trademark protection quality improvement and exports in developing countries trademarks indicate the inherent quality or other distinguishing features of products strong trademark protection can lower consumers costs of searching for preferred quality characteristics with weak trademark protection firms in developing countries may not be willing to provide high quality products with strong trademark protection firms have an incentive to maintain or improve quality over time in order not to erode the value of their trademarks by solving the theoretical model we show that strengthened trademark protection in developing countries may induce domestic firms to become exporters and raise the quality of products on the export market the welfare analyses show that strengthened trademark protection in developing countries benefits southern customers and firms producing high quality products but harms firms producing counterfeits and uninformed customers if firm h charges low prices given firm h charges a high price the strengthened trademark protection only helps firm h and informed customers in the south while leaves the others unaffected

marketing mix and brand sales in global markets examining the contingent role of country market characteristics marketing products globally is challenging due to the diverse nature of markets we use market heterogeneity unbranded competition resource and infrastructure availability and sociopolitical governance as country market characteristics that distinguish between developed and emerging countries we investigate their moderating role on the relationship between elements of the marketing mix and brand sales we provide evidence from a hierarchical linear model and a panel data set of brands from 14 emerging and developed markets that account for 62 of the global gdp that country market characteristics moderate the relationship between the complete set of marketing mix elements and brand sales performance asymmetrically while distribution and price have the largest impact in emerging and developed countries respectively product innovation and advertising have significantly larger impacts in emerging markets relative to developed countries these finding highlights the importance of contingency view of marketing strategy in global markets

smuggling camouflaging and market structure we examine how market structure and enforcement affect smuggling and welfare in a model where smuggling is camouflaged by legal sales conditions are given for when some but not necessarily all firms smuggle with camouflaging the market price is below the price when all sales are legal so smuggling improves welfare if the price effect outweighs excess smuggling cost this welfare effect is directly related to the degree of competition increased enforcement in this model potentially reduces welfare the model is shown to be consistent with evidence on cigarette smuggling in the united states for 1975 1982

positional goods conspicuous consumption and the international demonstration effect reconsidered abstract ragnar nurkse s early formulation of the international demonstration effect explicitly eschewed the possibility that international emulation of the rich has anything to do with status seeking or to use veblen s phrase with conspicuous consumption this paper argues in favor of a reassessment of nurkse s formulation in the light first of recent analyses of advanced countries by hirsch frank and scitovsky which show the powerful welfare implications of consumption based on status seeking and in the light second of the large sociological literature that has investigated the modernization process in developing countries the analysis casts doubt on nurkse s eschewal of status seeking behavior at the international level and suggests an alternative view with a profoundly different set of welfare implications for the third world

diffusion of new products empirical generalizations and managerial uses the diffusion model developed by bass bass f m 1969 a new product growth model for consumer durables management sci 15january 215 227 constitutes an empirical generalization it represents a pattern or regularity that has been shown to repeat over many new products and services in many countries and over a variety circumstances numerous and various applications of the model have lead to further generalizations modifications and extensions of the model have lead to further generalizations in addition to the empirical generalizations that stem from the model we discuss here some of the managerial applications of the model

software piracy an analysis of protection strategies software piracy by users is generally believed to harm both software firms through lower profits and buying customers through higher prices thus it is thought that perfect and costless technological protection would benefit both firms and consumers the model developed here suggests that in some circumstances even with significant piracy not protecting can be the best policy both raising firm profits and lowering selling prices key to the analysis is joining the presence of a positive network externality with the fact that piracy increases the total number of program users the network externality exists because consumers have an incentive to economize on post purchase learning and customization costs

product introduction with network externalities the authors study the introduction of a new product in a market with network externalities there is a common presumption that such markets exhibit excess inertia i e that they are biased toward existing products in contrast the authors provide conditions under which equilibrium involves insufficient friction i e a tendency to rush into new incompatible technologies they also analyze the firms incentives to make their products compatible and they show that the firm introducing the new technology is biased against compatibility copyright 1992 by blackwell publishing ltd

