interfering with secondary markets we present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets in the model consumers have heterogeneous valuations for quality so that used good markets play an allocative role our results are the following 1 in contrast to swan s famous independence result a monopolist does not provide socially optimal durability 2 allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist s market power in the used market however forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability 3 the manufacturer benefits from a well functioning used good market despite the fact that used goods provide competition for new goods 4 the monopolist prefers to restrict consumers abilities to maintain the good

durable goods and product obsolescence the issue of product obsolescence is addressed by examining the optimal sales strategy of a monopolist firm that may introduce an improved version of its current product consumers expectations of a forthcoming product lowers the price that they are willing to pay for the current product because of its loss in value due to obsolescence the new product is characterized by consumers increased willingness to pay and by its competitive interaction with the old product these characteristics affect the tradeoff that the firm makes between the cost of waiting for new product sales versus the cost of cannibalizing these sales we analyze the effect of these characteristics of the new product on the firm s optimal sales strategy we consider the various policy measures available to the firm including limiting initial sales in order to lower cannibalization of the new product buying back the earlier version of the product in order to generate greater demand for the new product and announcements of future product introductions we find that for modest levels of product improvement the firm s optimal policy is to phase out sales of the old product while for large improvements a buy back policy is more profitable lastly we find that the firm is better off if it informs consumers whether a new product is forthcoming

are worker managed firms more likely to fail than conventional enterprises evidence from uruguay various theories suggest that worker managed firms wmfs are prone to failure in competitive environments using a long panel of uruguayan firms the author presents new evidence on firm survival by comparing wmfs with conventional firms after excluding microenterprises and controlling for differences in the effective tax burden faced by the two types of firms the hazard of dissolution is 29 lower for wmfs than for conventional firms this result is robust to alternative estimation strategies based on semiparametric and parametric frailty duration models that take into account unobserved firm level heterogeneity and impose a range of distributional assumptions about the shape of the baseline hazard the higher survival rates of worker managed firms seem to be associated with their greater employment stability this evidence suggests that the marginal presence of wmfs in actual market economies cannot be explained by the fact that these firms are less likely to survive than conventional firms

multi objective stochastic programming for portfolio selection abstract generally in the portfolio selection problem the decision maker dm considers simultaneously conflicting objectives such as rate of return liquidity and risk multi objective programming techniques such as goal programming gp and compromise programming cp are used to choose the portfolio best satisfying the dm s aspirations and preferences in this article we assume that the parameters associated with the objectives are random and normally distributed we propose a chance constrained compromise programming model cccp as a deterministic transformation to multi objective stochastic programming portfolio model cccp is based on cp and chance constrained programming ccp models the proposed program is illustrated by means of a portfolio selection problem from the tunisian stock exchange market

the effects of learning by doing on product innovation by a durable good monopolist abstract we analyze a durable good monopolist s decision to adopt a new and more efficient technology that is readily available at very low or zero adoption cost after an initial period of learning by doing the new technology makes the good more attractive to consumers anticipating a better product consumers delay their current purchases which lowers today s profits but increases future profits since the monopolist can charge a higher price for the high quality good we show that the effect on overall profit depends on variables such as the degree of innovation for certain parameter values the monopolist adopts the innovation even when it is not first best to do so we also provide conditions under which the monopolist finds it optimal to continue using the inferior production technology even if the innovation is freely available the latter result provides a possible rationale for a firm to hold on to a sleeping patent when its use is socially desirable

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

quality improvements and the incentive to leapfrog abstract in a model of an uncovered market of vertically differentiated products incentives of non identical duopolists to improve the technological maximum quality are analyzed it is assumed that initially firms offer products with different qualities and that the r d cost function changes exogenously this induces a reconsideration of firms quality decisions both firms have the same r d costs for improving the maximum quality quality changes within the existing quality range are assumed to incur only fixed adjustment costs it is shown that the firm which initially is in the low quality position always has a higher incentive to improve industry s quality than its rival if adjustments costs are sufficiently high persistence of dominance may occur for a low degree of initial differentiation low adjustment costs and r d cost functions with a high slope

the rationale of the mean standard deviation analysis skewness preference and the demand for money publisher summary this chapter discusses the rationale of the mean standard deviation analysis skewness preference and the demand for money in january 1969 issue of the review of economic studies karl borch and martin feldstein separately criticized the widely used mean variance analysis of portfolio selection borch contended that any system of upward sloping mean standard deviation e s indifference curves can be shown to be inconsistent with the basic axiom of choice under uncertainty he pointed out that one can always pick any two points on an upward sloping indifference curve to represent two bernoulli distributions with probability 1 p of gaining the same amount x in both the cases and probability p of gaining y1 in the case of one distribution and y2 in the case of the second distribution with y2 y1 if the second distribution represents the point to the northeast of the other point then by the dominance axiom the second distribution must be preferred to the first which contradicts the basic meaning of indifference curves feldstein by using a log utility function and a lognormal distribution for investment outcome showed that e s indifference curves for a risk averter need not be convex downwards though upward sloping they would change from convex to concave once the standard deviation of the outcome exceeds the mean multiplied by on the face of it this seems to suggest that risk aversion might decrease as risk is increased beyond a certain extent

