competition and the number of firms in a market are duopolies more competitive than atomistic markets this paper uses a variant of the standard search model to examine market equilibrium and the consequences for market equilibrium of an increase in the number of firms if marginal search costs increase with the number of searches then the demand curve facing any firm will be kinked with the elasticity of demand with respect to price decreases being less than with respect to price increases prices may not change in response to changes in marginal costs as the number of firms increases the maximum price that is consistent with equilibrium increases to the monopoly price but the minimum price decreases on the other hand if marginal search costs decrease with the number of searches equilibrium if it exists is characterized by a

brand equity and vertical product line extent this paper addresses the question of how the vertical structure of a product line relates to brand equity does the presence of premium or high quality products in a product line enhance brand equity conversely does the presence of economy or low quality products in a product line diminish brand equity economists and marketing researchers refer to variation in quality levels of products within a category as vertical differentiation whereas variation in the function or category of the products is referred to as horizontal differentiation much of the existing research on the relationship between product line structure and brand equity has focused on the horizontal structure of the product lineand has been primarily concerned with brand extensions what happens when the product line of a brand is extended horizontally into new categories researchers have been concerned primarily with how the extension fares but the effect of the extension on the core products is also important there is an analogous question of what happens when the product line of a brand is extended vertically either up market or down market this question of vertical extensions is part of the more general issue of how the vertical structure of a product line relates to brand equity the specific research questions addressed in this paper are 1 do premium or high quality products enhance the brand equity associated with the other products in the line 2 conversely do economy or low quality products diminish the brand equity associated with the other products in the line these research questions are relevant to three managerial issues in product line strategy first what are the costs and benefits of including down market products within a brand second what are the implications of including high end models within a brand third when should high end and low end products be offered under an existing brand umbrella and when should these products be offered under separate brands we address these research questions empirically through an analysis of the models and brands within the u s mountain bicycle industry we use price premium above that which can be explained by the physical characteristics of the bicycle as a metric for brand equity we then test several hypotheses related to the relationship between extension of the product line upward and downward and the price premium commanded by the brand we further support this analysis with a simple laboratory experiment the analysis reveals that price premium in the lower quality segments of the market is significantly positively correlated with the quality of the lowest quality model in the brand s product line and that for the upper quality segments of the market price premium is also significantly positively correlated with the quality of the highest quality model in the brand s product line the results of the analysis are supported by the outcome of an experiment in which 63 percent of the subjects preferred a product offered by a high end brand to the equivalent product offered by a low end competitor these results imply that managers wishing only to maximize the equity of their brands would offer only high quality products and avoid offering low quality products however this result must be moderated by the overall objective of maximizing profits maximizing profits is likely to involve a tradeoff between preserving high brand equity and therefore high margins and pursuing the volume typically located in the lower end of the market one of the most significant implications of this research is that product line managers need to be mindful not just of the incremental cannibalization or stimulation of sales of products that are immediate neighbors of an extension to the product line but also the effect of such an extension on the brand equity in other possibly quite different parts of the product line

the role of brand image and product characteristics on firms entry and oem decisions we investigate the optimal market entry and original equipment manufacturer oem decisions of a firm facing a market in which firms brands can be horizontally differentiated and products can be vertically differentiated the entrant might sell under its own brand and compete with an incumbent become a supplier to the incumbent or both findings reveal that when consumers perceive the firms are horizontally and vertically differentiated the entrant profits by simultaneously entering the market and establishing an oem arrangement with the incumbent in such competitive scenarios both buyer and seller increase profits by agreeing on wholesale prices that are not too low which softens both horizontal and vertical conflict between the firms findings also show that the incumbent may prefer to pay high wholesale prices to the entrant even if the incumbent had the option to source the product independently at a lower marginal cost when firms have the capability of producing each other s product lines su

cyclical behavior of real wages in japan this paper studies the cyclicality of aggregate real wages in japan by using both static and dynamic approaches i measure comovements between real wages and business cycle indicators this paper finds that while real wages constructed using the consumer price index and the gdp deflator are procyclical real wages constructed using the producer price index are countercyclical this result is robust to the data and methods used to compute the comovements

