cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

interfirm rivalry in a repeated game an empirical test of tacit collusion rivalry in the vancouver retail gasoline market is modeled as a repeated game service station demand cost and intertemporal reaction functions are estimated from daily data on individual station prices costs and sales these functions are then used to calculate noncooperative and cooperative solutions to the constitutent game and the actual outcome of the repeated game the actual outcome is found to be substantially less lucrative than the monopoly solution nevertheless all stations are better off than if they played their noncooperative strategies in every period copyright 1987 by blackwell publishing ltd

generating and sustaining backward linkages between maquiladoras and local suppliers in northern mexico abstract despite 25 years of growth mexico s in bond assembly or maquila operations use very little material inputs that are made in mexico mexican content is less than 2 of value added and those coming from the northern border region are even more miniscule some of the reasons for the paucity of local sourcing are reviewed with particular emphasis on corporate and plant purchasing arrangements mexican policies designed to support national suppliers are reviewed and the authors offer suggestions that stress the need for a regional focus that concentrates on fostering local technological capacities the study relies in part on surveys of plant managers and corporate purchasing officers

product market competition and the industry price cost markup fluctuations abstract we examine the role played by imperfect competition in the response of markups to energy price and monetary changes we find i for concentrated industries markups increase with monetary expansion and decrease when energy prices increase the elasticity with respect to energy prices is greater than monetary changes ii for low concentration industries markups are virtually unaffected by monetary changes and the energy price elasticities are statistically insignificant iii markups are procyclical over the industry specific cycle and iv increased import competition lowers markups only in the concentrated industries the energy price increases decreases during the 1970s 1980s may have been a key factor contributing to the narrowing widening of the markup gap between high and low concentration industries we provide evidence that procyclical markups in concentrated industries are not being driven by differences in the degree of labor hoarding between low and high concentration industries

the identification of monetary policy disturbances explaining the liquidity puzzle abstract this paper examines recent work on the identification of monetary policy disturbances its main finding is that the empirical anomalies found in the literature reflect a failure to properly address the federal reserve s policy of accommodating reserve demand shocks a new method of identifying monetary policy using nonborrowed reserves is proposed using this specification policy has a strong persistent liquidity effect regardless of subsample policy granger causes output even in the presence of interest rates explaining approximately 49 of the variance in output at a two year horizon and the residual explanatory power of interest rates for output is negligible

product market competition and the impact of price uncertainty on investment some evidence from us manufacturing industries the authors estimate the impact of price uncertainty on investment using a panel of u s manufacturing industries pooling the data for all industries uncertainty has no impact on current investment however for industries that have low levels of seller concentration and thus are likely to be highly competitive the estimated impact is negative and statistically significant while for industries with high levels of seller concentration the impact is always small and not significantly different from zero the finding of a negative relationship between investment and price uncertainty in competitive industries is broadly consistent with models that incorporate irreversibility of capital investment copyright 1996 by blackwell publishing ltd

strategic pricing models and interpretation of price war data abstract price wars cartel breakdowns and other seemingly disequilibrium pricing phenomena are examined questions of interest include when do breakdowns occur how long do they last what determines their severity and are they characterized by increased cross sectional price dispersion and or temporal price volatility the first half of the paper explains how the choice of punishment strategy the specification of the stochastic shocks to the system and the assumptions regarding observability determine the pricing dynamics implicit in several theoretical price war models theories are classified into imperfect monitoring models in which players actions cannot be observed learning models in which structural parameters are unknown to the players and cyclical models in which observability is perfect but business cycles affect the difficulty of colluding the second half in contrast examines data on prices actually set by firms in industries which are subject to periodic wars when the models are confronted with the data we can see how well oligopoly theory explains the behavior of the firms in these industries the object of the exercise is not to pick a winner instead the role of industry characteristics in determining pricing dynamics is assessed and the reasons why simple models may fail to explain complex pricing patterns are examined finally directions for future research are suggested by the empirical regularities which are uncovered

