competition and cooperation in decentralized push and pull assembly systems in this paper we study a decentralized assembly system consisting of a single assembler who buys complementary components from independent suppliers under two contracting schemes push and pull in both schemes the component suppliers are allowed to freely form coalitions or alliances among themselves to better coordinate their pricing or production decisions we show that the sole driver of the inefficiency in a push system which is due to horizontal decentralization of suppliers is the number of alliances that were formed specifically it is shown that in a push system the assembler s profit the total profit of all suppliers and the consumers surplus are all decreasing in the number of coalitions and are thus maximized when the grand coalition is formed we further carry out a stability analysis of coalition structures to verify to what extent suppliers can reduce or eliminate the inefficiency due to their decentralization by forming alliances we show that in a push system with more than two

public health spending old age productivity and economic growth chaotic cycles under perfect foresight abstract this paper analyses the dynamics of a double cobb douglas economy with overlapping generations and public health investments that affect the supply of efficient labour of the old aged it is shown that the positive steady state of the economy is unique moreover we provide necessary and sufficient conditions for the emergence of endogenous deterministic complex cycles when individuals are perfectly foresighted interestingly i the equilibrium dynamics shows rather complicated phenomena such as a multiplicity of bubblings depending on the size of the public health system and ii the higher the degree of thriftiness the likelier an economy is exposed to endogenous fluctuations because the need to save when young to support consumption when old is reduced

the cost of pollution on longevity welfare and economic stability this paper presents an overlapping generations model where pollution private and public health expenditures are all determinants of longevity public expenditures financed through labour taxation provide both public health and abatement we study the role of these three components of longevity on welfare and economic stability at the steady state we show that an appropriate fiscal policy may enhance welfare however when pollution is heavily harmful for longevity the economy might experience aggregate instability or endogenous cycles nonetheless a fiscal policy which raises the share of public spending devoted to health may display stabilizing virtues and rule out cycles this allows us to recommend the design of the public policy that may comply with the dynamic and welfare objectives

endogenous lifetime and economic growth abstract endogenous mortality is introduced in a two period overlapping generations model probability of surviving from the first period to the next depends upon health capital that is augmented through public investment high mortality societies do not grow fast since shorter lifespans discourage savings development traps are possible productivity differences across nations result in persistent differences in capital output ratios and relatively larger gaps in income and mortality high mortality also reduces returns on education where risks are undiversifiable when human capital drives economic growth countries differing in health capital do not converge to similar living standards threshold effects may also result

endogenous formation of coalitions with composite goods abstract we construct a model of endogenous formation of coalitions when three goods are necessary for a composite good and composite goods are substitutes for each other this analysis extends economides and salop s journal of industrial economics xl 1992 105 model of composite goods where two goods are necessary we analyze the welfare implications of coalition structure and investigate which coalition structure leads to the highest social welfare the paper investigates whether the most desirable coalition structure represents an equilibrium and provides a sufficient condition for the socially efficient coalition structure to be a stable nash coalition structure

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

on price competition with complementary goods we consider a duopoly industry with two separate firms each selling an indivisible product the joint consumption of these goods has a specific value for the consumers which exceeds the mere addition of utilities when products are consumed in isolation the higher this excess the larger the complementarity between the goods we analyse price equilibria in this market as related to the degree of complementarity existing between the two products

endogenous efficiency gains from mergers this article analyzes endogenous efficiency gains from mergers it considers oligopolistic homogeneous good markets and duopolistic and triopolistic markets under product differentiation pd quantity and price competition in a two stage game firms invest in cost reducing innovation with and without mergers and then compete in output prices it is found that in homogeneous good markets all possible mergers generate efficiency gains and that these are most significant when r d spillovers are very low or very high efficiency gains increase with the number of insiders and generally decrease with the number of outsiders with pd in most cases the merger generates efficiency gains when spillovers and or pd are sufficiently high with pd efficiency gains increase with spillovers but may increase or decrease with the level of pd the implications of the results for the relationship between competition and innovation outputs and for merger policy are discussed

compatibility and bundling of complementary goods in a duopoly this paper presents a simple model of compatibility and bundling in industries where consumers assemble several necessary components into a system that is close to their ideal the authors show that for a wide range of parameters firms will choose to produce compatible components but will offer discounts to consumers who purchase all components from the same firm however firms would be better off if they could commit not to provide such discounts furthermore the equilibrium tends to involve socially excessive bundling finally mixed bundling strategies tend to increase the range of parameters over which socially excessive standardization occurs copyright 1992 by blackwell publishing ltd