lessons from the kibbutz on the equality incentives trade off the first kibbutz was established southwest of the sea of galilee in 1910 but the vast majority of kibbutzim were established in the 1930s and 1940s shortly before the creation of the state of israel in 1948 founders aimed to create a new human being who cared about the group more than about himself a homo sociologicus who would challenge the selfish homo economicus this idealistic view can explain many of the key features of kibbutzim equal sharing in the distribution of income no private property a noncash economy communal dining halls where members ate their meals together high provision of local public goods for use by kibbutz members separate communal residences for children outside their parents homes which were supposed to free women from their traditional role in society and allow them to be treated equally with men collective education to instill socialist and zionist values communal production whereby kibbutz members worked inside their kibbutzim in agriculture or in one of the kibbutz plants and no use of hired labor from outside kibbutzim because hiring labor was considered exploitation under the reigning socialist ideology to an economist steeped in thinking about incentives that self interested individuals face there are three reasons why an equal sharing arrangement of this sort seems unlikely to last first high ability members have an incentive to exit equal sharing arrangements to earn a wage premium so called brain drain second low ability individuals have an incentive to enter equal sharing arrangements so that they can be subsidized by more able individuals so called adverse selection third in context of equal sharing shirking and free riding are likely to be prevalent however kibbutzim have survived successfully for the past century and currently consist of 120 000 members living in 268 kibbutzim in a number of ways the kibbutzim offer an exceptional environment to examine the potential trade off between equality and incentives

disruption costs learning by doing and technology adoption abstract we study technology adoption in a dynamic model of price competition adoption involves disruption costs and learning by doing because of disruption costs the adopting firm begins in a market disadvantage which may persist if its rival captures the customers that the adopting firm needs to learn the technology the prospect of future rents by the rival results in i a failure to adopt socially efficient technologies ii an equilibrium preference for technologies that are learned faster but have lower social value and iii more technologies being adopted if more firms enter the market

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

does sticky information affect the locus of innovation evidence from the japanese convenience store industry abstract scholars have long discussed the locus of innovation and its determinants there is empirical evidence that innovations can be developed by those holding any of a number of functional relationships to them such as manufacturers users or materials suppliers past studies have considered two factors important in predicting the functional locus of innovation one is expected profit of a player involved in the innovation and the other is stickiness of innovation related information although some studies have shown empirically the link between an innovator s expected profits and the locus of innovation no research has yet been conducted to test the hypothesized relationship between stickiness of innovation related information and the locus of innovation in the study reported upon here i explore relationships between these two variables via a study of 24 innovations for the japanese convenience store industry my study shows empirically that stickiness of innovation related information does have the hypothesized relationship to the functional locus of innovation i discuss implications of these findings and some directions for future research

conformity replication of design and business niches conformity affects the choice and design of organizations conformists replicate successful strategies play along with the rules of the game and display inert behavior conformity leads to the dominance of one mode the combined impact of conformity and inertia and the existence of employment costs switching costs and network externalities may exclude equally or superior efficient modes from replacing the incumbent mode the first mover unable to overcome these barriers to entry efficient maverick organizations are forced into niches this is illustrated with respect to niches formed by labor managed firms and ethnic businesses

a model of the evolution of duopoly does the asymmetry between firms tend to increase or decrease this paper is an attempt to identify some of the factors that affect the evolution of market structure in a model of dynamic competition between two firms the stochastic evolution of the state of competition depends on the respective effort rates of the firms the question is whether the current leader works harder than the laggard does the gap between firms tend to increase or decrease we show that several effects are at work the state tends to evolve in the direction where joint payoffs are greater since joint payoffs are related to joint product market profits less joint effort costs there are two classes of effect the joint profit effect and various joint cost effects the latter result in part from the pattern of profits and in part from endpoint effects that give relief from efforts asymptotic expansions illuminate these influences moreover we show by numerical simulation that there is another kind of joint cost effect the pattern of joint effort costs can influence the pattern of evolution of market structure and the evolution of the pattern of market structure can influence the pattern of efforts in a mutually self reinforcing manner in particular there may be equilibria in which this last effect means that the laggard works harder than the leader even though all the other effects work in favour of the leader

competition or predation consumer coordination strategic pricing and price floors in network markets although network effects can make predation more likely to succeed we find that the leading anti predation rules may lower or raise efficiency and consumer welfare in network markets we find that a the extensive debates about the correct measure of cost on which to base price floors are unlikely to be productive b the ordover willig rule that is widely thought to be correct in theory but difficult to apply in practice is in fact incorrect in theory and c efficient price floors would have to depend on consumer expectations and coordination processes that are unlikely to be observable in practice

when do auctions ensure the welfare maximizing allocation of scarce inputs we determine when an unfettered auction will ensure the welfare maximizing allocation of a scarce input that enhances product quality and may reduce production costs a supplier values the input for this use value and for its foreclosure value because once the input is acquired it is unavailable to rivals an unfettered auction often ensures the welfare maximizing allocation of an input increment however it can fail to do so when the input would increase relatively rapidly the competitive position of a rival with a moderate competitive disadvantage bidder handicapping that ensures auctions generate welfare maximizing input allocations differ from standard handicapping policies