r d cooperation and the joint exploitation of r d is r d cooperation preferred to non cooperative r d and does the answer depend on how firms choose output and if anti trust protection is provided to r d is it desirable to extend anti trust protection to cooperative production as well in our model cooperative r d is always preferred by both firms and consumers regardless of how output is chosen we then show that though innovation effort and profits are higher when both output and r d effort are chosen cooperatively consumer surplus and overall social welfare are higher when cooperation is restricted to r d

symposium on mergers and antitrust m x ergers and acquisitions spark ongoing controversy in the economics profession and in society at large this is not surprising billion dollar deals not only involve a great deal of money but they often raise economic issues implicating capital and labor markets as well as the markets for the products sold by the merger partners because of this merger enforcement is probably the most widely known area of antitrust however economists who do not specialize in industrial organization generally have little understanding of the type of competitive analysis that forms the basis for merger enforcement by the antitrust authorities and the courts this is unfortunate not only does this analysis have important social implications but when formulated rigorously the analytic model used in antitrust represents a simple yet quite sophisticated microeconomic model of competition in the past ten years economics and economists have become far more important in antitrust the so called chicago school of antitrust has provided the intellectual rationale for a considerable loosening of antitrust law its intellectual leaders for example robert bork richard posner and frank easterbrook have become judges and soon may ascend to or already have joined the supreme court economists like james miller and george douglas have become federal trade commissioners and the staff economists at the commission and the department of justice have gained considerable influence

aggregate impact of different brand development strategies current branding literature investigates the spillover effects and extension effects due to the introduction of product extensions however no study so far has evaluated the aggregate market impact of these effects across different brand development strategies or accounted for the strategic decision to introduce the extension it is important to examine the above given the significant investments and the high failure rates associated with the introduction of new product extensions in this study we develop an analytical framework that derives revenue outcome due to an extension introduction as a function of spillover and extension effects we empirically estimate the above effects through a bayesian endogenous switching model that jointly models market shares of the extension and its parent brand along with the strategic decision to introduce the extension and the endogeneity in prices by using a data set that covers 155 extensions introduced across 20 u s geographic markets we obtain several new gen

persistent trade effects of large exchange rate shocks this paper presents a theoretical basis for the argument that large exchange rate shocks such as the 1980s dollar cycle may have persistent effects on trade flows and the equilibrium exchange rate itself we begin with a partial equilibrium model in which large exchange rate fluctuations lead to entry or exit decisions that are not reversed when the currency returns to its previous level then we develop a simple model of the feedback from hysteresis in trade to the exchange rate itself here we see that a large capital inflow which leads to an initial appreciation can result in a persistent reduction in the exchange rate consistent with trade balance

some empirical evidence on the effectiveness of antimerger relief in the united states the paper seeks to flll the void in the empirical economics literature of u s antimerger policy a new empirical measure of relief secured in a section 7 case is proposed the extent of obtained relief is modeled as a fraction of the competitive overlap subject to structural divestiture the model of determination of the relative size and scope of divestiture is applied to a sample of recent section 7 cases the estimated model is reasonably successful at predicting the outcomes of several out of sample cases

oligopoly supergames some empirical evidence on prices and margins this paper is a panel data study on the behavior of prices and margins of oligopolies involved in repeated games the authors examine two supergame models which generate very different predictions about the cyclical behavior of prices and margins evidence on the levels of price cost margins indicates that oligopolies achieve equilibria that more closely resemble a one shot cournot nash outcome than monopoly the authors find however that industries with high price cost margins exhibit cyclical price behavior which is quite different from that of unconcentrated industries little evidence of price wars during either recessions or booms is found copyright 1987 by blackwell publishing ltd

profit margins and the business cycle evidence from uk manufacturing firms this paper presents some empirical models of profitability using panel data covering 709 large u k companies ove r the 1970s and 1980s focusing specifically on the role of aggregate demand shocks in shaping firm level profitability in basic regressi ons and in quite complex econometric models the results suggest that firm level profit margins fell heavily during the deep manufacturing recession of the early 1980s and as such are consistent with model s predicting the procyclical nature of profit margins this result hol ds across different product groups producer goods consumer durables a nd nondurables though the timing of the impact of aggregate shocks appears to differ copyright 1993 by blackwell publishing ltd