the demand for cigarette smuggling introduction an enduring issue in economic analysis involves accounting for the behavior of agents when illegal or quasi legal activity is rewarded smuggling retrading under regulations or restrictions bribery and bootlegging are all aspects of the general phenomenon common contemporary forms of such activity are the smuggling of prohibited substances such as drugs or medicines prohibited arms or weapons or highly taxed commodities between countries 1 but smuggling or bootlegging of highly taxed or otherwise regulated legal commodities such as alcohol cigarettes or gasoline also takes place within countries in the united states such illegal activity both casual and organized may have significant effects on state tax revenues it may also alter the expected consumption effects of specific tax changes in a competitive environment the existence of different tax structures between states may mean that a given state s tax enactments will not have their desired revenue or consumption effects this paper offers a new econometric methodology for estimating the economic effect of border crossing between u s states our technique in contrast to previous models of cross border effects allows accommodation of the dichotomy between variations in state level sales due to state specific characteristics such as prices tastes incomes and other demographic factors the presence of organized smuggling tourism and so on and demand variations due to casual border crossing beginning with a simple theoretical model of a representative consumer s border crossing decision we develop a nonlinear econometric model which produces estimates of the representative consumer s demand in each state it allows estimation of the degree and direction of sales to border crossing consumers for each state and facilitates explicit testing of the statistical significance of border crossing in explaining variations in cigarette sales between jurisdictions the data set is comprised of state level cigarette sales for the forty eight contiguous states and the district of columbia over the period 1960 to 1986 we obtain strong evidence that border crossing is a significant factor in explaining cigarette sales differentials and we identify states which have important border crossing sales further we note the consequences of border crossing for demand elasticity estimation and tax policy in general the evidence indicates that the ability of states to raise revenue via cigarette taxation is more constrained than conventional analysis suggests the paper is divided into five sections section ii discusses bootlegging and previous literature on cigarette demands and smuggling section iii presents our theoretical and empirical models while section iv discusses the data and our statistical results section v concludes the paper and examines some of the policy implications of our findings ii the economic literature on smuggling smuggling bootlegging or arbitrage takes place when full prices net of all costs differ for legal or illegal goods between specific economic units when net returns to smuggling or bootlegging all production and consumption opportunity costs being considered are positive arbitrage will occur in an organized and or casual fashion a primary though not an exclusive reason for smuggling has been the often significant divergence between full prices in different locales caused by differences in tax treatment a variety of models starting with wales 1968 have been employed to analyze problems related to smuggling and bootlegging jensen thursby and thursby 1988 and bhagwati and hansen 1973 study camouflaging systems the mixture of legal and illegal sales from the firm s perspective with contrasting welfare results smith 1976 integrates illegal markets into the traditional theory of taxation but explicitly ignores casual smuggling earlier studies considering cross border effects have not specified a theoretical foundation and in this respect our approach is fundamentally different

trade misinvoicing the dark side of world trade n this paper we study the determinants of trade misinvoicing we contrib ute to the literature in the following ways rst we present a simple micro economic framework that simultaneously analyses the effect of microeconomicincentives and deterrents on the macroeconomic phenomenon of trade misin voicing this approach takes into account that the nancial incentives for trademisinvoicing determine the decision as to whether and how much exports imports to underinvoice or overinvoice whereas the deterrents to trademisinvoicing only have an impact on the optimal amount of misinvoicing second we test the derived theoretical hypotheses using a rich data set of 86countries over the period 1980 to 2005 trade misinvoicing occurs if the true value of exports or imports deviatesfrom the amount of exports or imports businesses report to the authorities aninteresting literature has emerged that studies the determinants of trade mis invoicing by analysing bilateral trade partner statistics for recent examples fisman and wei 2007 berger and nitsch 2008 farzanegan 2008 trademisinvoicing is typically motivated by nancial incentives for example by ben e ting from a premium at the black market for foreign exchange or by evadingtariffs or taxes while the empirical literature has mainly focused on analysingthe incentives for that nancial malpractice we also test the relevance ofdeterrents to misinvoice i e the risk of detection and costs of punishment the microeconomic framework presented in this paper demonstrates that the nancial incentives for trade misinvoicing such as the black market premium

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

herd behavior the penguin effect and the suppression of informational diffusion an analysis of informational externalities and payoff interdependency this article analyzes a technology adoption process in which the effect of informational spillover interacts with network externalities the interplay of informational externalities and payoff interdependency induces risk averse and clustering behavior in the technology adoption process the analysis differs from the herd behavior literature in focusing on how the herd behavior of subsequent users influences the initial adoption decision moreover herd behavior in this article stems from each agent s desire to inhibit the revelation of new information that can be used in a way detrimental to her rather than from each agent s effort to free ride on information contained in the decisions made by predecessors

estimating shocks and impulse response functions this paper examines the issue of how to identify the shocks in a cointegrated var when the following assumptions are made the variables can be classified as endogenous or exogenous there are as many cointegrating relations as endogenous variables the cointegrating vectors are identified and they contain at least one exogenous variable it is shown that with these assumptions it is possible to identify the shocks without the use of further restrictions on the covariance matrix of the disturbances or the short run dynamics if the long run parameters are known the whole model can be estimated by ols the analysis is extended to allow the var to have both stationary and non stationary variables an illustration of the method is provided using the traditional benchmark var model involving us data on output prices interest rates and money a liquidity effect is not found using this var methodology