divide and rule the economic and legal implications of the proposed ownership unbundling of distribution and supply companies in the dutch electricity sector abstract in machiavelli s theory of power the concept of divide and rule forms the main theme the ruler has absolute power and to maintain and increase such power all means are justified when viewed against the background of this theory the current debate in the netherlands on the unbundling of energy electricity gas companies can be observed as an example of divide and rule in which the dutch minister of economic affairs plays a central role yet contrary to machiavelli in his time the dutch government does in fact aim principally at the greater welfare of the dutch people it is therefore noteworthy that while important steps in the decision to unbundled have been taken there is no evidence that the dutch people will indeed benefit from the envisaged unbundling

optimal incentive contracts under inequity aversion we analyze the classic moral hazard problem with the additional assumption that agents are inequity averse the presence of inequity aversion alters the structure of optimal contracts when the concern for equity becomes more important there is convergence towards linear sharing rules the sufficient statistics result is violated depending on the environment contracts may be either overdetermined i e include non informative performance measures or incomplete i e neglect informative performance measures finally our model delivers a simple rationale for team based incentives implying wage compression 2010 elsevier inc

desirability of compatibility in the absence of network externalities i compare the incentives firms have to produce individual components compatible with components of other manufacturers instead of systems composed of components that are incompatible with components of competing manufacturers i show that even in the absence of positive consumption externalities network externalities prices and profits will be higher in the regime of compatibility equilibrium total surplus could be higher in either regime both regimes overprovide variety compared to the surplus maximizing solution in today s environment many products are complex specified by a long array of characteristics part of the decision of the firm is to choose if it should break this long array of features into two or more smaller parts and produce the products corresponding to the smaller arrays instead of the product that embodies the full array we will call the products that correspond to these smaller arrays components and the product that corresponds to the full array a system note that components are by their definition complements components produced by different manufacturers are compatible if it is feasible for the consumers to combine them costlessly into a working system in this paper we will assume that there are two components which make up a system we will discuss competition under full compatibility when components produced by all firms are compatible with each other and under incompatibility when no components produced by different firms are compatible and no hybrid systems can exist 2 assuming availability of the same

public and private expenditures on health in a growth model abstract this paper introduces endogenous longevity into an otherwise standard overlapping generations model with capital in the model a young agent may increase the length of her old age by incurring investments in health such private health investments are assumed to be more productive if accompanied by complementary tax financed public health programs the presence of the public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos and such volatility is impossible in its absence the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries

complementarity coordination and compatibility the role of fixed costs in the economics of systems abstract we analyze industry equilibrium and incentive to compatibility when goods produced by different producers generate utility only when consumed as component parts of a system we assume the presence of two systems each composed of some basic component and a set of differentiated complementary products the combination of complementarity between the two components of the system and of fixed costs in the production of the complementary product results in a form of network effect we focus on the role played by the size of the fixed costs in the production of the complementary products in determining the size of this system effect and by this means the structure and types of equilibria that may be observed monopolistic or duopolistic symmetric or asymmetric we also highlight the consequence of the same fixed costs for the private and social incentives to render the systems compatible

quality coordination and complementary products this article models the choice of price and quality where products are complementary and components can be provided by either one or two monopolists the firms have to choose price and quality simultaneously but can coordinate in the latter dimension we consider two specifications for the quality of the composite good bottleneck and additive set ups in both cases a single monopolist may produce lower quality as compared to dual ownership if the latter is modelled as a single stage quality and price setting game when separate markets for components of the composite good are added to the model we provide an example where dual ownership leading to higher quality also yields higher consumer surplus but not total welfare than a single monopolist

do consumers search for the highest price oligopoly equilibrium and monopoly optimum in differentiated products markets we develop a model of search among substitutes for the best combination of commodity variant and price in which the structure of search costs is manipulable by the suppliers of these variants e g by joining an existing market or opening a new one we analyze the subgame perfect equilibria arising in a multistage game involving specialized firms choice of entry variant and price and we compare them to a multiproduct monopolist s optimal choice we show that equilibrium prices increase in the number of substitutes sold in one market and that in the situation considered here monopoly increases welfare

