self enforcing collusion in large dynamic markets abstract the folk theorem in game theory implies that any outcome that is better for all players than some single period nash outcome can be achieved through noncooperative equilibrium in repeated games with discounting whether the folk theorem holds for a repeated cournot oligopoly as the number of firms n increases without bound is investigated it is shown that the folk theorem holds in the limit iff demand increases at the same rate as the number of firms and the cournot price sequence is bounded strictly above by the supremum of marginal cost for large n

rural urban differences in bonding and bridging social capital sorensen j f l rural urban differences in bonding and bridging social capital regional studies it is a common sentiment that rural areas are richer in social capital than urban areas this hypothesis is tested here by drawing on data from a danish survey 2011 2012 and by using the distinction between bonding and bridging social capital bonding social capital was found to be significantly higher in rural areas whereas bridging social capital was found to be marginally higher in urban areas the evidence thus partly refutes the hypothesis of higher social capital in rural areas among other results the evidence suggests a degree of trade off between the two forms of social capital

rent seeking and the provision of public goods in this short paper i adopt the public choice school paradigm of modeling a government in order to compare its performance with that of the market in the standard model of the provision of public goods private provision is represented by the cournot nash equilibrium in individual contributions public provision incorporates rent seeking whereby some of the aspects of the allocation are determined indirectly by influence activities of the interested parties thus both allocation procedures yield inefficiency and the question is which procedure results in a greater amount of inefficiency private provision with its free riding incentives or public provision with its rent seeking incentives the results indicate that public provision may well be preferred to private provision of public goods thus superiority of private provision is not guaranteed even in the case of a non benevolent government copyright 1993 by royal economic society

price setting supergames with capacity constraints this paper examines the role of industry capacity in enforcing collusion in the context of repeated games for a fixed capacity per firm it is shown that changes in the number of firms have a non monotone effect on the best enforceable cartel price this is due to the fact that while an additional firm lowers the share that each of the other firms enjoys at the collusive price it also increases the losses to each firm should the cartel fail

separating the likelihood and timing of bank failure abstract we use a split population survival time model to separate the determinants of bank failure from the factors influencing the survival time of failing banks basic indicators of a bank s condition such as capital troubled assets and net income are important in explaining the timing of bank failure however many of the other variables typically included in bank failure models such as measures of bank liquidity are not associated with the time to failure the results also suggest that the closure of large banks is not delayed relative to the closure of small banks

social capital and interlocal service collaboration in us counties abstractsocial capital and interlocal service collaboration in us counties regional studies local governments are increasingly faced with public policy problems that span across their individual jurisdictional boundaries interlocal service collaboration has been suggested as a preferable alternative to address these issues this study examines the association between collective social capital especially focusing on putnam type organizations and interlocal service collaboration by investigating the interlocal revenues at the county level for the fiscal year 2002 in the united states an instrumental variables estimator to address a potential endogeneity problem of social capital was adopted the results show that social capital is positively associated with interlocal service collaboration further analysis revealed that 15 8 of counties variation in interlocal service collaboration was attributed to the state level

differences in social capital between 54 western european regions beugelsdijk s and van schaik t 2005 differences in social capital between 54 western european regions regional studies 39 1053 1064 based on the extant literature a newly developed index measuring social capital at the regional level in europe is presented it is shown that there are large regional differences on this social capital index it was tested if higher scores on this social capital index correlate with higher levels of economic development and regional economic growth in 54 western european regions though further research is required these preliminary results suggest a positive relationship exists between social capital and regional economic development the paper concludes with suggestions for future empirical research

a general model of rent seeking for public goods this paper generalizes the model of collective rent seeking over a public good expanding the rent seeker s consumption bundle to include preferences over the public good and a private good our results suggest collective rent seeking is positively related to group size although free riding exists within a group there is not a one for one tradeoff in addition rent seeking increases with wealth finally total effort expended by both groups increases if either group increases in membership size except in the case of an extremely lopsided contest the key condition underlying these results is that the marginal utility of the public good is not inversely related to the private good

the effect of group size on public good provision in a repeated game setting abstract the ability to cooperate in the provision of a pubic good is analyzed in a repeated game holding the level of provision fixed with quasi linear utility we find that the critical value of the discount parameter converges to 0 in the limit thus cooperation is feasible in a large market next we allow the level cooperation to be adjusted optimally as the group size increases both for a specific form of quasi linear utility and for cobb douglas utility in each case we find that there are admissible values of the discount parameter such that cooperation may be maintained in the limit

