on the robustness of equilibrium refinements abstract the philosophy of equilibrium refinements is that the analyst if he knows things about the structure of the game can reject some nash equilibria as unreasonable the word know in the preceding sentence deserves special emphasis if in a fixed game the analyst can reject a particular equilibrium outcome but he cannot do so for games arbitrarily close by then he may have second thoughts about rejecting the outcome we consider several notions of distance between games and we characterize their implications for the robustness of equilibrium refinements

testing oligopoly power in domestic and export markets empirical applications of testing oligopoly power in different industries are based on the new empirical industrial organization neio approach parallel to this approach theoretical and empirical applications to testing oligopoly power in international trade have also emerged a shortcoming of these approaches is that they do not account for the possibility that an industry which is active in the domestic and international markets may exhibit oligopoly power in both markets we extend the existing models by simultaneously accounting for domestic and international components of four industries in testing for oligopoly power we found that in some cases industries exhibit oligopoly behaviour in either or both markets

concentration in ownership of plant variety rights some implications for developing countries this paper explores concentration levels in the ownership of intellectual property rights over plant varieties worldwide an analysis of data for 30 upov member countries shows a high degree of concentration in the ownership of plant variety rights for six major crops at the national level in the developed world much of this concentration has arisen owing to the rapid consolidation of the seed industry through mergers and acquisitions especially in the 1990s a high degree of concentration in the ownership of plant variety rights in combination with recent efforts to strengthen plant variety protection regimes is likely to have significant effects on the prospects for future innovation in plant breeding and the distribution of market power between companies for developing countries concentration in intellectual property right ownership may have important implications for the structure of domestic seed industries and access to protected varieties and associated plant breeding technologies these implications for developing countries are likely to become apparent in the context of the rapid spread of plant variety protection and access legislation emerging changes in the international exchange regime for plant material and liberalised investment policies permitting foreign investment in the seeds sector

sustaining growth in agriculture a quantitative review of agricultural research investments abstract growth in agriculture depends on many things but one of the most important is investment in agricultural research decision making in the agricultural research policy area can only be aided by access to better information this article overviews a recent endeavor to move policy dialogue beyond merely qualitative impressions towards a process that is underpinned with new and cogent data the data used have been assembled at isnar in a manner designed to make comparisons both over time and between countries more valid than has been the case in the past the comparisons thus possible reveal considerable diversity both between countries and between broad regional aggregations also illuminated here are issues related to the commodity orientation capital and labor intensity and size and scope of particular national programs

carving up the commons emergence of a new international regime for germplasm development and transfer no nation has ever fabricated or maintained a prosperous food system based on genetic resources of purely indigenous origin remarkably many countries now seem ready and almost eager to try such an approach we identify four separate components of an emerging regime that are interacting in ways that should worry everyone concerned with the development and transfer of plant genetic materials into the south new provisions on intellectual property increased concentration of new enabling technologies into a few large multinational companies heightened anxieties over transgenic crops and new problems arising from international agreements we argue that the solutions now being discussed in global forums are either infeasible incomplete or are likely to have seriously negative effects we call instead for creative new thinking on building human capacity in developing countries on the legal status of plant genetic resources and on publicprivate partnerships especially those in service of the poor 2002 published by elsevier science ltd

measuring market power in multi product oligopolies the us meat industry this paper develops and estimates an economic model for measuring market power in a quantity setting oligopoly engaged in the joint production of demand related goods the model which allows for firms conjectures about both same and cross market responses to own output variation is applied to the us meat beef and pork industry he hypothesis that the industry s equilibrium reflects price taking behaviour is rejected the hypothesis of no cross effects cannot be rejected roughly half of the farm to retail price spreads for beef and pork appear to be attributable to market power

