wages and productivity growth in a dynamic monopoly abstract this paper studies the intertemporal problem of a monopolistic firm that engages in productivity enhancing innovations to reduce labor costs the optimal innovation policy is not monotone and the rate of productivity growth is the highest when the firm s size is in some intermediate range as long as its initial productivity is not too low the firm eventually reaches a steady state where the rate of productivity growth is identical to the rate of wage growth productivity dependent wage differentials do not affect productivity growth in the steady state they increase however the firm s long run equilibrium cost level

product and price competition in a duopoly this paper examines the role of consumer preferences costs and price competition in determining the competitive product strategy of a firm in the model studied here there are two identical firms competing on product quality and price they face consumers who prefer a higher quality product to a lower quality product but differ in how much they are willing to pay for quality the consumers can also choose a substitute if they don t like the product price offerings of the two firms for the firms a higher quality product costs more to produce than a lower quality product the paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor with the firm choosing the higher quality choosing the higher margin as well this differentiation however is not efficient that is it is possible to choose two other products and offer them at prices that cover their marginal cost and still satisfy consumers needs better in the aggregate a monopolist by contrast would differentiate his product line efficiently this suggests that cannibalization has different effects on product strategy than competition the paper also shows that if one firm enters the market first then it can defend itself from later entrants and gain a first mover advantage by preempting the most desirable product position

analysis of the changing influences on traditional households ownership patterns abstract sociological and economic forces have begun to alter ownership patterns in ways not yet captured by movements in the aggregate ownership rate while demographic factors such as marital status and family structure remain influential in determining tenure choice their impact has waned particularly among the best educated households and those with rising real incomes labor market conditions as evidenced by increasing returns to skill are more strongly felt than ever before in the housing market the impact on owning of being highly educated now rivals the influence of being married with minor children increasingly delayed ownership is a reality even for traditional family units with 36 to 45 year old heads that have not prospered in the labor market the rising real cost of even relatively inexpensive suburban housing is also beginning to be reflected in a heightened impact for real family income on tenure choice finally race currently is more adversely influential in determining suburban ownership for young middle aged minority families than it was in 1960 particularly if the household head is not well educated we suspect this is due to racially disparate impacts of increasingly rigorous zoning regulations and higher impact fees in the suburbs

imperfect competition multiple equilibria and unemployment policy this paper takes a simple imperfectly competitive macro model with increasing returns and shows how it can lead to nonexistence or multiplicity of equilibria the consequences for government policy toward unemployment are explored and shown to be very different from the traditional model it is argued that a multiple equilibrium model is an attractive possible explanation of the behavior of u k unemployment in the 1980s copyright 1990 by royal economic society

institutional prerequisites for economic growth europe after world war ii abstract european economic growth in the quarter of a century that ended in 1973 outstripped growth in any period of comparable length before or since the elements of europe s growth miracle wage moderation high investment and rapid export growth were delivered by a taylor made set of domestic and international arrangements on the domestic side the social market economy on the external side international agreements and institutions including the european payments union and the european coal and steel community that solved problems of commitment and cooperation that would have otherwise hindered the resumption of growth

is unemployment lower if unions bargain over employment would there be more employment if unions bargained over employment and not only over wages most economists seem to answer yes 1

commonality in product design cost saving valuation change and cannibalization abstract offering a variety of products is important for a firm to attract different consumer segments however high product variety increases production and distribution costs modular product design and parts commonality are approaches used to counter this trend in cost and still offer a variety of products this paper develops a model to examine when modular products should be introduced and how much modularity to offer the model looks at a market consisting of a high segment and a low segment customers choose the product that maximizes their surplus which is defined as the product s utility minus its price presence of commonality affects the utility of a product greater commonality decreases production cost but makes the products more indistinguishable from one another this makes the product more desirable for the low segment but less desirable for the high segment the firm s objective is to design the products and set the prices so as to maximize its profit