olson s logic of collective action at fifty in the 50 years since its publication mancur olson s logic of collective action has had an enormous impact on the academic literature in both economics and political science in this review essay i discuss olson s work in light of the ensuing research particularly developments in the theoretical literature much of the discussion focuses on the group size paradox as applied to politics i e the extent to which the group size paradox can explain why the interests of some groups are better represented in the political process than others i also discuss selective incentives with an emphasis on the byproduct mechanism under which a firm sells a private good and uses the resulting profits to provide a public good

retailing public goods the economics of corporate social responsibility abstract this paper explores the feasibility and desirability of corporate social responsibility csr we identify csr with creation of public goods or curtailment of public bads using a model with profit maximizing firms the paper shows that there is a direct parallel between csr and traditional models of private provision of public goods indeed firms that use csr will produce public goods at exactly the same level as predicted by the standard voluntary contribution equilibrium for public goods we compare csr with government provision and charitable provision discussing when csr by private for profit firms could have a comparative advantage in dealing with public goods provision

olson s exploitation hypothesis in a public good economy a reconsideration since the publication of olson s 1965 the logic of collective action the exploitation hypothesis in which the rich shoulder the provision burden of public goods for the poor has held sway despite empirical exceptions to address such exceptions we establish two alternative exploitation hypotheses based on contributors asymmetric preferences or on their productivity differences regarding the public good the classic hypothesis and its two variants are proven in a novel fashion for asymmetric preferences we also establish the exploitation hypothesis for the joint products model with private and public co benefits our theoretical insights are then illustrated by some empirical examples from the field of international public goods such as military defense and cross border pollution

monopolistic competition growth and public good provision a normal good in this article i develop a model of public good provision in which private goods are supplied in a monopolistically competitive market in this context increases in the size of the group are increases in the population of a society i find that increases in population lead to reduced public good provision the reason is quite simple as population increases the number of private goods available for consumption also increases this raises the marginal utility of income and increases the opportunity cost of contributing to the public good while the level of voluntary contributions falls in this model the optimal level of provision is shown to increase with population thus there is a growing divergence between the optimal and equilibrium levels of provision of the public good in the standard model with a pure public good individual welfare rises with an increase in population both because of the increase in the level of provision of the public good and the reduced contribution per person that results from the population increase furthermore in the model of monopolistic competition without a public good welfare also increases with population due to the wider of variety of goods which are available in a larger economy however when the models are combined an increase in popu lation has an ambiguous effect on welfare this stems from the reduction in the level of provision of the public good as the population increases the model of monopolistic competition in this article is based on krugman 1980 this model assumes a simple form of increasing returns to scale under which each good may be produced by incurring a fixed set up cost plus a constant marginal cost of production when the population increases the economy can support a broader range of goods and this leads to a higher real income for individuals in the economy thus economic growth arising from a scale effect leads to reduced contributions to the public good in this model economic growth can also be caused by increases in total factor productivity in the model of monopolistic competition used here this would be reflected by reductions the fixed and marginal cost of production it turns out that reductions in these parameters also lead to reduced public good provision

dyke maintenance and other stories some neglected types of public goods the orthodox summation model of a pure nonexcludable public good assumes that each individual consumes a quantity of public good defined as the sum of all individuals contributions to that good recently hirshleifer 1983 1985 has analyzed models that do not fall within this class at one extreme is the weakestlink in which the total quantity available to each consumer equals the smallest individual contribution at the other is the best shot in which the total quantity available equals the largest individual contribution hirshleifer s example of the weakest link case concerns a circular region of which each citizen owns a pie shaped slice the perimeter is marked by a dyke floods may penetrate the weakest point of the dyke and cause damage equally throughout the region each citizen decides the height and state of repair of that section of the dyke adjoining his piece of land its maintenance constituting his contribution to the public good thus the level of protection enjoyed by all is determined by the least well maintained section of the dyke an example of the best shot case concerns a number of antimissile batteries ringing a city firing at an incoming icbm all that matters is the accuracy of the best shot bliss and nalebuff 1984 discuss dragon slaying as another example of a best shot situation section ii of this paper introduces a class of functions of which the summation weakest link and best shot are examples section iii analyzes the properties of equilibrium when consumers have identical tastes and incomes section iv analyzes the implications of income redistribution in the summation case the equilibrium is unaffected by the initial redistribution over a range and outside that range transfers help the recipient and hurt the donor within the broader class of models however the invariance property does not generally hold and there may be opportunities for paretoimproving income redistribution i give an example similar to the weakest link case in which a pareto improving redistribution is