monetary policy and real wage cyclicality this article points to the potential role of monetary policy in affecting the degree of real wage cyclicality we show that the degree and direction of real wage cyclicality is determined by the interaction of i the returns to scale in production ii the nature of aggregate shocks and iii monetary policy given that production technology is fairly constant in the short run we suggest that variations in the real wage output covariance depend largely on the combination of the latter two identifying well documented monetary policy phases in six major organization for economic co operation and development oecd countries and accounting for both aggregate demand and supply shocks we provide empirical evidence to support our main theoretical claim

inventories rational expectations and the business cycle abstract the simplest macroeconomic models in which markets clear instantaneously and expectations are rational preclude the existence of business cycles that is of serially correlated deviations of output from trend this paper studies one of several mechanisms that can be used to make these so called new classical models produce business cycles the mechanism is the gradual adjustment of inventory stocks two macroeconomic models of inventory holdings are formulated both imply first that current output should be a decreasing function of the stock of inventories and second that inventories once perturbed from equilibrium levels should adjust only gradually these two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational two principal conclusions are reached first disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend second if desired inventories are sensitive to the real interest rate then even fully anticipated changes in money can affect real variables

search frictions matching aggregate and establishment observations abstract we estimate a search model to match hours employment vacancies and unemployment at the micro and macrolevels we establish a set of facts concerning the variability of unemployment and vacancies in the aggregate and the distribution of net employment growth and the comovement of hours and employment growth at the establishment level a search model with non convex costs of posting vacancies establishment level profitability shocks and a contracting framework to set hours provides a structure to understand these observations the estimated model is able to capture both the aggregate and establishment level facts

dynamics and seasonality in quarterly panel data this article presents an empirical analysis of the dynamics of individual earnings using spanish quarterly earnings i propose a new econometric methodology to control for the seasonality in my dataset moreover i apply this methodology to the study of earnings mobility in spain using transition probabilities among earnings quintiles for the period 1985 1996 i find substantial mobility from one year to the next however earnings changes are basically among adjacent quintiles workers with university education are more mobile than workers with primary and secondary education on the other hand i observe greater negative mobility among earnings quintiles and more persistence of low earnings situations in the 1990s especially for workers with primary education

wage rigidity in canadian collective bargaining agreements the authors search information on the provisions of 10 947 wage contracts signed in the canadian unionized sector between 1976 and 1999 for evidence of downward nominal wage rigidity the disinclination of wages to fall in nominal dollars below their established level over the sample period real wage reductions were common but nominal wage reductions were rare the probability of downward nominal wage rigidity increased substantially during low inflation periods during such periods apparently there was no reduction in the incidence of real wage cuts but the magnitude of those cuts was modest suggesting a lesser ability of wages to adjust to labor market conditions than at other times

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

multi market competition r d and welfare in oligopoly we investigate a multi market cournot model with strategic process research and development r d investments wherein a multi market firm meets new competitors that enter one of the markets we show that entry can enhance the total r d expenditures of the multi market firm moreover the incumbent s profit nonmonotonically changes as the number of entrants increases depending on the fixed entry costs and r d technologies both insufficient and excess entry can appear our results imply that diversification of their products can be a useful strategy for firms

why are the wages of job changers so procyclical evidence on wage cyclicality shows job changers have more procyclical wages than job stayers previous work argued this arises because workers gain greater access to jobs in sectors such as manufacturing that offer high wages this article argues that workers who switch jobs in booms enter temporary jobs with unemployment risk and are merely compensated for subsequent losses i demonstrate that the two explanations can be distinguished using the relationship between unemployment insurance and wage cyclicality among job changers the evidence supports the compensation hypothesis that is that job changers might not experience real gains from higher paying jobs in booms

profit increasing consumer exit this paper examines the phenomenon of profit increasing consumer exit and the related phenomenon of profit decreasing consumer entry we demonstrate that firms can be better off in shrinking markets and worse off in growing markets even in the absence of competitive entry or exit specifically firms may benefit if a segment of consumers who are relatively indifferent about consuming any product in the category leave the market profits can increase for all firms even if the exiting consumers have strong preferences for only one of the products in the market in shrinking markets it is reasonable to assume that the people who are likely to exit the market first are people who are least committed to the category in particular people who are the least satisfied with the existing offers are the most likely to change their behavior by finding an alternative or adopting a new technology similarly in growing markets consumers who enter the market late are generally the least committed to the category such exiting can relax the competitive pressure between firms and lead to increased profitability our findings provide an explanation for profit growth that has been observed in product industries exhibiting slow and predictable declines over time including vacuum tubes cigarettes and soft drinks

