cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

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

productive performance technology heterogeneity and hierarchies who to compare with whom in this paper we argue that inappropriate handling of technological heterogeneity distorts the benchmarking process eroding performance scores country and industry specific frontier studies have been the dominant approaches in explaining productivity differentials stating that heterogeneous performance patterns are attributed to different sources however studies bringing together the above approaches have not been surfaced yet we fill that void by partitioning the metafrontier to account for alternative technological hierarchies to disentangle the layers of complexity triggering heterogeneous performance we introduce two types of heterogeneity each one referring to different stages of the performance evaluation process to identify the decision making unit specific heterogeneity type attached to each entity we propose the w ratio as a result of an iterative algorithm developed herein in order to identify the hierarchical structural heterogeneity type arising under alternative hierarchical structures we define thresholds of heterogeneity using data on seventeen european countries and thirteen industries from manufacturing and transportation from 1999 through 2006 and employing a control function approach with one endogenous covariate we find that the dsh and the hsh type are endogenously related via the role of the state dependence while the path dependence phenomenon is a major catalyst for future technological achievements and productivity improvements transition economies and fragmented industries exhibit persistent technological heterogeneity regardless of the technological structure adopted since further development is mostly affected by past characteristics of the economic environment implying low subsequent competitiveness

market dynamics in the netherlands competition policy and the role of small firms a recent literature analyzing the dynamics of firms and industries suggests that the contribution of new and small firms to the dynamics of competition is significantly greater than found in a static analysis policy makers have responded by implementing a wide range of programs to reduce barriers to new firm startup at the same time a number of european countries have maintained systems of collective agreements imposing industry wide standards on the deployment and remuneration of inputs particularly labor the purpose of this paper is to examine whether the ability to deviate from the industry standards practiced by the incumbent firms promotes the viability of small and new firms we examine this using a longitudinal data base from the netherlands where a system of rigid industry wide collective agreements was abandoned in favor of greater flexibility whether or not the ability of small firms to deviate from the standards and practices of the incumbent firms in the industry promotes their viability in the dutch context is instructive to other european countries such as germany and france the latter countries have identified the startup of new firms as a central policy goal but have maintained systems of industry wide collective agreements the important finding emerging from this paper is that wage flexibility promotes the viability of small firms and thus can be considered to be an instrument of competition policy in a dynamic context

back to basics the comanor wilson mes index revisited the present article attempts to investigate the validity of the comanor wilson minimum efficient size mes measure the basic assumption is that firms that have exhausted scale economies are in non increasing returns to scale the same firms are also assumed to have a size greater than mes estimated on sales total turnover employment or fixed assets data envelopment analysis dea is used on a sample of firms in three greek manufacturing industries to classify firms in operation according to increasing or non increasing returns to scale on the basis of the results of the dea input oriented model the mes measure correctly predicts over 85 of the cases a probit model is applied to those cases that are not identically predicted by mes concerning returns to scale results indicate that technical efficiency size and age are the factors that compel mes to yield the same prediction as the dea approach

does entry size matter the impact of the life cycle and technology on firm survival a wave of empirical studies has recently emerged showing that smaller scale entry is confronted with a lower likelihood of survival than their larger counterparts the purpose of this paper is to examine whether the relationship between size of a firm when entering an industry and the likelihood of survival holds under different technological conditions and across the different stages of the industry life cycle the empirical evidence suggests that the relationship between firm size and the likelihood of survival is shaped by technology and the stage of the industry life cycle while the likelihood of survival confronting small entrants is generally less than that confronting their larger counterparts the relationship does not hold for mature stages of the product life cycle or in technologically intensive products in mature industries that are still technologically intensive entry may be less about radical innovation and possibly more about filling strategic niches thus negating the impact of entry size on the likelihood of survival

breaking up a research consortium inter firm r d collaborations through contractual arrangements have become increasingly popular but in many cases they are broken up without any joint discovery we provide a rationale for the breakup date in r d collaboration agreements more specifically we consider a research consortium initiated by a firm a with a firm b b has private information about whether it is committed to the project or a free rider we show that under fairly general conditions a breakup date in the contract is a second best optimal screening device for firm a to screen out free riders with the additional constraint of renegotiation proofness a can only partially screen out free riders entry by some free riders makes sure that a does not have an incentive to renegotiate the contract ex post we also propose empirical strategies for identifying the three likely causes of a breakup date adverse selection moral hazard and project non viability

r d policies trade and process innovation we set up a simple trade model with two countries hosting one firm each the firms invest in cost reducing r d and each government may grant r d subsidies to the domestic firm we show that it is optimal for a government to provide higher r d subsidies the lower the level of trade costs even if the firms are independent monopolies if firms produce imperfect substitutes policy competition may become so fierce that only one of the firms survives international policy harmonization eliminates policy competition and ensures a symmetric outcome however it is shown that harmonization is not necessarily welfare maximizing the optimal coordinated policies may imply an asymmetric outcome with r d subsidies to only one of the firms