economics of alliances the lessons for collective action this essay provides an up to date summary of the findings of the literature on the economics of alliances we show that the study of the economics of alliances has played a pivotal role in understanding and applying public good analysis to real world applications we establish that the manner in which alliances address burden sharing and allocative issues is related to strategic doctrines weapon technology perceived threats and membership composition past contributions are evaluated and areas needing further development are identified the theoretical and empirical knowledge gained from the study of alliances is shown to be directly applicable to a wide range of international collectives

public goods provision redistributive taxation and wealth accumulation this paper presents an extension of a static model of public goods provision with redistributional taxation as described by uler journal of public economics 93 3 4 pp 440 453 as a dynamic model of wealth accumulation intertemporal consumption and saving behavior strongly affect the relation between redistributive taxation and charitable contribution indeed the analyses presented herein reveal that more patience i e higher saving engenders a lower redistributional tax rate however the optimal redistributive tax rate is not zero because redistributive taxation improves the efficiency of providing public goods that are not improved by balanced growth this paper fills the gap separating static analysis and dynamic analysis and generalizes the results presented by static analysis

do meetings in smoke filled rooms facilitate collusion the sherman act prohibits firms from discussing prices in meetings traditional thought suggests that this prohibition makes it harder for firms to collude and economists have concluded that the sherman act operates in the public interest i provide an alternative explanation for the act that also accounts for the small sanctions chosen by the legislature when firms interact in a dynamic environment in which the law helps them to prevent renegotiation the firms may benefit from the law that makes it costly but not very costly to meet to discuss prices the sherman act may help firms to collude

estimating a non minimum cost function for hospitals hospital costs have been rigorously scrutinized by economists and health policy experts for several decades despite the large volume of research two related problems persist first although theoretical models of hospital behavior such as 9 and 10 suggest systematic deviations from cost minimization there has been little attention given to modelling and measuring this inefficiency second because cost minimization is a questionable maintained hypothesis most hospital cost research has not used cost functions that are dual to production technology consequently the technological concepts of scale and factor substitution are obscured we address these twin problems by developing and estimating a long run cost function that allows for systematic allocative inefficiency the parameter estimates we present also provide information on the traditional production concepts of scale and factor substitution as well as information on the size and source of allocative inefficiency in u s hospitals hospital services clearly comprise a large industry short term hospital expenditures were 120 billion in 1984 for example the u s short term hospital sector has increased in relative size by a factor of 2 5 since 1960 so that short term hospital expenditures are now about 3 6 percent of the gnp in the united states while industry size alone probably justifies an empirical investigation into the production technology for hospital services we are also motivated by the relevance of our findings to several health policy issues measures of scale economies are crucial in forming public policies concerning entry exit and mergers in the hospital industry yet most studies have not actually estimated the technological concept of scale elasticities of factor substitution are also technological and economic concepts that should be of interest to health policy makers these measures indicate the extent to which cost increases can be avoided by substituting away from the factor whose price has increased hospital cost estimates that do not include factor

on price increasing entry it is shown that the effect of the number of sellers on price can be related to a concept of elasticity which links consumers brand loyalty to the quantity sold by each firm a class of inverse demand functions for differentiated goods which lends itself to the analysis of the conditions of price increasing entry is formulated the effects of entry on price are decomposed into a competitive and a displacement effect copyright 1987 by the review of economic studies limited

the effects of management decisions on agricultural bank failures the assertion that local economic conditions have been responsible for the failures of large numbers of agricultural banks is investigated by pairing solvent and failed banks within rural counties and examining whether balance sheet items alone explain differences in the probability of failure for the two groups of banks estimation of a probit model indicates that higher ratios of loans to assets and agricultural to total loans were associated with higher probabilities of failure banks with higher capital ratios and those affiliated with multibank holding companies had lower probabilities of failure

a voluntary participation game with a non excludable public good faculty of economics tokyo metropolitan university hachioji tokyo 192 0397 japanyamato takehiko c metro u ac jpreceived november 14 1997 revised august 21 1998in the previous mechanism design on public goods it was implicitly assumed thatevery agent must participate in the mechanism that the designer provides thisapproach neglects non excludability of public goods we explicitly incorporatenon excludability and examine a two stage game with voluntary participation inthe first stage each agent simultaneously decides whether she participates in themechanism or not and in the second stage knowing the other agents participationdecisions the agents who selected participation in the first stage choose theirstrategies participation of all agents is not an equilibrium in many situations journal of economic literature classification numbers c72 d71 d78 h41

equilibrium with product differentiation tive consumer formulations is used to examine the properties of single and multiple price equilibria conditions under which decreases in the intensity of consumer preferences reduce price are given it is shown that with certain types of demand curves entry can eliminate price cost markups even given product differentiation if competition is localized it is demonstrated that entry does not affect the markup finally the effect of spurious product differentiation on price is examined