unionisation structures and innovation incentives this paper examines how dierent unionisation structures aect rms innovation incen tives and industry employment we distinguish three modes of unionisation with increasing degree of centralisation 1 decentralisation where wages are determined independently at the rm level 2 coordination where one industry union sets individual wages for all rms and 3 centralisation where an industry union sets a uniform wage rate for all rms while rms investment incentives are largest under centralisation investment in centives are non monotone in the degree of centralisation decentralisation carries higher investment incentives than coordination labour market policy can spur innovation by decentralising unionisation structures or through non discrimination rules

optimal strategies for general price quality decision models of new products with learning production costs abstract the question of product quality permeates every level of business and is becoming crucial for the survival of modern manufacturing firms in automotive and high tech industries in this paper we deal with the optimal price and quality policies for the introduction of a new product on the supply side the firm wants to determine the unit price and quality level over time given that unit cost declines along a learning curve and increases if quality is made greater on the demand side dynamic demand is related to price and quality as well as to cumulative sales which represent diffusion and saturation effects we will model this problem in a general framework that includes several previous results as special cases by applying the maximum principle we will derive the optimal price and quality policies and discover the interactions between these two major strategic marketing instruments and the diffusion process several fundamental theoretical results will be established for the model under certain specified conditions higher prices do imply higher quality and under other conditions the optimal price declines over time while the product quality improves to illustrate these results the theoretical results are applied to two specific cases the first one is a simple nonseparable demand growth function in price and quality the other is a separable demand function of price and quality

the tradeoff between wages and employment in trade union objectives this paper demonstrates that contrary to a widely held opinion the determination of the goals of unions is fully amenable to empirical analysis a characterization of the wage and employment setting process in unionized markets is adopted and its qualitative implications examined the first order condition for this model is fitted to time series data on the newspaper industry from ten cities the international typographical union s objective function reveals very restricted opportunities for substituting wages for employment in response to a change in the slope of the employer s labor demand function larger union locals place greater emphasis on wages versus employment than smaller union locals

optimal temporal product introduction strategies under valuation changes and learning consider a firm facing two consumer segments with differing valuations for quality the demand is stationary and known and consumers make repeat purchase over two time periods however once a premium product is introduced the valuations of the consumers change in the next period the firm derives a cost savings due to learning effect in the second period the magnitude of which depends on the sales volume in the first period under such a situation should a firm introduce a premium product before a basic product or the vice versa should it introduce two products simultaneously when should a firm expand or consolidate its product line what is the optimal product introduction strategy for a firm using a two period stylized model we seek to answer these questions we characterize the optimal product introduction strategy for the firm we describe three easily calculable parameters that govern the optimal choice of the firm the conditions under which a firm should expand or consolidate its product line are discussed we study the effects of cost savings and customer valuation changes we show that the dominated product strategies in absence of these effects can be a part of an optimal product strategy of a firm under valuation changes and cost savings the managerial implications of the model are discussed

trade unions and regional development abstract we focus on the role that labour unions play in the context of a two region dual economy we show that unskilled unions will increase the wage of unskilled workers and depress growth in both the backward and the advanced regions the growth effects will be felt more strongly in the relatively poor region if skilled workers are allowed to migrate and unions recognize that a more aggressive wage setting policy may foster migration unions will moderate their wage requests however regional unions would then have a strong incentive to coordinate their wage demands across regions this would further raise the unskilled wage and more so in the backward region we conclude that labour market policies designed to foster regional convergence should seek both to discourage centralized wage setting and favour skilled labour mobility

do unions reduce investment evidence from canada the authors test for a link between unionization and net investment rates in canadian manufacturing analysis of data on 18 industries for the years 1967 87 reveals a negative non linear relationship the presence of unions appears to have reduced investment when the percentage of firms in the industry that were unionized was between 0 and approximately 50 with a plateau or slight positive marginal effect above this level in an industry moving from no unions to the mean level of unionization net investment and gross investment are predicted to fall by 66 74 and 18 25 respectively

