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

the structure of financial equilibrium with exogenous yields the case of incomplete markets1 this paper presents an analysis of the structure of competitive equilibrium in a model whose principal feature is incomplete financial markets formulated in the spirit of arrow specifically the overall payoffs or returns from financial instruments are assumed to be fixed or predetermined independently of the operation of the economy and these instruments are assumed to be fewer in number than required to span all potential spot markets for commodities our main result establishes that market incompleteness generates a corresponding degree of allocation indeterminateness suppose there are n 1 spot markets but only 0 m n linearly independent financial instruments so that the deficiency in financial markets is 0 n n m n then subject to some relatively innocuous technical qualifications the set of equilibrium allocations contains a smooth n dimensional submanifold we also indicate how real indeterminacy may increase when returns for example the market price and promised interest on an ordinary bond are treated as variables rather than parameters

is the european community an optimal currency area optimal taxation versus the cost of multiple currencies the authors propose a view of optimal currency areas that is based on the principles of public finance inflation taxes are distortionary and an optimal spreading of tax distortions may require high inflation in one region and low inflation in another each region would need its own currency to do this on the other hand multiple currencies imply valuation and currency conversion costs which impede trade between regions this tradeoff is explored in the context of the european community s debate over a common currency using a two country variant of robert lucas and nancy stokey s cash in advance model copyright 1990 by american economic association

real sources of european currency policy sectoral interests and european monetary integration in the thirty years before economic and monetary union was achieved european currency policies varied widely among countries and over time in this article i argue that the sectoral impact of regional exchange rate arrangements in particular their expected real effects on european trade and investment exerted a powerful influence on the course of european monetary integration the principal benefit of fixing european exchange rates was facilitation of cross border trade and investment within the european union eu the principal cost of fixed rates was the loss of national governments ability to use currency policy to improve their producers competitive position empirical results indeed indicate that a stronger and more stable currency was associated with greater importance of manufactured exports to the eu s hard currency core while depreciations were associated with an increase in the net import competition faced by the country s producers this suggests a powerful impact of real factors related to trade and investment and of private interests concerned about these factors in determining national currency policies

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

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

international investment positions a cross sectional analysis abstract we explore some empirical properties of the level and composition of gross international investment positions in a cross section of countries we find that more open countries with larger domestic financial markets tend to hold greater quantities of foreign assets and liabilities there is some evidence that cross holdings are positively correlated with inflation volatility but negatively correlated with terms of trade volatility

r d cooperation and the joint exploitation of r d is r d cooperation preferred to non cooperative r d and does the answer depend on how firms choose output and if anti trust protection is provided to r d is it desirable to extend anti trust protection to cooperative production as well in our model cooperative r d is always preferred by both firms and consumers regardless of how output is chosen we then show that though innovation effort and profits are higher when both output and r d effort are chosen cooperatively consumer surplus and overall social welfare are higher when cooperation is restricted to r d

exchange rate variability and asset trade in popular discussion about the merits of different international monetary arrangements it is often maintained that increased exchange rate variability has a negative influence on international tra

an exploration in the theory of exchange rate regimes three exchange rate regimes a float a one sided peg and a cooperative peg are evaluated and compared in terms of efficiency and welfare levels the framework of analysis embodies country specific monies with the money of each country being used to transact in its commodity markets and its currency denominated bonds welfare levels depend only on consumption levels in the presence of perfect foresight all equilibrium allocations are pareto efficient in a floating exchange rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy the same result holds in a one sided peg if the pegging country s exchange rate stabilizing authority breaks even over time in a cooperative peg regime there is a different equilibrium allocation for each combination of exchange rate levels and monetary policies problems of policy coordination and conflicts in desired monetary policies are discussed