public good provision in a repeated game the role of small fixed costs of participation pecorino 1998 models tariff lobbying in a repeated game and finds that cooperation can be maintained in a large group even though tariff lobbying provides a rival public good to interest group members we add small fixed costs of participation to this model and find that cooperation must break down in large groups by contrast if a fully rival public good directly enters the utility function then cooperation is possible in large groups even with small participation costs thus we find only partial support for olson s 1965 proposition that collective action must break down in large groups

prize sharing in collective contests the characteristics of endogenously determined sharing rules and the group size paradox are studied in a model of group contest with the following features i the prize has mixed private public good characteristics ii groups can differ in marginal cost of effort and their membership size iii in each group the members decide how much effort to put without observing the sharing rules of the other groups it is shown that endogenous determination of group sharing rules completely eliminates the group size paradox i e a larger group always attains a higher winning probability than a smaller group unless the prize is purely private in addition an interesting pattern of equilibrium group sharing rules is revealed the group attaining the lower winning probability is the one choosing the rule giving higher incentives to the members

are scale economies in banking elusive or illusive evidence obtained by incorporating capital structure and risk taking into models of bank production abstract this paper explores how to incorporate banks capital structure and risk taking into models of production in doing so the paper bridges the gulf between 1 the banking literature that studies moral hazard effects of bank regulation without considering the underlying microeconomics of production and 2 the literature that uses dual profit and cost functions to study the microeconomics of bank production without explicitly considering how banks production decisions influence their riskiness various production models that differ in how they account for capital structure and in the objectives they impute to bank managers cost minimization versus value maximization are estimated using u s data on highest level bank holding companies modeling the bank s objective as value maximization conveniently incorporates both market priced risk and expected cash flow into managers ranking and choice of production plans estimated scale economies are found to depend critically on how banks capital structure and risk taking are modeled in particular when equity capital in addition to debt is included in the production model and cost is computed from the value maximizing expansion path rather than the cost minimizing path banks are found to have large scale economies that increase with size moreover better diversification is associated with larger scale economies while increased risk taking and inefficient risk taking are associated with smaller scale economies

an economic approach to social capital a standard optimal investment model can be used to analyse an individual s decision to accumulate social capital we analyse six facts that support the predictions of this individual based approach 1 social capital first rises and then falls with age 2 social capital declines with expected mobility 3 social capital rises in occupations with greater returns to social skills 4 social capital is higher among homeowners 5 social connections fall sharply with physical distance 6 people who invest in human capital also invest in social capital we fail to find robust evidence that social capital investments fall with the value of time or that geographic religious groups generate social capital complementarities

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

trade firm size and product variety under monopolistic competition monopolistic competition is used to examine rationalization behavior in response to market integration a particular second order condition on demand functions for differentiated products must be satisfied to generate an increase in firm size with an associated decline in equilibrium price when market size increases for identical products the firm size increase is guaranteed the number of firms increases less than it does in proportion to market size for identical products but may increase more than in proportion to market size for differentiated products the latter results implies that market integration need not lead to exit of firms

dynamic behaviour in large markets for differentiated products an important question is how well competitive models approximate models of large finite economies for a class of differentiated products models static nash equilibria if they exist always converge to competition as the number of firms increases dynamic nash equilibria need not so converge easily checked conditions for convergence to competition do however exist

aggregate efficiency market demand and the sustainability of collusion this paper studies the effects of firms aggregate efficiency and the level of demand on collusion collusion is more difficult in markets where aggregate efficiency i e the ability of firms to profitably produce at prices exceeding the cournot price is large relative to the level of demand

can by product lobbying firms compete abstract olson 1965 argues that some large groups can overcome the free rider problem through by product lobbying the by product firm sells a private good to potential members of the interest group and finances lobbying with its profits others argue that by product lobbying firms cannot survive competition with for profit firms since this would compete away monopoly rents leaving the firm unable to lobby in a model of monopolistic competition i show that the by product firm can enter the market and earn enough profits to exceed the noncooperative level of lobbying this is true despite the free entry of for profit firms