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

cooperation in ongoing organizations this paper argues that overlapping games can provide a natural theory of long lived organizations it shows that participation in organizations of infinite duration changes the incentives of agents with finite lives and will induce more cooperation than a static model would predict after developing the general theory we apply it to the description of career paths in organizations and show that it can be optimal to give the youngest workers the most arduous tasks

testing gibrat s law for small young and innovating firms this article analyses whether small young and innovating firms have experienced a greater employment growth than other spanish firms over the period 1990 2000 the study draws upon a sample of 1272 manufacturing firms in which only 967 of the firms survived for the entire ten year period the analyses test gibrat s law both by least squares and by utilizing the procedure proposed by heckman in which a probit survival equation is first estimated to correct for sample selection bias two estimators correcting for selection bias are utilized one that incorporates the inverse mill s ratio and the other that employs maximum likelihood methods all the results reject gibrat s law and support the proposition that small firms have grown larger additionally the results show that old firms grow less than young ones and innovating activity both process and product is a strong positive factor in the firm s survival and its employment growth

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

capture and the bureaucratic mafia does the revolving door erode bureaucratic integrity does the revolving door phenomenon erode bureaucratic integrity to answer this question we undertake a quantitative case study of a private university in south korea that recruited a former vice minister of education as its president specifically we investigate whether after employing this high ranking former public official the university received favorable treatment from the education ministry in terms of funding estimates from difference in difference triple difference and synthetic control methods all suggest that the high profile public official s recruitment is associated with financial benefits from the official s former employing agency no such advantage however was observed for benefits from other agencies this result offers suggestive but compelling evidence that the revolving door distorts the allocation of government resources the financial benefits the university received are due not to the recruited official s greater competence expertise or knowledge but rather to his implicit collusion with the government

on the organization of cooperative research and development theory and evidence abstract it has become increasingly prevalent that business firms often rival firms join forces in cooperative r and d to develop new technologies that they can use in their downstream business equity research joint ventures and non equity co development are the two major modes of organization and they differ in how ownership rights over newly developed technologies are assigned this paper addresses the question of when cooperative r and d should be carried out in a research joint venture as opposed to a co development program in a setting of contractual incompleteness the nature of the downstream business of participating firms is shown to determine the organization of cooperative r and d empirical evidence that is consistent with the theoretical analysis is also presented

networks of collaboration in oligopoly abstract in an oligopoly prior to competing in the market firms have an opportunity to form pair wise collaborative links with other firms these pair wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms we study the incentives of firms to form links and the architecture of the resulting collaboration network we find that incentives to form links are intimately related to the nature of market competition our analysis also suggests that collaborations are used by firms to generate competitive advantage and that strategically stable networks are often asymmetric with some firms having many links while others have few links or are isolated specifically we show that networks with the dominant group architecture stars and inter linked stars are stable we also present some results on the architecture of socially efficient networks

intellectual property rights violations and spillovers in north south trade abstract the article examines the role of technological spillovers when northern and southern firms compete in quantities on the common world market and when only the northern firm is supposed to conduct innovative activity the intensity of spillovers is interpreted as an indicator of the strength of intellectual property rights ipr protection in this light the paper reconsiders the questions raised in the recent economic analysis of ipr protection in north south relations when and whether the southern countries benefit in welfare terms from protecting ipr how the north fares in this story how large is the conflict between the north and south and what is the optimal level of ipr protection at the world level the paper shows that the common belief that the south generally benefits from relaxing ipr protection while the north is worse off does not carry over in the applied duopoly model with spillovers in this respect the congruence of interests between north and south with respect to southern ipr protection regime should not be an exceptional or even impossible state of affairs

