative games however it may be desirable especially in applications to separate the basic strategic features of a situation from those strategic features added as a consequence of the possibility of coalitional behaviour we define an equilibrium for the bargaining procedure called by greenberg the theory of solid situations an alternative game theoretic approach cambridge university press cambridge uk 1990 coalitional contingent threat situation we argue that the crucial problem of expectations on the counterdeviations following a deviation can be addressed by defining coalitional strategies and studying the equilibrium of the extended game journal of economic literatureclassification numbers c70 c71

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

a theory of market structure with sequential entry this article sets out a theory of market structure with sequential entry we characterize the perfect nash equilibrium to the entry game in several propositions first equilibria never involve excess capacity second a sufficient statistic for the entry of any firm is that its profits are positive when computed myopically i e with no further entry third the equilibrium number of firms is the smallest number that can deter entry fourth aggregate output in equilibrium is no smaller than the limit output we calculate some explicit solutions to the model and examine comparative static properties

innovation intellectual property rights and economic development a unified empirical investigation two important strands of literature investigate the way the effect of intellectual property rights ipr on innovation depends on either the initial ipr level or the level of economic development we expand on this by studying their joint effect in a single unified empirical framework we find that the effect of ipr on innovation is more complex than previously thought displaying important nonlinearities depending on the initial levels of both ipr and per capita gdp the policy implications of this are examined and include the conclusion that a single global level of ipr is in general sub optimal

noncooperative entry deterrence uncertainty and the free rider problem previous authors who have considered the issue of noncooperative entry deterrence have not found the free rider problem to be a significant factor these authors however have only considered models in which the exact investment needed to deter entry is known with certainty in this paper i add uncertainty to the models investigated by these previous authors and demonstrate that the free rider problem can be significant but is not so in all cases that is for certain types of entry deterring investments the introduction of uncertainty causes the oligopoly to underinvest in entry deterrence however for other types no underinvestment result arises

intellectual property rights in mexico do they play a role summary there is little empirical evidence concerning the effects of intellectual property rights ipr in technologically advanced developing countries complete enumeration of the mexican maize breeding industry showed that contrary to the hypothesis that ipr would support innovation ipr play no role in the industry ipr theory should be revised to include characteristics of developing countries critical for the good functioning of ipr quality of the institutional environment and importance of transaction given the relatively good score of mexico on these critical aspects ipr are likely to play an even smaller role in other developing countries

oligopolistic entry deterrence under incomplete information recent work has investigated the effects of asymmetric information between an incumbent firm and a potential entrant this study extends the analysis to allow the initial market structure to be a noncooperative oligopoly we show that there is a bayesian nash equilibrium in which the incumbent firms although unable to collude strategically deter entry that would have occurred under complete information in contrast to the past limit pricing literature it is a high price that deters entry as it signals to the potential entrant that this is a high cost industry extending the model to allow for multiple potential entrants we find that increasing the degree of potential competition raises the preentry price and reduces the likelihood of entry

when does predation dominate collusion i study repeated competition among oligopolists the only novelty is that firms may go bankrupt and permanently exit the probability that a firm survives a price war depends on its financial strength which varies stochastically over time under some conditions including no entry an anti folk theorem holds when firms are patient so that strength levels change relatively quickly every nash equilibrium involves an immediate price war that lasts until at most one firm remains surprisingly the possibility of entry may facilitate collusion as may impatience the model can explain some observed patterns of collusion and predation

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

a model of dynamic limit pricing with an application to the airline industry we develop a dynamic limit pricing model where an incumbent repeatedly signals information relevant to a potential entrant s expected profitability the model is tractable with a unique equilibriu

collusion and predation under almost free entry abstract this study investigates the degree of cooperation that firms can support in the absence of significant barriers to entry a free entry subgame perfect equilibrium is defined by q n where q is the collusive output rate and n is the number of active firms such that there is no incentive for an active firm to deviate output from q and there is no incentive for a potential entrant to enter the industry it is shown that for all n 1 if the discount factor is sufficiently high there exists a free entry equilibrium in which active firms sustain a non trivial degree of cooperation cooperation is supported by active firms credibly threatening to respond to entry with a period of aggressive competition

