trade and protection in vertically related markets abstract we consider home country tariff and subsidy policies in a setting where a home firm is partially dependent on a foreign vertically integrated firm for supplies of a key input the firms are cournot competitors in the home market for the final product we show that a tariff on final product imports may cause the foreign vertically integrated firm to reduce the price charged for the input under circumstances where a simple monopoly supplier of the input would increase its price supply conditions for the input significantly affect whether imports of the input should be taxed or subsidized

multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

price advertising and the deterioration of product quality arguments in favour of self enforced bans on advertising by professionals often rely on the stylized fact that advertising can communicate information about price but not about quality this being the case it is argued that allowing professionals to advertise runs the risk that firms will compete vigorously over price at the expense of the quality of their product this paper shows that even if price can communicate no information directly about quality it can do so indirectly because price will be a signal of quality because of this allowing advertising is shown to improve consumer welfare

search costs and investment in quality in this paper we analyze how lower search costs aect rms incentives to invest in quality we identify two con icting eects on the one hand lower search costs increase incentives to invest in quality by eroding the market share of low quality rms and increasing the market share of high quality rms on the other hand by intensifying price competition lower search costs adversely aect high quality rms more than low quality rms the net eect of a change in the search cost on quality is shown to depend on the initial quality distribution there is a critical value such that if the average quality in the market is initially above this value lower search costs lead to lower quality whereas if the initial quality is below this value lower search cost leads to higher quality we show that our results are consistent with a superstar eect

foreign monopoly and optimal tariffs for the small open economy abstract in competitive markets a small open economy cannot improve its terms of trade by levying a tariff with imperfectly competitive suppliers such a country might be able to get better prices if its market is segmented from that in other countries the paper points out that tariffs provide the kind of market segmentation required the advisability of protection for a small country is shown to rest upon the asymmetry between its demand elasticity and the elasticity of demand on average in the market

monopoly and trade policy abstract this paper derives trade policy rankings for a country trading with a foreign monopoly firm it characterizes the first best policy under decreasing monopoly costs and itdemonstrates that a minimum import requirement implements first best trade only under constant monopoly costs the paper shows further that a voluntary import expansion eliminates all gains from trading with the monopoly and that all quotas and voluntary export restraints are equivalent finally it establishes that a price ceiling and a minimum import requirement are equivalent when monopoly costs are constant or decreasing but that their ranking is ambiguous when costs are increasing

does demand for product quality increase worker training abstract we uniquely examine the relationship between firm organized training and the sensitivity of consumer demand to product quality cross section panel fixed effect and instrumental variable estimates confirm that british workplaces provide more intensive training when their product demand is more sensitive to product quality robustness checks including using alternative key variable definitions and a counterfactual analysis examining the importance of competing on price support this confirmation

price quality and reputation evidence from an online field experiment we examine the link between price quality seller claims and seller reputation in internet auctions after purchasing actual baseball cards and having them professionally graded we find that some buyers in the online graded market are misled by incredible claims of quality they pay higher prices but do not receive better quality and in fact are defrauded more often online seller reputation is effective for identifying good faith sellers but conditional on completed auctions reputable sellers do not provide better quality evidence also suggests that high claim sellers target less experienced buyers we attribute these patterns to two loopholes in the ebay rating system we benefited from the comments of austan goolsbee raphael thomadsen john shea dan vincent david reiley larry ausubel peter cramton v joseph hotz jeff smith jimmy chan vincent crawford mark duggan and attendees at numerous seminars and conferences we are particularly grateful to seth sanders and john list for their constructive advice at the early stage of the research to timothy bresnahan rachel kranton and thomas hubbard for their detailed suggestions in reshaping earlier versions and to editor ariel pakes and two anonymous referees for their careful readings special thanks to eight friends who acted as our agents in purchasing baseball cards in retail markets and to numerous sports card store owners who shared their insights on the sportscard industry excellent research assistance from randy alexander moore and krzysztof fizyta is gratefully acknowledged any remaining errors are ours

domestic industrial structure and export quality country of origin may provide a signal of product quality if consumers are on average correct in thei r assessments of product quality from a given country then a lemons effect emerges a firm which pays the full cost of quality improvem ent will receive only diluted benefits in return while competitors gain by free riding the resulting international trade equilibrium i s suboptimal for the exporting country the country may be able to ra ise its welfare by use of export quality standards or by internalizi ng the externality by limiting export licenses or by industrial conso lidation copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

