the decline of dominant firms 1905 1929 the theory of dynamic limit pricing implies that a firm maximizes its wealth by gradually sacrificing its dominant market share we extend the theory by simulation methods to show that higher structural entry barriers generally result in both higher profits and a slower sacrifice of market share the model is applied to 42 once dominant firms in u s manufacturing to explain jointly the declines of their market shares and the profit rates earned during 1905 1929 the statistical results agree substantially with the hypothesis that these firms behaved consistently with maximizing their wealth through dynamic limit pricing

the relative importance of actual and potential competition empirical evidence from the pharmaceuticals market the relative importance of actual and potential competition empirical evidence from the pharmaceuticals market

are judges leading economic theory sunk costs the threat of entry and the competitive process in this paper we attempt to bring theoretical form to a particular entry argument that has found favor in the courts we suggest that sunk costs may not be a major impediment to entry when a group of customers can commit to an entry enhancing strategy buyers have strong incentives to adopt such strategies because they benefit directly from the resulting lower prices the simplest example involves a large buyer that is able to guarantee an entrant a market for its product long term contracts or even informal purchase commitments backed by customer reputation may also allow the entrant to obtain a guarantee of sufficient business to make the entry profitable once entry is thought likely to occur the existing competitors may be unwilling to attempt a price increase of any magnitude thus the threat of entry can maintain competitive prices even in the presence of sunk costs in section ii we motivate the analysis by discussing the current controversy over the role entry conditions play in an antitrust merger review then we discuss the necessary assumptions for a model of how the threat of entry can deter any price increase in the presence of sunk costs we note that these conditions are different from those commonly used in the economic literature

endogenous sequential entry in a spatial model in this paper we simulate a sequential entry of firms in a differentiated industry a la hotelling firms select a product location once for all they are aware of the unique price equilibrium that will take place after entry has occurred and take into account the behaviour of subsequent entrants it is found that early entrants will systematically locate around the centre but in such a way as not to induce later competitors to locate in between them location choices are also investigated as an instrument for entry deterrence which is feasible because of a fixed cost we identify several ranges of fixed cost for which entry is innocently deterred corresponding to a natural monopoly duopoly triopoly entry deterrence is then typically used to stretch the range of fixed cost for which a given number of firms can be sustained deterrence strategies are consistently such that firms locate at more regular intervals

on passive money there are two ways in which the quantity of money may be included in a general equilibrium system as a datum whose value is fixed exogenously or as an unknown whose value is determined by the equilibrium system itself let them be called active money and passive money respectively current monetary theory uses the first approach the ricardo walraskeynes tradition in general equilibrium models is clearly of the activemoney variety this is also true of the more contemporary versions such as patinkin s well known system 1965 apart from the main stream of thought however a number of analyses exist which imply passive money the gold standard model as it is usually expounded belongs to this class the price of gold in terms of money is given while the stock of money is endogenously determined by the set of equilibrium conditions the form in which the quantity of money adapts to its equilibrium level differs according to the institutional mechanism convergence is assured through monetization and demonetization of gold in the pure goldcurrency system and through convertibility of notes into gold and vice versa in the gold standard system with paper money in either case the money supply is allowed to conform to its equilibrium volume this kind of monetary system in which the money price of a certain product or commodity is a datum and the quantity of money a dependent magnitude may be denoted in general as a commodity standard

advertising sunk costs and barriers to entry this paper tests hypotheses about the entry deterring effects of advertising the model isolates three separate effects of advertising on entry the effect on the irrecoverable costs of entry the effect on the uncertainty underlying the entry environment and the effect on the measured rates of profit we find that advertising impedes entry since necessary advertising expenditures give rise to a sunk cost which raises the risk of entry however we also find a countervailing force due to advertising in that the entrant perceives a greater likelihood of success in markets where advertising is important our analysis shows that the overall impact of advertising on entry is positive

low pay dynamics and transition probabilities this paper models low pay transitions in britain using a bivariate probit model with endogenous selection to address the initial conditions problem and parental variables as instruments the exogeneity of the initial state is strongly rejected and results in considerable overstatement of the effects of explanatory factors the probability of being low paid depends strongly on low pay in the previous year restricting attention to those who remain employees results in an overstatement of the probability of the low paid moving up the earnings distribution but is not found to have much effect on the estimated effects of explanatory variables

location choice product proliferation and entry deterrence within a slightly modified version of hotelling s model we reconsider the claim that the threat of entry induces existing firms to produce a larger number of products than they would otherwise we show that entry deterrence although optimal need not be achieved through product proliferation in some cases the incumbent monopolist resorts to an entry deterring strategy based on location choice rather than product proliferation we also show that in some cases the number of products chosen by the incumbent facing the threat of entry is strictly greater than the minimum number required to deter entry