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies

cooperation with network monitoring this paper studies the maximum level of cooperation that can be sustained in perfect bayesian equilibrium in repeated games with network monitoring where players observe each other s actions either perfectly or not at all the foundational result is that the maximum level of cooperation can be robustly sustained in grim trigger strategies if players are equally well monitored comparative statics on the maximum level of cooperation are highly tractable

allocative inefficiency and its cost the case of spanish public hospitals in this paper we present a new empirical model based on an input distance function from which estimates of allocative inefficiency and its cost can be obtained the model avoids the greene problem which refers to the difficulty in practice of using a cost system to separate economic inefficiency into its technical and allocative components we also develop a procedure to calculate the cost of allocative inefficiency using a panel of spanish public hospitals to apply our methodology we find evidence of systematic allocative inefficiency in the employment of variable inputs since inputs are generally poor substitutes the cost of this allocative inefficiency is high

entry exit and imperfect competition in the long run an infinite horizon stochastic model of entry and exit with sunk costs and imperfect competition is constructed simple examples provide insights into 1 the relationship between sunk costs and industry concentration 2 entry when current profits are negative and 3 the relationship between entry and the length of the product cycle a subgame perfect nash equilibrium for the general dynamic stochastic game is shown to exist as a limit of finite horizon equilibria this equilibrium has a relatively simple structure characterized by two numbers per finite history under very general conditions it tends to exhibit excessive entry and insufficient exit relative to a social optimum

consistent estimation of the impact of tax deductibility on the level of charitable contributions when charitable contributions are tax deductible the marginal price of charitable giving in other consumption foregone per dollar of contributions is generally less than unity further if the income tax schedule is a progressive step function the marginal price of contributions is generally a rising step function of the level of contributions the problem of estimating a contributions demand function for individuals is therefore complicated by the spurious correlation between the level of contributions and the observed marginal price we take this econometric problem into account in estimating a contributions demand function using data from the 1972 73 consumer expenditure survey after comparing our results with those of estimation techniques used by other authors we provide evidence on the impacts of alternative tax policies on charitable giving using our estimates of the model parameters

contests with group specific public goods and complementarities in efforts abstract this paper starts from the observation that in public goods group contests group impact can in general not be additively decomposed into some sum of functions of individual efforts we use a ces impact function to identify the main channels of influence of the elasticity of substitution on the behavior in and the outcome of such a contest we characterize the nash equilibria of this game and carry out comparative static exercises with respect to the elasticity of substitution among group members efforts if groups are homogeneous i e all group members have the same valuation and efficiency within the group the elasticity of substitution has no effect on the equilibrium for heterogeneous groups the higher the complementarity of efforts of that group the lower the divergence of efforts among group members and the lower the winning probability of that group this contradicts the common intuition that groups can improve their performance by solving the free rider problem via higher degrees of complementarity of efforts

collective action and the group size paradox according to the olson paradox larger groups may be less successful than smaller groups in furthering their interests we address the issue in a model with three distinctive features explicit intergroup interaction collective prizes with a varying mix of public and private characteristics and nonlinear lobbying costs the interplay of these features leads to new results when the cost of lobbying has the elasticity of a quadratic function or higher larger groups are more effective no matter how private the prize with smaller elasticities a threshold degree of publicness is enough to overturn the olson argument and this threshold tends to zero as the elasticity approaches the value for a quadratic function we also demonstrate that these results are true irrespective of whether we examine group sizes over the cross section in some given equilibrium or changes in the size of a given group over different equilibria

public good provision in legislatures the dynamics of enlargements abstract this paper analyzes the effects of legislature enlargements on public good provision in a repeated game we find that enlargements induce two countervailing effects on the legislature s ability to yield efficient outcomes cooperation though necessarily breaks down in large legislatures

strategic incentives in teams implications of returns to scale this article demonstrates the critical relationship between the characteristics of the production function and the strategic incentives in a team equilibrium effort increases in team size when substitutability is low relative to returns to scale effort levels are actually strategic complements when returns to scale exceed the substitutability of members effort moreover even with equal shares the well known problem is determined by returns to scale and becomes worse as returns increase while a target scheme can support the optimal output level as an equilibrium it does not completely deter free riding a team member will accommodate shirking by increasing their own effort within a remarkably large accommodation zone where the additional effort cost is less than the bonus this accommodation of shirking by others exists for different returns to scale and even for very low levels of substitutability

social capital economic growth and regional development iyer s kitson m and toh b 2005 social capital economic growth and regional development regional studies 39 1015 1040 this paper examines the relationships between social capital economic performance and regional development and it stresses the complexity and variability across space of such relationships in contrast to the conventional macroeconomic approach of using indicators of social capital in formal growth models what is required is a more nuanced analysis that evaluates the impact of social capital by region to support this argument the paper examines social capital data from the social capital community benchmark survey 2000 which provides social capital data for more than 24 000 individuals living in 40 communities grouped into nine regions in the usa these data show remarkable diversity of social capital by region multivariate analysis is used to examine the impact of economic and social determinants of social capital and shows that education is important for nearly all ind