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

unionization structure licensing and innovation we show the effects of the unionization structure viz decentralized and centralized unions on a firm s incentive for technology licensing and innovation the incentive for technology licensing is stronger under decentralized unions we identify circumstances under which the benefit from licensing creates a stronger incentive for innovation under decentralized unions if the union s preference for employment is high the benefit from licensing may create higher incentive for innovation under decentralized unions however if the union s preference for wage is high enough the incentive for innovation is higher under a centralized union irrespective of licensing ex post innovation if the centralized union decides whether or not to supply workers to all firms the possibility of higher innovation under decentralized unions increases we further show that perfectly substitutable workers can be better off under decentralized unions if the labor productivity depends on the unionization structure which occurs in our analysis when e g licensing after innovation occurs only under decentralized unions or innovation with no licensing occurs only under a centralized union

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

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

rational expectations and policy credibility following a change in regime we examine the dynamic path of an economy after a change in regime when neither the policy to be followed nor the reactions of the public are known the model is an application of kreps and wilson s reputation model to barro and gordon s macroeconomic policy game equilibrium is defined to be the dynamically consistent solution to a game between the government and the private sector it involves mixed strategies and bayesian learning by both sides until the uncertainty about government and public behaviour is resolved the absence of complete credibility of government policy and intransigence of private sector wage demands increase the output loss of disinflation the analysis also sheds light on the strategic nature of economic policymaking and the role of information in macroeconomics

caught in the housing bubble immigrants housing outcomes in traditional gateways and newly emerging destinations research has documented that immigrants have moved in large numbers to almost every metropolitan area and select rural areas in the us in the midst of these demographic shifts the country has experienced a profound recession to date there has been little research on the impact of the recession on immigrants across the us using 2006 and 2009 american community survey microdata the paper assesses how the recent economic crisis has affected latino and asian immigrants with respect to two housing outcomes homeownership and headship over two important time points in the recent economic cycle immigrants have worse housing outcomes and significantly lower mobility rates after the recession regression results suggest that the negative impacts from the recession are strongest in the gateway metropolitan areas and that after controlling for residence in the hardest hit areas increases in metropolitan level unemployment and mortgage delinquency rates have a negative impact on homeownership rates the results also suggest that even though the recession has disrupted immigrants upward trajectory in the housing markets the effect has not been as severe on immigrants as one might expect in particular the places where immigrant populations are newest have not experienced as large a reduction in homeownership as those in the large immigrant gateways even in the established gateways the decline in homeownership has been smaller for immigrants than for us born households

government policy real wage resistance and the resolution of conflict a theory of bargaining with k players is proposed to reconcile the multitude of conflicting interests in an econometric model this nash strategy corresponds to a non zero sum differential dynamic game and is established either by rational anticipation of finite conflict or pre play round table discussion the theory is illustrated with an analysis of conflict between government trade unions and entrepreneurs all results are calculated from a large scale multisectoral dynamic model of the u k economy developed by the cambridge growth project

the codetermined firm in oligopoly abstract a simple duopoly model is considered where firm owners bargain with employees representatives about employment but not about wages as is the case for codetermined firms in germany it turns out that for some range of the bargaining power a prisoner s dilemma exists bargaining is the dominant strategy although joint profits would be maximized with unrestricted profit maximization

consumer habituation this paper examines how consumers willingness to pay for goods is determined by past patterns of consumption the central result is atheorem of interior maximum which states that willingness to pay for a good is maximized at a moderate level of habitual consumption the theorem is derived from a simple model of adaptive behavior that involves a shifting s shaped value function the detailed analysis of the impact of consumption frequency and intensity on willingness to pay reveals an unsuspected implication of diminishing sensitivity even as it leads to a formalization of consumer habituation patterns including sensitization habituation and response recovery upon withdrawal that matches and integrates the most robust empirical regularities attendant on nonassociative learning in neurobiology and behavioral psychology an examination of the implications for demand dynamics and pricing highlights deterministic recurrent and transient patterns of consumption at higher price points