network effects software provision and standardization in this paper we examine the software provision decision of software firms the provision decision by software firms determines the value and hence the market share of competing hardware technologies we show how the provision decision by software firms determines whether multiple hardware technologies are supported in equilibrium or whether there is de facto standardization with only one hardware technology supplied with software in equilibrium we show that when consumers place a high value on software variety there is a suboptimal amount of standardization by the market

barter and monetary exchange under private information the authors develop a model of production and exchange with uncertainty concerning the quality of commodities and study the role of fiat money in ameliorating frictions caused by private information the model is specified so that without private information only high quality commodities are produced and there is no welfare gain from using money with private information there can be equilibria and sometimes multiple equilibria where low quality commodities are produced and money can increase welfare money works by promoting useful production and exchange in efficient monetary equilibria agents adopt strategies that increase the probability of acquiring high quality output copyright 1994 by american economic association

information and prices with capacity constraints since george j stigler s 1961 seminal work the literature on consumer search has attempted to understand the relationship between the prices that are set by sell ers and the extent to which consumers can observe and compare these prices before purchasing a good in the theoretical branch of this literature one conclusion is almost universal as buyers become better informed about prices ex ante sellers will set lower prices in equilibrium 1 in fact this relationship is so engrained in the theory of consumer search that it is often accepted as manifest and applied to various markets and situations with little or no hesitation 2 in this paper i examine a completely standard consumer search model with one small yet often relevant additional restriction i assume that sellers possess a limited number of goods or can only serve a limited number of customers at once so that a given seller may be unable to meet realized demand in such an environment i show that the conven tional wisdom regarding information and prices does not necessarily hold having more informed consumers can lead to either an increase or decrease in equilibrium prices or have no effect at all i characterize the regions of the parameter space where each is likely to occur the assumption that a seller s capacity may be fixed and that this constraint may be binding is a fairly important feature of many markets in some markets time is the constraint doctors and barbers and contractors can only serve a limited number of clients at once in other markets space is an issue private schools have a lim ited number of spots in each classroom while restaurants have a limited number of tables perhaps most common is markets in which sellers inventory is occasionally a limiting factor landlords have a limited number of apartments for rent and ticket agents have a limited number of concert tickets available in markets such as these consumers regularly trade off price and availability they are willing to pay more for

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

search money and inflation under private information abstract i study monetary exchange and inflation when buyers have private information about their willingness to pay for certain goods introducing imperfect information in the lagos wright a unified framework for monetary theory and policy analysis j polit economy 113 3 2005 463 484 economy shows that the existence of monetary equilibrium is a more robust feature of the environment in general my model has a monetary steady state in which only a proportion of the agents hold money agents who do not hold money cannot participate in trade in the decentralized market the proportion of agents holding money is endogenous and depends negatively on the level of expected inflation as in lagos and wright s model in equilibrium there is a positive welfare cost of expected inflation but the origins of this cost are very different

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

the economic effects of intellectual property right infringements in this article the authors use data from a small but varied sample of u s companies to examine the static welfare consequences of foreign infringement of u s intellectual property rights in five industry sectors they estimate that infringement causes profit losses for the legitimate u s suppliers that are at least one percent as great as their total sales that the static gains to consumers are more than half as great as the losses of legitimate producers and might exceed these losses and that the losses of the legitimate producers exceed the profits of infringers they also find that legitimate producers spend relatively little to combat foreign infringement less than 4 percent as much as their losses from such infringement copyright 1990 by the university of chicago

worldwide organized cigarette smuggling an empirical analysis this article estimates the economic size and the impact on government revenues of cigarette smuggling worldwide and formulates economic policies that can be used to effectively address the problem first information from various sources are combined and a global map of smuggling routes for cigarettes is described by examining the international cigarette trade records the hub transit countries in six regions of the world are identified second a variable that measures smuggling incentives for cigarettes is defined and computed for 110 countries third a static global demand model for cigarettes that includes the smuggling incentives variable is specified and robustly estimated using the estimation results global price and income elasticities of cigarette demand are obtained as 0 41 and 0 37 respectively it is estimated that in 1999 3 4 of global cigarette consumption was smuggled and 7 4 of tax revenue was lost to smuggling fourth the best policy options are identified to achieve the objec

what s in a sign trademark law and economic theory the aim of this paper is to summarize the extant theory as it relates to the economics of trademark and to give some suggestions for further research with reference to distinct streams of literature the proposed line of study inevitably looks at the complex relationship between signs and economics copyright 2006 the authors journal compilation 2006 blackwell publishing ltd