measuring and decomposing productivity change measuring productivity change with malmquist indices has become common practice because they are easily computed using nonparametric programming techniques and can be readily decomposed into technical and efficiency change however this approach is nonstochastic and requires a constant returns to scale assumption to construct the reference technology we propose estimating productivity change using a stochastic input distance frontier imposing no restrictions on returns to scale we derive the analogous decomposition of productivity change and develop a generalized method of moments strategy in which outputs or inputs may be endogenous we compare two methods in an application to electric utilities

on dynamic compromise abstract most legislatures require the consent of only a simple majority to pass a proposal so why don t legislative outcomes favor only a bare majority we show that compromise can be achieved if legislators are neither too impatient nor too patient and initial allocations are not too unequal the compromise is only sustainable if starting from the unequal allocations there is a possibility of spiraling towards a complete absence of compromise we find that the range of discount factors for which the equilibrium exists increases as the number of legislators increases in this sense compromise is easier in larger legislatures

rent seeking for pure public goods in this paper we present a formal analysis of rent seeking for public goods by two or more groups with different numbers of individuals we begin by considering equally wealthy groups under risk neutrality a case which constitutes our basic model several surprising and interesting results emerge from the analysis of this basic case the problem is then extended to deal with a groups with different wealth levels and b risk aversion this last extension brings about a further crop of interesting and useful results

on the efficiency of by product lobbying to explain the existence of large lobbying groups olsonproposes a by product theory large lobbies are by productsof industry associations that operate as monopolists inprivate goods markets this paper explicitly formulatesolson s by product theory of lobby funding and examines itsefficiency as a funding method lobbying efficiency isenhanced by the association s ability to price discriminate price discrimination in turn is facilitated by theassociation s superior knowledge of its members characteristics the paper also examines the relationshipbetween lobby strength and industry size as well as thequestion of who exploits whom under by product lobbying

regulating the anticommons insights from public expenditure theory this article offers a new interpretation of the traditional cournot complements problem or anticommons by using the theory of public goods to gain a perspective on the problem specifically i examine the pricing strategies and regulation of multiple monopolies that produce products which consumers view as perfect complements i show that collusion by the firms increases total social welfare and that the collusion problem can be reinterpreted as a problem of provision of public goods from the point of view of the firms i take this insight further and derive the familiar concepts of the samuelson marginal condition and the ratio equilibrium for the firms i compare these outcomes to the first best solution and then apply incentive compatible mechanisms to strategically implement the pareto superior ratio equilibrium outcome and the optimal marginal cost pricing outcome finally i show how this methodology can be applied to the more familiar cournot model of oligopoly

efficiency properties of large dynamic markets this paper considers an infinitely repeated cournot market with discounting it studies the asymptotic properties of stationary perfect equilibria in such a market when the demand and production sectors are replicated indefinitely specifically the paper establishes 1 necessary and sufficient conditions for the approximate competitiveness and efficiency of stationary perfect equilibria 2 necessary and sufficient conditions for the presence of excessive competition and for the presence of limited competition at some stationary perfect equilibria and 3 conditions for approximately competitive stationary perfect equilibria to be approximately efficient the analysis focuses on the case where the market discount factor is close to unity copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the environmental consequences of decentralizing the decision to decentralize abstract environmental statutes that initiate devolution frequently contain provisions that allow tiers of government to control the final assignment of policymaking authority these provisions may allow one tier of government to propose a re assignment of authority and may give other tiers of government the power to veto the proposed transfer of authority using data from the devolution of the resource conservation and recovery act in california we empirically model a dual selection process in which a lower tier government i e a city may assume policymaking authority from an upper tier government i e a county but only if the upper tier entity chooses not to veto the petition using simulation methods we compare the consequences of this policy with those of two alternative devolution policies each devolution policy results in the setting of different levels of public goods across tiers of government each policy also produces markedly different levels of compliance with state environmental standards