competition and the incentive to produce high quality previous literature indicates that when quality is a choice variable firms have an incentive to produce high quality to maintain their reputations with consumers the strategic interaction among firms and competition for market share is not considered this paper finds that when firms compete for market share perfect equilibria in which firms produce high quality goods need not exist competition for customers can eliminate the price premium needed to induce firms to maintain a reputation for high quality production in this case economists and policy analysts should pay greater attention to the interaction among firms and the institutions such as professional associations that structure interfirm relations when considering whether firms have an incentive to produce high quality goods

pareto ranking optimal tariffs under foreign monopoly abstract this paper shows that whether or not optimal ad valorem and specific tariffs can be pareto ranked for a country trading with a foreign monopoly firm depends on parameters of the economy

demand elasticities asymmetry and strategic trade policy abstract this paper shows that demand elasticities and cost asymmetry are important determinants of strategic trade policy in the symmetric case the direction of intervention is critically dependent upon the elasticity of demand under unit elastic demand free trade is optimal under symmetry and a subsidy tax is optimal if the exporting firm has lower higher marginal cost than its competitor if both the exporting governments intervene then the conventional result that the lower cost firm gets the higher subsidy is reversed for inelastic demand however such an equilibrium is unstable in policy space

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

imperfect competition and reputational commitment abstract competition can both aid and hinder reputational commitments for quality these are self sustaining depending on future profits after maintaining or deviating from the commitment and on current costs of sustaining it competition can affect these three elements at different rates

development and the interaction of enforcement institutions we examine how formal and informal contract enforcing institutions interact in a competitive market with asymmetric information where consumers do not observe quality before purchase firm level incentives for producing high quality can be achieved with an informal enforcement mechanism reputation the efficacy of which is enhanced by consumers investing in connectedness or with a formal mechanism legal enforcement the effectiveness of which can be reduced by means of bribes we show that formal and informal enforcement mechanisms do not necessarily substitute each other while high levels of judicial efficiency decrease consumers incentives to connect higher consumers connectedness leads to higher levels of judicial efficiency we then look at how the equilibrium institutional mix evolves with the level of development in doing so we show the presence of a new physical channel that can affect institutions i e the frequency of bad productivity shocks that in less developed settings can impact on firms incentives to cheat c 2010 elsevier b v all rights reserved

antitrust innovation and competitiveness the essays in this book explore how the us antitrust laws especially the sherman act have affected the ways in which us corporations can form alliances to compete in world markets the editors start from the premise that current antitrust laws needlessly and unwisely restrain innovation because they inhibit communication and co operation between firms although not all the contributors agree with them about the extent of this effect

competition and product quality in the supermarket industry this article analyzes the effect of competition on a supermarket firm s incentive to provide product quality in the supermarket industry product availability is an important measure of quality using u s consumer price index microdata to track inventory shortfalls i find that stores facing more intense competition have fewer shortfalls competition from walmart the most significant shock to industry market structure in half a century decreased shortfalls among large chains by about a third the risk that customers will switch stores appears to provide competitors with a strong incentive to invest in product quality

competition in shared markets and major league baseball broadcast viewership abstractthis work evaluates the cross quality elasticity of related products in the context of local market nielsen local people meter ratings of major league baseball mlb regular season broadcasts from 2010 through 2013 from six teams in three shared markets we employ a fixed effects panel regression with multi way error clustering finding that fans exhibit nuanced behaviour related to the absolute quality and relative quality of the two local teams our estimates imply quality related competition for viewership between teams in the face of large disparities in quality however when both teams are of high quality viewership increased beyond what own team success would predict alone for the competing team the competitive effects are largely dominated by the spillover effects these findings point to complementary effects of team success beyond own team interest and bring about an important nuance in the literature on market definition competition and substitution in sport

trade taxes and subsidies with imperfect competition abstract traditional results in the theory of international trade suggest that a country large enough to influence world prices can raise its national income by levying a tariff in a partial equilibrium model brander and spencer 1984 suggest that a country facing a monopolistic supplier of importables may find it optimal to subsidize this activity rather that tax it this result is reconsidered in a general equilibrium framework it is in general correct but specific and ad valorem forms of taxation may yield different results