inequity aversion may increase inequity inequity aversion models have been used to explain equitable payoff divisions in bargaining games i show that inequity aversion can actually increase the asymmetry of payoff division if unanimity is not required this is because responders may be willing to accept a lower share rather than risk being left out inequity aversion may also affect comparative statics the advantage of being the proposer can decrease as players become more impatient game theory usually assumes that players care only about their own material payoffs this hypothesis is clearly refuted by the experimental evidence in the ultimatum and related games see camerer 2003 for a recent survey inequity aversion theories have been developed in order to account for the stylised facts observed in the laboratory see fehr and schmidt 1999 and bolton and ockenfels 2000 inequity aversion means that people are willing to give up some material payoffs in order to achieve more equitable outcomes inequity averse responders prefer to reject small offers in the ultimatum game and the proposers anticipating this make higher offers in this article i examine the implications of inequity aversion for bargaining games in which unanimity is not required e g legislative bargaining games and show that it may lead to a more inequitable outcome than would occur with selfish preferences the leading model of legislative bargaining is due to baron and ferejohn 1989 in this model n symmetric players must divide a budget by simple majority each player has an equal chance of being chosen to propose a division of the budget once a proposal is made the remaining players vote yes or no if a majority of the players supports the proposal it is implemented and the game ends otherwise the procedure is repeated this model predicts that minimal winning coalitions will form and that the proposer will receive a disproportionate share of the proceedings thus the equilibrium of the baron ferejohn model with selfish preferences exhibits a substantial amount of inequity some players are excluded almost half of them if the decision rule is simple majority and the proposer receives a substantial share more than half of the total payoff if the decision rule is simple majority the advantage of the proposer increases as players become more impatient or more risk averse the baron ferejohn model has led to many applications and extensions 1 in its simplest form it assumes that parties are selfish risk neutral and only concerned with their share of cabinet posts as opposed to policy the predictions of the model under these assumptions have been tested by ansolabehere et al 2005 using data on the

shared atm networks and banking competition abstract in this paper we study the incentives of banks to share their automatic teller machines atms when they are competitors in the market for deposits we construct a stylized model of banking competition which emphasises the distinctive features of atm compatibility we find that in equilibrium either a strict subset of banks share their atms or total incompatibility prevails we also derive the implications for atm compatibility of withdrawal fees interchange bank fees entry and depositor switching costs finally we investigate the normative implications of our model and draw some policy conclusions

complementary monopolies and bargaining abstracthow should complementarities affect antitrust merger policy i introduce a two stage strategic model in which complementary input monopolists offer supply schedules to producers and then engage in bilateral bargaining with producers the main result is that there is a unique weakly dominant strategy equilibrium the equilibrium attains the joint profit maximizing outcome and output equals that of a bundling monopoly the result holds with perfect competition in the downstream market with both unit capacity and multiunit capacity the result also holds with oligopoly competition in the downstream market the result contrasts with the cournot effect which states that complementary input monopolists choose total prices that are greater than the bundled monopoly level the analysis shows that consumers surplus and total producers surplus are greater with supply schedules and bargaining than with posted price competition the analysis has implications for antitrust policy toward vertical and conglo

complementarity without superadditivity abstract the distinction between complements substitutes and independent goods is important in many contexts it is well known that when consumers conditional indirect utilities for two goods are superadditive the goods are gross complements generalizing insights in gans and king 2006 and gentzkow 2007 we show that superadditivity between one pair of goods can also introduce complementarity between competing pairs of goods one implication is that lower prices can result from a merger between producers of goods that themselves offer no superadditivity