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

contestability queues and governmental entry deterrence this paper demonstrates that a perverse kind of entry deterrence can result when government subsidized production is combined with non price rationing in the form of queuing even though queuing leads to a total cost to the consumer not including the tax cost that is higher than the cost of an unsubsidized private supplier and even though the government s money price is rigid the market is not contestable the key to the result is that the waiting cost portion of the consumer s acquisition cost declines immediately upon entry and losses would be forced upon the entrant privatization would negate the entry deterrence thus leading to entry increased output at lower full prices lower average production costs decreased waiting costs increased profits and increased consumer surplus

noncooperative behavior by a cartel as an entry deterring signal recent work has investigated the effect of a potential entrant s uncertainty about postentry profits on the likelihood of his entering the market it has always been assumed that the potential entrant knows the type of postentry solution but lacks information on cost or as to whether the postentry solution will be cooperative or noncooperative we find that entry is more likely the greater is the preentry profit rate in equilibrium the threat of entry then forces the incumbent firms to act more competitively to deter entry

do changes in the labour market take families out of poverty determinants of exiting poverty in brazilian metropolitan regions using survival models we test whether short term changes in the labour market affect poverty duration data are from the brazilian monthly employment survey such a monthly dataset permits more accurate estimations of events than using annual data but its panel follows households for a short period then methods that control for both right and left censoring should be used the results are as follows households with zero income are not those with the lowest chances of exiting changes in aggregate unemployment do not affect poverty duration and increasing wages in the informal sector has a negative effect on poverty duration

demand for international reserves corrections for serial correlation and heteroscedasticity 1987 demand for international reserves corrections for serial correlation and heteroscedasticity applied economics vol 19 no 5 pp 609 618

predation among supermarkets an algorithmic locational analysis abstract first an algorithm that finds certain polygonal tesselations of r 2 is described the polygons involved here are market areas of supermarkets in a city defined by prices and transport cost proportional to euclidean distance then statistics based on the adjacencies boundaries and sizes of all market areas in edmonton canada during 1959 1973 are used to test hypotheses on locational predation

the demand for international reserves and exchange rate adjustments thecase of ldcs 1964 1972 in this paper the relationship between the demand for international reserves and exchange rate adjustments is empirically investigated for agroup of ldc s it is shown that countries that have maintained a fixed exchange rate for a long period of time have a different demand function than countries that have occasionally used exchange rate adjustments for correcting payments imbalances the dynamics of the adjustment for both groupsof countries are also analyzed the results show that while both groups tend to eliminate reserve disequilibria fast those countries that have maintained a fixed rate tend to do it more slowly than countries that have occasionally devalued their currency it is also shown that the year prior to a devaluation international reserves have been on average 30 below their short run desired level these results are important since they indicate that not all ldc s should be aggregated for prediction purposes the results also have implications for the analysis of the adequacy of international reserves in less developed countries this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract wa this abstract was borrowed from another version of this item

excess capacity and entry some empirical evidence recent articles by spence i977 dixit i979 and schmalensee i98i have elaborated on wenders i97i1 proposition that excess capacity can act as a barrier to entry the intent of all of these treatments is to suggest that firms may rationally invest in excess capacity with the expectation that excess capacity will be seen by potential entrants either as a signal of aggressive intent or as a credible threat 2 when excess capacity does not lead to creation of a credible threat it may still act as a barrier to entry by shifting the risk return perceptions of potential entrants enough to divert the potential entrants investments into other industries 3 alternatively investment in excess capacity by incumbent firms may reduce the prospects of an active market for the used equipment of a defunct entrant and thereby help to convert fixed costs into sunk costs consequently raising entry barriers 4 this paper represents an exploratory effort to investigate empirically the prevalence and efficiency of excess capacity in deterring entry first a simple and traditional model of entry is presented this is followed by the description of the data used to explore the excess capacity investment concept a combined results and comments section follows the description of the data