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

smuggling around the world evidence from a structural equation model this article uses a multiple indicators multiple causes mimic model to analyse the determinants of smuggling the analysis reveals that higher corruption and a lower rule of law encourage smuggling tariffs and trade restrictions are important push factors while a higher black market premium bmp discourages smugglers based on the mimic estimates we calculate an index of smuggling which provides a ranking for 54 countries we find that smuggling is rampant in cameroon pakistan and kenya while it is least prevalent in switzerland finland and sweden

impacts of entry by counterfeiters this paper uses a natural experiment to test the impact of counterfeiting under weak intellectual property rights i collect new panel data from chinese shoe companies from 1993 2004 by exploiting the discontinuity of government enforcement efforts for the footwear sector in 1995 and the differences in authentic companies relationships with the government i identify and measure the effects of counterfeit entry on authentic prices qualities and other market outcomes the results show that brands with less government protection differentiate their products through innovation self enforcement vertical integration of downstream retailers and subtle high price signals these strategies push up authentic prices and are effective in reducing counterfeit sales

network externality an uncommon tragedy economists have defined network externality and have examined putative inframarginal market failures associated with it this paper distinguishes between network effects and network externalities where the latter are market failures the authors argue that while network effects are important network externalities are theoretically fragile and empirically undocumented some network externalities are merely pecuniary network ownership or transactions among network participants can internalize some network effects the type of market failure that has been associated with these externalities is a transition problem that has little to do with externality

counterfeit product trade the authors analyze trade in both legitimate and counterfeit products domestic firms ow n trademarks and establish reputations for delivering high quality pr oducts in a steady state equilibrium foreign suppliers export legiti mate low quality merchandise and counterfeits of domestic brand name merchandise heterogeneous home consumers either purchase low quality imports or brand name products rationally expecting some degree of counterfeiting of the latter the authors describe the positive and normative effects of counterfeiting in comparison with a no counterfe iting benchmark they also provide a welfare analysis of border inspe ction policy and of policy regarding the disposition of counterfeit g oods that are confiscated at the border copyright 1988 by american economic association

tariff quota administration in china s grain markets an empirical assessment in 2016 the u s launched a trade dispute against china at the world trade organization arguing that china has been restricting its grain imports via tariff quota administration despite sharp criticisms by the u s the extent to which the grain imports were restricted in china remains largely unknown primarily due to that china s grain import behaviors are still under researched the u s grain export sector might actually gain little from china s grain trade liberalization in the short run since china has become less import dependent on the u s through the pursuit of import diversification in this context this article aims to quantify impacts of the tariff quota administration on china s grain imports from its trading partners we calculate ad valorem tariff equivalents of the tariff quota administration and then estimate import demand elasticities using a source differentiated import demand model we find that the tariff quota administration might have reduced china s quota fill rates for the grain commodities by 10 35 during 2013 2017 in particular the u s wheat exports to china were largely negatively affected we also find that the tariff quota administration in china acts like a variable import levy its import restrictiveness varies negatively with world prices leading to lower import demand elasticities

policy theory and the cycle the paper sets out some simple statistical models and shows that they are capable of generating the ob served characteristics of classical cycles in three countries australia the united kingdom and the united states both analytical and simulation work is used for this purpose these models emphasize the fact that to generate a realistic business cycle requires some deterministic trend growth near unit root behaviour in the deterministically detrended data and innovations of a certain magnitude with this information we examine some popular models of the cycle asking how they produce these features and then explore the implications of the analysis for economic policy

undefeated equilibria of the shi trejos wright model under adverse selection abstract decentralized markets where assets are useful as media of exchange are also usually subject to private information to analyze the liquidity and prices of such assets i adapt the shi 1995 trejos and wright 1995 model with lucas trees under adverse selection while most studies focus on either a pooling or separating equilibrium i apply the undefeated equilibrium refinement by mailath et al 1993 to make the selection based on fundamentals under pooling the high quality asset holder accepts a pooled price and under separating signals quality through asset retention applying the refinement results in a regime switch from no information pooling to information revelation separating following a negative shock to the quality or quantity of lemons this change leads to a discontinuous fall in aggregate welfare

do national patent laws stimulate domestic innovation in a global patenting environment a cross country analysis of pharmaceutical patent protection 1978 2002 this paper evaluates the effects of patent protection on phar maceutical innovations for 26 countries that established pharmaceutical patent laws during 1978 2002 controlling for country characteristics through matched sampling techniques to establish two proper comparison sets among 92 sampled countries and through country pair fixed effects regressions this study yields robust results national patent protection alone does not stimulate domestic innovation as estimated by changes in citation weighted u s patent awards domestic r d and pharmaceutical industry exports however domestic innovation accelerates in countries with higher levels of economic development educational attainment and economic freedom additionally there appears to be an optimal level of intellectual property rights regulation above which further enhancement reduces innovative activities

addessing international product piracy international counterfeiting of products covered by intellectual property laws is a major issue in international business the united states government in particular has threatened to invoke trade legislation to retaliate against countries that fail to attack domestic piracy activities this paper briefly reviews the economic consequences of international product counterfeiting it cautions that while such piracy has net costs widespread retaliation through trade protectionism could also prove costly it recommends a policy approach that facilitates private protection of property rights