marketing information a competitive analysis selling information that is later used in decision making constitutes an increasingly important business in modern economies jensen jensen fred o 1991 information services congram friedman eds the ama handbook of marketing for the service industries chapter 22 ama com new york 423 443 information is sold under a large variety of forms industry reports consulting services database access and or professional opinions given by medical engineering accounting financial and legal professionals among others this paper is the first attempt in marketing to study competition in the rapidly emerging information sector specifically we are interested in answering the following questions 1 is competition fundamentally different when competing firms sell information rather than traditional goods and services and if yes why 2 what are the implications of such differences for decision makers marketers and regulators 3 can we explain some of the observed marketing strategies in the information industry as such the audience of the paper includes academics as well as professionals who are interested in understanding what is specific about competition in information markets familiarity with the practical implications of such differences and understanding of the mechanisms that drive them is essential for those who are faced with the problem of marketing information to answer the above research questions we build a simple game theoretic model that consists of two firms selling information to a population of consumers who are heterogeneous in their willingness to pay for the quality of information the most important features of the model are the following information products sold by the two firms are modeled as random draws from two normal distributions having equal mean the variances of these distributions and their correlatedness constitute the product attribute space which is assumed to be common knowledge consumers are interested in assessing the mean of the distributions and to do so they can buy the sample from any of the firms or they can buy both samples and combine them to obtain a more accurate estimate quality of information is linked to the accuracy of consumers estimate of the mean which in turn is influenced by the accuracy of each sample as well as by their correlatedness consumers utility depends on the quality of information they purchased on their inherent utility for quality taste and on the total price they paid to acquire information knowing consumer preferences firms simultaneously price their information products the main finding of the paper is that information markets face unique competitive structures in particular the qualitative nature of competition changes depending on basic product characteristics while traditional products and services compete either as substitutes or as complements in the relevant product attribute space information may be one or the other depending on its position within the same product attribute space said differently the nature of competition changes qualitatively with a continuous change in basic product attribute levels the intuition behind this finding is the following when purchasing information consumers facing important decisions may find it beneficial to purchase from several information sellers this is more likely to happen when the reliability of information is low and the sources of information are independent under such conditions information products tend to be complements and as a result competition between sellers is relatively mild in the opposite case when information is reliable and or sellers sources are highly correlated consumers are satisfied after consulting a single source in this case information products are substitutes and sellers tend to undercut one another s prices to induce consumers to choose their brand understanding this discontinuity in competitive structures has important implications for decision makers as very different strategies are optimal under different product characteristics under substitution traditional strategies to avoid competition e g differentiation are recommended when the competing products reliability is generally low they are complements firms are better off accommodating competition in fact we find that a firm may benefit from inviting a competitor finally our findings are also important for regulators of information markets as the literature on complementarity suggests price fixing agreements between firms offering complementary products may benefit firms as well as consumers

how does incompatibility affect prices evidence from atm s if consumers value mix and match combinations of network complements incompatibility between different sellers components should affect prices in atm markets a 1996 governance change exogenously generated such incompatibility by allowing banks to impose surcharges when other banks deposit customers use their atm s in our data incompatibility makes the relationship between deposit account pricing and own atm s more positive and makes the relationship between deposit account pricing and competitors atm s more negative the level effect on prices is positive the pattern of results is more pronounced in high population density markets where customers may care more about atm s

a model of longevity fertility and growth abstract economic and demographic outcomes are determined jointly in a dynamic general equilibrium model of longevity fertility and growth reproductive agents in overlapping generations mature safely through two periods of life and face an endogenous probability of surviving for a third period given this probability each agent maximises her expected lifetime utility by choosing consumption and the number of children child bearing is costly in the sense that time must be spent on child rearing activities rather than on production or education the model produces multiple development regimes which yield different predictions about life expectancy fertility timing of births and educational investment depending on initial conditions these predictions accord strongly with the empirical evidence on demography and development

do converters facilitate the transition to a new incompatible technology a dynamic analysis of converters abstract this paper analyzes the process of transition in standards between incompatible technologies when converters are available contrary to a common presumption that converters facilitate the transition from an old technology to an otherwise incompatible new technology i find circumstances in which the possibility of transition is blockaded by the existence of converters in the welfare analysis of converters a distinction is made between ex ante and ex post efficiency effects finally i also analyze the equilibrium behavior in the provision of converters and compare it to the socially optimal outcome

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

crime fertility and economic growth theory and evidence abstract this paper studies the link between crime and fertility and the way by which they jointly impact on economic growth in a three period overlapping generations model where health status in adulthood depends on health in childhood adult agents allocate their time to work leisure child rearing and criminal activities an autonomous increase in the probability offenders face in escaping apprehension increases both crime and fertility non monotonically giving rise to an ambiguous effect on growth a cross country empirical examination based on data that span four decades supports the non linear effects on both crime and fertility at the same time it reveals a negative effect on output growth

competition and integration among complements and network market structure this article analyzes the competition and integration among complementary products that can be combined to create composite goods or systems the model generalizes the cournot duopoly complements model to the case in which there are multiple brands of compatible components it analyzes equilibrium prices for a variety of organizational and market structures that differ in their degree of competition and integration the model applies to a variety of product networks including automatic teller machines real estate multiple listing services and airlines crs as well as to nonnetwork markets of compatible components such as computer cpus and peripherals hardware and software and long distance and local telephone services copyright 1992 by blackwell publishing ltd