why capital suppliers usually hire workers what we know and what we need to know abstract a fundamental question for economics is why large firms in market economies usually assign control rights to capital suppliers rather than labor suppliers a diverse collection of answers can be found in the literature but unfortunately little theoretical consensus has emerged and few attempts have been made to resolve this issue through systematic empirical investigation this paper reviews a number of different hypotheses clustering around work incentives the financing of firms and collective choice we identify the strengths and weaknesses of each approach filling in theoretical gaps where necessary and conclude with some suggestions for empirical research

the response to incentives and contractual efficiency evidence from a field experiment abstract we use data from a field experiment to estimate worker reaction to incentives and the optimality of piece rate contracts our estimate of the elasticity of output with respect to piece rates is 0 39 regression methods cannot predict performance under hypothetical contracts therefore we apply structural econometric methods without imposing profit maximization to evaluate observed contract optimality using profit as a metric we estimate the distance between observed and profit maximizing contracts to be negligible this suggests that observed contracts closely approximate optimal contracts under asymmetric information about worker ability under complete information the firm could increase expected profits by 14 percent keeping workers indifferent to the observed piece rate contract profits could increase between 44 and 49 percent if the firm exploited information about ability to reduce worker utility to the outside alternative

entry and competitive dynamics in the mobile telecommunications market abstract we propose an extension of the gans stern gans j s stern s 2003 the product market and the market for ideas commercialization strategies for technology entrepreneurs research policy 32 2 333 350 framework that includes entry by existing firms an incumbent firm possessing complementary assets and strong appropriability is in a formidable position teece d j 1986 profiting from technological innovation implications for integration collaboration licensing and public policy research policy 15 6 285 305 however a de alio entrant can leverage complementary assets to enter along a new technological trajectory and then develop appropriability we illustrate how several mobile telecommunications firms ericsson nokia and samsung pursued this strategy to catch up with the market leader motorola we also identify several shortcomings in motorola s approach it was too inward looking in developing technologies but ironically not inward looking enough in exploiting its most valuable patents

why monopolists prefer to make their goods less durable this paper considers goods that depreciate in terms of quality over time and permits consumers to differ in their attitude concerning the usability of a durable good after it has depreciated given this it is shown that even if a monopoly can costlessly increase the durability of its product it may choose not to do so this does not happen in competition copyright 1988 by the london school of economics and political science

dynamic optimal control of process product innovation with learning by doing abstract in this paper we present a dynamic optimal control model of process product innovation with learning by doing and extend the model of chenavaz 2012 to an even more general model in which the firm s cost functions of product and process innovation depend on both the innovation investments and the knowledge accumulations of product and process innovation furthermore in our paper the product price the investments of product and process innovation are decision variables the product quality production cost the change rates of knowledge accumulations of product and process innovation are state variables the main objective of this paper is to analyze the relationships between these variables and investigate the model s optimal conditions and characteristics further we solve the model with some numerical examples and sensitivity analysis is conducted to study the effect of changing the parameters and coefficients on the objective function value

social class and income inequality in the united states ownership authority and personal income distribution from 1980 to 2010 this study outlines a theory of social class based on workplace ownership and authority relations and it investigates the link between social class and growth in personal income inequality since the 1980s inequality trends are governed by changes in between class income differences changes in the relative size of different classes and changes in within class income dispersion data from the general social survey are used to investigate each of these changes in turn and to evaluate their impact on growth in inequality at the population level results indicate that between class income differences grew by about 60 since the 1980s and that the relative size of different classes remained fairly stable a formal decomposition analysis indicates that changes in the relative size of different social classes had a small dampening effect and that growth in between class income differences had a large inflationary effect on trends in personal income inequality

when do stronger patents increase continual innovation under continual innovation greater patent strength expands innovating firms profit against imitation but also shifts profit from current to past innovators we show how the impact of patents on innovation as determined by these two opposing effects varies with industry characteristics when the discount factor is sufficiently high the negative profit division effect is negligible and innovation monotonically increases in patent strength otherwise innovation has an inverted u relationship with patent strength and stronger patents are more likely to increase innovation when the discount factor or the fixed innovation cost is higher we also show how the impact of patents on innovation may change with firms innovation capability and with the intensity of competition from imitators

choosing the competition and patent licensing this article examines licensing as a means of choosing the competitors which a patentee monopolist will face in the period after the patent expires the queue of entrants consists of two firms which differ in their relative strengths as competitors for example by size or level of marginal cost by structuring the industry to be composed of weak competitors the incumbent is able to prolong its dominant position in the industry after the patent expires examples are presented in which the evidence suggests that choosing the competition was an important motivation of the licensor s behavior

is it a car or a truck managerial beliefs the choice of product architecture and the emergence of the minivan market segment new markets segments are a common setting for studies in technology strategy these studies generally assume that new segments already exist or have formed following the introduction of a product innovation by an entering firm thus theory on the role of established firms in the emergence of new market segments is underdeveloped this study informs current research by explaining the product innovation decisions of established firms during the emergence of a new market segment the results of a case study on the development and commercialization of the minivan at chrysler ford and general motors between 1970 and 1985 indicate that existing theories based on managerial cognition firm capabilities economic incentives and organizational structure are insufficient to explain the decisions this article develops theory based on the interrelationship of these four mechanisms