trade unions investment and employment the implications of long term wage contracts and investment in capital on non cooperative wage bargaining between a firm and a union are analysed the union maximises a utilitarian utility function and the firm faces a neoclassical investment problem with internal adjustment costs the monopoly union outcomes with binding contracts is time inconsistent because the union has an incentive to renege on announced low wage strategies once the capital stock has been accumulated the monopoly union outcome without binding contracts leads to credible strategies which correspond to higher wages and lower levels of employment investment and the capital stock efficient contracts give rise to higher employment than monopoly union outcomes whether with or without long term wage contracts the results are illustrated with a numerical example finally when the game between the union and firm is repeated reputational equilibira provide a solution to the problem of time inconsistency

capacity decisions for high tech products with obsolescence abstract modern high tech products experience rapid obsolescence capacity investments must be recouped during the brief product lifecycle during which prices fall continuously we employ a multiplicative demand model that incorporates price declines due to both market heterogeneity and product obsolescence and study a monopolistic firm s capacity decision we investigate profit concavity and characterize the structure of the optimal capacity solution moreover for products with negligible variable costs we identify two distinct strategies for capacity choice demarcated by an obsolescence rate threshold that relates both to market factors and capacity costs finally we empirically test the demand model by analyzing shipping and pricing data from the pc microprocessor market

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

dynamic pricing when consumers are strategic analysis of posted and contingent pricing schemes abstract we study dynamic pricing policies for a monopolist selling perishable products over a finite time horizon to strategic buyers buyers are strategic in the sense that they anticipate the firm s price policies it is expensive and administratively difficult for most brick and mortar retailers to change prices placing limits on the number of price changes and the types of pricing policies they can adopt the simplest policy is to commit to a set of price changes a more complex alternative is to let the price depend on sales history we investigate two pricing schemes that we call posted and contingent pricing using the posted pricing scheme the firm announces a set of prices at the beginning of the horizon in the contingent pricing scheme price evolution depends upon demand realization our focus is on the posted pricing scheme because of its ease of implementation counter to intuition we find that neither a posted pricing scheme nor a contingent pricing scheme is dominant and the difference in expected revenues of these two schemes is small limiting the number of price changes will result in a decrease in expected revenues we show that a multi unit auction with a reservation price provides an upper bound for expected revenues for both pricing schemes numerical examples suggest that a posted pricing scheme with two or three price changes is enough to achieve revenues that are close to the upper bound dynamic pricing is only useful when strategic buyers perceive scarcity we study the impact of scarcity and derive the optimal stocking levels for large markets finally we investigate whether or not it is optimal for the seller to conceal inventory or sales information from buyers a firm benefits if it does not reveal the number of units it has available for sale at the beginning of the season or subsequently withholds information about the number of units sold

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

pricing strategies in a dynamic duopoly a differential game model we formulate a differential game model for dynamic pricing in a duopolistic market firms demand functions are derived from utility maximizing behavior of consumers with the demand for a brand given by the logit model preferences for brands are assumed to evolve over time in the market in a manner akin to learning models postulated in the marketing literature we derive the differential equations governing the equilibrium open loop price paths over time and show that in steady state the brand with the higher preference level charges the higher price the formulation is extended to include the effects of consumer heterogeneity and equilibrium steady state prices are compared with those obtained when heterogeneity is ignored a comparison of steady state dynamic prices with myopic prices is provided an empirical example is discussed to show how steady state model predictions may be obtained from actual longitudinal purchase data

immigration and economic resilience in the great recession the 2007 2009 financial crisis has caused economic disruption in many us cities and has drawn considerable academic attention despite abundant evidence of immigrants economic and social value to

testing for choice dynamics in panel data this article applies different approaches to distinguish state dependence from unobserved heterogeneity and serial correlation and hence test for state dependence in consumer brand choices first we apply a simple method proposed by chamberlain which involves lagged exogenous variables only second we also estimate a lagged dependent variable specification proposed by wooldridge third we use the estimation approach suggested by wooldridge to estimate a model with both lagged dependent and exogenous variables to distinguish between the two different sources of choice dynamics state dependence and lagged effects of the exogenous variables our analysis reveals that the best approach is to use models with both lagged dependent and exogenous variables our findings include strong evidence for state dependence in five out of the six product categories studied in this article