bargaining under incomplete information fairness and the hold up problem in the hold up problem incomplete contracts cause the proceeds of relation speciflc investments to be allocated by ex post bargaining the present paper investigates the e ciency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior and equally important preferences are private information as the sunk investment costs can thus potentially signal preferences they can in uence beliefs and consequently bargaining outcomes the necessities of signalling are shown to generate very strong investment incentives these incentives are based on the desire not to reveal information that is unfavorable in the ensuing bargaining after flnding all perfect bayesian equilibria in pure strategies the paper derives the necessary and su cient conditions under which it is optimal to invest and trade e ciently

mergers of complements and entry in innovative industries abstract i study a merger between producers of complement inputs facing potential entry with investment by the incumbents in deterministic cost reduction and by the entrants in probabilistic innovation and then competition in prices the merger solves cournot complementarity problems in investment and pricing which is what makes it profitable but also potentially anti competitive when the demand is inelastic the merger harms consumers by reducing r d of the entrants if the incumbents are efficient enough always when bundling is adopted instead with a demand elastic enough the merger increases consumer surplus even with bundling

innovation rent extraction and integration in systems markets author s farrell joseph katz michael abstract we consider innovation incentives in markets where final goods comprise two strictly complementary components one of which is monopolized we focus on the case in which the complementary component is competitively supplied and in which innovation is important we explore ways in which the monopoly may have incentives to confiscate efficiency rents in the competitive sector thus weakening or destroying incentives for independent innovation we discuss how these problems are affected if the monopolist integrates into the competitive sector

strategic incompatibility in atm markets abstract we test whether firms use incompatibility strategically using data from atm markets high atm fees degrade the value of competitors deposit accounts and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes atm profit considered as a stand alone operation the results are consistent with such behavior by large banks but not by small banks for large banks the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base

the division of markets is limited by the extent of liquidity spatial competition with externalities liquidity considerations will limit the number of markets in a competitive economy welfare implications are ambigious since liquidity is a positive externality there may be too little liquidity per market at a noncooperative equilibrium and too many markets compared to the surplus maximizing market structure but liquidity is also self reinforcing given an existing equilibrium new markets may not open because nobody wants to use a new market with low liquidity there may be too few markets to achieve efficiency a nondiscriminating monopolist will operate smaller and more numerous markets compared to optimality as well as to the equilibrium of independent auctioneers copyright 1988 by american economic association

invention under uncertainty and the threat of ex post entry abstract this article proposes a theoretical framework for studying the invention of new products when demand is uncertain in this framework under general conditions the threat of ex post entry by a competitor can deter invention ex ante asymmetric market power in the ex post market exacerbates the problem the implications of these general results are examined in a series of examples that represent important markets in the computer industry the first is a model that shows how an operating system monopolist by its mere presence can deter the invention of complements to its own detriment as well as that of society the implications of policies such as patent protection price regulation and mandatory divestiture are considered three additional examples consider the ability of a monopolist in one market to commit to bundling an unrelated product a pair of horizontally differentiated firms that can add a new feature to their products and a platform leader that can be challenged in its base market by the supplier of a complementary product

aging growth and the allocation of public expenditures on health and education in this paper i develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy i first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth i then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age as usually happens in aging economies resume vieillissement croissance et l allocation des depenses publiques en sante et en education dans ce texte l auteur developpe un modele de croissance endogene avec des generations qui se chevauchent dans lequel les services publics en sante et en education sont des sources de croissance en raison du fait qu ils affectent le taux d accumulation du stock de capital humain et le taux d epargne au cours du cycle de vie on decouvre que les complementarites dynamiques des depenses publiques determinent des seuils minimaux de depenses publiques en sante et en education qui assurent une croissance durable on montre comment les gouvernements peuvent utiliser l allocation des depenses publiques comme un instrument de politique publique de rechange pour maximiser la croissance sans accroitre le taux d imposition ou l ge de la retraite comme cela se fait d habitude dans les economies vieillissantes

symmetric equilibrium existence and optimality in differentiated product markets abstract equilibrium existence and optimality are analysed in a market for products differentiated by their variety a game of three stages is analysed firms enter in the first stage choose varieties in the second stage and choose prices in the third stage the existence of subgame perfect equilibria is established at equilibrium products are symmetrically located in the space of characteristics and are offered at equal prices the surplus maximizing solution is characterized and it is shown that surplus maximizing product diversity is lower than the equilibrium one