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

currencies and the allocation of risk the welfare effects of a monetary union in a general equilibrium model with incomplete asset markets nominal securities and mean variance preferences a monetary union is desirable when the gain from eliminating excess volatility of nominal variables exceeds the cost of reducing the number of currencies with which to hedge risks copyright 1998 by american economic association

capital market imperfections and the theory of optimum currency areas this paper studies how within and cross country capital market imperfections affect the welfare effects of forming a currency union the analysis considers a bank only world where intermediaries compete in cournot fashion and monitoring and state verification are costly the first part determines the credit market equilibrium and the optimal number of banks prior to joining the union the second part discusses the benefits from joining a currency union a competition effect is identified and related to the added monitoring costs that banks may incur when operating outside their home country through an argument akin to the brander krugman reciprocal dumping model of bilateral trade however in our framework whether joining a union raises welfare of the home country is ambiguous it depends on the relative strength of investment creation and intermediation diversion effects

argentina s convertibility plan and the imf almost six years have passed since argentina introduced a currency board system called convertibility it consists of a one for one peg between the peso and the u s dollar and full backing of the monetary base with international reserves in spite of its resounding success in reducing inflation there is still a considerable degree of skepticism in the world although not so much in argentina about whether convertibility is a suitable monetary arrangement for the long run prestigious economists have argued that convertibility was a useful tool to stop hyperinflation in argentina but that it is not suitable for countries facing less dramatic conditions see john williamson 1995 and the speeches by max corden stanley fischer and williamson in world bank 1997 according to them even argentina should think of abandoning this system as a way to promote economic growth and higher employment international institutions like the international monetary fund and the world bank have been extremely supportive of convertibility in argentina but in private they are concerned about what sebastian edwards former world bank chief economist for latin america has called the exit problem i e how a country like argentina can get out of the commitment to a fixed exchange rate without risking price stability

multidivisional firms internal competition and the merger paradox traditional modelling of mergers has the merged firms insiders cooperate and maximize joint profits this approach has several unappealing results in quantity setting games for example mergers typically are not profitable for insiders but are profitable for non merging firms outsiders we take a different approach and allow for a parent company that can play each insider off one another in quantity setting games with our approach mergers are profitable for insiders unprofitable for outsiders socially beneficial and involve in a non monopolizing merger a small number of firms finally we find that the optimal strategy depends on whether firms compete in quantity or prices jel classification l000 entreprises multi divisionnelles concurrence interne et le paradoxe des fusions les modelisations conventionnelles des fusions suggerent que les entreprises fusionnees parties prenantes cooperent et maximisent leurs profits conjoints cette approche engendre plusieurs resultats contre intuitifs dans des jeux de concurrence par les quantites i e les fusions en general ne sont pas profitables pour les parties prenantes mais sont profitables pour des entreprises qui ne sont pas fusionnees les autres les auteurs adoptent une approche differente qui permet a l entreprise mere de jouer les parties prenantes l une contre l autre dans ce genre de jeu avec l approche adoptee les fusions sont profitables pour les parties prenantes non profitables pour les autres socialement benefiques et impliquent un petit nombre d entreprises dans une fusion qui ne cree pas un monopole finalement on trouve que la strategie optimale depend fondamentalement du fait que les entreprises se concurrencent par les prix ou par les quantites

optimal financial market integration and security design 1 we study 2 period pure exchange capital asset pricing model capm economies with incomplete financial markets and restricted participation we characterize the optimal financial market structure and efficient innovations consisting of both the introduction of new assets and the integration of segmented markets welfare gains from innovations are maximal when the endowments of affected agents are negatively correlated uncoordinated innovations lead to efficient market structures if all assets have identical participation structure or the markets being integrated trade identical assets however coordination failure in the introduction of new assets may result when assets have participation structures that overlap only partially

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

cooperative r d and strategic trade policy in this paper three different cooperative r d arrangements in a strategic trade policy model are examined a policy game between two governments is analysed where each government chooses a particular cooperative r d policy in order to maximize national welfare allowing cooperation in r d is also compared with the use of r d subsidies it is jointly optimal for both governments to allow their firms to participate in the same type of cooperative r d and allowing cooperation in r d can

inflation indexed bonds and nominal bonds financial innovation and precautionary motives this paper introduces a two period monetary general equilibrium model with proportional transaction costs on nominal and inflation indexed bonds this paper demonstrates that financial innovation on indexed bonds causes equilibrium interest rates of the nominal bond to increase when agents have precautionary saving motives this result implies that ignoring precautionary motives would underestimate savers welfare gain and overestimate borrowers welfare gain from innovation on indexed bonds

multivariate density forecast evaluation and calibration in financial risk management high frequency returns on foreign exchange we provide a framework for evaluating and improving multivariate density forecasts among other things the multivariate framework lets us evaluate the adequacy of density forecasts involving cross variable interactions such as time varying conditional correlations we also provide conditions under which a technique of density forecast calibration can be used to improve deficient density forecasts and we show how the calibration method can be used to generate good density forecasts from econometric models even when the conditional density is unknown finally motivated by recent advances in financial risk management we provide a detailed application to multivariate high frequency exchange rate density forecasts