to lobby or to partner investigating the shifting political strategies of biopharmaceutical industry associations in innovation systems of south africa and india the role of industry associations in shaping policy through various lobbying activities is well established in most cases while such activities are deemed essential from an industry perspective they also carry negative connotations connected to narrow rent seeking and the pursuit of elites interests which run counter to the public good and discourage competition and subsequent innovation as such industry associations have long been excluded from discussions regarding the relational dynamics and evolution of innovation systems in contrast this paper builds upon more recent work that places industry associations as key intermediary actors that facilitate knowledge exchange and institutional capacity building particularly in the context of developing countries where limited institutional capacities and substantial knowledge gaps can limit both innovation and development employing a qualitative cross national comparison this paper examines the changing roles and activities of biopharmaceutical industry associations in the development of the south african and indian pharmaceutical industries with a particular focus on government industry relations for doing so the paper captures developments during three main periods through which both the south african and indian biopharmaceutical industries have similarly evolved although within different national contexts 1 pre liberalization 2 expanding pluralism and 3 increasing partnership we argue that in south africa and india particular historical trajectories and lack of institutional capacities are shifting industry associations away from ineffective lobbying to a new political approach that emphasizes partnering with government in the pursuit of not only narrow industry objectives but also broader development aims

the labor supply of immigrants in the united states the role of changing source country characteristics economists have long explored the role that source country characteristics have in determining the labor market performance of immigrants for example george j borjas 1987 models the migration decision as determined by the expected difference in the immigrant s position in the earnings distribution in the host and source countries deborah a cobb clark 1993 extends borjas s model to immigrant women similarly other studies explore how culture or traditional gender roles in the source country persist across borders and influence the labor market outcomes of immigrant women in the united states for example heather antecol 2000 2001 and francine d blau lawrence m kahn and kerry l papps 2008 find a positive relationship between source country characteristics and the labor market outcomes of immigrant women in the us absent from the existing literature however is an examination of how changes over time in a source country s characteristics are associated with changes in the labor market outcomes of immigrants from that source country in this paper we study how changes in the source country characteristics are associated with changes in the labor supply outcomes of immigrants in the us and whether these relationships are different across men and women in particular we focus on the changes in three the labor supply of immigrants in the united states the role of changing source country characteristics

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

vertical product differentiation with entry abstract this paper examines the non cooperative behaviour of established firms that compete in product quality and prices while foreseeing the effects of their rivalry on the decisions made by the later entrants we prove an existence and uniqueness of the equilibrium and show that the dominant firms engage in maximal product differentiation i e select the highest and lowest technologically feasible qualities later entrant however always selects an intermediate quality moreover we show that the equilibrium configuration is identical to that generated by perfect foresight equilibrium in a model of sequential entry furthermore the profits earned by each firm are ranked in the same order as the qualities implifying that the later entrant despite being the last mover ends up with higher profits and larger market share than one of the incumbents

the role of multiple potential entrants sequential entry in noncooperative entry deterrence a number of authors have recently considered whether the free rider problem is exhibited in models characterized by multiple potential entrants sequential entry bernheim 1984 and eaton and ware 1987 find that the free rider problem is not an important factor while mclean and riordan 1989 find that it is in this article i identify a general property whose presence is important for whether a model of noncooperative entry deterrence exhibits a free rider problem and in this way help clarify why the above mentioned authors reach these diverse conclusions the article also demonstrates that quite plausible changes in the specifications of both bernheim and eaton and ware lead to incumbent firms underinvesting in entry deterrence

self selection and the earnings of immigrants this paper analyzes the way in which the earnings of the immigrant population may be expected to differ from the earnings of the native population because of the endogeneity of the decision to migrate the empirical study shows that differences in the u s earnings of immigrants with the same measured skills but from different home countries are attributable to variations in political and economic conditions in the countries of origin at the time of migration excerpt

collusion under financial constraints collusion or predation when the discount factor is near one abstract this paper considers the possibility of collusion between financially constrained firms it is found that they cannot collude when the discount factor is sufficiently close to one while collusion emerges at lower discount factors

stable farsighted coalitions in competitive markets in this paper we study dynamic alliance formation among agents in competitive markets we look at n agents selling substitutable products competing in a market in this setting we examine models with deterministic and stochastic demand and we use a two stage approach in stage 1 agents form alliances coalitions and in stage 2 coalitions make decisions price and inventory and compete against one another to analyze the stability of coalition structures in stage 1 we use two notions from cooperative games the largest consistent set lcs and the equilibrium process of coalition formation epcf which allow players to be farsighted thus in forming alliances players consider two key phenomena first players trade off the size of the total profit of the system versus their allocation of this total pie and second they weigh the possibility that an immediate beneficial defection can trigger further counter defections that in the end may prove to be worse than the status quo in particular one such example is that of the grand coalition which we show to be stable in the farsighted sense even though players benefit myopically by defecting from it we also provide conditions under which a situation of a few lone players competing against a large coalition is stable we examine the impact of the size of the market n the degree of competition the effect of cost parameters and the variability of the demand process on the prices inventory levels and structure of the market we discuss the possible strategic implications of our results to firms in a competitive market and for new entrants