imperfectly competitive labour markets and the productivity puzzle abstract we integrate imperfectly competitive labour markets in a dynamic macromodel in accordance with empirical evidence we find that temporary shocks are consistent with little real wage and large employment responsiveness while permanent shocks affect real wages and not employment

the cyclicality of the user cost of labor abstract the user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period analogous to the price of any long term asset the user cost not wage is the relevant price for a firm that is considering adding a worker i construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers i demonstrate an application of the finding using the textbook search and matching model

price dispersion in the small and in the large evidence from an internet price comparison site this paper examines four million daily price observations for more than 1 000 consumer electronics products on the price comparison site http shopper com we find little support for the notion that prices on the internet are converging to the law of one price in addition observed levels of price dispersion vary systematically with the number of firms listing prices the difference between the two lowest prices the gap averages 23 per cent when two firms list prices and falls to 3 5 per cent in markets where 17 firms list prices these empirical results are an implication of a general clearinghouse model of equilibrium price dispersion

defensive marketing strategies this paper analyzes how a firm should adjust its marketing expenditures and its price to defend its position in an existing market from attack by a competitive new product our focus is to provide usable managerial recommendations on the strategy of response in particular we show that if products can be represented by their position in a multiattribute space consumers are heterogeneous and maximize utility and awareness advertising and distribution can be summarized by response functions then for the profit maximizing firm it is optimal to decrease awareness advertising it is optimal to decrease the distribution budget unless the new product can be kept out of the market a price increase may be optimal and even under the optimal strategy profits decrease as a result of the competitive new product furthermore if the consumer tastes are uniformly distributed across the spectrum a price decrease increases defensive profits it is optimal at the margin to improve product quality in the direction of the defending product s strength and it is optimal at the margin to reposition by advertising in the same direction in addition we provide practical procedures to estimate 1 the distribution of consumer tastes and 2 the position of the new product in perceptual space from sales data and knowledge of the percent of consumers who are aware of the new product and find it available competitive diagnostics such as the angle of attack are introduced to help the defending manager this article was originally published in marketing science volume 2 issue 4 pages 319 360 in 1983

price and variety in the spokes model the spokes model of nonlocalized spatial competition provides a new analytical tool for dierentiated oligopoly and a representation of spatial monopolistic competition an increase in the number of rms leads to lower equilibrium prices when consumers have relatively high product valuations but surprisingly to higher equilibrium prices for in termediate consumer valuations new entry alters consumer and social welfare through price market expansion and matching eects with free entry the market may pro vide too many or too few varieties from a social welfare perspective and the equilibrium price remains above marginal cost even when the number of rms is arbitrarily large

business cycle models aggregation and real wage cyclicality a substantial literature has developed to estimate the true cyclicality of real wages that is composition bias free two major issues are addressed in this article aggregation of heterogeneous workers and potential bias in the measurement of the labor input a general analysis of the biases is presented and alternative approaches in the literature are nested in a single framework estimates based on an efficiency units concept that avoids the usual aggregation problems are presented composition bias underestimates the usual parameters of interest unless both the price and the quantity of the labor input are adjusted appropriately

measuring the cyclicality of real wages how important is the firm s point of view there is a growing consensus among economists that real wages in the postwar united states have been procyclical greatly bolstering technology driven theories of business cycles at the expense of more classical models this paper makes the point that technological movements in firm s labor demand curves should be tested with a wage that is deflated by the firm s own price of output with appropriate controls for intermediate inputs and with respect to the cyclical state of the firm s own industry as opposed to the state of the aggregate economy failure to control for these factors is found to lead to substantial overrejection of the classical model in detailed industry data with controls for changes in worker composition i find that a vast majority of sectors have paid real product wages that vary inversely that is countercyclically with the state of their industry