socially responsible investment a multicriteria approach to portfolio selection combining ethical and financial objectives abstract in a context of socially responsible investment sri this paper deals with portfolio selection for investors interested in ethical policies in the opportunity set there are ethical assets and other assets which are not characterized as ethical two goals are considered the traditional financial goal in the classical utility theory under uncertainty and an ethical goal in the same utility framework a new financial ethical bi criteria model is proposed with absolute risk aversion coefficients and targets depending on the investor s ethical profile this approach is relevant as an increasing number of mutual funds are becoming interested in sri strategies from the proposed model an actual case on green investment is developed concerning this case without generalizing to other contexts an analysis of the numerical results shows that efficient portfolios obtained by the traditional e v model outperform the strong green portfolios in terms of expected return and risk but this does not significantly occur with weak green investment

innovation and the persistence of monopoly abstract the auction framework enables us to highlight a crucial feature of many r d races the losing firm can recoup part but not the entirety of its r d investments this feature is shown to account for the marked differences in results obtained by gilbert and newbery and by reinganum when the firm investing the largest amount wins with certainty we establish the existence of a unique equilibrium neither firm employs a pure strategy and the incumbent wins more often than the challenger

an economic theory of planned obsolescence planned obsolescence is the production of goods with uneconomically short useful lives so that customers will have to make repeat purchases however rational customers will pay for only the present value of the future services of a product therefore profit maximization seemingly implies producing any given flow of services as cheaply as possible with production involving efficient useful lives this paper shows why this analysis is incomplete and therefore incorrect monopolists are shown to desire uneconomically short useful lives for their goods oligopolists have the monopolist s incentive for short lives as well as a second incentive that may either increase or decrease their chosen durability however oligopolists can generally gain by colluding to reduce durability and increase rentals relative to sales some evidence is presented that appears to be generally consistent with the predictions of the theory

stochastic goal programming a mean variance approach abstract we propose a stochastic goal programming gp model leading to a structure of mean variance minimisation the solution to the stochastic problem is obtained from a linkage between the standard expected utility theory and a strictly linear weighted gp model under uncertainty the approach essentially consists in specifying the expected utility equation corresponding to every goal arrow s absolute risk aversion coefficients play their role in the calculation process once the model is defined and justified an illustrative example is developed

worker participation and productivity in labor managed and participatory capitalist firms a meta analysis using meta analytic techniques the author synthesizes the results of 43 published studies to investigate the effects on productivity of various forms of worker participation worker participation in decision making mandated codetermination profit sharing worker ownership employee stock ownership or individual worker ownership of the firm s assets and collective ownership of assets workers collective ownership of reserves over which they have no individual claim he finds that codetermination laws are negatively associated with productivity but profit sharing worker ownership and worker participation in decision making are all positively associated with productivity all the observed correlations are stronger among labor managed firms firms owned and controlled by workers than among participatory capitalist firms firms adopting one or more participation schemes involving employees such as esops or quality circles

the behavior of worker cooperatives the plywood companies of the pacific northwest using data collected by the authors on the largest and most durable of worker owned firms in u s manufacturing this paper is addressed to two questions first are the responses of cooperatives to changes in their economic environment different from those of conventional firms it appears that cooperatives are more inclined to adjust pay than employment second how profitable has membership in the cooperatives been using information on share prices the authors find membership to have been extremely profitable and in this sense the prices of co ops shares have been underpriced the riskiness of cooperative memberships is discussed copyright 1992 by american economic association

productivity capital and labor in labor managed and conventional firms an investigation on french data using two new data sets from france the authors present the first study of the comparative productivity of labor managed and conventional firms involving large representative samples of firms in a

unbundling the structure of inertia resource versus routine rigidity i work to unbundle the structure of inertia into two distinct categories resource rigidity failure to change resource investment patterns and routine rigidity failure to change organizational p

dynamic inducements in r d investment market signals and network locations this research shows that alliance networks shape how firms respond to uncertainty reducing information generated outside a network product awards signal the potential commercial success of the awa

strategic innovation and technology adoption in an evolving industry abstract we introduce a racing model with multiple product generations product innovation spin outs and licensing industry conditions and innovation characteristics affect who wins the race and who markets the resulting product small firms market their innovations when they pioneer a new generation or improve quality in a young generation and license their innovations in mature generations if old generation leaders ever market improvements in young generation goods they do so early on leadership in mature generations persists tests on the rigid disk drive industry 1977 1997 provide empirical support the results have implications for antitrust policies and policies governing employee non compete agreements

whose preferences are revealed in hours of work it has become orthodox in economics research to interpret the association between hourly earnings and working hours as the expression of the preferences of workers this convention originated in h gregg lewis explanation for the decline in hours of work since the nineteenth century his explanation rested on an explicit resolution of the identification problem inherent in any quantity hours price wage relation for over 40 years researchers have neglected this identification problem with the result that the findings in the purported labor supply literature are of questionable value jel j22 j23 c13

regulation innovation and the introduction of new telecommunications services i examine the effects of fcc regulation on the innovation and introduction of advanced telecommunications services in the united states an interim of lighter regulation provides an experiment to test the regulatory regime s impact the econometric model comprises an arrival process for service innovation followed by a duration process for regulatory delay the number of services the firms created during the interim is 60 99 higher than the model predicts they would have created if the stricter regulation had still been in place overall firms would have introduced 62 more services to consumers during the study period if the regulation had not been in place