pricing of conspicuous goods a competitive analysis of social effects abstract social needs play an important role in the purchase of conspicuous goods in this article the authors extend traditional economic models to accommodate social needs such as desire for uniqueness and conformism and examine their implications for pricing conspicuous goods first in the context of a duopoly the authors identify the conditions under which the desire for uniqueness can increase demand among some consumers as the price of a product increases second the authors show that though the desire for uniqueness leads to higher prices and firm profits a desire for conformity leads to lower prices and profits third the authors find that consumers purchase high quality products not because of their desire for uniqueness but despite it finally marketers of conspicuous goods may find it beneficial not to emphasize the functional differences among their products when the need for uniqueness is high in a laboratory test the authors find support for the claim that demand for a product amo

mnc interdependence and local embeddedness influences on perceptions of career benefits from global integration this manuscript examines when global integration is perceived as being beneficial and or detrimental to employee careers study results demonstrate that employees of more interdependent offices generally perceive greater career benefits from global integration while employees of more locally embedded offices perceive negative career consequences hypotheses are guided by a theory of attention focus

uniform commercial policy illegal trade and the real exchange rates a theoretical analysis countries on fixed exchange rates sometimes use uniform tariff cum subsidy utcs schemes as a way of achieving a real depreciation without disturbing the nominal exchange rate a potential drawback of this policy in relation to an across the board devaluation is that a utcs scheme provides incentives for illegal trade using an optimizing model with currency convertibility and illegal trade the author finds that welfare is lower under a utcs scheme than under a corresponding across the board devaluation and that in some cases the real exchange rate actually appreciates in response to an increase in the utcs rate

a traditional interpretation of macroeconomic fluctuations under the traditional interpretation of macroeconomic fluctuations aggregate demand shocks move output and prices in the same direction while aggregate supply shocks move output and prices in opposite directions this paper examines the joint behavior of u s output unemployment prices wages and nominal money and asks whether it is consistent with this interpretation the answer is a qualified yes

cross border commuting and consuming an empirical investigation abstractthis article contributes to our understanding of cross border activity in general and the determinants of cross border trade in particular by focusing on the part of cross border sales that arise due to work related cross border crossings of households we analyse empirically how cross border consumption expenditures vary across product and services categories as well as household characteristics using representative household survey data of cross border commuters to luxembourg in total these households spend an estimated 17 of their gross annual income across the border contributing about 10 to the total household final consumption expenditure hfce in luxembourg cross border expenditure is linked to individual and household related characteristics and to distance between home and work cross border commuters systematically exploit arbitrage opportunities that arise because of existing price level index differences between the country of work and the country of residence

efficient excise taxation the evidence from cigarettes we develop a model in which optimizing policy makers in adjacent government jurisdictions levy excise taxes on a commodity that has a unique point of production from which all shipments emanate from this model we derive an unusually specific predicted geographical pattern of those excise taxes in which these taxes rise at a decreasing rate as one moves outward from the point of production we compare these predictions to the observed pattern of cigarette taxes imposed by state governments in the united states and find the data to be fully consistent with our model among these predictions is the existence of a ripple effect which reduces taxes in many other jurisdictions due to low taxes at the point of production we estimate that these induced tax reductions in other states save cigarette producers and consumers a minimum of 110 million per year

the welfare implications of unauthorized reproduction of intellectual property in the presence of demand network externalities this paper finds that unauthorized reproduction of intellectual property in the presence of demand network externalities can not only induce greater firm profits relative to the case where there is no copying it can lead to a pareto improvement in social welfare ceteris paribus when network externalities are present firms have a greater incentive to expand output because marginal revenue is higher and or they may wish to create preemptive installed bases this paper suggests that unauthorized copying can be a relatively efficient means of achieving this by allowing the firm in effect to price discriminate among different classes of consumers copyright 1994 by blackwell publishing ltd

counterfeiting screening and government policy abstract we construct a search theoretic model of money in which counterfeit money can be produced at a cost but agents can screen for fake money also at a cost counterfeiting can occur in equilibrium when both costs and the inflation rate are sufficiently low optimal monetary policy is the friedman rule however the rationale for the friedman rule in an economy with circulation of counterfeit money differs from the conventional mechanism that holds in the model when counterfeiting does not occur we also study optimal anti counterfeiting policy that determines the counterfeiting cost and the screening cost