price and investment dynamics theory and plant level data we construct a model of a firm competing for market share in a customer market and making investments in physical capital the firm is financially constrained and there are implementation lags in investment our model predicts that product prices should depend on costs and competitors prices but respond weakly to demand shocks also prices should be strongly related to investment we estimate price and investment equations on panel data for swedish manufacturing plants and find results that are qualitatively in line with these predictions though the relation between investment and prices is stronger than predicted by our model

multidivisional firms internal competition and the merger paradox traditional modelling of mergers has the merged firms insiders cooperate and maximize joint profits this approach has several unappealing results in quantity setting games for example mergers typically are not profitable for insiders but are profitable for non merging firms outsiders we take a different approach and allow for a parent company that can play each insider off one another in quantity setting games with our approach mergers are profitable for insiders unprofitable for outsiders socially beneficial and involve in a non monopolizing merger a small number of firms finally we find that the optimal strategy depends on whether firms compete in quantity or prices jel classification l000 entreprises multi divisionnelles concurrence interne et le paradoxe des fusions les modelisations conventionnelles des fusions suggerent que les entreprises fusionnees parties prenantes cooperent et maximisent leurs profits conjoints cette approche engendre plusieurs resultats contre intuitifs dans des jeux de concurrence par les quantites i e les fusions en general ne sont pas profitables pour les parties prenantes mais sont profitables pour des entreprises qui ne sont pas fusionnees les autres les auteurs adoptent une approche differente qui permet a l entreprise mere de jouer les parties prenantes l une contre l autre dans ce genre de jeu avec l approche adoptee les fusions sont profitables pour les parties prenantes non profitables pour les autres socialement benefiques et impliquent un petit nombre d entreprises dans une fusion qui ne cree pas un monopole finalement on trouve que la strategie optimale depend fondamentalement du fait que les entreprises se concurrencent par les prix ou par les quantites

real wages employment and the phillips curve a recent study by bils found real wages to be procyclical contradicting previous findings by geary and kennan who found no consistent relationship and neftci who found countercyclical movements in real wages these studies differed in both methodology and sample period in this study we found that real wages were either procyclical or countercyclical depending on the sample period chosen employment changes generated by aggregate supply shocks were associated with procyclical real wage movements while during years dominated by shifts in aggregate demand real wages were highly countercyclical

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

antitrust and merger policy a review and critique a ny antitrust policy that tries to put some restrictions on mergers must have a conceptual basis one such framework might be a populist approach in which only absolute or relative size of the merger partners and or the resulting entity would be the criterion political rhetoric often embodies this approach an alternative approach the one that underlies the 1982 department of justice merger guidelines concerns itself with the possible exercise of market power 1 i believe this second approach is more consistent with the language of section 7 of the clayton act itself which instructs the department of justice and the federal trade commission to prevent those mergers the effects of which may be substantially to lessen competition or to tend to create a monopoly this market power approach also places merger policy in a realm that is susceptible to economic analysis for this reason as well this approach appeals to me the merger guidelines are firmly rooted in the standard oligopoly theory developed by chamberlin 1933 fellner 1949 and stigler 1964 and strengthened

cooperative r d and strategic trade policy in this paper three different cooperative r d arrangements in a strategic trade policy model are examined a policy game between two governments is analysed where each government chooses a particular cooperative r d policy in order to maximize national welfare allowing cooperation in r d is also compared with the use of r d subsidies it is jointly optimal for both governments to allow their firms to participate in the same type of cooperative r d and allowing cooperation in r d can