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

sleeping quotas pre emptive quota bidding and monopoly power abstract we rationalize the puzzling existence of binding quotas that are not fully utilized our model has its roots in bhagwati 1965 in r baldwin et al eds trade growth and the balance of payments essays in honor of g haberler mit press new york on tariffs quotas equivalence and is related to the io literature on preemption we study the conditions that lead a monopolist facing a quota restricted market to buy the quota licenses itself and the conditions under which they may remain unused the divisibility of the quota is crucial for the monopolist to pre emptively buy the quota furthermore we study the implications of use it orlose it clauses commonly imposed on auctioned quotas

a new perspective on planned obsolescence automobile manufacturers have long had a policy of introducing annual style changes into their new model cars textbook publishers have a policy of periodically bringing out revised editions of their popular books recently ibm changed the operating system used in its personal computers causing a reduction in the compatibility between its old and new machines if one were to ask the typical man in the street to explain what is happening in these markets he would not hesitate before giving the following answer in economists terminology he would say that for the above firms the incentive to introduce new products that make old units obsolete is too high i e the firms have an incentive to practice planned obsolescence of course just as is true for the man in the street economists have also long observed and commented on the speed with which new products are introduced for example galbraith 1958 suggests that the annual model changes of automobile manufacturers are socially wasteful while fisher griliches and kaysen 1962 provide empirical estimates of the costs of these changes there have also been numerous theoretical attempts to model the idea of planned obsolescence or the related idea of killing off the market for secondhand goods but most of these models have in fact considered the choice a monopolist faces concerning how much durability to build initially into his product rather than the monopolist s incentive to introduce new versions of his product over time 1 in this paper i consider planned obsolescence from the standpoint of a firm that can change the nature of what it sells and show that the man in the street is in fact correct in many settings the incentive for a durable goods monopolist to introduce new products that make old units obsolete will be above that which is socially optimal

persistent parochialism trust and exclusion in ethnic networks decentralized groups such as close knit residential neighborhoods and ethnically linked businesses often achieve high levels of cooperation while engaging in exclusionary practices that we call parochialism we investigate the contribution of within group cultural affinity to the ability of parochial groups to cooperate in social dilemmas we analyze parochial networks in which the losses incurred by not trading with outsiders are offset by an enhanced ability to enforce informal contracts by fostering trust among insiders we show that there is a range of degrees of parochialism for which parochial networks can coexist with an anonymous market offering unrestricted trading opportunities

safety first portfolio choice based on financial and sustainability returns the aim of this paper is to expand the methodological spectrum of socially responsible investing by introducing stochastic sustainability returns into safety first models for portfolio choice we provide a foundation of the notion of sustainability in portfolio theory and establish a general model for generalized safety first portfolio management with probabilistic constraints and three specifications of it moreover we prove theorems about conditions for unique optimal solutions and for the constraints of one model being more restrictive than those of another in an empirical part we calculate the costs of investing according to our approach in terms of less financial return

multiple criteria decision aiding for finance an updated bibliographic survey finance is a popular field for applied and methodological research involving multiple criteria decision aiding mcda techniques in this study we present an up to date bibliographic survey of the contributions of mcda in financial decision making focusing on the developments during the past decade the survey covers all main areas of financial modeling as well as the different methodological approaches in mcda and its connections with other analytical fields on the basis of the survey results we discuss the contributions of mcda in different areas of financial decision making and identify established and emerging research topics as well as future opportunities and challenges

planned obsolescence and the r d decision by investing in rd i e the r d choice that maximizes current profitability does not maximize overall profitability the result is that if output is sold rather than rented then in its r d decision the monopolist has an incentive to practice a type of planned obsolescence that lowers its own profitability

network externality compatibility choice and planned obsolescence this paper attempts to provide a formal theory of planned obsolescence based on incompatible technologies in the presence of network externalities the author explores how a monopolist s ability to make the new product incompatible with the old version of a product constrains the optimal dynamic behavior of the monopolist the social optimum and the market equilibrium are compared finally the possibility of quality distortion is considered as a commitment mechanism to the future compatibility choice copyright 1994 by blackwell publishing ltd

invention and innovation under alternative market structures the case of natural resources this paper examines the interactions between market structure and resource allocation over time when there is endogenous technical progress the structures considered are a planned economy pure monopoly and competition with patent rights in an efficient allocation the date of invention coincides with the date of innovation the date at which technology is used this is also true with a pure monopoly but monopoly retards technical progress relative to the efficient level competition for patents rights to a new technology results in excessively rapid technical progress if the resource endowment of the economy is sufficiently large also competition may lead to sleeping patents where invention strictly precedes the date of innovation

price cap regulation and technical change abstract existing analyses of the implications of price cap regulation for the development of cost reducing technologies assume that all r d is done by the regulated industry this is unrealistic we present a simple model of non cooperative r d by a regulated firm and a single external developer under a price cap regime of the sort characterised by cabral and riordan in equilibrium the external developer exerts less r d than is socially optimal the regulated firm may exert more or less a tightening of the regulatory regime impacts the r d incentives of both players though in different ways the optimal regulatory adjustment parameter may be bigger or smaller than that suggested by existing studies despite the scope for duplication of results research by an outsider necessarily enhances welfare