public private mix of health expenditure a political economy and quantitative analysis this paper constructs a simple model to examine decisions on public and private health spending under majority voting in the model agents with heterogeneous incomes choose how much to consume and spend on health care and vote for public health expenditure the health status of an agent is determined by a ces composite of public and private health expenditure the existence and uniqueness of the voting equilibrium are established a quantitative exercise reveals the importance of the relative effectiveness of public and private health expenditure and their substitutability in determining the public private mix of health expenditure and in accounting for the observed differences across a sample of 22 advanced democratic countries

strategic spin offs of input divisions abstract when a downstream producer enters backward into the input market a helping the rivals effect exists such entry hurts the firm s downstream business as it increases upstream competition and thus benefits its rival downstream firms this negative externality prevents the newly created upstream unit from expanding a spin off enables the firm to credibly expand in the input market thereby forcing its upstream competitors to behave less aggressively spin offs occur in equilibrium if and only if the number of downstream firms exceeds a threshold level when there is more than one integrated firm a spin off by a firm can trigger spin offs by others that would not occur otherwise

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

endogenous private health investment and the willingness to pay for public health projects the effects of income abstract a distinction is made between the wtp for health improvement and the wtp for health improving projects through endogenizing private health investment while the former always increases in income income s effect on the latter depends on whether private and public health inputs are substitutes or complements

competition cooperation and mergers economic and policy issues abstract this paper contrasts two types of european community competition policies with respect to joint ventures namely concentrative joint ventures ccjv which fall under the merger control regulation and cooperative joint ventures cpjv which fall under article 85 1 the contrast occurs at different levels procedural jurisdictional and substantive it provides firms with bargains and trade off opportunities for the choice of the more convenient jurisdiction for their transactions the paper presents a model illustrating how these bargains and trade offs can operate in the context of an endogenous choice between a ccjv and a cpjv

local network externalities and market segmentation this paper models interaction between groups of agents by means of a graph where each node represents a group of agents and an arc represents bilateral interaction it departs from the standard katz shapiro framework by assuming that network benefits are restricted only amongst groups of linked agents it shows that even if rival firms engage in bertrand competition this form of network externalities permits strong market segmentation in which firms divide up the market and earn positive profits the analysis also shows that some graphs or network structures do not permit such segmentation while for others there are easy to interpret conditions under which market segmentation obtains in equilibrium c 2009 elsevier b v all rights reserved

healthcare investment and income inequality abstract this paper examines how the relative shares of public and private health expenditures impact income inequality we study a two period overlapping generation s growth model in which longevity is determined by both private and public health expenditure and human capital is the engine of growth increased investment in health reduces mortality raises return to education and affects income inequality in such a framework we show that the cross section earnings inequality is non decreasing in the private share of health expenditure we test this prediction empirically using a variable that proxies for the relative intensity of investments private versus public using vaccination data from the national sample survey organization for 76 regions in india in the year 1986 87 we link this with region specific expenditure inequality data for the period 1987 2012 our empirical findings though focused on a specific health investment vaccines suggest that an increase in the share of the privately provided health care results in higher inequality

durable products time inconsistency and lock in many durable products cannot be used without a contingent consumable product e g printers require ink ipods require songs razors require blades etc for such products manufacturers may be able to lock in consumers by making their products incompatible with consumables that are produced by other firms we examine the effectiveness of such a strategy in the presence of strategic consumers who anticipate the future prices of both the durable product and the contingent consumable under a lock in strategy the manufacturer has pricing power over the contingent consumable which she can use to extract additional rents from higher valuation consumers but such pricing power may also reduce consumers willingness to pay for the durable because it subjects them to being held up with higher consumables prices in the future restricting our attention to linear pricing policies we find that if the manufacturer can commit to shutting down production of her durable after an initial one time sale then competition from another consumable of an appropriately degraded level of quality can benefit the manufacturer by mitigating consumers fears of being held up on the other hand when the manufacturer cannot commit to shutting down production of her durable then her own output of additional durables gives her an incentive to keep consumables prices low and competition in the consumables market is less beneficial this paper was accepted by pradeep chintagunta and preyas desai special issue editors this paper was accepted by pradeep chintagunta and preyas desai special issue editors

health spending savings and fertility in a lifecycle dynastic model with longevity externalities we investigate health spending savings fertility and policy implications in a lifecycle dynastic model with longevity externalities in annuity returns we show that such externalities engender not only excessive health spending but also under saving and excessive fertility social security and health subsidization increase health spending and savings but reduce fertility from laissez faire levels a publicly funded universal health system under labour income taxation raises fertility taxing health spending or using social security and public health together can obtain socially optimal health spending savings longevity and fertility numerical results based on us observations suggest substantial variations among these cases especially in old age health spending