modeling production externalities in the maquila industry in the past decade the maquiladora export industry surpassed both tourism and petroleum products to become the number one source of earned foreign exchange for mexico the continued growth of the maquila industry suggests that there may be significant production spillovers into the local environments dynamic modeling using stella provides a framework for quantifying the environmental impacts emanating from the growth of the maquila industry focusing on wastewater treatment consequences and resulting infrastructural policy considerations such detailed modeling of industrial infrastructural and ecological linkages has not yet been a feature of research on this region despite the potential for significant human health ramifications an environmental model is therefore developed for two focal urban communities nogales and mexicali facing potential wastewater treatment concerns due to the growth of nearby maquila factories in the former case the analysis revealed the inadequacy of the capacity planning for the treatment of effluent in the latter case conservative projections reveal that the system upgrades should be able to handle demands through 2020

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

why are prices sticky preliminary results from an interview study this paper reports preliminary results from a large research project on business pricing which is currently underway the idea is to use interviews with actual price setters to assess the validity of a dozen theories of price stickiness the rather unorthodox for economists methodology is defended the research design is described briefly and a few results based on the first 72 interviews out of a projected 200 are presented this sample suggests that the median firm changes its price annually and that price adjustments typically lag 3 4 months behind shocks to demand or cost this abstract was borrowed from another version of this item

banks as multioutput oligopolies an empirical evaluation of the retail and corporate banking markets the distinction between retail and corporate banking markets is of much importance in real life banking organizations the two markets differ with respect to concentration the importance of informational asymmetries and the extent of customer mobility within a standard conjectural variation model estimated on cost efficient banks as well as on the full sample of banks the authors empirically characterize the strategic behavior in each of these markets and also focus on cross market interactions to see whether initial moves in one market affect the equilibrium in the other market they compare their findings to the predictions that would follow from merely considering concentration ratios such as the herfindahl index

evidence on nominal wage rigidity from a panel of u s manufacturing industries we provide a set of stylized facts on the response of industry nominal wage growth to aggregate and industry specific influences using annual data for 450 u s manufacturing industries over the period 1958 to 1989 we find support for the canonical wage contracts model the response of nominal wage growth to expected inflation is estimated to be between 0 6 and 0 8 this estimate holds for several sectors within manufacturing the response of nominal wage growth to unexpected inflation is around 0 1 indicating a striking departure from the classical assumption of full indexation we also find support for the multisector wage indexation models the estimated profit sharing elasticity is positive as hypothesized in these models the instrumental variable estimates of the profit sharing elasticity are typically between 0 1 and 0 2 copyright 1996 by ohio state university press

do supply curves slope up this paper examines the short run responses of price and quantity to exogenous demand shocks for disaggregated u s manufacturing industries using prior information on input output linkages to identify industries whose fluctuations are likely to function as approximately exogenous demand shocks for other industries i find that demand shocks induce positive covariation between price and quantity for 16 out of 26 sample industries controlling for observable cost shift variables when sample industries are pooled i estimate that a demand shock which initially raises industry output by 1 percent generates a price increase of 0 182 percent within one year i find that input output instruments detect upward sloping supply curves more readily than least squares or other commonly used demand shift instruments

the differential impact of uncertainty on investment in small and large businesses we study the impact of profit uncertainty on investment and whether or not this response is different in industries that are dominated by small firms versus those that are dominated by relatively larger firms our key findings are that the sign of the investment uncertainty relationship is negative and that the quantitative negative impact is substantially greater in industries dominated by small firms these results are robust to accounting for potential endogeneity of the uncertainty measure alternate procedures for measuring uncertainty and alternate ways of segmenting industries into small and large firm groups