what do revolving door laws do abstracton the basis of evidence from state public utility commissions we find that revolving door laws laws that restrict the post government employment opportunities of public sector workers including public utility regulators do not do much at least with respect to electricity prices in this paper we take advantage of a quasi experiment afforded by the fact that revolving door laws were introduced in different states at different times to investigate their effects on electricity prices our findings suggest that while revolving door laws temporarily dampen industrial electricity prices they have no effect on commercial or residential prices there is also some evidence that these regulations affect the characteristics of state public utility commissioners commissioners from states with revolving door regulations serve shorter terms and are less likely to be subsequently employed in the private sector compared with their counterparts from states without revolving door laws

optimal abatement technology adoption based upon learning by doing with spillover effect abstract we specify a general model of the dynamic abatement technology adoption process and show how the accumulated experience among them can alter the adoption timing learning by doing lbd effect is considered to describe the reduction of the costly price to the adoption moreover spillovers effect which reflects how accumulated experience can be shared among different technologies is integrated into the learning process to ensure the specification convincing some reasonable assumptions are considered such as one abatement technology must conduct its own experience in order to realize the spillover besides to investigate how the abatement process is influenced by the technology allocation under the spillovers effect an endogenous emission path is considered to necessitate a meaningful optimization problem finally apart from obtaining some basic properties of the model we implement an empirical study to verify the effectiveness of the model data from the iron industry in china is used to specify the process which can highlight the spillovers effect among different technologies from a sector angle in the results we find that intrinsic mechanism in the model results in the interplay among abatement coefficient spillover factor and the growing rate of the emission etc collaborative relationships between variables are discussed as well

equilibrium inflation as determined by a policy committee building upon the work of kydland and prescott 1977 barro and gordon 1983b developed a model explaining excess socially suboptimal inflation as the result of a policy game between the monetary authority and wage setters in an economy in a follow up paper barro and gordon 1983a modified their original model to achieve a lower inflation rate by allowing the monetary authority to acquire a reputation for good behavior in essence this extension models monetary policy as the outcome of an infinitely repeated game between a monetary authority and wage setters in this game wage setters adopt punishment rules for bad monetary authority behavior where bad behavior is an inflation rate higher than expected this extended model of barro and gordon and hence the conclusions derived from it is open to several criticisms see for example canzoneri 1985 and rogoff 1987 first the results hinge on the theory of infinitely repeated games and thus would appear to be of questionable relevance in any economy with finitely lived policy makers second and more fundamentally it is difficult to accept the description of policy as a game between the monetary authority and wage setters one can accept that under certain circumstances an individual wage setter would adopt punishment rules of the type barro and gordon discussed if the individual thought all wage setters were doing so what is left unexplained in the barro and gordon analysis is how or why each individual wage setter when left alone would think and act in such a manner it would seem that some formal coordination among wage setters would be needed to establish punishment rules which suggests a limited applicability of the model to countries with a dominant union or with an aggregate wage setting authority of course this criticism is relevant to other papers in this literature for example backus and driffill 1985 and aspects of canzoneri 1985 the purpose of this paper is to demonstrate how these criticisms can be voided and how the barro and gordon 1983a results can be rehabilitated by modeling monetary policy more realistically

credible signals of the release of new versions i introduction many products are marketed some time after they have been developed for instance a new smartphone may be developed and tested well before it is available for purchase a new car might be prototyped and driven months before it comes to the market indeed a firm will often have several products concurrently in a development pipeline consumers may know a product is in that pipeline without knowing its progress towards the market because the outcome of such development and testing is not visible to outsiders the firm knows whether it can market a product before consumers do consumers are uninformed about when and if the new product will be marketed to them economists have long recognized that the present demand for durable goods depends on future prospects such as the future price or the introduction of an improved version 1 the existence of such an improved version is often the seller s private information if consumers anticipate a new version some will defer purchases until the new version is available and the seller will face low demand for the present version disclosing the new version is not in a monopoly seller s interest a seller whose good does not have a new version would also like to communicate that fact to consumers while a firm with a successful product innovation can credibly disclose the new version with relative ease a firm that has failed to develop a new product could have great difficulty convincing consumers that the product has no new version in such situations it is important to examine whether prices can inform consumers whether a new version will be marketed in the near future in a recent paper choi et al 2010 developed a model with a risky product development process in which reputation effects allow cheap talk announcements to signal successful product development to consumers an announcement induces consumers to delay or divert purchases to the announcer s coming product which increases the announcer s profit and can improve welfare 2 in their model the announcer and her non innovative rivals supply the original good competitively because of this an announcement does not reduce profit on the current version this paper will focus on markets where the seller has substantial market power before innovating so announcing a successful product development has a cost in terms of current revenue further because we attend to prices as signals this model may also apply to markets where a long run relationship between consumers and firms may not be sustainable another objective of this paper is to examine the welfare effects of mandatory disclosure a government policy mandating disclosure of any new version is an alternative means of informing consumers 3 as long as firms are not willing to lie to the government such a policy would credibly communicate whether a new version of a durable is coming mandatory disclosure would bring about full information as consumers are informed about any improved future version before observing the price of the current version in this paper we explore a two period model of a durable good monopoly in which consumers are initially uninformed about whether there will be a new version of the current good the monopoly seller is privately informed if he will be able to market an improved version in the second period in the first period consumers must decide whether to purchase the good now or wait for an upgraded version they may be able to infer from the price of the current version whether the seller will bring a new version to the market it is important to see first whether prices can serve as signals and second how welfare compares between any signaling outcome and a full information benchmark corresponding to mandatory disclosure we will show that there is a unique equilibrium supported by intuitive beliefs in this equilibrium the seller s private information about an improved version is completely revealed to consumers