a note on the optimal rate of growth of international reserves the current reform of the international monetary system rests on the conception that the nominal quantity of external reserves taken in the aggregate must provide the flexible element in the adjustment between the supply of and the demand for real international liquidity carried to its logical conclusion this principle implies the adoption of a passive money system in the international sphere the nominal quantity of money ceases to be an exogenous datum to which prices and wages must conform and becomes a dependent variable having an equilibrium level 1 the new reserve assets are destined to satisfy the long run needs for reserve growth 2 yet as is well known the evaluation of such needs presents appreciable difficulties in itself this estimation problem is not new it was explicitly discussed in the report of the gold delegation appointed in 1929 to examine the trends in the gold demand and supply the method used by the delegation is worth recalling it is based upon the double assumption that 1 the monetary demand for gold is proportional to the quantity of money and 2 the demand for money is proportional to the aggregate value of transactions the second part of this hypothesis reflects obviously the quantity theory in its classical form the first part expresses instead an institutional situation in those years the countries under the gold standard used to maintain by virtue of law or of convention a margin of gold cover against the total amount of notes and of central bank sight liabilities the combination of the two ratios led the delegation to estimate the need for gold reserves as a fixed proportion of the total value of transactions

who stays poor who becomes poor evidence from the british household panel survey we estimate a first order markov model of poverty persistence and entry rates for working age britons and demonstrate the importance of controlling for endogenous selection via initial poverty status and attrition predicted poverty transition rates reveal substantial heterogeneity in poverty transition rates but there is also substantial genuine state dependence in poverty

limit price entry prevention when complete information is lacking abstract this paper extends an earlier paper by the author in which there were two economic agents an established firm and a potential entrant operating under complete information each agent being assumed to know the profit functions of both firms the present paper extends some of the results of the earlier work to a model in which it is not known with certainty to either agent what the profit functions would be after the entrant would come into the market

technology debt and the exploitation of growth options abstract this paper analyzes the effect of the firm s technology on the agency costs of debt it is shown that for an important class of technologies agency costs are not a uniformly rising function of leverage for these technologies relatively high leverage can be consistent with a small tax subsidy the effect of technology on the exploitation of real options by a levered firm is examined the analysis provides a framework for a direct test of the agency cost of debt hypothesis using cost data

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

demand for international reserves survey of recent empirical studies in the last decade many countries have preferred to move to a system of managed floating that is intermediate between the extremes of fixed rates and a clean float since managing the float requires international reserves it is clear that the study of these reserves is as relevant today as it has been in the past there are at least six reviews of the literature relevant to this study clower and lipsey 1968 niehans 1970 salant 1970 grubel 1971 williamson 1973 and cohen 1975 the justification for writing this review is that since completion of the last survey many papers have appeared which contribute to the stock of knowledge in this field however unlike the previous reviews which have concentrated on the broader issues pertaining to international liquidity such as the demand for reserves the supply of reserves the composition and distribution of reserves etc this study focuses solely on surveying empirical studies bearing on the demand for international reserves this review wi

would hotelling kill the electric car in this paper we show that the potential for endogenous technological change in alternative energy sources may alter the behaviour of resource owning firms when technological progress in an alternative energy source can occur through learning by doing resource owners face competing incentives to extract rents from the resource and to prevent expansion of the new technology we show that in such a context it is not necessarily the case that scarcity driven higher traditional energy prices over time will induce alternative energy supply as resources are exhausted rather we show that as we increase the learning potential in the substitute technology lower equilibrium energy prices prevail and there may be increased resource extraction and greenhouse gas emissions we show that the effectiveness and the incidence of emissions reduction policies may be altered by increased potential for technological change our results suggest that treating finite resource rents as endogenous consequences of both technological progress and policy changes will be important for the accurate assessment of climate change policy

action characteristics as predictors of competitive responses a central question in competitive dynamics is whether a competitive response can be predicted this study links various characteristics of actions with the total number and the time lag of competitors responses the hypothesized relationships were tested with a sample of competitive moves among u s airlines the results suggested that responses are influenced by the characteristics of the actions that evoked them specifically the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses strategic as opposed to tactical actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals counteractions finally contrary to prediction competitors who have a high stake in the markets under attack by a competitive move react slowly