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

export orientation and domestic merger policy theory and some empirical evidence abstract recent open economy industrial organization literature finds export orientation enhances the weight of post merger international competitive gains favouring lenient domestic merger policy however mergers seldom generate the significant synergies supportive of international competitive gains since a joint economies of production effect suggests domestic mergers tend to generate international competitive losses not gains export orientation favours strict not lenient domestic merger policy we show how non synergistic domestic mergers in the presence of international sales might reduce national welfare and incur stringent merger reviews a panel data set of u s merger policy by manufacturing sector 1990 2001 empirically supports export orientation leading to strict merger policy jel classification l40 f10

in search of the liquidity effect abstract a short run negative relationship between monetary aggregates and interest rates the liquidity effect is central to discussions of monetary policy this paper searches for this empirical relationship we investigate whether the characterization of the liquidity effect is sensitive to i changes in sample period ii conditioning the correlations on past information iii assuming money growth is exogenous and iv treating monetary changes as anticipated or unanticipated the correlations change substantially in each case we conclude that the traditional analysis and modern models which rely completely on demand side behavior cannot explain the observed correlations a successful characterization of the liquidity effect requires identification of both private and policy behavior

international trade and industrial organization this survey reviews recent contributions to the interface between international trade and industrial organization import competition places a substantial limit on domestic market power in the short run competitive conditions can influence the speed and efficiency of a domestic market s adjustment to international disturbances exports effects on competition among national sellers are unclear and depend on the scope for price discrimination models of trade with monopolistic competition explain intra industry trade and also the widely observed sensitivity of firm size to market size exposure to trade also increases the technical efficiency of production diverse policy issues turn on the distinction between national and global welfare and the scope for commitment

sticky prices new evidence from retail catalogs this paper presents new results on the size frequency and synchronization of price changes for twelve selected retail goods over the past 35 years three basic facts about the data are uncovered first nominal prices are typically fixed for more than one year although the time between changes is very irregular second prices change more often during periods of high overall inflation third when prices do change the sizes of the changes are widely dispersed both large and small changes occur for the same item and the sizes of these changes do not closely depend on overall inflation

critical import supply elasticities and the imports as market discipline hypothesis abstract this paper formally examines the factors underlying how responsive imports must be to domestic prices the import supply elasticity in order to thwart an anticompetitive domestic price increase stemming from a merger an issue that frequently arises in many antitrust reviews domestic firms face a fringe comprised of foreign firms who import their products into the domestic market in the eyes of domestic consumers these imports are viewed as imperfect substitutes in demand to the output produced by the domestic firms the model is solved in terms of the critical import supply elasticity that can then be used evaluate the ability of imports to constrain an anticompetitive price increase post merger numerical simulations are conducted to consider the magnitude of perturbations in the model s exogenous parameters potential empirical extensions of the model are also considered

potential foreign competition in us manufacturing abstract trade barriers are falling and firms are competing in increasingly open international markets the data reveal considerable heterogeneity across industries in the intertemporal path of import shares against this backdrop we focus on an issue that is increasingly important for competition policy analysis potential foreign competition inadequate attention to this aspect could result in a biased picture of total competition leading to misguided antitrust decisions drawing on the conceptual framework outlined by landes and posner harvard law review 94 1981 937 we measure potential foreign competition by the intertemporal response of industry import share to industry specific and aggregate economic factors and our estimates indicate wide variation across industries in this dimension a particularly striking finding is that highly concentrated industries which are more likely to be subject to antitrust scrutiny have a greater degree of potential foreign competition than industries with low concentration even though the extent of actual foreign competition is similar across these groups of industries

monopoly in the uk what determines whether the mmc finds against the investigated firms this paper draws on data from 73 uk monopolies and mergers commission reports on monopoly between 1973 and 1995 it shows that there is a roughly two in three chance that the commission will come to an adverse conclusion against the investigated firms in a given case 75 80 of decisions can be explained purely in terms of the market share of the leading firm and knowledge of the broad nature of the alleged anti competitive practice an adverse finding is most likely in cases involving exclusive dealing and least likely where other vertical restraints are involved