buyer supplier relations in industrial markets when do buyers risk making idiosyncratic investments it is well established that the existence of investments specific to a relationship influences the choice of governance structure including the use of contractual safeguards what is less well understood are the circumstances leading to the creation of those specific assets to begin with this paper explores the industrial buyer s motives to put itself at risk by making investments tangible and intangible which cannot be readily redeployed from one supplier to another using original data from a sample of 388 supply relationships involving all automakers in the u s and japan we examine features of the supply task the supplier and the supply environment which serve as motives to make supplier specific investments we also examine potential factors which facilitate the posting of specific assets as credible commitments to attenuate supplier opportunism we find that specific investments by buyers serve as a mechanism to 1 increase coordination when the manufacturing task is complex 2 buffer the buyer against technological uncertainty and 3 build close relationships when the requisite production skills are scarce the supply market is thin we find more specific investments in supply arrangements that are embedded in a broader business relationship we find fewer supplier specific investments in the japanese context finally we find that buyers focus their investments on lesser known low share component makers perhaps to capitalize on a unique focused supplier capability

real business cycle analysis a needed revolution in macroeconometrics the contention of this paper is that real business cycle rbc analysis has highlighted fundamental flaws in the underlying macroeconomic theory and econometric methodology of traditional macroeconometric model building but by stating its message crudely and proposing an inferior statistical procedure has failed to receive the recognition it deserves properly understood the lessons to be learned from rbc analysis combined with the new approach of bringing evidence to bear proposed here would amount to a revolution in macroeconometric methodology the outcome of this revolution would be a macroeconometrics better based on macroeconomic theory and a macroeconomics more consistent with the evidence the main failing of most macroeconometric models is in not taking macroeconomic theory seriously enough with the result that little or nothing is learned about key parameter values a fault no amount of econometric sophistication will compensate for consequently macroeconometrics has had surprisingly little influence on macroeconomic theory or macroeconomics teaching and even the main users of macroeconometric models business government the monetary authorities and other national and international bodies are reluctant to employ them for anything other than short term forecasting the popular view of rbc analysis is that it is about whether technology shocks are the predominant cause of aggregate output fluctuations and whether calibration rather than standard econometric methods should be used to analyse this question although this may be a reasonable description of the initial work of kydland and prescott i982 and prescott i 986 subsequent developments make it outdated and obscure its fundamental insights in fact rbc theory is part of a research programme which can be traced back to ramsey and is associated in modern times with lucas in which the aim is to bring out the general equilibrium inter temporal characteristics of macroeconomics before turning to the more difficult issues of disequilibrium in large part the stimuli for adopting the ramsey approach were the now well known criticisms of macroeconometric models made by lucas i976 who argued that macroeconomics should be built on the same theoretical foundations as microeconomics in addition to the weak theoretical foundations of these models lucas objected to the way in which the econometric methods used lent themselves to ambiguous interpretations a good example of this is the difficulty of deciding what meaning to give to observed dynamics the new

an experimental examination of the economics of information this article presents an experimental test of propositions that come from stigler s classic economics of information theory it reviews previous empirical evidence for the propositions and discusses the mixed support provided for the theory it also discusses a major assumption of the theory and presents hypotheses that suggest that the propositions are not as universal as has been thought the results indicate that buyers with more certain beliefs about retailer price images search less and are less responsive to changes in the costs and benefits of search than buyers with less certain beliefs finally the article discusses the implications of the results for both economics and marketing

counterfeiters foes or friends how counterfeits affect sales by product quality tier a key concern about counterfeits and weak intellectual property protection is that they may hamper innovation by displacing legitimate sales this paper combines a natural policy experiment with randomized lab experiments to estimate the heterogeneous impacts of counterfeiting on the sales and consumer purchase intent related to branded products of various quality levels i collect new product line level panel data 1993 2004 on chinese shoe companies i identify heterogeneous effects of counterfeit entry on sales of authentic products of three quality tiers finding that counterfeits have both advertising effects for a brand and substitution effects for authentic products additionally the effects linger for some years the advertising effect dominates the substitution effect for high end authentic product sales and the substitution effect outweighs the advertising effect for low end product sales the positive effect of counterfeits is most pronounced for high fashion products such as women s high le

a model of the threat of counterfeiting abstract a simple matching model of money with the potential for counterfeiting is constructed in contrast to the existing literature lotteries are included these provide scope for the operation of the intuitive criterion of cho and kreps the application of that refinement is shown to imply that there is no equilibrium with counterfeiting if the cost of producing counterfeits is low enough then there is no monetary equilibrium otherwise there is a monetary equilibrium without counterfeiting in other words the threat of counterfeiting can eliminate the monetary equilibrium

collaborative promotion of technology standards and the impact on innovation industry structure and organizational capabilities evidence from modern patent pools this study explores the impact of modern patent pools inter organizational collaborative arrangements for promoting the adoption of technology standards on the rate of follow on innovations based on pooled technologies the vertical structure of associated industries and organizational capabilities of noncollaborating firms on one hand the formation of modern pools can boost follow on innovation by lowering the search negotiation and licensing costs associated with pooled standards on the other hand modern pools may decrease the incentives to invest in follow on innovations because of cannibalization risks and grant back provisions to the extent that modern pools succeed in establishing a dominant standard their collaborative nature and their reliance on markets for technology can reduce technological uncertainty and appropriation hazards hence triggering vertical disintegration in related industries moreover by establishing a dominant standard modern pools can effectively diminish the relati