strategic deterrence of sequential entry into an industry industrial entry deterrence is typically studied in a setting where an established firm or firms confront and attempt to deter a single potential competitor during the evolution of most industries however a sequence of firms enters or attempts to enter at distinct points in time consideration of issues arising from sequential entry fundamentally alters the qualitative nature of the deterrence decision undertaken by incumbent firms within a sequential setting counterintuitive behavior may be observed specifically numerous government policies designed to decrease industrial concentration penalties for anticompetitive practices subsidization of entry consent decrees restructuring industries may have the opposite effect

formation of a coalition proof stable cartel formation of coalitions in oligopolies is modeled as a noncooperative game in which firms strategies have a binary form to cooperate or not the author demonstrates a one to one correspondence between stable cartels defined by c d aspremont et al 1983 and the nash equilibria of this game using a coalition proof nash equilibrium they define the concept of a coalition proof stable cartel and prove that there is a unique equilibrium

immigrant selectivity and wages the evidence for women in an effort to extend the analysis of selectivity to female immigrants this paper examines the impact of economic conditions at the time of migration on the subsequent wages of foreign born women in the united states in addition the variables chosen to describe the migration decision have been expanded to include the effects of household status and immigration policy these results are compared to previous results for men and provide additional evidence about how the context of the migration decision affects the subsequent success of immigrants in the united states the sample for this project comes from the april 1983 current population survey and consists of married native and foreign born women between the ages of 16 and 64 excerpt

national innovation systems and the intermediary role of industry associations in building institutional capacities for innovation in developing countries a critical review of the literature abstract developed over the past three decades the national innovation system concept nis has been widely used by both scholars and policy makers to explain how interactions between a set of distinct nationally bounded institutions supports and facilitates technological change and the emergence and diffusion of new innovations this concept provides a framework by which developing countries can adopt for purposes of catching up initially conceived on structures and interactions identified in economically advanced countries the application of the nis concept to developing countries has been gradual and has coincided in the nis literature with a move away from overly macro interpretations to an emphasis on micro level interactions and processes with much of this work questioning the nation state as the most appropriate level of analysis as well as the emergence of certain intermediary actors thought to facilitate knowledge exchange between actors and institutions this paper reviews the nis literature chronologically showing how this shift in emphasis has diminished somewhat the importance of both institutions particularly governments and the political processes of institutional capacity building in doing so the paper suggests that more recent literature on intermediaries such as industry associations may offer valuable insights to how institutional capacity building occurs and how it might be directed particularly in the context of developing countries where governance capacities are often lacking contributing to less effective innovation systems stagnant economies and unequal development

the evolution and performance of biotechnology regional systems of innovation the paper maintains that biotechnology regions develop as complex systems they start with star scientists in research universities generating knowledge spillovers then move progressively towards regional technology markets in the process they attract venture capital or modify the behaviour of existing venture capital firms with the addition of biotechnology portfolios the routines of universities are also modified with the addition of intellectual property and technology transfer offices intervening as sellers in the newly created knowledge markets the paper also considers whether companies located in regional agglomerations grow faster than isolated ones and whether companies spun off from universities have a better performance than start ups the study is based on about 90 canadian based publicly quoted biotechnology companies

capacity output and sequential entry two crucial assumptions frequently made in industrial organization are that an established firm deters entry either by a constant high output the sylos postulate or by high excess capacity the excess capacity hypothesis these assumptions may be an accurate description of the observed conduct of firms in some industries however when the rules of the post entry game are clearly specified the optimal output and investment strategies of an established firm may depart considerably from these behavioral assumptions because of this possible inconsistency with rational behavior any conclusions about the formation of industry based upon either assumption are highly suspect what is more these assumptions avoid the main issue of whether entry deterrence is worthwhile at all this paper presents a dynamic model of entry in which established firms pursue a cournot nash alternatively stackelberg strategy toward a potential entrant the entrant behaves in cournot nash fashion and chooses output on the basis of expected postentry profits at the equilibrium of the post entry game within this framework a constant output entry deterring strategy would involve maintenance of an entry deterring output level before and after entry is threatened an excess capacity entry deterring strategy would involve holding excess capacity at an entry deterring level and increasing output to that level after entry is threatened special conditions are presented under which the sylos postulate or the excess capacity hypothesis will accurately describe optimal entry deterring strategies in addition special conditions are examined under which the established firm maintains a constant output or holds pre entry excess capacity when large scale entry does in fact take place the analysis shows that in general established firm reactions to entry are quite different from these special cases the sylos postulate see joseph bain paolo sylos labini franco modigliani 1958 asserts not only that potential entrants expect established firms to maintain their output constant as entry occurs but that established firms keep output constant at a level that deters entry whether or not it is profitable to do so hailed as a welcome major breakthrough on the oligopoly front modigliani 1958 the sylos postulate underlies many papers in the large theoretical and empirical literature on limit pricing yet the sylos postulate ignores both the strategic interaction between firms and the dynamic aspects of entry 2 unless the established firm s monopoly output exceeds the entrydeterring level the established firm with a general cost function able to choose an entry deterring output level will instead always desire a lower output level before entry for the special case where capacity is an upper bound on output and the established firm is a stackelberg leader in the post entry game