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

the relation between narrative and money market indicators of monetary policy this paper studies the relation between narrative based indicators of monetary policy and widely used money market indicators of monetary policy three principal findings emerge first changes in monetary policy as measured by the narrative based policy indices are associated with persistent changes in the levels of m2 and the monetary base in contrast changes in the narrative policy indicators lead to transitory changes in short term interest rates nonborrowed reserves and the spread between the six month commercial paper rate and the three month treasury bill rate third these findings are generally robust across different narrative based policy indices

economic fluctuations market power and returns to scale evidence from firm level data recent research on aggregate fluctuations coupled with ongoing work in industrial organization has renewed interest in the existence magnitude and cyclical pattern of market power and the extent of increasing returns to scale by exploiting restrictions from dynamic theory and information from financial markets we present a framework for generating quantitative evidence on market power and returns to scale tailoring the econometric model to firm level panel data we calculate the percentage differential between price and marginal cost the lerner index in terms of the parameters from the econometric system results for firms in eleven industries indicate that there is a great deal of heterogeneity in the extent of market power industries with significantly positive lerner indices tend to have substantial increasing returns in the production technology we find that there is only a modest relation between our estimated lerner indices and traditional measures of market power and that when market power varies temporally it is usually procyclical thus variations in the markup of price over marginal cost may help dampen aggregate economic fluctuations

the cyclical behavior of marginal cost and price the author examines the cyclical behavior of price marginal cost margins for u s manufac turing after 1956 short run marginal cost is markedly procyclical this is primarily due to procyclical overtime payments incurred beca use employment is not perfectly flexible in most industries output price fails to respond to the cyclical movement in marginal cost so price marginal cost margins are markedly countercyclical the res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing they support theories that explain low production in a recession by the inability of firms to sell their output copyright 1987 by american economic association

beat em or join em export subsidies versus international research joint ventures in oligopolistic markets this paper compares adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in r d and output and because of spillovers each firm benefits from the other s r d when the government can commit to an export subsidy such a policy raises welfare relative to cooperation except when r d is highly effective and spillovers are near complete without commitment however subsidisation may yield welfare levels much lower than cooperation and lower even than free trade though qualifications to the dangers from no commitment are noted

is there a causal effect of concentration on persistent profitability differentials this article searches for a causal effect of industry concentration on estimates of persistent profitability differentials i offer solutions to identification problems that plague related analyses by applying an iv and a natural experiment this is the first study that explains estimates of persistent profit differentials using business segments data allowing to match micro and industry level data more consistently testing linear relations critical concentration levels and interactions with mobility barriers i find no evidence that concentration has any positive effect on long run profitability differences results rather tend to point to a statistically and economically significant negative causal effect

on the inefficiency of merger control abstract according to the merger guidelines the antitrust authority has to challenge an anticompetitive merger these guidelines however neglect the parties litigation costs during trial we analyze under which circumstances these costs are so high that the agency s intervention is inefficient

the rigidity of prices this paper uses evidence on individual transaction prices to analyze price behavior the evidence shows that for many transactions pricesremain rigid for periods exceeding one year the rigidity of price ispositively correlated with industry concentration for several productsthe correlation of price changes across buyers is low the paper alsoinvestigates the relationship between price rigidity price change andthe length of time a buyer and seller have been doing business together the author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets copyright 1986 by american economic association

microfoundations of macroeconomic price adjustment survey evidence from swedish firms this paper presents the results of a survey on price setting behavior conducted on a large random sample of swedish firms the median firm adjusts the price once a year state and time dependent price setting are about equally important the four highest ranked explanations for price rigidity in this study implicit contracts sluggish costs explicit contracts and the kinked demand curve have close correspondents among the top five places in two similar large scale surveys carried out in the uk and the u s the results point to the importance of the long term relations with customers for the rigidity of prices the estimated share of sales that go to regular customers is more than 80