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

firms timing of production with heterogeneous consumers i revisit endogenous timing in a quantity setting duopoly game in the basic model i show that given strong heterogeneity in consumers willingness to pay wtp and a moderately small consumer segment with low wtp sequential moving outcomes can appear in equilibrium with the follower enjoying second mover advantage owing to consumer heterogeneity in wtp there is a local property that a firm s aggressive behaviour may lead to a competitor responding more aggressively hence the sequential moves can restrict firms total outputs to avoid a price collapse and result in firms strategic choices that pareto dominate those under the simultaneous move i further generalize my results and show that although firms compete in quantity under some conditions of the demand function features of strategic complements can appear

the cyclicality of consumption wages and employment of the public sector in the euro area this study empirically examines the business cycle behaviour of public consumption and its main components the public wage bill including its breakdown into compensation per employee and public employment and intermediate consumption in the euro area aggregate euro area countries and a group of selected non euro area organization for economic co operation and development oecd countries denmark sweden the uk japan and the us it looks across a large number of variables and methods using annual data from 1960 to 2005 it finds robust evidence supporting that public consumption wages and employment co move with the business cycle in a pro cyclical manner with 1 2 year lags notably for the euro area aggregate and euro area countries the findings reflect mainly the correlation between cyclical developments but also point to an important role of pro cyclical discretionary fiscal policies

market competition r d and firm profits in asymmetric oligopoly we investigate a cournot model with strategic r d investments wherein efficient low cost firms compete against less efficient high cost firms we findthat an increase in the number of high cost firms can stimulate r d by the low cost firms while it always reduces r d by the high cost firms more importantly this force can be strong enough to compensate for the loss that arises from more intense market competition the low cost firms profits may indeed increase with the number of high cost firms an implication of this result is far reaching as it gives low cost firms an incentive to help rather than harm high cost competitors we relate this implication to a practice known as open knowledge disclosure especially ford s strategy of disclosing its know how publicly and extensively at the beginning of the 20th century

why competition may drive up prices abstract we show that the expected price of an incumbent firm may increase in response to increasing competition as it may become more profitable to exploit a rather immobile fraction of consumers instead of capturing a larger but more contested segment of the market to derive this result we consider two approaches of modelling the degree of competition first in a duopolistic setting competition is said to be more intense if the entrant s product becomes more attractive to the mobile fraction of buyers in this case we find that all buyers i e both the mobile and the immobile fraction may lose if the market becomes more competitive secondly in a model with two entrants competition is said to become intense if entrants serve an overlapping segment of the market for mobile buyers

evaluating the performance of the search and matching model abstract does the search and matching model fit aggregate u s labor market data while the model has become an important tool of macroeconomic analysis recent literature pointed to some significant failures in accounting for the data this paper aims to answer two questions i does the model fit the data and if so on what dimensions ii does the data fit the model i e what are the data which are relevant to be explained by the model the analysis shows that the model fits certain specifications of the data on many dimensions though not on all this includes capturing the high persistence and high volatility of most of the key variables the negative co variation of unemployment and vacancies and the behavior of the worker job finding rate a key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate the latter is a major component of the rate discounting the future value of the job worker match the paper offers a workable empirically grounded version of the model for the analysis of aggregate u s labor market dynamics

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

real myths and a monetary fact in their paper business cycles real facts and a monetary myth kydland and prescott federal reserve bank of minneapolis quarterly review 14 1990 present a series of statistics generated by using the hodrick prescott filter which they define as the business cycle facts prescott federal reserve bank of minneapolis quarterly review 10 1986 argued that the facts are immune to the method of detrending however even if we use the hodrick prescott filter we can get a set of facts that differ in important ways from those in kydland and prescott 1990 in particular we can generate the conventional wisdom that real wages are acyclical very different relative volatilities of consumption investment and output and m1 leading the cycle in addition we note that the other important fact generated by kydland and prescott the countercyclicality of prices was not actually a new result

when showrooming increases retailer profit abstractshowrooming the phenomenon of consumers visiting a brick and mortar b m store to learn about products but then buying online to obtain lower prices is attracting increased attention both in business practice and in academic literature it is considered a major threat to the b m retailers and determining how to fight it seems to be the only consideration however the manufacturer s need for retail informational services has always been one of the essential reasons for retailers to exist and is a means for retailers to achieve profitability the popular arguments about the threat of showrooming ignore the strategic role of the manufacturer in the distribution channel this article analytically shows that when the manufacturer s decisions are considered i e when the manufacturer retailer contract is endogenous consumers ability to engage in showrooming may lead to increased rather than decreased profitability for b m retailer s thus retail efforts to restrict showrooming behavior m