markowitz revisited social portfolio engineering abstract in recent years socially responsible investing has become a popular subject with both private and institutional investors at the same time a number of scientific papers have been published on socially responsible investments sris covering a broad range of topics from what actually defines sris to the financial performance of sri funds in contrast to non sri funds in this paper we revisit markowitz portfolio selection theory and propose a modification allowing to incorporate not only asset specific return and risk but also a social responsibility measure into the investment decision making process applied in an a posteriori fashion the model results in a three dimensional capital allocation plane illustrating the complete set of feasible optimal portfolios it enables investors to custom tailor their asset allocations and incorporate all personal preferences regarding return risk and social responsibility in an empirical analysis with a data set of over 6000 international companies including the complete universe of social responsibility rated stocks we find that investors opting to maximize the social impact of their investments do indeed face a statistically significant decrease in expected returns however the social responsibility risk optimal portfolio yields a statistically significant higher social responsibility rating than the return risk optimal portfolio

strategic behaviour of incumbent firms in the uk abstract the main purpose of this paper is to examine the incidence of strategic behaviour in the uk by means of a questionnaire study performed across three broad manufacturing industries food electrical engineering and chemicals of the strategies which have received substantial theoretical attention r d and advertising appear widely used patenting pricing and excess capacity much less so vertical instruments such as purchasing policy also stand out as important but possibly only a minority of firms in our sample actively pursue strategic instruments

the limits of equality insights from the israeli kibbutz what limits the capacity of society to redistribute what determines the structure of compensation in organizations striving for income equality this paper addresses these questions by investigating the economic and sociological forces underlying the persistence of the israeli kibbutzim communities based on the principle of income equality to do this i exploit newly assembled data on kibbutzim and a financial crisis in the late 1980s that affected them differentially the main findings are that 1 productive individuals are the most likely to exit and a kibbutz s wealth serves as a lock in device that increases the value of staying 2 higher wealth reduces exit and supports a high degree of income equality and 3 ideology facilitates income equality using a simple model i show that these findings are consistent with a view of the kibbutz as providing optimal insurance when members have the option of leaving more generally these findings contribute to an understanding of how mobility limits redistribution and to an understanding of the determinants of the sharing rule in other types of organizations such as professional partnerships cooperatives and labor managed firms

patent licensing entry and the incentive to innovate abstract we analyze the economic impact of process innovations where the innovator auctions off licenses to both potential entrants and incumbent firms it is shown that opening the market to entrant licensees the incentive to innovate is maximized if the industry is initially a monopoly as was envisioned by schumpeter 1942 this is in contrast to previous literature on licensing of process innovations when entry is excluded the incentive to innovate is maximized in an oligopoly market if licenses are sold by auction sen and tauman 2007 or in a competitive market if licenses are sold by royalty arrow 1962 the post innovation market structure the diffusion of the innovation and the social welfare are analyzed and compared with the case where entry is excluded

a theory of economic obsolescence a new generation of durable goods makes an old generation economically even if not physically obsolete economic obsolescence due to technological innovation requires the durable goods monopolist to implement price discrimination in two dimensions both between consumers with different valuations and between consumers with different purchase histories equilibrium in the game between the durable goods monopolist and consumers depends on the extent of economic obsolescence and the relative sizes of the consumer groups underinvestment in innovation may take place this contrasts with the standard literature on planned obsolescence where the durable goods monopolist overinvests in durability reducing technology

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

differences in the rates of return to r d for european and us young leading r d firms this paper examines the sources of europe s lagging business r d performance relative to the us particularly the role played by missing young leading innovators in high technology intensive sectors in europe it investigates through econometric analysis differences in the rates of return to r d of european and us large r d firms it finds that while in the us young firms succeed in realizing significantly higher rates of return to r d as compared to their older counterparts including in high tech sectors european firms fail to generate significant rates of return even if they are yollies and even if they are in high tech sectors these findings can at least partly explain why europe has less r d intensive young leading innovators in high technology intensive sectors

comparison of alternative utility functions in portfolio selection problems this paper examines the effect of alternative utility functions and parameter values on the optimal composition of a risky investment portfolio normally distributed assets are the setting for the theoretical and empirical analyses the results agree well with the available theory and imply utility functions and parameter values that are appropriate for investors with particular risk bearing attitudes the results give strong empirical support to the proposition that utility functions having different functional forms and parameter values but similar absolute risk aversion indices have similar optimal portfolios these results suggest that over horizons up to one year one can safely substitute convenient surrogate utility functions for other utility functions for reasons of tractability or otherwise the results also provide guidance regarding the significance of the magnitude and change of particular numerical values of the risk aversion index moreover theoretical exact results are obtained using rubinstein s measure of global risk aversion

employee buyout in a bargaining game with asymmetric information why are some firms purchased by their employees this paper explores this question theoretically suggesting that employees may attempt to overcome their informational handicap regarding firm profitability by making simultaneous offers on wages and a purchase price for the firm owners of relatively unprofitable firms will tend to sell out for low prices instead of paying high wages whereas owners of profitable firms will prefer to pay high wages over receiving low firm prices the buyout serves as a screening mechanism the probability of an employee buyout decreases with the employees outside options and increases with owners outside options copyright 1996 by american economic association