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

r d cooperation in smes the direct effect and the moderating role of human capital abstractwe analyse the determinants of r d cooperation for smes in italy we introduce in the literature human capital as one of the main determinants of r d cooperation concentrating on its moder

lobbies delegation and the under investment problem in regulation abstract a time inconsistency problem in regulation often results in under investment especially where there are high sunk costs in network industries such as electricity gas telecommunications and water this paper provides a new perspective on this hold up problem facing the price regulation of a firm with market power where full commitment to a price regime is not possible we compare a political equilibrium based on a voting model with lobbying with a delegation equilibrium where a government can delegate to a particular type of pro or anti industry regulator our analysis suggests two possible ways in which we may observe price regulation that encourages socially optimal investment in the absence of externally imposed regulatory commitment first there is less than total transparency in which voters receive an optimal amount of information and second the decisions on price are delegated to a sufficiently but not excessively pro industry regulator

the revolving door and worker flows in banking regulation abstract this paper traces career transitions of federal and state u s banking regulators from a large sample of publicly available curricula vitae and provides basic facts on worker flows between the regulatory and private sector resulting from the revolving door we find strong countercyclical net worker flows into regulatory jobs driven largely by higher gross outflows into the private sector during booms these worker flows are also driven by state specific banking conditions as measured by local banks profitability asset quality and failure rates the regulatory sector seems to experience a retention challenge over time with shorter regulatory spells for workers and especially those with higher education evidence from cross state enforcement actions of regulators shows gross inflows into regulation and gross outflows from regulation are both higher during periods of intense enforcement though gross outflows are significantly smaller in magnitude these results appear inconsistent with a quid pro quo explanation of the revolving door but consistent with a regulatory schooling hypothesis

noncooperative regulation of a nonlocalized externality with a nonlocalized pollution externality different groups bear the costs and benefits of abatement in the case of acid rain these groups are respectively consumers in the midwest and pollutees in the northeast these groups have conflicting interests that are represented respectively by a public utilities commission and an environmental regulator we analyze a model in which the environmental protection agency acting as a von stackelberg leader regulates pollution and the public utility commission regulates the price for a monopolist that has private information about the effectiveness of its abatement alternatives we characterize a noncooperative equilibrium and compare it with a cooperative equilibrium a nonlocalized pollution externality poses special regulatory problems when the benefits and the costs of abatement are borne by distinct groups whose interests are represented by different regulatory agencies a relevant example is acid rain which is believed to be caused in part by coal fired electricity generating plants these emit sulfur dioxide and nitrogen oxide which upon contact with moisture in the atmosphere form acid that falls with rain measures to reduce these emissions are of concern to the residents of the states in which the coal fired generating plants are located because abatement costs increase the prices they pay for electricity a number of plans have been proposed for distributing those costs more broadly but the costs of reducing the emissions of generating plants located in ohio will likely be borne in large part by ohio consumers and utilities while the benefits from abatement will largely be realized by the residents of the northeast and canada the control of a nonlocalized externality such as acid rain raises the issue of the relationship between the environmental regulator the environmental protection agency epa and the public utility commission the former is responsible for achieving an acceptable balance between the damage from pollution and the cost of abatement the latter is responsible for pricing electricity on the basis of the costs of production and pollution control one possibility is that cooperation between the two regulators leads to the joint regulation of emissions and prices cooperation would internalize the conflicting interests and mandates of the regulators but the distributive consequences of the regulatory alternatives inhibit cooperation the public utility commission for example has an interest in avoiding abate