on the economics of philanthropy friedman says that he accepts this argument as justifying governmental action to alleviate poverty economists will be familiar with this kind of argument someone takes as a premise that a particular activity is the subject of altruistic concern by individuals he shows that if matters are left to unco ordinated private philanthropy a free rider problem will arise and then he claims that this problem can be solved by some kind of intervention by government this strategy has been used to justify many kinds of intervention including compulsory transfers of income through the tax system hochman and rodgers i969 public policy to stimulate saving and investment marglin i963 sen i967 and the subsidisation or public provision of health care arrow i963 lindsay i969 culyer i976 this whole line of argument rests on a particular theory of private philanthropy which in turn relies on three principal assumptions first there is the publicness assumption the charitable activity in question say the relief of poverty or the provision of health care is a common argument in many individuals utility functions and so is a public good in the theoretical sense samuelson i954 in some cases of private philanthropy it is indisputable that the charitable activity is a public good from which donors derive utility consider for example the case of yachtsmen contributing to the royal national lifeboat institution or potential cancer victims contributing to the cancer research campaign in other cases the assumption takes on a rather different character rich britons contribute towards famine relief in cambodia childless old age pensioners contribute towards the care of handicapped children in such cases one would have to be extremely cynical to believe that the charitable activity furthers the self interest of the donor in any significant way but one might suggest that for purely altruistic reasons the donor derives utility from knowing that less fortunate people are being made better off such an effect will be called an altruistic externality friedman along with all of the other writers quoted in the first paragraph of this paper relies on altruistic externalities to justify the publicness assumption the second assumption is that of utility maximisation each individual s decisions concerning his philanthropic

collective contests for commons and club goods abstract this paper focuses on collective contests for commons and club goods our main objective is to examine in this context the effect of group size on its performance the main results specify conditions for the existence non existence of the group size paradox namely the situation where a larger group is less more effective in pursuing its interest because of despite the combined effect of the incentives that result in the free riding problem and the tragedy of the commons the paper also explains under what circumstances there exists a bias towards excessive or inadequate winning group size finally it examines the effect of restricted excludability of the commons good within the winning group on the relationship between group size and its winning probability

effort levels in contests the public good prize case abstract we examine the equilibrium individual players groups and total effort levels expended in a contest where groups compete with one another to win a group specific public good prize and the players choose their effort levels simultaneously and independently

collective reputation social norms and participation this paper analyzes a repeated games model of collective reputation with imperfect public monitoring and perfect local peer monitoring of efforts even when peer monitoring is local firms may achieve higher profits under collective reputation by decreasing the cost of maintaining customers trust the optimal number of firms that share a common reputation is greater when 1 trades are more frequent and public information is disseminated more rapidly 2 the deviation gain is smaller compared to the quality premium 3 customers information regarding firms quality is more precise or 4 intragroup information about firms quality is more global from a positive perspective we suggest how social norms can influence the reputation of regional products we also offer an efficiency explanation for food scares from a normative point of view in our model protection of geographical indications increases and mandatory traceability decreases welfare and incentives to provide quality without taking into account direct implementation costs copyright 2012 oxford university press

the relative efficiency of public and private firms in a regulated environment the case of u s electric utilities abstract the relative efficiency of privately owned and publicly owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation the estimation results indicate that the two types of firms are equally cost inefficient in the united states the average effect of inefficiency is to increase the cost of production by 2 4 percent holding output constant inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel

is there a free rider problem in lobbying endogenous tariffs trigger strategies and the number of firms there are two reasons we expect moreconcentrated industries to have advantages over less concentrated industries in playing the lobbying game one is that in a noncooperative setting as the number firms rises we expect the free rider problem to become worse this is the finding of rodrik 1986 the second is that we expect that the ability to maintain a cooperative outcome deteriorates as the number of firms in the industry rises the classic reference is mancur olson 1965 also see russell hardin 1982 and todd sandler 1992 among others in contrast with the second intuition this paper shows that there is no general presumption that maintaining cooperation becomes more difficult as the number of firms in the industry rises the ability of an industry to overcome the free rider problem is analyzed in a re peated tariff lobbying game where cooperation may be maintained through the use of a simple trigger strategy 2 the difficulty of maintaining cooperation is measured by the critical value of the discount parameter all values above this critical value are consistent with cooperation and all values below the critical value imply that cheating will prevent maintenance of the cooperative outcome there is no presumption that this critical value rises with the number of firms a separate but related question involves asymptotic results standard intuition suggests that as industry structure approaches perfect competition it becomes impossible to maintain cooperation in the context of this paper this intuition corresponds to the critical value of the discount factor converging to i as the number of firms increases to infinity in the general case it is shown that the critical value of the discount parameter converges to a value less than 1 in the limit as the number of firms becomes arbitrarily large if the actual discount parameter lies above this value then cooperation may be maintained even with an infinite number of firms though the framework here is quite simple it provides results which contrast sharply to our standard intuition about how industry structure affects the ability to maintain cooperation there are two ways to interpret the results of this paper one is to assert that standard intuition is wrong and that there is in fact no presumption that maintaining cooperation becomes more difficult as the number