synthetic indicators of mutual funds environmental responsibility an application of the reference point method abstract socially responsible investing sri is broadly defined as an investment process that integrates not only financial but also social environmental and ethical see considerations into investment decision making sri has grown rapidly around the world in the last decades in the last years given the causes of the 2008 financial crisis ethical social environmental and governance concerns have become even more relevant investment decision criteria however while a diverse set of models have been developed to support investment decision making based on financial criteria models including also social responsibility criteria are rather scarce the aim of this paper in which we focus on the environmental dimension is to assist individual investors in their investment decisions providing them with a synthetic indicator of mutual funds environmental responsibility which is by nature a multicriteria concept and therefore multicriteria techniques are to be used to measure it the proposed approach is based on the double reservation aspiration reference point method this scheme is applied to each fund of a randomly selected set of u s equity mutual funds in order to determine on the basis of a given set of indicators a pair of synthetic indicators that measure the weak and the strong environmental responsibility degree of each mutual fund relying on the particular preferences of the investor

production experiences and market structure in r d competition abstract in the rd and ii the likelihood of persistent leadership increases with the value of being the winner and the value of being a loser but decreases with expected waiting time of r d innovation and the flow of monopoly profits however destructive innovations may still occur even when production experiences are allowed to play an important role in the r d competition

dea frontier improvement and portfolio rebalancing an application of china mutual funds on considering sustainability information disclosure abstract data envelopment analysis dea has been a widely used methodology for evaluating the relative performance of portfolios extensive work has appeared for realizing the role of dea in the aspect of assessing portfolio performance and deriving the relative rankings however the role of providing realizable benchmarks is not fully explored in the existing literatures most importantly the dea based portfolio performance evaluation methods developed in the existing literatures can hardly provide support for fund managers in pursuing sustainability performance in this paper we first propose a dea frontier improvement approach under the mean variance framework this approach provides investor with a rebalancing strategy as well as an improved dea frontier which approximates the portfolio efficient frontier better than the traditional dea model does then this approach is extended to a general return risk framework our in sample simulation results verify the effectiveness of the proposed approach for a wide range of applications in addition the out of sample tests show that the rebalancing investment strategies can achieve higher sharpe ratios and sortino ratios than those of the original ones finally we apply the proposed approach to evaluate mutual fund performance in china with the consideration of sustainability information disclosure we construct a disclosure index to indicate the extent of sustainable information disclosure of each mutual fund the results show that the proposed approach provides not only investment recommendations but also references for constructing sustainable green funds

equality under threat by the talented evidence from worker managed firms does workplace democracy engender greater pay equality are high ability individuals more likely to quit egalitarian organisational regimes the article revisits this long standing issue by analysing the interplay between compensation structure and quit behaviour in the distinct yet underexplored institutional setting of worker managed firms the analysis is based on novel administrative data sources which allow constructing a simple ordinal measure of the workers ability type the article s key findings are that worker managed firms have a more compressed compensation structure than conventional firms and high ability members are more likely than other members to exit

second mover advantages in the strategic adoption of new technology under uncertainty abstract this paper introduces technological uncertainty into a timing game of new technology adoption it is shown that the timing neither necessarily involves first mover advantages in precommitment equilibria reinganum review of economic studies xlviii 1981 395 405 nor rent equalization due to the threat of preemption fudenberg and tirole review of economic studies lii 1985 383 401 rather there may be second mover advantages because of informational spillovers furthermore the model predicts that the equilibrium payoffs will typically be discontinuous and non monotonic in the probability that the new technology is profitable a welfare analysis reveals several market failures and suggests that policy intervention should adequately depend on the nature of uncertainty and the rate of technological progress

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

property rights and wireless license values abstract while extending the scope of spectrum property rights promotes efficiency such reforms are often deterred by equity concerns theoretically however the windfalls may be negative relaxing license restrictions may increase profits by allowing enhanced productivity yet liberalization across a class of licensees can reduce the expected profits by increasing competitiveness this article examines license value changes for regimes that decisively shift toward private property rights in radio spectrum by analyzing the average prices paid in international cellular phone license auctions during 1995 2001 this unique data set encompasses 1 365 licenses assigned by competitive bidding in 38 auctions held in 24 countries licenses awarded by regimes with more expansive spectrum property rights generated winning bids that were 61 percent lower adjusting for other factors this evidence reverses the equity argument against liberalization over the policy margin studied and is consistent with coase s view

monopoly incentives for cost reducing r d abstract it is shown in this paper that there exist cost innovations for which a monopolist has a higher incentive to invest than a social planner this unveils the limits of the claim based on arrow 1959 that a monopoly always has a lower incentive to innovate than a social planner and therefore than is socially desirable in contrast to previous results the comparison of incentives may also depend upon the demand function finally for a restricted domain of analysis a rule for comparing the monopoly and the social planner incentives is derived