sequential entry and deterrence with competitive spatial price discrimination abstract this paper analyzes sequential entry with perfect foresight in a competitive spatial price discrimination model with both an exogenous and an endogenous number of firms the spne locations do not coincide with the social cost minimizing locations

the square root law uncertainty and international reserves under alternative regimes canadian experience 1950 1976 abstract a transactions precautionary model of demand for international reserves is developed and tested against canadian data the results indicate that i the demand for reserves is characterized by economies of scale with respect to the volume of transactions that are invariant to the exchange rate regime but ii structural change took the form of a relatively larger responsiveness of reserves holdings under fixed rates to a measure of permanent variability in transactions

modelling low income transitions we examine the determinants of low income transitions using first order markov models that control for initial conditions effects those found to be poor in the base year may be a non random sample and for attrition panel retention may also be non random our econometric model is a form of endogeneous switching regression and is fitted using simulated maximum likelihood methods the estimates derived from british panel data for the 1990s indicate that there is substantial genuine state dependence in poverty we also provide estimates of low income transition rates and lengths of poverty and non poverty spells for persons of different types

empirical tests for predatory reputation in our earlier studies of the supermarket industry in edmonton alberta we tested for predation in a spatial setting and found evidence which supported the predation hypothesis in this paper we use data on the locations entry exit and market area populations of supermarkets in edmonton to test whether the entry deterrence and timing of expansion implications of the reputation hypothesis are confirmed we find that our time series data are consistent with entry s being deterred and with delayed opening of new supermarkets by the dominant established firm

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

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

strategic behaviour of incumbent firms in the uk abstract the main purpose of this paper is to examine the incidence of strategic behaviour in the uk by means of a questionnaire study performed across three broad manufacturing industries food electrical engineering and chemicals of the strategies which have received substantial theoretical attention r d and advertising appear widely used patenting pricing and excess capacity much less so vertical instruments such as purchasing policy also stand out as important but possibly only a minority of firms in our sample actively pursue strategic instruments

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

achieving demand side synergy from strategic diversification how combining mundane assets can leverage consumer utilities we explore the overlooked issue of how certain strategic level interindustry diversification options might increase consumer utility discussions of inter industry diversification typically focus on producer synergies obtainable from economies of scope or from skill transfer across business units discussions of intra industry product diversification generally the province of marketing typically focus on synergies obtainable from product bundling which lowers producer costs or provides convenience for consumers we take a different tack by linking interindustry diversification and consumer utility we first separately examine two possible consumer benefits of interindustry diversification 1 facilitating consumers accomplishment of two tasks simultaneously or 2 attracting diverse consumer groups to a common platform when intergroup externalities exist we then assess a simple empirical context that shows potential for simultaneous consumer utilities and two sided market utility together we analyze this context and concurrently develop a mathematical model showing how these demand side synergies can create unique business value we next introduce asymmetric preferences among consumer subgroups and we refine our arguments by comparing their conclusions with the empirical data we learn that combinations of otherwise mundane i e commonplace assets can create consumer value superior assets are not necessary moreover common ownership is necessary for the pricing flexibility required to deliver and capture maximum value through interindustry diversification especially when consumer groups preferences may change the negotiations and settling up required for cooperation through alliances will without common ownership increase costs and reduce responsiveness we discuss the sustainability of demand side advantages and the implications of these ideas for future research and practice

a poverty dynamics approach to social stratification the south african case abstract the wave of upbeat stories on the developing world s emerging middle class has reinvigorated a debate on how social class in general and the middle class in particular ought to be defined and measured in the economics literature most scholars agree that being middle class entails being free from poverty which means being able to afford the basic things in life not only today but also tomorrow in consequence there is an increasing tendency to define the middle class based on a lack of vulnerability to poverty in this paper we strengthen and expand on these existing approaches in three ways first we incorporate the differentiation between the middle class and a non poor vulnerable group into a broader social stratification schema that additionally differentiates between transient and chronic poverty second in estimating the risk of poverty we employ a multivariate regression model that explicitly allows for possible feedback effects from past poverty experiences and accounts for the potential endogeneity of initial conditions unobserved heterogeneity and non random panel attrition four factors insufficiently addressed in existing studies third we highlight the value of paying attention to these conceptual and modelling issues by showing that class divisions based on monetary thresholds inadequately capture a household s chances of upward and downward mobility we then apply our conceptual framework to the south african case we find that only one in four south africans can be considered stably middle class or elite access to stable labor market income is a key determinant of achieving economic stability a lack of jobs as well as the prevalence of precarious forms of work drive high levels of vulnerability which in turn constrains the development of an emergent middle class not only in south africa but potentially also in other parts of the developing world that face similar labor market challenges