aspirations health and the cost of inequality how does inequality motivate people and at what cost in a model of perpetual youth people have heterogeneous upward looking aspirations they value their consumption relative to the conditional mean of those above them in the distribution their survival depends on health capital produced from time investment and health goods higher fundamental inequality working through the aspirations gap motivates people to work and save more economic outcomes improve but income and consumption inequality worsen because the poor have less capacity to respond on the labor market by diverting resources from health production aspirations also worsen mortality especially for the poor though relative income has a strong negative effect on personal health inequality has a weak effect on population health explaining an empirical puzzle on the relative income and health gradient

the value of life and the rise in health spending over the past half century americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result debate on health policy often focuses on limiting the growth of health spending we investigate an issue central to this debate is the growth of health spending a rational response to changing economic conditions notably the growth of income per person we develop a model based on standard economic assumptions and argue that this is indeed the case standard preferences of the kind used widely in economics to study consumption asset pricing and labor supply imply that health spending is a superior good with an income elasticity well above one as people get richer and consumption rises the marginal utility of consumption falls rapidly spending on health to extend life allows individuals to purchase additional periods of utility the marginal utility of life extension does not decline as a result the optimal composition of total spending shifts toward health and the health share grows along with income in projections based on the quantitative analysis of our model the optimal health share of spending seems likely to exceed 30 percent by the middle of the century

longevity complementarities under competing risks many of the high expenditure health programs established by international organizations or national and subnational governments involve disease specific interventions such as measles vaccinations hiv education programs mammogram screening malaria prevention and lung cancer research typically these programs are evaluated solely upon the success or failure of their impact on the targeted disease this paper argues that such an exclusive evaluation may significantly underestimate the overall effect of disease specific interventions when multiple risks act as competing forces on life we suggest that programs that target one disease may have important spillover effects on the mortality and morbidity of other causes of death in order to better understand and evaluate the overall effects of disease specific programs it is necessary to understand and measure these spillover effects this paper provides a theoretical and empirical analysis of the incentives introduced by disease specific mortality interventions more precisely we discuss predictions about health investment incentives as implied by the competing risk model which is the empirical framework almost exclusively used to study multiple cause mortality we show that important complementary effects between niultiple causes of death operate to equalize the occurrence of the causes we argue that this complementarity should alter the evaluation of cause specific interventions by discrediting the argument that interventions are wasted because competing mortality risks are just around the corner in support of the existence of such complementarities we present substantive evidence from one of the most important public health programs ever introduced in developing countries the expanded programme on immunization epi of the united nations the paper is organized as follows section i provides a theoretical analysis arguing that the competing risk model of multiple causes of mortality corresponds to the leontief production function of survival this implies that there are inherent complementarities between investments in the prevention of cause specific mortality risks both on the individual level and on the aggregate level for competing risks the marginal benefit of investing to avoid one cause of death increases as a function of the survival rates of other causes the implications of this complementarity are important and have not received sufficient attention in theoretical or practical evaluations of causespecific interventions when mortality is treated as exogenous a disease specific intervention may seem wasteful if members of the targeted group are likely to die from a second cause as soon as the first has been eliminated then reducing the mortality from one cause of death would not appear to substantially increase life expectancy indeed this argument is repeatedly made by economists and demographers about medical care interventions in old age however it is sguided to use the preintervention background mortality when assessing the effectiveness of an interventionbehavior under one policy should not be assumed to prevail under a new policy as the leontief nature of competing risks predicts health investments will be focused upon he most immediate cause of death so that there are dow department of health policy and administration cb 7400 university of north carolina chapel hill nc 27599 philipson irving b harris graduate school of public policy studies department of economics and the law school university of chicago 1155 east 60th street chicago il 60637 sala i martin department of econornics columbia university 420 west 118th street 1005 new york ny 10027 and universitat pompeu fabra we are thankful to three anonymous referees for comments that substantially improved the paper and we especially acknowledge the contributions of jessica holmes who was a research assistant and co author on early drafts of this work we also thank gary becker kate howe steen jorgenson casey mulligan sherwin rosen paul schultz and participants at numerous workshops for discussions dow acknowledges financial support from national institute on aging grant no t32 ag00244 philipson from the national science foundation and the rockefeller foundation this research was begun while all authors were at yale university during 1994