the rise of the chicago packers and the origins of meat inspection and antitrust the meat inspection act of 1891 and the sherman act of 1890 are closely tied this link makes clearer congress intent in enacting the legislation both laws were products of economic conditions after 1880 and reflected in part widespread concern about the market power of chicago meat packers the concerns of local slaughterhouses which were being displaced by new low cost refrigerated beef and of farmers who sold livestock to the large chicago packers were echoed elsewhere by other small businesses and farmers who feared for their livelihood during a time of structural change in the economy i introduction in the few years between 1887 and 1891 the legislative basis was established for major intervention by the federal government into the american economy the interstate commerce act of 1887 the sherman act of 1890 and the meat inspection act of 1891 1 with these laws the federal government became directly involved in the regulation of railroad rates antitrust enforcement and the inspection and certification of food quality for consumers representing a significant break from what had previously been considered an appropriate role for the federal government this legislation provided a new and permanent mandate for government regulation in the market economy despite the importance of these laws the link between the economic and political environment in the united states in the late nineteenth century on the one hand and the legislative histories of the laws on the other has not been thoroughly explored as a result the motives of congress for enacting these laws remain both unclear and controversial consider meat inspection and antitrust although most attention in the literature is focused on the 1906 meat inspection act made popular by the publication of upton sinclair s the jungle the initial legislation the meat inspection act of 1891 came fifteen years earlier and it addressed the production and consumption of fresh beef but as reported in this paper there is no evidence of a major health crisis regarding the consumption of beef at the time something else appears to have been on the mind of congress when it passed the legislation in 1891 the objectives of congress in enacting the sherman act are even more controversial because of the prominence of the law debate revolves around whether the sherman act was designed to promote competition and consumer welfare or to limit competition and protect special interests 2 this paper argues that to gain a better understanding of the origins of this important legislation and its early economic effects the laws must be placed into the context of the extraordinary changes taking place in the american economy in the late nineteenth century the linkages among the laws help to identify the underlying political and economic forces behind the legislation three broad characteristics of the economy must be kept in mind in analyzing this period first the post civil war period was a time of general deflation between 1864 and 1900 the consumer price index fell by 47 percent u s department of commerce 1975 211 in general prices for farm products followed the overall pattern but prices for cattle fell in real terms after the mid 1880s fluctuations in farm prices also appear to have coincided with periods of agrarian unrest 3 second as described by higgs 1971 and chandler 1977 the period after 1880 was a time of major structural change in the economy the economy was becoming more industrial and biased technological change economies of scale in production distribution and marketing as well as the lowering of transportation costs were fundamentally altering production methods and products this affected the competitive positions of many firms creating winners and losers james 1983 burns 1983 atack 1985 emerging large firms expanded from local to national and international markets and existing small firms found their local markets threatened by new competitors

surplus distribution from the introduction of a biotechnology innovation we examine the distribution of welfare from the introduction of bt cotton in the united states in 1996 the welfare framework explicitly recognizes that research protected by intellectual property rights generates monopoly profits and makes it possible to partition these rents among consumers farmers and the innovating input firms we calculate a total increase in world surplus of 240 3 million for 1996 of this total the largest share 59 went to u s farmers the gene developer monsanto received the next largest share 21 followed by u s consumers 9 the rest of the world 6 and the germplasm supplier delta and pine land company 5

the creation of dominant firm market power in the coconut oil export market legal and institutional changes that centralized control of the philippine coconut oil refining and exporting industries enabled the philippines to exercise some of its potential dominant firm market power if the elasticity of demand for coconut oil continues to increase in part due to concerns about the health risks from eating saturated fats philippine exports will increase slightly while the price and philippine revenue will fall significantly within the next decade

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

agricultural biotechnology s complementary intellectual assets we formulate and test a hypothesis for the dramatic restructur ing that the plant breeding and seed industry has recently undergone the reorganization can be explained in part by the desire to exploit comple mentarities between intellectual assets needed to create genetically mod ified organisms this hypothesis is tested using data on agricultural biotechnology patents notices for field tests of genetically modified organisms and firm characteristics the presence of complementarities is identified with a positive covariance in the unexplained variation of asset holdings results indicate that coordination of complementary assets has increased under the consolidation of the industry ne of the central problems in the economics of inno vation concerns how industries change as they absorb fundamental research breakthroughs rarely has change been more pronounced than in agriculture following the introduction of recombinant dna technology and affiliated techniques of genetic engineering by offering breeders the ability to alter plant traits by directly manipulating se quences of genetic code tools of agricultural biotechnology change the possibilities for crop improvement profoundly the new techniques enhance the speed and precision of agricultural research and development r d while ex panding the space of potential new products seed firms now offer farmers crop varieties embodying new ap proaches for controlling pests managing physical stresses on plants increasing crop yields and growing differenti ated quality enhanced crops concurrent with these technical changes in the r d process the agricultural inputs industry has over the past two decades witnessed a comprehensive restructuring sev eral large chemical firms including monsanto dow and dupont moved aggressively into plant biotechnology mak ing huge investments in the life sciences as newly minted agronomic systems companies these firms acquired all of the large national seed firms in north america including pioneer dekalb asgrow garst and others meanwhile the research intensive agricultural biotechnology sector from its appearance in the 1980s as a large set of small startup firms had by the end of the 1990s already reached a second stage with most of the startups either folded or acquired by the new agronomic systems giants the industry s consoli dation was surprising not only for its rapid pace and com prehensive scope but also for the extremely high valuations at which some firms were acquired in 1997 for example monsanto acquired holdens foundation seeds of wil liamsburg iowa together with two marketing subsidiaries for 1 02 billion 25 times the annual sales of the mature privately held firm whose revenues derived entirely from the breeding and distribution of corn seed the emergent industry structure with a relatively small number of tightly woven alliances each organized around a major life sciences firm each vertically integrated from basic r d through to marketing stands in contrast to the more diffuse structure of twenty years ago this structure is likewise noteworthy when one considers trends in other research intensive fields the pharmaceutical biotechnology industry for example maintains a large number of free standing firms specializing in r d and earning revenues through various licensing agreements majewski 1998 hall and ziedonis 2001 observe that the u s semiconduc