asset stock accumulation and the sustainability of competitive advantage reply authors reply to comments regarding their paper dierickx i k cool 1989 asset stock accumulation and the sustainability of competitive advantage management sci

can entrepreneurial firms benefit from product piracy abstract we examine the potential benefits of product piracy to entrepreneurial firms specifically we use a resource based perspective to show that a decrease in the inimitability of an entrepreneurial firm s intellectual property does not necessarily diminish performance when piracy increases the value of this resource and an information economics perspective to explain why and when imitation can increase the value of an intellectual property resource this explanation reconciles empirical studies that indicate mixed results it also expands the resource based view by suggesting that reducing the value of one resource can directly increase the value of another

appropriating signs and meaning the elusive economics of trademark this paper deals with economic analysis of trademark its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection however this information conveying function is also accompanied by a differentiation effect arising from the power of persuasion that signs can exert on individuals the exploitation of differentiation has given rise to the practice of branding which ties markets and consumption to the realms of meaning and experience branding is so all pervasive in today s economy as to have somehow transfigured it so that the role of persuasion is now pre eminent nonetheless the mainstream economic theory tends to resist acknowledging this change which would to a large extent call into question well established hypotheses and theoretical tools the general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models welfare evaluations and policy prescriptions that bear little or no relation to the actual markets the opposing approach in the shadow of the nelson s and arrow s seminal papers on economics of information is recognising the idiosyncratic character of information and therefore drawing conclusions and devising solutions that while still based upon the welfare criterion also incorporate a wider awareness and a deeper representation of the scenario under study the present work attempts to move in this direction showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings

cigarette taxes and illicit trade in europe cigarettes are highly taxed in europe but at higher prices some consumers substitute more toward illicit cigarettes the illicit retail trade in cigarettes irtc includes counterfeit untaxed and smuggled cigarettes some existing literature includes claims that taxes are not an important determinant of irtc using data from the european union we find the opposite raising prices leads to substantial increases in irtc a 1 increase in tax pack is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 29 to 95 the results are robust to alternative specifications and data jel i18 h26 k42

the threat of counterfeiting in competitive search equilibrium recent studies in monetary theory show that if buyers can use lotteries to signal the quality of bank notes counterfeiting does not occur in a pooling equilibrium in this paper i investigate the robustness of this non existence result by considering an alternative trading mechanism

money and information this paper investigates the role of money in markets in which producers have private information about the quality of the goods they supply when the fraction of high quality producers in the economy is given money promotes the production of high quality goods which improves the quality mix and welfare unambiguously when this fraction is endogenous however we find that money can decrease welfare relative to the barter equilibrium the origin of this inefficiency is that money provides consumption insurance to low quality producers which can result in a higher fraction of low quality producers in the monetary equilibrium finally we find that most often agents acquire more costly information in the monetary equilibrium than in the barter equilibrium consequently money is welfare enhancing because it promotes useful production and exchange but not because it saves information costs

prices taxes and automotive fuel cross border shopping abstract the aim of the present paper is to determine whether differences in automotive fuel prices among neighboring autonomous communities i e spanish political administrative regions affect the decisions taken by individuals regarding the region in which to purchase fuel in particular the intention is to discover if price increases in certain autonomous communities as a result of the application of the regional tranche of the hydrocarbon retail sales tax hrst has affected fuel purchases in neighboring communities in order to achieve the above mentioned objectives the monthly purchases of automotive diesel in aragon between january 2001 and march 2007 is estimated from the fuel price in aragon the relation between prices in each of the bordering communities and aragon weighted by density of traffic the number of vehicles registered in that community and three dummy variables representative of the implementation of the regional tranche of the hrst in madrid catalonia and valencia the paper finds empirical evidence to demonstrate a positive effect of the relative prices in the neighboring communities and vehicle registrations and also a negative effect of prices in aragon upon the acquisition of diesel in this region in the case of catalonia some evidence suggests that the price effect may have been strengthened following the introduction of the regional tranche of the hrst in august 2004

what global emission regulations should corporations support in their role as political actors and lobbyists corporations have responsibilities to help determine the existence and content of global regulations of pollutants the ethical nature of those responsibilities is highly sensitive to the assumed normative framework this paper compares several frameworks by modeling them as differently weighted versions of utilitarianism under a strict neoclassical approach corporations have a narrow obligation to maximize profits which generally entails opposing emission regulations in contrast a stakeholder approach as well as marxian and common ethics approaches suggest that firms have an obligation to actively support sustainable emission regulations with the following properties major restrictions would be global rather than local global restrictions would apply in all cases of persistent emissions global restrictions would apply to non persistent emissions as well unless they have been affirmatively shown to be safe using reasonably persuasive scientific evidence safety thresholds would be set fairly restrictively based on administrative models and rules of thumb in light of existing scientific knowledge but without requiring full scientific justification long run goals would include zero emission of persistent unsafe substances