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

interest groups and the electoral control of politicians abstract we develop a model of interest group influence in the presence of repeated electoral competition in each period of the game an interest group attempts to buy an incumbent s policy choice and a voter chooses whether to replace the incumbent with an unknown challenger the voter faces a tension between retaining good politician types and rewarding past performance the model predicts that above average incumbents face little discipline but others are disciplined increasingly and re elected at a higher rate as the interest group becomes more extreme extensions of the model consider term limits long lived groups and multiple groups

the impact of classes of innovators on technology financial fragility and economic growth in this article we study innovation processes and technological change in an agent based model by including a behavioral switching among heterogeneous innovative firms the model is able to replicate via simulations well known industrial dynamic and growth type stylized facts the main original element of the model is that firms are allowed to endogenously change among three different classes namely single innovators collaborative innovators and imitators moreover our analysis focuses on the impact of these three innovation categories on micro meso and macro aggregates we find that collaborative companies are those having the highest positive impact on the economic system furthermore we have paid particular attention to the role of credit market in promoting smart growth for this purpose we analyze the role of banks as sources of external funds for innovative entrepreneurs our results suggest a trade off between short term profit maximization and long term efficiency which prevents banks to foster investment in r d and technological progress the model is then used to study the effect that different innovation policies have on macroeconomic performance

equilibrium and optimal size of a research joint venture in an oligopoly with spillovers this paper analyzes a simple oligopoly model with information spillovers firms spend on r d to affect their costs of production the main finding is that depending on the magnitude of the spillover the market may not provide enough incentives for the optimum degree of cooperation to take place it is shown that the equilibrium size of a research joint venture is usually less than the optimum size which requires all firms to participate in the research joint venture the policy implications of this result are that there should be encouragement for firms competing in high technology industries to form industry wide cooperative agreements copyright 1995 by blackwell publishing ltd

persistence of innovation in dutch manufacturing is it spurious this paper studies the persistence of innovation and the dynamics of innovation output in dutch manufacturing using firm data from three waves of the community innovation surveys cis pertaining to the periods 1994 1996 1996 1998 and 1998 2000 we estimate by maximum likelihood a dynamic panel data type 2 tobit model accounting for individual effects and handling the initial conditions problem we find that there is no evidence of true persistence in achieving technological product or process innovations while past shares of innovative sales condition albeit to a small extent current shares of innovative sales

trigger price regulation we consider the difficulty of achieving efficient prices and investments when returns on a public utility s projects are vulnerable to opportunistic ratemaking we model the long term relationship between a firm and its regulator as a time dependent supergame in which the regulator sets price ceilings to maximize surplus and the firm invests to maximize profit we find history dependent strategies that support self enforcing mutually beneficial equilibria equilibrium payoffs are close to the planning solution provided interest rates are small enough and capital depreciates fast enough we concentrate on trigger price regulation where in response to inefficient behavior the regulator cuts price down to operating cost and the firm curtails investment this mechanism performs well even with production economies and with restrictions on players threats

why do most firms die young a model is developed to explain why most firms die in the first few years of trading a risk averse entrepreneur with initial capital endowment faces a brownian motion in net worth over time to balance return profits growth and risk variance of profits she adopts a portfolio strategy choosing market positioning to achieve an optimal combination of risk and return at each instant given her financial and human capital endowments and attitude towards risk failure occurs when the firm s value falls below the opportunity cost of staying in business the resulting distribution of failure is inverse gaussian implying for specific parameter values a positively skewed failure curve of the type observed in practice in addition the model presents a novel measure of management human capital mhc which implies that high mhc entrepreneurs will have higher absolute and marginal profits growth than low mhc entrepreneurs at given levels of risk

innovative strategic groups in multinational industries abstract differences in innovative strategies between groups of domestic and multinational enterprises are analyzed within a two stage game model that incorporates the asymmetries in transaction costs between the two species of enterprises nash and cooperative behaviour is shown to result in different equilibrium r d strategies with the multinational companies doing typically more r d for larger markets and domestic companies focusing on specific market segments survey data from companies operating in eleven high tech multinational industries in belgium provide support for these strategic differences and show how they are related to company performance