the existence of low end firms may help high end firms two models of competition between high end and low end products benefiting the high end firms are presented one is a quantity competition model and the other is a price competition model with product differentiation the key factor is the existence of two heterogeneous consumer groups those who demand only high end name brand products and those who care little whether products are high or low end we show that under certain conditions the profits of firms in the high end market are larger when there are firms producing low end products than when there are not the existence of price sensitive consumers who care little about product quality intensifies competition among the high end firms the existence of low end firms functions as a credible threat which induces the high end firms not to overproduce because price sensitive consumers buy products from the low end firms the result provides a new theoretical mechanism concerning the profitability and pricing of national brand firms after the entry of private labels it has an implication for pricing and marketing strategies established firms should not decrease their prices after the entry of nonestablished firms

the relative adjustment of wages and prices direct tests within a multiple equation system in order to assess the relative rigidity of the aggregate price level and the nominal wage rate most researchers have focused on the implied behaviour of the real wage rate in response to a purely demand disturbance the present work examines the explicit behaviour of the two variables and is therefore able to analyse the variables short run responses within the context of their defined long run behaviour while the paper reports evidence of long run stability in the real wage rate additional evidence is presented which supports both sticky price and sticky wage models the determining factor is the choice of lag

procyclical labour productivity a closer look at a stylized fact at 4 digit united states manufacturing industry level we find evidence suggesting that the stylized fact of procyclical labour productivity should be treated with great caution we use the nber manufacturing productivity database to investigate the relationship between hourly labour productivity and real output for 450 industries for the years 1958 91 labour productivity is significantly procyclical in 63 of industries and acyclical in 36 in the latter respect a high proportion of investment goods industries display acyclical productivity cross section regressions are carried out that seek to explain the interindustry distribution of cyclicality the analysis attributes a significant role to variations in materials costs as a proxy for fluctuations in factor utilization

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

competitive promotional strategies this article analyzes the equilibrium pricing strategies of brands engaged in a pricing game each brand has a monopoly market loyal consumers and competes with others in a common market called brand switchers in the case of a duopoly it is shown that the behavior of the brand switchers characterizes the equilibrium behavior of the duopolists this article focuses on two key comparative statics namely the depth of discounts away from a regular high price and the probability of giving a deal or the frequency of deals how these properties vary with the size of the loyal markets and the behavior of the brand switching population is discussed copyright 1988 by the university of chicago

product diversion to a direct competitor a manufacturer will often limit competition among downstream partners by authorizing only a select group of retailers to carry its product however it is not uncommon for authorized retailers to create an additional competitor by diverting units to an unauthorized seller this paper presents an analytical model that demonstrates how diversion from authorized retailers to an unauthorized direct competitor can occur under circumstances not considered by the prior literature in fact diversion can represent a prisoner s dilemma whereby retailers diminish their own profit by selling to the unauthorized direct seller the authorized retailer s profit loss actually increases as the per unit diversion costs incurred by the authorized retailer decrease the model also shows that the unauthorized direct seller earns greater profit by strategically procuring a unilaterally constraining quantity even though this procurement strategy results in an equivalent increase in the quantity sold by the retailers combined the results identify a new reason for diversion and its consequences for retailers and the unauthorized direct seller

a comparison of the cyclical behavior of union and nonunion wages in the united states this paper presents an extensive analysis of the behavior of union and nonunion wages over the business cycle using quasi panels developed from the current population survey in an attempt to resolve or reconcile competing claims about the cyclical behavior of union and nonunion wages union wages were roughly as procyclical as nonunion wages were prior to the early 1980s substantial reductions in union wage procyclicality since then are associated with reductions in the procyclical exercise of bargaining power

competitive reactions to advertising and promotion attacks how do competitors react to each other s price promotion and advertising attacks what are the reasons for the observed reaction behavior we answer these questions by performing a large scale empirical study on the short run and long run reactions to promotion and advertising shocks in over 400 consumer product categories over a four year time span our results clearly show that the most predominant form of competitive response is passive in nature when a reaction does occur it is usually retaliatory in the same instrument i e promotion attacks are countered with promotions and advertising attacks are countered with advertising there are very few long run consequences of any type of reaction behavior by linking reaction behavior to both cross and own effectiveness we further demonstrate that passive behavior is often a sound strategy while firms that do opt to retaliate often use ineffective instruments resulting in spoiled arms accommodating behavior is observed in only a minority of cases and often results in a missed sales opportunity when promotional support is reduced the ultimate impact of most promotion and advertising campaigns depends primarily on the nature of consumer response not the vigilance of competitors