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

humanitarian aid fertility and economic growth this paper examines the effect of humanitarian aid on fertility and economic growth in an overlapping generations model where health status in adulthood depends on health in childhood adult agents allocate their time to work leisure and childrearing activities humanitarian aid influences the probability of survival to adulthood health in childhood and the time that adults allocate to childrearing giving rise to an ambiguous effect on both fertility and growth an empirical investigation for the period 1973 2007 suggests that humanitarian aid has on average a zero effect on the rates of fertility and of per capita output growth

do investments in specialized knowledge lead to composite good industries we try to understand why firms producing goods by means of complementary components do not merge especially in industries in which investments in component based knowledge matters as audretsch we state that these activities are developed by individuals who do their best to appropriate the return from their knowledge and whose effort is non contractible the organization of the industry into firms is identified to a partition of the set of individuals in this context we prove that an organization in which each individual hold his own firms is both stable with respect to unilateral deviation and optimal in the line of the property right approach if the returns are high enough this structure is even the only one which shares both properties

networks and compatibility implications for antitrust in this paper we draw crucial parallels between the concepts of compatibility and networks and the more traditional concepts of complementarity and vertical relationships we also develop the important distinctions between two way networks and one way networks we then apply our framework to a number of current antitrust issues

bargaining and inequity aversion on the efficiency of the double auction abstract in a bargaining setting with asymmetrically informed inequity averse parties a fully efficient mechanism i e the double auction exists if and only if compassion is strong less compassionate parties do not trade in the double auction in the limit of strong envy

a model of corporate donations to open source under hardware software complementarity in recent years there has been an increasing diffusion of open source projects as well as an increasing interest among scholars on the topic open source software oss is developed by communities of programmers and users usually sponsored by private firms is available in the public domain and redistributed for free we present a model of open and closed source software competition in a differentiated oligopoly of hardware software bundles hardware and software are complement goods and oss is financed by hardware firms results are several hardware firms contribute to the development of open source although the level of contribution is not socially optimal oss availability has a positive impact on hardware firms profits and prices whereas the closed source producer is harmed by oss competition furthermore we analyze under what circumstances hardware firms have incentives in investing in os projects the model can explain the increasing participation in os projects of several embedded device producers and server producers although we focus on hardware this model can be generalized to a wide range of complementary goods and services such as it training web hosting and information and communication technology ict consultancy services

why does child labor persist with declining poverty we develop a dynamic overlapping generations model to highlight the role of income inequality in explaining the persistence of child labor under declining poverty differential investment in two forms of human capital schooling and health in the presence of inequality gives rise to a nonconvergent income distribution in the steady state characterized by multiple steady states of relative income with varying levels of education health and child labor the child labor trap thus generated is shown to preserve itself despite rising per capita income policy recommendations include public provision of education targeted toward reducing schooling costs for the poor or raising the efficacy of public health infrastructure jel i1 j2 o1 o2

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

competition in multiechelon assembly supply chains in this paper we study competition in multiechelon supply chains with an assembly structure firms in the supply chain are grouped into homogenous sectors nodes that contain identical firms with identical production capabilities that all produce exactly one undifferentiated product that may itself be a kit of components each sector may use several inputs to produce its product and these inputs are supplied by different sectors the production process within any sector is taken to be pure assembly in fixed proportions the number of firms in each sector is known the demand curve for the final product is assumed to be linear as are production costs in all sectors competition is modeled via a coordinated successive cournot model in which firms choose production quantities for their downstream market so as to maximize profits given prices for all inputs and all complementary products production quantities for sectors supplying the same successor are coordinated through pricing mechanisms so that complementary products are produced in the right proportions under these assumptions equilibrium prices for any multiechelon assembly network are characterized by a system of linear equations we derive closed form expressions for equilibrium quantities and prices in any two stage system i e a system with multiple input sectors and a single assembly sector we show that any assembly structure can be converted to an equivalent larger structure in which no more than two components are assembled at any node finally large structures can be solved either by direct solution of the characteristic linear equations or through an iterative reduction compression to smaller structures

quality choice and vertical integration abstract we show that despite coordination in the quality level of the components that they provide independent vertically related disintegrated monopolists will provide products of lower quality level than a sole integrated monopolist further the integrated monopolist achieves higher market coverage higher consumer surplus and higher profits we establish these results for any distribution of preferences in the standard model of quality differentiation despite the lower quality we also show that for a wide class of cost functions price will be higher in a market of independent vertically related monopolists all results are the effects of the interaction of double marginalization occurring in the market of independent monopolists with the choice of quality