unions taxes and the structure of multinational enterprises abstract this note analyzes how a firm s relationship with unions or tax authorities influences its basic structure in particular it is shown that the prospect of capture by unions or tax authorities of part of the rents associated with the firm s investments leads it to open more plants than is technologically efficient thus unions and taxes are an independent reason for a firm s expansion nationally and for foreign direct investment

the determinants of wage pressure some implications of a dynamic model most models of wage determination are static this paper analyzes a simple dynamic model of collective bargaining and argues that this provides insights into the determinants of wage pressure that a static model cannot provide in particular it is shown how the length of labor contracts and the dynamics of the labor market affect the level of aggregate wage pressure the policy implications of the model are very different from those traditionally put forward to moderate wage pressure copyright 1991 by the london school of economics and political science

durable goods monopolists rational consumers and improving products we consider the case of a monopolist supplying an improving durable product to a population that is heterogeneous in its valuation of product quality in a two period framework we show that if consumers expect the product to improve in present value terms then intertemporal discrimination might result in the first period marginal consumer being left with zero surplus and some higher end consumers postponing purchase the resulting trajectories for quality and price do not constitute a subgame perfect equilibrium one of our conclusions is that the logic of profit maximization in the context of rational consumer choice imposes a demand side constraint on the rate of product improvement we also emphasize the disequilibrium consequences of improving a product so rapidly that high end consumers are tempted to wait for a future new and improved version finally the formulation adopted in the paper may be useful to understand observed differences in product improvement rates in different markets

the dynamic pricing of next generation consumer durables learning curve effects aspects of consumer demand models e g reservation price distributions intertemporal utility maximizing behavior and competitive activity are reasons which have been offered to explain why prices of new durables decline over time this paper presents an alternative rationale based on the buying behavior for products with overlapping replacement cycles i e next generation products a model for consumer sales of a new durable is developed by incorporating the replacement behavior of a previous generation product pricing strategies for two product generations are investigated analytically and with numerical methods results indicate that durable replacement behavior leads to a wider set of optimal pricing strategies than previously obtained several empirical illustrations of industry pricing practices for successive product generations are also shown to be consistent with the theoretical results finally various areas for future research are outlined

dynamics of unemployment vacancies and real wages with trade unions this paper considers the response of wages unemployment and vacancies to shocks when the number of job slots and real wages are determined by a nash bargain between a firm and a small union unemployment and vacancies co exist because of search considerations there is a unique natural unemployment rate which ensures that every firm union s bargained wage is stationary shocks that are eventually absorbed by wages cause deviations of unemployment from its natural rate because the firm union initial response to a shock is to change vacancies and possibly wages which cause changes in unemployment flows via the search process

pricing for a durable goods monopolist under rapid sequential innovation a durable goods monopolist who will be introducing new and improved versions of his product must decide how to price his products keeping in mind the relative attractiveness of the current and future products dhebar 1994 has shown that if technology is changing too quickly and the producer cannot credibly commit to future prices and quality then no equilibrium strategy exists that is there is no credible strategy for the future product that the producer can commit to in the first period we show that an equilibrium pricing strategy exists if the monopolist does not offer upgrade pricing that is special pricing to consumers who have bought an earlier version the author shows the possible purchase patterns in equilibrium and derives the optimal pricing strategy

fiscal policy profits and investment this paper evaluates the effects of fiscal policy on investment using a panel of oecd countries we find a sizeable negative effect of public spending and in particular of its wage component on profits and on business investment this result is consistent with different theoretical models in which government employment creates wage pressure for the private sector various types of taxes also have negative effects on profits but interestingly the effects of government spending on investment are larger than those of taxes our results can explain the so called non keynesian i e expansionary effects of fiscal adjustments jel e22 e62