contracts job experience and cyclical labor market adjustments longitudinal estimates of the variability of individual wages hours and weeks worked over the course of changing demand states are provided for all workers generally and for workers of varied levels of job experience emphasis is placed on that part of job experience represented as years on current job a commonly used proxy for the magnitude of firm specific skills interpretation of resulting estimates in the context of the labor market contracting literature is attempted generally significant procyclical patterns are found for real weekly wages weekly hours and weeks worked the extent of weekly wage variability is much greater than is generally suggested in the literature furthermore workers with greater tenure exhibit greater cyclical wage and hours variability and less weeks variability finally empirical distinctions are drawn separately for white collar and blue collar as well as union and nonunion workers

why are wages cyclical in the 1970 s this article investigates cyclicality in real wages between 1969 and 1982 using panel study of income dynamics data there is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years however cyclicality in the movement of workers between heterogeneous labor market sectors affected aggregate wage cyclicality while sector location is important sector selectivity is not correlated with wages yet even within sectors cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels as well as in the coefficients associated with particular worker characteristics

durable goods leasing in the presence of exporting used products to an international secondary market abstract with the rapid growth of global trade used durable goods from wealthy countries increasingly find their way into the secondary market of less wealthy countries exporting used products to a physically separate market not only removes cannibalization for new products at home but also fetches additional revenue in this paper we investigate the implications of exporting used products to international secondary markets in the durable goods industry we find that such a practice may significantly stimulate new product lease on the home market an effect in which the market attractiveness and product quality are mutually reinforcing we discover that removing cannibalization pressure is more of a priority than generating additional revenue while exporting used products if the export is carried out by an agent who exports used products bought from oem original equipment manufacturer we observe the disadvantage of double marginalization in a channel structure which slows down export and causes quantity distortion and also reduces the effectiveness of government stimulus however if the agent and oem set export price based supply and demand equilibrium this reduces the quantity distortion one special characteristic of used products trade across borders is the involvement of governments on both sides of the border the government measures include penalties imposed on aging durable goods and trade barriers we find that legislation of penalizing used products on the domestic market can stimulate export but it does not have an intended effect of stimulating new products produced at home the channel structure worsens the problem

competing for low end markets recent business research points to the fortune awaiting to be tapped in low end markets in this paper we investigate how the size of the low end market influences a firm s profits and the pioneering firm s quality choice as low valuation consumers increase in a market on average consumers willingness to pay decreases this may lead us to expect firms profits to decrease as the size of the low end market increases our analysis shows that if the size of the low end market is below a threshold an increase in the size of the low end market may actually dampen price competition and improve profits as firms can then strategically choose their quality levels such that their products are more differentiated conventional wisdom also suggests that the pioneering firm will offer a higher quality product and earn more profits compared with the later entrant in contrast to this notion of quality advantage our analysis identifies circumstances in which a pioneer can offer a lower quality product and yet earn more profits an experimental test lends support for some of our model s predictions we further extend the model to consider markets with multiple firms firms with multiple products and consumers with limited purchasing power

competition with targeted product design price variety and welfare abstract we consider the price and welfare effects of competition in targeted product design in the context of the salop circle model changes in product design lead to demand rotations that set the stage for our analysis with an exogenous number of firms we show that the degree of targeted product design tends to increase with the number of firms moreover under reasonable conditions price increasing competition takes place for intermediate levels of the number of firms this effect is associated with the possibility of lower consumer welfare with endogenous firm entry an interesting insight from our analysis is that in some situations an increase in market size or a technological progress that reduces entry costs both might reduce consumers welfare

on informative advertising and product differentiation abstract we study informative advertising within a random utility non localized competition model of product differentiation quasi concavity of profits may fail as each firm may prefer to deviate to a high price targeting consumers who only become informed about its own product when a symmetric equilibrium exists it is unique increasing the number of firms may increase or decrease the equilibrium price advertising tends to be suboptimal when product differentiation is low and excessive otherwise we also revisit grossman and shapiro grossman g shapiro s 1984 informative advertising with differentiated products review of economic studies 51 63 81 focusing on similarities in constructing a symmetric equilibrium in the two models but also illustrating differences in their welfare properties