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

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

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

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

the copula garch model of conditional dependencies an international stock market application abstract modeling the dependency between stock market returns is a difficult task when returns follow a complicated dynamics when returns are non normal it is often simply impossible to specify the multivariate distribution relating two or more return series in this context we propose a new methodology based on copula functions which consists in estimating first the univariate distributions and then the joining distribution in such a context the dependency parameter can easily be rendered conditional and time varying we apply this methodology to the daily returns of four major stock markets our results suggest that conditional dependency depends on past realizations for european market pairs only for these markets dependency is found to be more widely affected when returns move in the same direction than when they move in opposite directions modeling the dynamics of the dependency parameter also suggests that dependency is higher and more persistent between european stock markets

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

golden fetters the gold standard and the great depression barry eichengreen oxford university press new york 1992 pp xix 448 39 95

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

persistence of dollarization after price stabilization credit contracts in developing countries are often denominated in foreign currencies even after many of these economies succeeded in controlling inflation this paper proposes a new interpretation of this apparent puzzle based on the demand for insurance against real shocks the fact that devaluations occur more frequently in adverse states of the world provides a motive for holding dollar assets this approach implies a complementarity between the optimal monetary policy and the currency denomination of contracts when a large proportion of liabilities is denominated in a foreign currency the optimal exchange rate volatility is low which reinforces the demand for dollar assets

evaluating density forecasts with applications to financial risk management density forecasting is increasingly more important and commonplace for example in financial risk management yet little attention has been given to the evaluation of density forecasts the authors develop a simple and operational framework for density forecast evaluation they illustrate the framework with a detailed application to density forecasting of asset returns in environments with time varying volatility finally the authors discuss several extensions copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

political and institutional commitment to a common currency a stroll along the first floor corridor at the international monetary fund s washington headquarters reveals the fundamental and indisputable fact that political considerations rather than purely economic concerns are the predominant practical determinants of the domain of operation of currency regimes despite the theory of optimum currency areas which might suggest alternative outcomes with few exceptions the empirical regularity is one country one money even the exceptions help to prove the rule the common currencies of the african franc zone reflect a still strong political as well as economic linkage to the former colonial power the use of the u s dollar as the circulating medium in panama and liberia also reflects present or past political relationships moreover the political theory of currency areas is not merely a statement of static facts it has predictive power the common currency that rome imposed throughout its empire did not survive the decline and fall of that empire similarly the states that emerged from the breakups of the austro hungarian and ottoman empires after world war i rapidly moved to separate currencies when the soviet union collapsed at the end of 1991 some misguidedly thought that a ruble zone could and should be preserved but reality prevailed and the 15 sovereign republics of the former soviet union all now have independent national currencies conversely when the founding fathers sought to construct a more perfect union in the u s constitution of 1787 the power to coin money and regulate the value thereof was transferred from the states to the new federal government the objective was not only to improve the monetary basis for commerce and finance within and between the states but also thereby to strengthen their political union in europe today the drive to construct a european monetary union emu has been justified primarily on the prospective economic benefits of a common currency however such a proposal would have been literally unthinkable whatever its possible economic benefits with the political divisions that characterized europe until relatively recent years and still today the strongest advocates of emu tend to be those who see monetary union not only as a beneficial economic mechanism but also as substantively and symbolically important for strengthening the political dimension of european union conversely those who are skeptical about stronger political union in europe also tend to be skeptical about emu in view of the centrality of political considerations in determining monetary arrangements it seems essential to ask how these considerations affect the differences between currency areas and currency unions most importantly in the effort to transform european monetary arrangements from a currency area into emu a currency area is an arrangement for a group of countries to peg exchange rates among distinct national currencies in some cases exchange rates may be rigidly pegged but more usually they are allowed to fluctuate within narrow bands members retain their own central banks although with serious constraints on the independence of national monetary policies a currency union involves a much stronger political and institutional commitment to fix exchange rates absolutely through a single money that functions as the monetary standard for a group of countries the supporting institutional structure also includes a common monetary authority for all the countries of the union which determines monetary policy on a union wide basis research department international monetary fund washington dc 20431 the opinions expressed in this paper are solely those of the author and do not reflect the views of the international monetary fund