poverty transition and persistence in ethiopia 1994 2004 summary this study analyzes the persistence of poverty in both rural and urban areas in ethiopia during 1994 2004 the key finding is that households move frequently in and out of poverty but the difficulty of exiting from poverty like the chance of avoiding slipping back increases with the time spent in that state and varies considerably between male and female headed households our results imply that it is important to design anti poverty policies both to hinder households from slipping into extreme poverty and to minimize the length of the poverty spell for households once they have fallen into it

caveat innovator strategic and structural characteristics of new product introductions abstract the assumptions underlying models of strategic behavior by incumbents are evaluated using a case study of a ground coffee product introduction the assumption underlying earlier strategic models that the entrant does not know the incumbent s payoffs after strategic have been tested does not appear to apply instead strategic behavior is observed to hinge on ex ante uncertainty about the structure of the payoff matrix and the incremental decision making which this uncertainty spawns in this environment strategies which create noise can slow learning and delay entry

climbing out of poverty falling back in measuring the persistence of poverty over multiple spells this paper investigates the persistence of poverty over individuals life times using a hazard rate approach that accounts for multiple spells of poverty and incorporates spell duration individual and household characteristics and unobserved heterogeneity the findings highlight the importance of considering multiple spells in an analysis of poverty persistence with half of those who end poverty spells returning to poverty within four years accounting for multiple spells shows that approximately 50 percent of blacks and 30 percent of whites falling into poverty in some year will have family income below the poverty line in five or more of the next ten years

fixed costs sunk costs entry barriers and sustainability of monopoly this paper shows that i fixed costs of sufficient magnitude assure the existence of a vector of sustainable prices for the products of a natural monopolist prices making him invulnerable against entry ii nevertheless fixed costs do not constitute barriers to entry that is they need not have undesirable welfare consequences iii indeed in market forms that we call perfectly contestable large fixed costs are completely compatible with many desirable attributes of competitive equilibrium iv sunk costs do however constitute barriers to entry and v finally the profit and welfare consequences of entry barriers are described formally in this paper it is shown that i fixed costs of sufficient magnitude assure the existence of a vector of sustainable prices a set of product prices that make a natural monopolist invulnerable against successful entry ii nevertheless costs that are truly fixed do not constitute barriers to entry that is they do not have the welfare consequences normally attributed to barriers to entry iii indeed there are markets of a form which we call perfectly contestable markets and whose properties may be approximated in practice in which large fixed costs are completely compatible with many if not most of the desirable attributes of competitive equilibrium iv sunk costs do however constitute barriers to entry and v finally the resource allocation problems that stem from fixed costs are formally identical with those that accompany public goods both their sources and their character are the same thus the rationale for public supply of public goods may be no different from that pertaining to nationalization of natural monopolies

predatory reputation in us airline markets abstract despite its long history in antitrust policy predation remains a poorly understood phenomenon the main difficulty is in empirically identifying predatory intent i propose a method for measuring the effect of reputation whose significance would enable us to infer predatory intents maximum likelihood estimation using simulated annealing algorithm is conducted with a sample of us airline markets the results provide some support for the presence of entrants learning and reputation effect as an application i discuss how the outcomes of my empirical model could help analyze such antitrust cases as the american airlines case

the persistence of monopoly an investigation of the effectiveness of the united kingdom monopolies commission a sample of twenty eight markets investigated by the uk monopolies and mergers commission is taken and market share changes are analysed for subsequent erosion of dominance the evidence points to a modest erosion for leading firms but only rarely to a loss of leadership although there is no significant difference between the rates of decline for leading firms in the mmc sample and a control group the achievement of some erosion of dominance in markets where entry barriers were reduced may represent some limited success for competition policy