towards a renaissance of economic theory in his penetrating essay theory and experiment vernon smith observes that subject behavior often diverges from game theoretic predictions and asserts that minor fudging with theory is unlikely to solve our problems because circumstances unknown to us are responsible for the explanatory failures of neoclassical economic theory i deal precisely with these issues in thebounds of reason 2009a my remarksheredrawupon several themes fromthis book relevant to specifying a refocused research agenda for the study of human strategic interaction the core of economic theory is the rational actor model which holds that individuals have preferences over outcomes beliefs called subjectivepriors linking choices to the relativeprobability of alternativeoutcomes and theymaximize their expected payoffs given these preferences and beliefs subject towhatevermaterial informational and other constraints they face many observers consider the experimental work of daniel kahneman and others kahneman et al 1982 gigerenzer and todd 1999 as destructive of the rational actormodel in fact however their research has considerably strengthened the rational actor model s explanatory power albeit at the expense of increasing its complexity gintis 2009a chs 1 and 12 most important these studies have shown the value of modeling using heuristics that conserve on information processing and of including the current state physiological temporal and ownership of the individual as an argument of the preference ordering in the 1980s the core of economic theory was extended to include game theory viewed as the theory of the strategic interaction of bayesian rational actors game theory has become a centerpiece of microeconomic theory alongside the traditional walrasian model of general market equilibrium it is important to note however that this exalted position is quite recent the textbooks that expound the received wisdom of today s practicing economists were written in the early years of the game theory revival between 1988 and 1995 these textbooks include misconceptions promulgated in the 1980s that have been transmitted to the current generation of economists as i shall show some of these misconceptions have been repaired in more recent contributions to game theory contemporary experimentalists however generally rely on the more traditional body of outdated theory i here rely on more recent theoretical contributions especially those of robert aumann and adam brandenburger and their coworkers to bring game theory up to date i then argue that despite their analytical power game theory and the rational actor model provide only part of the theoretical toolkit needed to explain human strategic interaction moreover because individuals bring much of the complexity of society into the controlled conditions of the laboratory game theory and the rational actor model are insufficient to explain experimental results concretely i suggest that a these analytical tools must be supplemented by what i term the psycho social theory of norms b the correlated equilibrium should replace

an empirical test of monopoly behaviour an application to the hardwood case a comment a recent article in this journal alexander 1988 tests whether the exchange of price information in the 1921 hardwood case was a means of fixing prices or a way of coping with costly information alexander makes two serious errors both errors involve the incorrect use of a technique used to measure price cost margins to determine the extent to which an industry is monopolistic competitive or somewhere in between i reestimate alexander s model correcting his two errors in addition i improve his data set alexander s conclusion that the price association was pro competitive although drawn incorrectly is shown to be correct

endogeneity testing in a supply and demand framework the powers of wu hausman endogeneity tests are related to the normalization d ecision in estimating demand equations power is not invariant to the choice bet ween quantity and price as the dependent variable a theoretical result due to n akamura and nakamura 1984 is used to explore the dependence of power on parame ters of the supply and demand system the theoretical result is corroborated wit h a monte carlo experiment the power results are used to analyze the u s deman d for poultry meat wherein price but not quantity is found to be predetermined copyright 1986 by mit press