a signal jamming theory of predation we propose a new theory ofpredation based on signal jamming in our model the predator s characteristics are common knowledge while the entrant is uncertain of his own future profitability the entrant uses his current profit to decide whether to remain in the market and the predator preys to jam or interfere with this inference problem thus our model differs from those based on reputation effects in which the predator preys to signal information about himself

social status entry and predation the case of british shipping cartels 1879 1929 the authors incorporate social status and regional affiliation two variables of central sociological interest into an economic analysis of entry and predation they build on scott morton s 1997 examination of entry and predation in the merchant shipping industry and examine whether the social status of an entrant owner impacts on the predation behavior of the incumbent cartels they find that high social status entrants are significantly less likely 40 to be preyed upon than the low social status entrants they discuss several interpretations of this result subsequent analysis supports the hypothesis that cartel members use social status as an indicator of an entrant s propensity to be a cooperative cartel participant

the dynamics of a stable cartel the railroad express 1851 1913 i introduction the economic literature contains ample theoretical justification for the possibility of stable cartels for example osborne 1976 and porter 1983a but little in the way of empirical evidence about how stable cartels actually behave there is of course good reason for this shortcoming few stable cartels have ever existed cartel members find it too attractive to violate agreements in order to capture market share in eckbo s 1976 study of fifty one formal cartels the median lifetime of a cartel was only five years the mean was hardly better at 6 6 1 in general the dearth of stable cartels creates a problem for application of cartel theory 2 this paper however examines the exception to the rule what was probably the most successful cartel in u s business history the railroad express cartel the express cartel persisted for more than half a century by one reckoning from 1851 to 1913 during that time the five firms of the cartel agreed on prices territory and governance procedures and maintained a relatively stable environment within the industry moreover all five firms earned profits in virtually every year of the cartel s existence even during periods when the economy as a whole slipped into depression 3 periods of stress were present in the cartel but they tended to be short lived and contracts while subject to revision and dispute were never wholly abandoned aspects of the success of this cartel can be illuminated by various models in the industrial organization literature including some that explicitly treat cartel stability yet most of the literature on stability is deficient in that it typically examines only one kind of strategic interaction as this case shows long run success involves many strategies and other factors including the institutional framework the structure of costs the nature of internal transactions and the character of the technology the cartel s stability also was a dynamic process in which the organization acted continually to maintain conditions favorable to survival this paper will focus on two key elements in the success of the express cartel elements that would seem necessary for long run stability in any cartel 1 proficiency at deterring or at least limiting entry from outside and 2 ability to prevent defection among the members in fact deterrence and control are linked in the case of the express and the linkage was crucial to this industry s success the key feature was the creation and management of a joint distribution network this network it will be shown was the source both of the cartel s market power and of its internal stability after a brief historical overview the paper will examine the effects of the cartel s distribution system how it promoted a stable cartel ii overview the origin and history of the express cartel the railroad express industry controlled the parcel post service in the united states from 1839 until 1913 during that time the express provided the only established way of transmitting a parcel in the united states the industry also obtained economies of scope by combining parcel service with financial courier operations the express offered direct delivery of consignments and promised a full warranty on the contents in its first decade local express firms sprang up along key rail and steamship routes once established many express franchises were contested by new entrants at this time fixed costs were small encouraging entry efforts but incumbents often fought newcomers with price wars that drove out the entrant led to the bankruptcy of the incumbent or resulted in a merger 4 by 1850 two large regional firms the adams and american express companies had developed despite their histories of price warfare against potential competitors the two firms decided against conflict and in 1851 signed their first cartel agreement