welfare analysis of currency regimes with defaultable debts abstract we modify the cole and kehoe model by including domestic debt according to the original model a speculative attack on a high debt level issued abroad triggers external debt default here it is possible to inflate away the domestic debt to avoid the external debt default we consider two possibilities for domestic debt denomination i local currency and ii common currency in the second case inflation depends on a monetary union decision our numerical results show that to have a debt share denominated in a common currency is optimal when the refinancing risks are highly correlated across union members otherwise the best is to keep the domestic debt denominated in local currency finally the extreme case of having all debt issued abroad and denominated in a foreign currency is suitable when under alternative regimes suboptimal inflation motivated by political factors is likely although the paper was originally developed for emerging market economies it sheds some light on the recent eurozone crisis

the long or short of it determinants of foreign currency exposure in external balance sheets abstract a major focus of the recent literature on the determination of optimal portfolios in open economy macroeconomic models has been on the role of currency movements in determining portfolio returns that may hedge various macroeconomic shocks however there is little empirical evidence on the foreign currency exposures that are embedded in international balance sheets using a new database we provide stylized facts concerning the cross country and time series variation in aggregate foreign currency exposure and its various subcomponents in panel estimation we find that richer more open economies take longer foreign currency positions in addition we find that an increase in the propensity for a currency to depreciate during bad times is associated with a longer position in foreign currencies providing a hedge against domestic output fluctuations we view these new stylized facts as informative in their own right and also potentially useful to the burgeoning theoretical literature on the macroeconomics of international portfolios

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

beat em or join em export subsidies versus international research joint ventures in oligopolistic markets this paper compares adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in r d and output and because of spillovers each firm benefits from the other s r d when the government can commit to an export subsidy such a policy raises welfare relative to cooperation except when r d is highly effective and spillovers are near complete without commitment however subsidisation may yield welfare levels much lower than cooperation and lower even than free trade though qualifications to the dangers from no commitment are noted

r d cooperation or competition abstract the economic literature provides empirical evidence of the existence of technological cartels such as research joint ventures or deliberate sharing of technological knowledge our aim is to answer to the questions i is the creation of technological cartels beneficial from a social welfare point of view and ii do the firms have private incentives to form such cartels we depart from the approach adopted in the literature by considering a dynamic model and allowing for the possibility that the firms are asymmetric the results show the importance of the degree of existing technological spillovers and stress the differences between the symmetric and asymmetric cases

real indeterminacy with financial assets abstract it is shown that in a two period general equilibrium securities model where assets pay in money the generic dimension of the set of equilibrium allocations in the incomplete market situation is s 1 where s is the number of assets hence the degree or real indeterminacy is independent of the number of assets this result requires beyond fewer assets than states that the number of traders be larger than the number of securities and that the asset return matrix be in general position the generic dimension for arbitrary returns matrix is also obtained it is argued in addition that the presence of real or mixed assets does not by itself lower the degree of indeterminacy

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

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

how does dollarization affect real volatility and country risk this study gives a non traditional framework for the evaluation of the convenience of an asymmetric monetary association such as dollarization from the point of view of the country that gives up its monetary sovereignty in the analytical part we discuss the relationship between nominal volatility real volatility and country risk given the social loss function of the policymaker we determine the necessary conditions for dollarization to improve social welfare with this in mind we concentrate in the analysis of two main aspects 1 the degree of synchronization existing between the cycle of the leader and associated country and 2 the effect and relative importance of the different channels the trade and financial channels that transmit the shocks from the central country the united states in the empirical part we perform an application of our analytical framework to the case of argentina to estimate the synchronization of the business cycles we use the coefficient of cyclical correlation calculated for four different methodologies of de trending the effect and relative importance of the financial channel and the trade channel were extracted from the impulse response functions and variance decompositions of a vector error correction model vecm we analyze the stability of the results altering the order of the variables re estimating the model with rolling sub samples and modifying the deterministic component in the error correction mechanism as a general result dollarization in argentina would not only reduce the risk of devaluation but also reduce the real volatility of the economy and so the country risk for that reason from the financial point of view the advantages of dollarization will depend on how much society values the alternative of keeping open the possibility of adjusting to extraordinary shocks with the exchange rate parity