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

a repeated game with finitely lived overlapping generations of players abstract this paper analyzes infinitely repeated noncooperative games where the players have finite but overlapping terms thus the nature of the game remains constant but the identity of the players changes over time this type of scenario depicts the situation facing firm managers in regulated or oligopolistic environments despite finite lives which lead players to always choose opportunistic actions at the end of their careers it is shown that there are equilibria where cooperative behavior emerges in this noncooperative setting further a folk theorem result is obtained any individually rational payoffs can be realized as a subgame perfect equilibrium journal of economic literature classification numbers 022 026

regulatory capture a review this article reviews both the theoretical and empirical literatures on regulatory capture the scope is broad but utility regulation is emphasized i begin by describing the stigler peltzman approach to the economics of regulation i then open the black box of influence and regulatory discretion using a three tier hierarchical agency model under asymmetric information in the spirit of laffont and tirole 1993 i discuss alternative modelling approaches with a view to a richer set of positive predictions including models of common agency revolving doors informational lobbying coercive pressure and influence over committees i discuss empirical work involving capture and regulatory outcomes i also review evidence on the revolving door phenomenon and on the impact that different methods for selecting regulators appear to have on regulatory outcomes the last section contains open questions for future research copyright 2006 oxford university press

european market integration through technology driven m as merger and acquisitions m as have been an important tool for reorganizing the european market since the establishment of european economic and monetary union this article suggests that european integration helped and encouraged european firms to source technology across national borders in europe establishing european innovative firms the figures confirm that once barriers impeding the free movement of capital goods and labour had fallen european firms used m as intensively to enter foreign european markets enhancing technology competencies is found to be one of the main motives for cross border acquisitions in the 1990s but is not a factor in domestic acquisitions over the same period

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

convergence to symmetry in dynamic strategic models of r d the undiscounted case abstract will r d increase or decrease the asymmetry between firms over time we examine this issue in the context of a dynamic alternate move duopoly model of non cooperative r d the asymmetry we consider is with respect to the initial stocks of technological knowledge which provides one firm a greater potential for current and future profits in the product market utilizing a value loss process constructed from the optimality equation of dynamic programming we show that for the undiscounted case the asymmetry between the firms disappears over time we obtain this convergence to symmetry result by imparting a temporal character to r d through the notion that r d investment cannot be changed instantaneously by allowing research externalities complementarity or substitutability between own and appropriated r d and either increasing decreasing or constant returns to scale in the production of technical knowledge from own and rival r d

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

behind the revolving door a new view of public utility regulation regulatory officials frequently work for firms they regulate after they leave office this revolving door has been the subject of much scrutiny owing to the natural suspicion of corruption in a time dependent supergame i take a strategic look behind the revolving door and find it can lead to improved performance of regulated industries when firm managers and regulators have finite and concurrent terms investment incentives are minimal staggered terms and revolving doors can result in improved performance of regulated firms when each side s actions at each date are contingent on past outcomes

collusion and dynamic under investment in quality in a dynamic game of investment in product quality i investigate whether collusive underinvestment equilibria can be supported by the threat of escalation in investment outlays when there are no spillovers underinvestment equilibria exist even though by deviating a firm can gain a persistent strategic advantage when there are strong spillovers underinvestment equilibria fail to exist a weakening of patent protection can thus lead to more investment in equilibrium a nonfragmentation result is shown to hold in all free entry equilibria industry concentration is bounded away from zero no matter how large the market and despite the existence of underinvestment equilibria

cooperation in r d the case of patent infringement agreements abstract this paper provides an insurance based argument behind patent infringement agreements pia such agreements constitute a form of cooperation in an otherwise non cooperative environment we develop a model where firms initially hold certain patents and undertake further r d by pursuing the latter they face a positive probability of infringing the patents held by the other a prior infringement agreement generates a binding contract so that such infringements would go unpunished if the infringing probability is not too low firms would have incentive to sign an agreement and sacrifice the monopoly option but this depends on the information structure about the patent infringement and search costs such a prior agreement is then compared and contrasted with a suitably designed ex post contract

optimal r d levels when firm j benefits from firm i s inventive activity abstract we amend the static model of industry structure in dasgupta and stiglitz to include external benefits from a firm s r d now the market can be seen to underinvest in r d relative to the social optimum the work of mansfield suggests that such external benefits are pervasive