bertrand edgeworth equilibria when firms avoid turning customers away this paper provides a simple solution to the problem of nonexistence of pure strategy equilibria in bertrand edgeworth models with strictly convex costs the voluntary trading constraint in standard bertrand edgeworth models is generalized to allow for there being costs incurred when customers are turned away so long as the industry is sufficiently large the presence of such costs ensures that the competitive price will be an equilibrium there will be other single price equilibria but if the offense costs are small all equilibria will be close to the competitive outcome

colluding on excluding abstract in an oligopoly characterized by barriers to re entry a finite horizon complete information convex costs and the presence of three identical firms i show that in subgame perfect equilibrium two of them the predators can choose to charge an initial price that is so low that the third the prey decides to exit immediately in this predatory pricing equilibrium the predators can enjoy higher profits than in the best collusive equilibrium with three firms thus a coalition of two firms can benefit from colluding on excluding

sectoral systems of innovation and production the concept sectoral system of innovation and production provides a multidimensional integrated and dynamic view of sectors it is proposed that a sectoral system is a set of products and the set of agents carrying out market and non market interactions for the creation production and sale of those products a sectoral systems has a specific knowledge base technologies inputs and demand agents are individuals and organizations at various levels of aggregation they interact through processes of communication exchange co operation competition and command and these interactions are shaped by institutions a sectoral system undergoes change and transformation through the co evolution of its various elements 2002 elsevier science b v all rights reserved

value of reputation in the chain store game with multiple incumbents abstract we extend the basic chain store game to the two incumbent case a highly stylized model is developed to analyze incentives of incumbent firms to maintain reputation for toughness entry deterrence has a public good property since maintaining reputation is costly each incumbent has an incentive to free ride on the entry deterring activities of its counterpart as a result of these incentives both incumbents accommodate when they both have a relatively high initial reputation for toughness this extreme form of underinvestment in entry deterrence becomes less likely as the number of markets with potential entry increases we also demonstrate that an incumbent s payoff is a decreasing function of its reputation over a large range of parameters this result stands in sharp contrast to the existing versions of the chain store game where high reputation for toughness always benefits a weak incumbent

participation games and international environmental agreements a non parametric model abstract we examine the size of stable coalitions in a participation game that has been used to model international environmental agreements cartel formation rd based on these examples a consensus has emerged that in this kind of game the equilibrium coalition size is small except possibly when the potential benefits of cooperation are also small in this paper we develop a non parametric approach to the problem and demonstrate that the conventional wisdom is not robust in a general setting we identify conditions under which the equilibrium coalition size can be large even when potential gains are large contrary to previously examined leading special cases we show that reductions in marginal abatement costs in an international environmental game can increase equilibrium membership and we provide a measure of the smallest reduction in costs needed to support a coalition of arbitrary size

industry structure with sequential technology choice abstract noncooperative entry deterrence arises in a market where firms enter sequentially and irreversibly choose a technology in the case of delegated entry deterrence the earliest firms enter with a normal technology and pass on entry deterrence responsibilities to subsequent entrants in the case of partial entry deterrence the earlliest firms choose an inferior technology that allows some but not full entry of later firms with a normal technology in both cases entry is deterred in that the equilibrium number of firms is smaller than would prevail if all firms were to choose a normal technology

do effective state business relations matter for economic growth evidence from indian states summary effective state business relations are a set of highly institutionalised responsive and public interactions between the state and the business sector this paper examines the impact of effective state business relations on economic growth across indian states over the period 1985 2006 we propose a measure that captures the various dimensions of effective state business relations at the sub national level and estimate standard growth regressions using dynamic panel data methods our results show that effective state business relations contribute significantly to economic growth and appear to be driven by the intensity of the interactions between the state and the private sector

on merger profitability in a cournot setting abstract in a setting where symmetric firms compete a la cour not and costsare linear the degree of concavity is identified as the main determinant of merger profitability this allows the results of salant et al 1983 and cheung 1992 to be generalized

why is there interethnic variation in the gender wage gap the role of cultural factors this paper analyzes interethnic variation in the gender wage gap among immigrants in the united states controlling for human capital factors does not eliminate interethnic variation in the gender wage gap moreover a positive correlation exists between the gender wage gaps of first generation immigrants and the same gaps in those groups countries of origin although i cannot detect a home country effect for second and higher generation immigrants the pattern for the first generation gap is consistent with a role for cultural factors in addition to human capital and institutional factors in explaining why some women earn more relative to men than others