the optimal pace of product updates some firms e g intel and medtronics use a time pacing strategy for product development pd introducing new generations at regular intervals if the firm adopts a fast pace introducing frequently it prematurely cannibalizes its old generation incurring high development costs while if it has a slow pace it fails to capitalize on customer willingness to pay for improved technology we develop a model to gain insight into which factors drive the pace we consider pd cost the diffusion rate coefficients of innovation and imitation the rate of margin decline and the degree to which a new generation stimulates market growth we find that a faster pace is generally associated with faster diffusion a higher market growth rate and faster margin decay not so intuitively we find that relatively minor differences in the development cost function can significantly impact the pace

macroeconomic stabilization policy and trade union behaviour as a repeated game lt is unquestionably true that the presence of trade unions in an economy affects its macroeconomic behaviour by attempting to maintain traditional patterns of relative wages among occupations and industries and by resisting cuts in real wages unions slow macroeconomic adjustment and structural change in response to macroeconomic shocks it is often argued that by insulating groups of workers from competitive pressures wage determination is less associated with market clearing than it otherwise would be overlapping contracts and resistance to relative wage changes thus give aggregate wage inflation mo mentum it would not otherwise have taylor 1980 jackman 1983 trade union bargaining may affect the position of the phillips curve jackman and layard 1982 nickell 1982 a popular argument for the increases in the nairu non acceleratinginflation rate of unemployment which have taken place between 1960 and 1980 in many industrialized countries where unions are strong is that trade unions have grown more militant and their bargaining behaviour has changed in some way this argument goes back at least as far as hines 1964

a note on price and quality competition between asymmetric firms abstract this paper analyzes the impact of asymmetry between firms on the outcome of price and quality competition from a microeconomic viewpoint consumers purchase a product based on not only its price but also its quality level therefore two firms compete in determining their prices and quality levels to maximize their profits the asymmetry arises from the difference in consumers loyalty to each firm that asymmetry then determines a character of differentiation between firms our purpose is to show how asymmetry influences competition under varying consumers price and quality sensitivity in doing so we extend earlier work in the area of price and quality competition we show that in both the moderately quality sensitive and price sensitive markets higher consumers sensitivity as well as lower consumers loyalty to any firm leads to intense competition resulting in a decrease of both firms equilibrium profits on the other hand in highly quality sensitive market asymmetry compels the smaller firm to change its competitive strategy in general this is more beneficial to the larger firm as the smaller firm s profit tends to decline in the worst case the smaller firm is driven out of business under equilibrium

investment profit sharing and the degree of centralization abstract this paper examines monopoly unions which are strong enough to use two part tariffs i e basic wages plus profit shares it is shown that decentralization in bargaining increases the total pay per worker and lowers the levels of capital stock and income

misleading comparisons of homeownership rates when the variable effect of household formation is ignored explaining rising homeownership and the homeownership gap between blacks and asians in the us despite ominous signs of housing market stress in the us the homeownership rate reached an all time high in 2006 the conventional definition of homeownership which is based on the share of households and ignores the effects of variable household formation confounds the measurement of success in achieving homeownership it is found that from 1990 to 2006 declining household formation led to an elevated homeownership rate in the us and that this effect varies substantially between racial ethnic groups asians who achieve high homeownership rates have the lowest propensity to form independent households in sharp contrast to african americans asians do not have better access per capita to owner occupied housing than do blacks the conventional measure of homeownership is an incomplete measure of homeownership opportunity because it fails to account for variable household formation the changing population mix in the us includes groups with different propensities for household formation thus confusing future assessments of homeownership and the housing market

trade unions non binding wage agreements and capital accumulation abstract this paper provides a counterexample to some recent results of grout and others which state that in a bargaining situation without binding wage agreements the capital stock will be biased downwards in a general equilibrium setting this result may be reversed the model is a simple diamond type overlapping generations economy where the young supply labour and the old own both capital and shares in firms in this environment a move from binding to non binding wage contracts may increase the capital stock as will a rise in trade union power finally it is shown that the move to non binding contracts may increase or decrease steady state utility but that the non binding contracts equilibrium is always pareto inefficient