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

on the relationship between technology transfer and economic growth in asian economies in this paper fdi and licensing are incorporated using a model where increasing the international transmission of technology adds to efficient production in the receiving country and results in higher welfare the model is then tested with data from a selection of 11 asian economies and a strong positive relationship is found between fdi licensing and economic growth the policy recommendations from both our theoretical model and empirical results are that asian economies should improve their production efficiency to host international technologies to maximise the benefits of international technology transfers

size growth and survival in the upper austrian farm sector this paper investigates the evolution of the size distribution of more than 40 000 farms in the upper austrian farm sector over the period 1980 90 using gibrat s law as our point of departure we find that smaller farms grow much faster towards some minimum efficient scale of production than farms at or above this threshold size we furthermore find evidence for the existence of two separate centres of attraction of farm size supporting the notion of a disappearing middle and the emergence of a bimodal structure of farm sizes correcting for size related attrition bias had very little effect on our results

cooperation in an overlapping generations experiment abstract recent theoretical work shows that folk theorems can be developed for infinite overlapping generations games cooperation in such games can be sustained as a nash equilibrium but of course there are other equilibria this paper investigates experimentally whether cooperation actually occurs in a simple overlapping generations game subjects both play the game and formulate strategies our main finding is that subjects fail to exploit the intertemporal structure of the game even when we provided subjects with a recommendation to play the grim trigger strategy most of the subjects still employed safe history independent strategies journal of economic literature classification numbers c72 c92 d90

sunk costs firm size and firm growth for several decades the conventional wisdom has been that expected firm growth rates are independent of firm size a property known as gibrat s law however recent empirical work has found a negative relation between firm growth and firm size this paper provides a theoretical explanation for this negative relation in a model of new firm growth where capacity and technology choices involve some degree of sunkness additional empirical implications of the theory of sunk costs are also developed these relate to profit rates tobin s q exit rates degree of sunkness of capacity costs as well as size and growth rates copyright 1995 by blackwell publishing ltd

the life cycle of regulatory agencies dynamic capture and transaction costs the dynamics of regulation is analysed in a model where regulatory capture comes from the repeated interaction between an interest group and a regulatory agency regulatory institutions offer a framework for this dynamic process they put constraints on the interest group s influence the dynamics of regulation and its long run outcome depend on the political principal s the regulator s and the regulated firm s time preferences and their information some foundations for the transaction costs of side contracting used in the standard literature on collusion are provided those transaction costs are linked to the precise nature of regulatory institutions

revolving doors and the optimal tolerance for agency collusion in this article i study how the presence of a revolving door and potential collusion between a regulator and a regulated firm affect the regulator s performance incentives contrary to the conventional wisdom these seemingly undesirable features of the regulatory system may serve the interests of the government because i the regulator s efforts to enhance her industry qualifications may have a complementary effect on her regulatory performance and ii the regulator may become more aggressive in regulation so as to signal her industry qualifications to the firm collusion between a regulator and a firm also can be beneficial because a regulator may increase her monitoring effort in order to increase the chance of achieving a profitable side contract with the firm and side contracting may not always succeed

the elementary economics of social dilemmas a social dilemma is in essence a prisoners dilemma in a continuous strategy space i discuss a number of social dilemmas that have caught my attention offer an elementary diagrammatic synthesis of them and discuss some of the economic insights that the diagrams capture including incentives for pre commitment finally i model pre commitment via delegation and link results to the literature on the evolution of preferences l economie elementaire des dilemmes sociaux un dilemme social est essentiellement un dilemme du prisonnier dans un espace continu de strategie l auteur discute d un certain nombre de dilemmes sociaux qui ont retenu son attention il en propose une synthese graphique elementaire et discute certaines des suggestions economiques qui decoulent de ces diagrammes comme par exemple les incitations a se pre engager finalement l auteur construit un modele de pre engagement par delegation et relie ses resultats a la litterature sur l evolution des references

non convex costs and capital utilization a study of production scheduling at automobile assembly plants i study detailed data from eleven automobile assembly plants these data display considerable cross plant heterogeneity in production scheduling to explain the observed heterogeneity i solve a dynamic programming model when desired production is below the plant s minimum e cient scale non convexities induce production bunching the plant uses less than full capital utilization on average and production is more volatile than sales when desired production is above the plant s minimum e cient scale the plant operates in a convex region of the cost curve in this case it uses high levels of capital utilization and production is less volatile than sales 2000 elsevier science b v all rights reserved jel classixcation e23 d21 l23