entrepreneurs and new ideas we study how early stage new ideas are turned into successful businesses even promising ideas can be unprofitable if they fail on one dimension such as technical feasibility correspondence to market demand legality or patentability to screen good ideas the entrepreneur needs to hire experts who evaluate the idea along their dimensions of expertise sharing the idea however creates the risk that the expert would steal it yet the idea thief cannot contact any other expert lest he should in turn steal the idea thus stealing leads to incomplete screening and is unattractive if the information of the other expert is critical and highly complementary in such cases the entrepreneur can form a partnership with the experts thus granting them the advantage of accessing each other s information yet very valuable ideas cannot be shared because it is too tempting to steal them

compliance with endogenous audit probabilities in this paper we study the effect of endogenous audit probabilities on reporting behavior in a face to face compliance situation such as at customs in an experimental setting in which underreporting has a higher expected payoff than truthful reporting we find an increase in compliance of about 80 percent if subjects have reason to believe that their behavior towards an officer influences their endogenous audit probability higher compliance is driven by considerations about how their own appearance and performance affect their audit probability rather than by the social and psychological effects of face to face contact

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

systems competition and network effects this paper discusses firm behavior market performance and the public and private institutions that arise in systems markets i e markets where consumers use compatible components together to generate benefits in such markets which include communications networks and hardware software networks popular products are inherently more valuable these network effects can drive corporate strategies and are critical in understanding innovation in many high technology markets the discussion here emphasizes the dynamics of consumer adoption decisions in the presence of network effects competition between incompatible systems and how suppliers choose which components are compatible and which are not

international trade and consumption network externalities abstract this paper studies the effects of trade liberalization in the presence of consumption network externalities the framework is applicable to the choice of network products and sheds light on the debate on globalization and culture in an extended ricardian model of international trade the paper shows that i trade is not pareto inferior to autarky if the free trade equilibrium is unique ii trade is not pareto superior to autarky if both countries are diverse network competition under free trade but can be if each country is homogenous network monopoly iii and when multiple free trade equilibria exist everybody in a country can lose from free trade if that country is homogenous under autarky consumers of imported network goods tend to gain while consumers of exported network goods tend to lose from trade liberalization

obtaining strategic advantage from being imitated when can encouraging clones pay an important business strategy research theme concerns finding ways to minimize competition faced by the firm this paper however focuses on a different set of situations the model developed suggests that an innovator s best strategy may be to encourage clones of its product when a network externality is present key factors to consider in assessing whether encouraging cloning is the innovator s best strategy are 1 the benefit to be derived in terms of added user base contributed by the clone sales traded off against 2 the unit sales that will be lost to the clones these factors in turn depend upon the strength of the network effect and the degree to which the innovator s product quality is perceived by consumers to be superior to the clone s the model further suggests that both the innovator and clone earn their highest payoffs when the clone takes the lead in price setting i e when the clone establishes its own price by considering for each price it might set how the innovator will react to that price and the innovator as price follower responds to the price the clone chooses the paper demonstrates that the clone leader innovator follower situation represents the unique nash equilibrium in price setting strategies a central implication is that when operating in a network externality environment instead of a problem to be avoided clones may be valuable assets to an innovating firm building up the user base for the innovator s technology by bringing lower valuing consumers into the market which in turn makes the innovator s product more attractive to high and medium valuing purchasers thus when the above described conditions hold being cloned can be more profitable for an innovating firm than dominating the market alone

foreign counterfeiting of status goods we study the positive and normative effects of counterfeiting i e trademark infringement in markets where consumers are not deceived by forgeries consumers are willing to pay more for counterfeits than for generic merchandise of similar quality because they value the prestige associated with brand name trademarks counterfeiters of status goods impose a negative externality on consumers of genuine items as fakes degrade the status associated with a given label but counterfeits allow consumers to unbundle the status and quality attributes of the brand name products and alter the competition among oligopolistic trademark owners we analyze two policies designed to combat counterfeiting enforcement policy which increases the likelihood of confiscation of illegal items and the imposition of a tariff on low quality imports

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

pricing and signaling with frictions abstract we study a market where each seller chooses the quality and price of goods and the number of selling sites observing sellers choices of prices and sites but not quality buyers choose which site to visit a seller s choices of prices can direct buyers search and signal quality a unique equilibrium exists and is separating when the quality differential is large the equilibrium implements the efficient allocation with public information otherwise the quality of goods and or the number of sites created is inefficient due to a conflict between the search directing and signaling roles of prices