what happens to household formation in a recession abstract while many studies have investigated the determinants of housing demand very few studies have focused on how economic conditions affect the formation of potential households directly potential households may choose to delay entry into the housing market by remaining with one s parents during times of economic hardship or by combining with other persons to share housing costs using a variety of modeling approaches we find that both the increase in the unemployment rate and the presence of recessions reduce the rate of household formation simulations suggest that these declines are substantively important for example in a recession the likelihood that a young adult will form an independent household falls by 1 9 points depending on the age of the person by way of comparison if an individual is unemployed the likelihood of leaving the parental home is up to 11 points lower

the economic determinants of young people s household formation the paper derives predictions about the impact of the price of housing young adults income and parental income on the probability that a young adult in the united kingdom lives apart from his her parents it shows that the predicted effect of the price of housing is intimately related to the price elasticity of housing demand it uses longitudinal data on a cohort of britons born in 1958 surveyed in the national child development study to estimate dynamic models of first departure from the parental home and particularly to estimate the impact of housing price on the timing and destination of first departure excerpt

multiple equilibria in the british labour market some empirical evidence abstract this paper takes a simple imperfectly competitive aggregate labour market model with increasing returns which can lead to non existence or multiplicity of equilibria the model is estimated using annual aggregate data for britain some evidence is found and recent british economic history is interpreted using the model

optimal price skimming by a monopolist facing rational consumers this paper considers the intertemporal pricing problem for a monopolist marketing a new product the key feature differentiating this paper from the extant management science literature on intertemporal pricing is the assumption that consumers are intertemporal utility maximizers a subgame perfect nash equilibrium pricing policy is characterized and shown to involve intertemporal price discrimination we compare this policy to the optimal policy for a monopolist facing myopic consumers and find that for any given state prices are always lower with rational consumers than with myopic consumers for plausible parameter values the assumption of consumer rationality can be shown to lead to large differences in optimal prices moreover if a monopolist facing rational consumers implements the optimal myopic consumer pricing policy profits can be significantly less than if the monopolist follows the equilibrium pricing policy for rational consumers

the response of latino immigrants to the great recession occupational and residential im mobility during the great recession in the us there were distinct housing and labour markets that were particularly hard hit this was primarily due to the fact that the housing industry had fueled much of the recent economic growth this article takes advantage of the shock to the construction industry to investigate the responses of latino immigrants in metropolitan areas that were most heavily concentrated with latino immigrants in the construction industry as expected there were large declines in the proportion of the latino immigrant population that was working in the construction industry during the recession there were some shifts of employment in the industry after the recession but the biggest change was in the number of unemployed while declines in construction jobs did predict moving out of a metropolitan area decline in the overall job market had a larger impact on mobility finally we find evidence that those who moved out of the metropolitan area were less likely to be employed although it i

a field study of rental market discrimination across origins in france abstract discrimination against particular groups in the housing market increases search costs and limits optimal matching thus resulting in economic and social inefficiencies this paper tests for the existence of discrimination in the french rental market against individuals with names which signal their connection to five immigrant groups northern africa sub saharan africa turkey poland portugal spain by implementing an online field study using one of france s largest online advertisements website the results show that applicants with foreign sounding names coming from northern africa sub saharan africa and turkey are 16 to 22 percentage points less likely to receive a response than applicants with french names or names associated with poland portugal or spain in addition when applicants with foreign sounding names from any origin receive a response it is significantly more likely to be negative or include a request for more information than responses to emails including french sounding names finally we find some geographic differences in response rate differentials that are correlated with differences in the local income and share of immigrants this provides evidence that landlords use names as a proxy for economic and other sociodemographic characteristics