a test for market power using marginal input and output prices with application to the u s beef processing industry for a number of years it has only been applied in rather limited ways in this paper we show how this method can be used to develop a general test for oligopoly and oligopsony behavior the test exploits the fact that under price taking behavior there is a known fixed relationship between changes in input prices on output supply and changes in output price on input demands the model and test developed are shown to be quite general and not dependent on empirical estimates of output demand and input supply we apply this test to the u s beef processing industry because of the high level of market concentration in this industry there is concern that beef packing firms are exercising market power in the purchase of finished cattle by keeping cattle prices below competitive levels and in the sale of packed beef by keeping prices above competitive levels most previous studies of the beef packing industry have found evidence that firms at least part of the time are exercising market power in the purchase of finished cattle schroeter azzam and pagoulatos schroeter and azzam azzam azzam and park koontz garcia and hudson or are exercising market power in the sale of packed beef schroeter schroeter and azzam however all of these studies are fairly restrictive in their assumptions regarding fixed proportions the relationship between market power in the input and output markets and the specification of input supply and output demand previous studies by muth and by muth and wohlgenant 1999 which allow for variable proportions and do not impose restrictions on the relationship of market power in each market did not find evidence of market power in the output and input markets for the beef packing industry however the results of each of these studies do depend on the specification of input supply and output demand

market power and the cattle cycle the relationship between the dynamic cattle cycle and the potential for market power in cattle purchases has rarely been studied this paper provides a conceptual framework showing how the cattle cycle and buyer market power are related not only does a larger cattle stock lead to a lower fed cattle price but the cattle stock s negative effect on price is magnified by the degree of buyer market power in cattle procurement empirical findings support the posited theoretical relationships and help explain why previous researchers reached different conclusions regarding the extent of market power in the industry copyright 2010 oxford university press

measuring market power and cost efficiency effects of industrial concentration in this paper i show how appelbaum s framework for testing price taking behavior in a single industry can be formally extended to consider concentration explicitly in so doing i separate the market power effect of concentration from its cost efficiency effect data from the us beef packing industry are used to illustrate an empirical application of the model the findings support oligopsonistic market power and slaughter cost efficiency in the industry however the cost efficiency effect outweighs the market power effect

an empirical test of monopoly behaviour an application to the hardwood case 1988 an empirical test of monopoly behaviour an application to the hardwood case applied economics vol 20 no 8 pp 1115 1127

testing the monopsony inefficiency incentive for backward integration in theory monopsony at one stage in a vertically related market provides an incentive for backward integration into the adjacent competitive stages by integrating backward a monopsonist internalizes the monopsony inefficiency due to underemployment of the factor produced upstream however little is known about the importance of such incentive in practice in this paper i provide an empirically implementable model to test the monopsony inefficiency incentive for vertical integration for illustration the model is applied to the u s beef slaughter industry findings seem to support the monopsony inefficiency incentive for backward integration by the industry into the live cattle market

estimating the degree of market power in the beef packing industry a technique for assessing the degree of monopoly power developed by appelbaum 1979 1982 is extended here to permit measurement of monopsony power as well data from the u s beef packing industry are examined the results reveal small but statistically significant monopoly monopsony price distortions in slaughter cattle and wholesale beef markets but in spite of a recent trend toward heightened concentration in the industry give no indication that performance has become appreciably less competitive of late this abstract was borrowed from another version of this item

testing for switching market conduct this paper tests for switching market conduct in an oligopsonistic industry the model adopts bresnahan s procedure for identifying the oligopoly solution and integrates the procedure with a switching regression model applied to the us beef slaughter industry two distinct regimes of conduct in the industry were identified the two regimes are consistent with the time periods during which the industry has undergone major structural change

common belief and the theory of games with perfect information abstract the statement it is common belief that player i is bayesian rational where bayesian rational means an expected utility maximizer is defined for two person games with perfect information it is shown that in most such games it is not possible for a theory so postulate the bayesian rationality of all players and to be common belief this bears directly upon the salience of standard solution concepts such as subgame perfect and sequential equilibria as well as upon the extensive form rationalizability theories of d bernheim econometrica 52 1984 1009 1028 and d pearce econometrica 52 1984 1029 1050 which rely heavily on the common belief of bayesian rationality journal of economic literature classification number c72