earmarking lottery proceeds for public goods empirical evidence from u s lotto expenditures this study examines motives for lottery play using a state level panel of lottery expenditures we find that expenditures per capita are greater in states that earmark proceeds for public goods further we find that casino gambling only impacts lotto play in general fund states

group size and free riding when private and public goods are gross substitutes abstract using the traditional model of voluntary public good provision it is shown that an expansion of group size exacerbates free riding tendencies as long as private consumption and the public good are strictly normal and weak gross substitutes this result generalizes a previous cobb douglas example with respect to preferences and asymmetric equilibria

public goods group size and the degree of rivalry it is well established that the provision of a pure public good is increasing in group size if the good is normal what i show is that if the good exhibits even a small degree of rivalry then the individual level of consumption of the public good falls to zero in a large group thus a strong version of olson s large group hypothesis applies to anything other than a pure public good while individual consumption of the public good goes to zero in a large group there is not a monotonicity result if it is initially small an increase in the group size may lead to an increase in the individual consumption of the public good

does voluntary participation undermine the coase theorem abstract the coase theorem states that costless enforcement of voluntary agreements yields efficient outcomes we argue that previous treatments fail to recognize the full meaning of voluntary it requires a two stage game a non cooperative participation decision followed by coaseian bargaining only among those who choose to participate we illustrate this in a simple public goods model and find outcomes ranging from extremely inefficient to fully efficient however the efficient equilibrium is not robust to even very small transaction costs thus we cast doubt on coaseian claims of universal efficiency finally we outline a kind of coercion that restores efficiency

optimal penal codes in price setting supergames with capacity constraints this paper constructs optimal pure strategy penal codes for a broad class of symmetric bertrand supergames with capacity constraints the results should simplify the analysis of bertrand supergames because the punishments comprising the penal codes constructed below have a very simple form and the associated payoffs are often easy to calculate it is also shown that for a commonly employed subclass of the games considered the admission of mixed strategies does not allow severer punishments the analysis draws heavily on the pathbreaking work of abreu 1984 he demonstrated that in the search for optimal penal codes attention can be restricted to simple penal codes simple penal codes are characterized by a vector of outcome paths one for each player the ith outcome path is interpreted as the punishment to be imposed on the ith player if he deviates from the equilibrium path or from any punishment path section 2 explains the basic framework of analysis the class of bertrand games studied is very general no particular rationing rule is imposed some mild restrictions are placed on the firms sales functions instead the commonly used models of levitan and shubik 1972 and beckman 1965 are special cases of the games analysed below it is assumed throughout that there is a price firms can be induced to charge if the punishment for charging a different price gives the offending firm a payoff equal to its security level for the supergame thus either there must exist a static nash equilibrium in pure strategies or else the discount factor must not be too close to zero in section 3 optimal penal codes are constructed and it is established that the punishments comprising them always drive punished firms to their security levels the arguments employed make clear that optimal penal codes are not generally unique this issue is addressed in section 4 where it is also shown that the levitan shubik rationing rule exhibits more types of optimal penal codes than do other rules in particular if the levitan shubik rule is employed then punishments that are analogous to abreu s 1986 symmetric two phase punishments for cournot games can be used to construct optimal penal codes in bertrand games this property does not hold generally however

the allocative efficiency measure by means of a distance function the case of spanish public railways abstract this paper is an empirical application of the distance function to study the allocative efficiency of a regulated railway spanish firm renfe where the cost minimising hypothesis may be questioned besides and in contrast with other studies we include the possibility of the presence of persistent allocative inefficiency to achieve these aims we have estimated a system of equations for the inputs distance function and cost shares using annual data over the period 1955 95 using this procedure we have checked the presence of persistent allocative inefficiency in particular a systematic overutilisation of labour and underutilisation of capital moreover we have found some empirical evidence that since 1984 management contracts have improved the input allocation in spanish railways

pre recession efficiencies and input allocation decisions of agricultural and critically insolvent banks abstractthe late 2000s economic recession is considered the longest economic downturn since the 1930s great depression declining real estate values ignited an increase in loan defaults and mortgage foreclosures that led to a surge of bank failures at a rate not experienced by the u s banking industry since the 1980s a total of 509 bank failures were recorded by the fdic from january 2007 december 2014 with nearly 60 of these failures occurring in 2009 and 2010 in contrast there were only 24 bank failures in the u s during the 7 year period prior to 2007 this study analyzed certain components of operating decisions made by banks that either survived or became critically insolvent during the late 2000s financial crisis using an input distance stochastic frontier function to estimate the technical efficiency te and allocative efficiency ae between agricultural banks and non agricultural banks this efficiency analysis was applied to a 7 year pre recession period and is designed to final out any