the effects of sensitization and habituation in durable goods markets abstract we develop a model to study the impact of changes in price sensitivity on the firm as it introduces multiple generations of a durable product where unit costs are a convex function of quality we incorporate the psychological processes of sensitization and habituation into a model of discretionary purchasing of replacement products motivated by past experience when price sensitivity decreases with each purchase sensitization the myopic firm offers a higher quality product at a much higher price with each generation when price sensitivity increases with each purchase habituation the myopic firm engages in price skimming when sensitization is followed by habituation the myopic firm eventually provides higher quality than the market is willing to pay for leading to a steep drop off in sales and profits the actions of the forward looking firm depend on the discount rate a firm with a low discount rate builds its customer base before offering a higher quality and higher priced product in contrast a firm with a high discount rate quickly increases price and quality following the same path to falling profits of the myopic firm these results provide insight into the firm and consumer behaviors underlying the phenomenon of performance oversupply identified in the innovation literature

spatial housing economics a survey this introduction to the virtual special issue surveys the development of spatial housing economics from its roots in neoclassical theory through more recent developments in social interactions modelling and touching on the role of institutions path dependence and economic history the survey also points to some of the more promising future directions for the subject that are beginning to appear in the literature the survey covers elements of hedonic models spatial econometrics neighbourhood models housing market areas housing supply models of segregation migration housing tenure subnational house price modelling including the so called ripple effect and agent based models possible future directions are set in the context of a selection of recent papers that have appeared in urban studies nevertheless there are still important gaps in the literature that merit further attention arising at least partly from emerging policy problems these include more research on housing and biodiversity

modifying customer expectations of price decreases for a durable product we study the introductory signalling strategy for a durable product that faces optimistic expectations among customers about price declines over time the firm introducing the product knows that experiential learning is low for the product however customers being uncertain about the extent of experiential learning assign a nonzero probability that the firm s new product will enjoy a high cost reduction with cumulative experience the optimistic expectations of customers reduce their willingness to pay a high price at the product s introduction while predisposing them to buying later the challenge facing the low experience firm is to choose an introductory strategy that will credibly convey the low experience curve effect to customers we use the sequential equilibrium concept in a game theoretic framework to identify the firm s signalling strategy we identify the unique separating equilibrium of the game after refining the set of separating equilibria we demonstrate that a high introductory price credibly signals the low experiential learning to customers we also show that signalling causes an artificial learning curve effect

why are hispanic and asian american homeownership rates so low immigration and other factors abstract the homeownership rates of hispanic and asian american households are significantly less than that of other demographic groups in the us especially after accounting for income and other characteristics this naturally leads to an investigation of the impact of immigration characteristics of various groups on the propensity for homeownership it is found that being an immigrant has a substantial negative effect on the probability of being a homeowner but that this effect dissipates over time the relative youth of these two groups in and of itself plays a significant role in lowering their homeownership rate as does the relatively high rate of residence in areas with high value rent ratios

labor policy and investment evidence from canada some critics of proposed legislative labor policy changes contend that laws favoring labor would adversely affect business investment research on labor policy however often assumes that investme

codetermination as a strategic advantage abstract a theoretical model of codetermination is considered where consistent with german institutions firm owners bargain with employees representatives about employment but not about wages a duopoly and a more general oligopolistic situation are analyzed for some range of bargaining power a prisoner s dilemma exists codetermination leads to increased profits if the other firm is a traditional profit maximizer bargaining is the dominant strategy although joint profits would be maximized with unrestricted profit maximization the theory is tested with data from 22 german firms who operate in the same markets over 23 years codetermined firms actually show a different behavior than other companies

why do governments subsidise investment and not employment abstract the governments of nearly all industrialised countries use subsidies to support the economic development of specific sectors or regions with high rates of unemployment conventional economic wisdom would suggest that the most efficient way to support these regions or sectors is to pay employment subsidies we present evidence showing that capital subsidies are empirically much more important than employment subsidies we then develop a simple model with unemployment to explain this phenomenon in our model unemployment arises due to bargaining between unions and heterogenous firms that differ with respect to their productivity union bargaining power raises wage costs and leads to a socially inefficient collapse of low productivity firms and a corresponding job loss union firm bargaining also gives rise to underinvestment it turns out that an investment subsidy dominates an employment subsidy in terms of welfare if there is bargaining over wages and employment on the firm level if bargaining is over wages only results are ambiguous but capital subsidies may still be preferable