the effect of implicit contracts on the movement of wages over the business cycle evidence from the national longitudinal surveys a 1991 study by paul beaudry and john dinardo found evidence of internal labor markets that augment incumbent workers wages when the external labor market is tight when unemployment is low and shield their wages when it is slack current wages they found depend on the tightest labor market conditions observed since a worker was hired not current labor market tightness or labor market tightness at the time of hiring this paper replicates and extends that research using data from six cohorts of the national longitudinal surveys that together span more than three decades as well as an estimation framework more robust than that in the original study the author finds strong support for beaudry and dinardo s key prediction supplementary regressions confirm other implications of the theory as well recently at least the effect of implicit contracting on wages has been similar for men and women

economic shocks and labor market flexibility we test how labor markets adjust to large but temporary economic shocks in a context in which such shocks are common using an individual level panel from 1 140 philippine municipalities over 26 quarters we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages without evidence of layoffs the results are strongest for formal wage paying jobs we argue that those results are best explained by implicit contracts where workers and firms share risks we provide extensive qualitative data suggesting that employment contracts in the philippines allow for such flexibility abstract from author

real wages and the business cycle the objectives of this review are threefold 1 to characterize the empirical literature on the cyclical behavior of real wages 2 to identify the sources of the differences in results across studies and 3 to enumerate key factors that determine the cyclicality of real wages given a host of measurement and methodological issues drawing firm conclusions is difficult but several generalizations can be made the estimated cyclicality of real wages depends crucially on the time period of analysis and the choice of whether to examine the production or the consumption wage composition effects play an important but complicated role as well

spatial dynamics and heterogeneity in the cyclicality of real wages neither the issue of how local and aggregate labor markets interact over time nor the issue of how heterogeneity by education race and other factors interacts with these spatial dynamics has prev

tenure business cycle and the wage setting process abstract we analyze the interaction between job tenure and external labor market conditions in wage determination first we introduce a model that combines job matching with business cycle effects as the employment relationship progresses the worker appropriates a portion of the value of the match specific human capital she accumulates gradually becoming shielded from the cyclical variations in external labor market conditions the employment relationship is progressively internalized then we present empirical evidence supporting this prediction the elasticity of wages to the unemployment rate decreases with tenure this finding is robust to different specifications that allow for job heterogeneity and it contributes to the interpretation of recent evidence of changes in the effect of the business cycle on wages

setting quality expectations when entering a market what should the promise be this paper examines optimal advertised quality actual quality and price for a firm entering a market it develops a two period model where advertised quality influences expectations and hence trial and the gap between actual quality and expectations determines satisfaction which in turn impacts second period sales in such situations a company makes a choice between advertising high quality and getting trial but little repeat and advertising low quality and getting low trial but high repeat results are derived by numerical methods as well as analytically for a special case of the model the model suggests it is optimal to overstate quality when i customers rely relatively less on advertising to form quality expectations and ii customers intrinsic satisfaction with a product is high these results are consistent with deceptive advertising cases at the ftc which showed more deception for unknown firms and for firms whose customers were more satisfied they are also consistent with the decisions made by future managers mbas except that the respondents would advertise higher versus lower quality when advertising was effective

in search of a stylised fact do real wages exhibit a consistent pattern of cyclical variability the paper surveys the studies on the cyclical behaviour of real wages published from the twenties onwards the traditional simple neoclassical model of the labour market suggests that real wages tend to move countercyclically however from a theoretical viewpoint there are few reasons to expect this behaviour once the simple model is extended to account for imperfect competition uncertainty lagged responses or contracting between firms and workers empirical studies give different answers to the problem the contributions reviewed in the paper are arranged roughly in a chronological order the interwar period the postwar pre econometric studies the econometric work using aggregate data the evidence produced on the basis of longitudinal data the analyses of the shock responsiveness of real wages and finally the most recent papers attempting a reconciliation of the somewhat conflicting evidence derived from aggregate and panel data

nominal wage rigidity in contract data a parametric approach using wage agreements reached in the canadian unionized sector during 1976 99 a period of high as well as exceptionally low inflation we consider how histograms of wage adjustment changed as inflation reached the low levels of the 1990s the histograms and parametric tests suggest that wage adjustment is characterized by downward nominal rigidity and significant spikes at zero there is some evidence of modest menu cost effects we examine whether the rigidity features of wage adjustment are sensitive to indexation provisions and investigate whether the distinction between short and long contracts is useful

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