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

segmented asset markets and optimal exchange rate regimes abstract this paper revisits the issue of the optimal exchange rate regime in a flexible price environment the key innovation is that we analyze this question in the context of environments where only a fraction of agents participate in asset market transactions i e asset markets are segmented under this friction alternative exchange rate regimes have different implications for real allocations in the economy in the context of this environment we show that flexible exchange rates are optimal under monetary shocks and fixed exchange rates are optimal under real shocks

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

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

portfolio choice exchange rates and indeterminacy consider an exchange economy under uncertainty the asset market is incomplete there are fewer assets a than states of nature s assets are nominal and are denominated in n distinct currencies competitive equilibria are distinct if the associated allocations are distinct an economy displays k degrees of indeterminacy if the set of distinct competitive equilibria contains a k dimensional open set generically the economy displays ns a n 1 n degrees of indeterminacy

trade in nominal assets monetary policy and price level and exchange rate risk in a previous paper trade in risky assets i have analyzed the pattern of international trade in risky real assets between barter economies relying on the law of comparative advantage and using autarky asset price differences to predict the pattern of asset trade in this paper the analysis is extended to international trade in nominal assets assets with returns paid in currencies between monetary economies the risk chracteristics of real returns on nominal assets depend on price level and exchange rate risk and therefore on monetary policy it is examined how different combinations of monetary policies and exchange rate regimes affect nominal assets return risk characteristics their autarky perices and hence their trade pattern when countries differ with respect to their outputs or their attitudes towards risk when world asset markets are incomplete different monetary policies and exchange rate regimes have dramatic effects on risk characteristics of home and foreign currency bonds and on the trade pattern in these assets as well as on aggregate capital and current accounts

economic integration and political accountability abstract this paper studies to what extent economic integration or globalization influences the accountability of politicians assuming that politicians are controlled by the voters through reelection rules we analyze to what extent economic integration affects the form of those rules and the efforts made by politicians we define economic integration by the existence of policies and shocks interdependences between countries then from a political point of view this integration is shown to be a two sided phenomenon shock interdependence allows yardstick comparison increases political accountability and therefore efforts while policy interdependence induces a lack of responsibility and harms the extent to which politicians can be controlled

moment based copula tests for financial returns we propose a class of moment based tests for copulas in a parametric multivariate dynamic context for financial returns the proposed method takes into account the effect of estimation uncertainty this effect is quite important but often is ignored in related studies our method can be applied to generate various tests to detect copula misspecification in different directions in particular on the basis of the conditional probabilities of quantile exceedances kendall s tau it generates the tail dependence tests the concordance test that can be used to investigate whether the copula being tested is suitable for characterizing the true tail dependence concordance structure such tests may be useful for exploring the cross dependence structures of financial returns that are essential for risk management and other purposes the monte carlo simulation supports the validity of our method as a demonstrative application we also apply these tests to an empirical study of stock market relationships

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

open economy macroeconomics developments in theory and policy this paper views developments in open economy macroeconomics through the lens of the debate over european monetary unification the empirical tendency for nominal exchange rate regimes to affect the variability of nominal and real exchange rates alike can be rationalized by sticky price theories or models of asset market liquidity effects but plausible liquidity models have difficulty generating enough persistence to match the data thus the macroeconomic stabilization costs of forgoing the exchange rate realignment option seem pertinent it is argued that our theories of efficiencies due to a common currency remain unsatisfactory despite recent advances the paper concludes by reviewing theories of currency crisis

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

out in the cold iceland s trade performance outside the european union and european monetary union although entering currency and customs unions involve both costs and benefits an increasing body of research is finding that the benefits in terms of international trade creation are remarkably large focusing simply on the european monetary union emu rather than the broad range of currency unions studied by other authors we find that the trade impact of emu is smaller but still substantial our findings suggest that the iceland s trade could increase by about 60 and that the trade to gdp ratio could rise by 12 percentage points should iceland join the european union and emu copyright 2006 oxford university press