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

export oriented industrialization and regional development a case study of maquiladora production in yucatan mexico biles j j 2004 export oriented industrialization and regional development a case study of maquiladora production in yucatan mexico reg studies 38 519 534 this study provides a critical appraisal of export oriented industrialization eoi in the guise of maquiladora production as a regional development strategy in the case of yucatan mexico maquiladoras are export oriented assembly plants characterized by the labour intensive manufacture of imported components traditionally these firms have located along the us mexico border however during the past decade maquiladora production has spread to other regions of mexico perhaps the most dramatic shift in maquiladora location has been experienced by the state of yucatan where export oriented firms now account for one third of all manufacturing jobs and more than two thirds of all exports interregional input output analysis reveals that maquiladora production has had a positive impact on economic growth and distribution of income in both urban

the impact of cyclical demand movements on collusive behavior recent work by rotemberg and saloner 1986 investigates the effect of the business cycle on optimal collusive pricing by specifying that demand is subject to i i d shocks an implication of the i i d assumption is that firms expectations on future demand are unrelated to the current level of demand we put forth a model that allows for both the level of current demand and firms expectations on future demand to change over time thus it captures two important properties of the business cycle our analysis reveals that while the gain to deviating from a collusive agreement is greatest during booms firms find it most difficult to collude during recessions as the forgone profits from inducing a price war are relatively low an implication of this effect for pricing behavior is that at the same level of demand price is lower when demand is declining than when demand is rising consistent with previous theoretical work we find that firms price countercyclically for a range of values for the discount factor however numerical simulations reveal a greater tendency for firms to price countercyclically during recessions than during booms

empirical evidence on ftc enforcement of the merger guidelines the justice department s 1982 1984 merger guidelines identify various factors concentration entry barriers ease of collusion efficiency that would thereafter determine whether the government will challenge a merger analysts have criticized enforcement agencies however for not following the guidelines and criticize the guidelines themselves for not identifying the weights attached to the factors using a 1982 86 sample of seventy horizontal mergers we examine which factors influenced federal trade commission decisions to challenge mergers the relative importance of the guidelines and other factors in merger challenges is measured and related empirical issues are also explored i introduction the 1982 1984 merger guidelines adopted by the antitrust division of the department of justice doj and followed by the federal trade commission ftc marked important antitrust policy changes by the reagan administration the herfindahl index replaced the fourfirm ratios used in the old 1968 guidelines as the measure of concentration other non concentration factors barriers to entry ease of collusion were elevated in importance in the 1984 revision of the 1982 guidelines efficiency considerations were for the first time generally included as a relevant factor however commentators who applauded the newer guidelines have complained subsequently that the reagan administration did not apply them the objections of two veteran academic antitrusters krattenmaker and pitofsky 1988 232 are typical certainly in many respects the announced merger guidelines are a substantial accomplishment this accomplishment however has been almost completely undercut by the administration s behavior in ignoring those guidelines in practice and instead enforcing without any public explanation a merger policy that was not only exceptionally lenient but substantially at odds with professed standards in an earlier paper coate et al 1990 we along with coauthor richard higgins tested one hypothesis why merger policy at least at the ftc in 1982 86 has departed from mere enforcement of the guidelines politics we showed how external pressures imposed on the commission by congress to block mergers independent of the factors identified in the guidelines as meriting a merger challenge are a statistically significant factor in the ftc s decision whether to challenge a merger in the present paper we use the same data seventy horizontal mergers from 1982 to 1986 to examine in greater detail the charges that the ftc has not followed the guidelines plus several related issues not considered in our earlier article these include the extent to which various guidelines factors are either necessary or sufficient for the commission to vote to challenge a merger and the role of the new efficiency criterion in merger evaluation an econometric model is presented as one approach to determine how the ftc balances the various guidelines factors this allows an estimate of the relative importance and influence of lawyers and economists in the evaluation process finally the data also permit an appraisal of the extent to which a structuralist or chicago approach to competition issues dominated merger votes at the ftc during the relevant period section ii discusses briefly the factors identified in the merger guidelines and the process by which the commission determines whether to oppose a proposed merger that section also identifies several testable hypotheses concerning the commission s reliance on the guidelines variables section iii then explains the data to be used for testing section iv the bulk of the paper presents empirical evidence concerning the ftc s use of the guidelines and related issues ii evaluating mergers at the federal trade commission the merger guidelines the federal trade commission enforces along with the justice department the federal antitrust laws including those applicable to mergers