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

rational cooperation in the finitely repeated prisoner s dilemma experimental evidence this paper presents experiments designed to examine the sequential equilibrium reputation hypothesis in the finitely repeated prisoner s dilemma the authors test the hypothesis by controlling the subjects ability to build reputations and by manipulating their beliefs that their opponent is irrational or altruistic the responses of subjects strongly support the sequential equilibrium prediction the results also suggest an important role for homemade altruism that is a natural tendency to cooperate that subjects bring to the experiment from the outside the authors find that there may be no difference between the beliefs that an opponent is altruistic and the actual chance it is so copyright 1993 by royal economic society

non structural measures of competition toward a synthesis of alternatives abstract procedures for detecting or measuring market power have been suggested in recent years by iwata rosse and panzar and bresnahan this paper integrates elements from all three approaches to provide a single more unified alternative to the structure conduct performance paradigm

u s trade policy on lamb meat who gets fleeced the u s lamb meat industry received protection from import competition in 1999 with a tariff rate quota this paper analyzes proposed and adopted policies using a partial equilibrium model of lamb meat and lambs incorporating imperfect competition in the packing industry under a tariff policy packers can only exercise oligopsony power in the lamb market and both packers and lamb growers benefit from protection if a quota or tariff rate quota policy is used packers can assert oligopoly power packers benefit from protection but lamb growers may not under the tariff rate quota adopted lamb growers suffer a welfare loss copyright 2001 oxford university press

competition in the us meatpacking industry is it history the us meatpacking industry has become concentrated to a degree not experienced since the days of the beef trust a century ago a number of mainstream studies have investigated if such concentration has been detrimental to competition just as earlier studies may have helped shape competition policy towards meatpacking a century ago contemporary studies have made their way into current discussions and may shape competition policy at the turn of this century this paper asks whether or not contemporary studies are useful in informing competition policy after comparing how competition looks from the econometric vantage point with how it looks from the vantage point of the industry s 300 yr history this article concludes that mainstream studies are more useful for a competition policy targeting conduct rather than structure

economics of consolidation in the beef sector research challenges in 1980 congressional hearings were conducted regarding the potentially negative dimensions of market power by meatpackers concentration levels had increased during the 1970s concern was sufficient to prompt the introduction of two pieces of proposed legislation both of which would have limited the size of packing operations during the hearings testimony was replete with dire predictions of what would happen to industry performance if concentration were to increase still further parker testified that the research literature documents rapid increases in prices and in profits as the four firm concentration moves up from 40 to 60 and higher viewed in the presence of the content and orientation of those congressional hearings the happenings later in the 1980s appear incomprehensible if the important threshold in terms of the four firm concentration ratio is around 40 why was the massive consolidation of the beef sector during the 1980s allowed by the regulatory authorities what research methodology was brought to bear on these issues is it adequate the answers to these related questions are not apparent but they are clearly important if the decisions by the regulatory authorities during the 1980s were not based on solid economic research then important issues confront the profession either the research methodology must be modified or the empirical results of our research were ignored the objective of this paper is to explore the economics of the consolidation in beefpacking to look at why it occurred and why it was allowed to occur and to draw inferences about our research efforts the perspective offered is that of a marketing economist looking ahead to an uncertain future for the beef sector in the 1990s

regime switching and oligopsony power the case of u s beef processing in this article we estimate a model of oligopsony behavior under imperfect monitoring of rival actions to analyze weekly marketing margin data for the u s beef packing industry oligopsonists are hypothesized to follow a discontinuous pricing strategy in equilibrium and we focus on shocks in the normal throughput of supply as a potential catalyst for regime switching between cooperative and noncooperative phases we adopt an algorithm developed by bellone 2005 that relies on hamilton s 1989 multivariate first order markov process to test for the cooperative noncooperative switching behavior we find strong evidence that links switching conduct by packers to disruptions in coordinating the derived demands for processed beef with the supply of live cattle once switched cooperative regimes lasted an average of 21 weeks while noncooperative regimes averaged 33 weeks the average marketing margin for processed beef was 68 lower in the noncooperative regimes compared to the cooperative regimes this led to an annual average increase in profits of 408 million dollars to the beef packing industry and about an 8 9 reduction in live cattle prices

rationality nash equilibrium and backwards induction in perfect information games we say that a player is certain of an event a if she assigns probability 1 to a there is common certainty cc of a if the event a occurred each player is certain of a each player is certain that every other player is certain of a and so forth it is shown that in a generic perfect information game the set of outcomes that are consistent with common certainty of rationality ccr at the beginning of the game coincides with the set of outcomes that survive one deletion of weakly dominated strategies and then iterative deletion of strongly dominated strategies thus the backward induction outcome is not the only outcome that is consistent with ccr in particular cooperation in rosenthal s 1981 centipede game and fighting in selten s 1978 chainstore game are consistent with ccr at the beginning of the game next it is shown that if in addition to ccr there is cc that each player assigns a positive probability to the true strategies and beliefs of the other players and if there is cc of the support of the beliefs of each player then the outcome of the game is a nash equilibrium outcome