and the winner is acquired entrepreneurship as a contest yielding radical innovations new entrants to a market tend to be superior to incumbents in originating radical innovations we provide a new explanation for this phenomenon based on markets for technology it applies in industries where successful entrepreneurial firms or their technologies are acquired by incumbents that then commercialize the innovation to this end we analyze an innovation game between one incumbent and a large number of entrants in the first stage firms compete to develop innovations of high quality they do so by choosing at equal cost the success probability of their rd the bigger the number of entrants the more radical the most radical project generally entrants tend to choose more radical r d approaches and generate the highest value innovation in case of success we illustrate our theoretical findings by a qualitative empirical study of the electronic design automation industry and derive implications for research and management

the empirical performance of orthodox models of the firm conventional firms and worker cooperatives though it is routinely posited that organizations with different property rights will not exhibit the same responses to changes in their economic environment compelling evidence of such behavior is difficult to find we collected observations on two types of firms conventional proprietorships and worker owned cooperatives operating in the same industry in the same location and at the same period of time we compare the firms reactions to changes in their input and output prices and ask whether their reactions are consistent with orthodox models of profit and dividend maximization

tri criterion inverse portfolio optimization with application to socially responsible mutual funds we present a framework for inverse optimization in a markowitz portfolio model that is extended to include a third criterion the third criterion causes the traditional nondominated frontier to become a surface until recently it had not been possible to compute such a surface but by using a new method that is able to generate the nondominated surfaces of tri criterion portfolio selection problems we are able to compute via inverse optimization the implied risk tolerances of given funds that pursue an additional objective beyond risk and return in applying this capability to a broad sample of conventional and socially responsible sr mutual funds we find that after the screening process there appears to be no significant di erence between how assets are allocated in socially responsible and conventional mutual funds which is likely to be di erent from what most sr investors would expect

quality choice and the coase problem abstract this paper studies the quality choice made by a durable good monopolist to alleviate the coase problem the durable good monopolist not only over supplies the quality but decreases the price per unit of quality so that the high demand consumers do not postpone their purchase

analyzing literature based innovation output indicators the italian experience abstract this paper presents the results of a study on the product innovations introduced in the italian market in 1989 and reported in a selected number of trade journals the analysis of data collected by means of this literature based counting procedure confirms that r d oriented industries and large firms do not in italy have a marked competitive advantage in innovation the country appears to be instead characterized by a significant presence of consumer goods industries and small firms in innovation our data indicate a statistically significant association between trade competitiveness and strength in product innovation and show the comparatively higher capacity for product innovation of some of the industries in which italy achieves a positive performance in international trade moreover the presence of spillovers at the regional level from both private and public r d expenditures proves to be positively correlated with the development of product innovations finally small firms with fewer than 50 employees appear to be more innovative than is usually believed to be the case

sequential auctions of endogenously valued objects two completely informed but possibly asymmetric bidders buy or sell identical claims in sequential auctions they subsequently receive monetary prizes that depend upon the final allocation of claims iterated elimination of weakly dominated strategies leaves a unique nash equilibrium for any prize schedule prices weakly decline as the auctions progress and points of strict decline have a simple characterization for one class of prize schedules which arises naturally if duopolists bid for a scarce input the equilibrium is completely characterized many initial allocations generate the same final unequal division of claims which may be interpreted as the natural market structure journal of economic literature classification numbers d43 d44 l11

the neo luddite s lament excessive upgrades in the software industry we examine two reasons why a monopoly supplier of software may introduce more upgrades than is socially optimal when the upgrade is backward but not forward compatible so users who upgrade reduce others network benefits one explanation involves a commitment problem profits and social welfare may suffer because ex post the monopolist will want to sell the upgraded product to new consumers the second involves consumer heterogeneity here oversupply arises from the difference between the externality that upgrades impose on the marginal and average consumer and from the effect of upgrades on sales of the base good

licensees as entry barriers in a more general setting than has been considered hitherto this paper examines how the incumbent in a market threatened by entry can exploit its first mover advantage by licensing its technology not to a potential entrant but to firms that would have remained outside the industry it is shown among other things that the incumbent may subsidize the variable costs of its licensees in order to deter entry even when entry is not deterred it is demonstrated that the incumbent might opt to invite outsiders as licensees

shirking sharing risk and shelving the role of university license contracts abstract in this paper we develop a theoretical model of university licensing to explain why university license contracts often include payment types that differ from the fixed fees and royalties typically examined by economists our findings suggest that milestone payments and annual payments are common because moral hazard risk sharing and adverse selection all play a role when embryonic inventions are licensed milestones address inventor moral hazard without the inefficiency inherent in royalties the potential for a licensee to shelve inventions is an adverse selection problem which can be addressed by annual fees if shelving is unintentional but may require an upfront fee if the firm licenses an invention with the intention to shelve it whether the licensing contract prevents shelving depends in part on the university credibly threatening to take the license back from a shelving firm this supports the rationale for bayh dole march in rights but also shows the need for the exercise of these rights can be obviated by contracts

intellectual property rights and the mode of technology transfer abstract transferring technology in an environment where patent protection is uncertain can pose significant risks to an innovating firm s ability to appropriate rents this paper incorporates asymmetric information in a screening game where the innovating firm has the choices of licensing a new product at arm s length to a foreign firm exporting it or licensing it to a subsidiary subsidiary production avoids the risk of imitation but involves higher costs for the innovating firm the gains to the southern country from the lack of intellectual property right protection may be offset by strategic behavior by northern firms who opt for technology transfer via subsidiary or monopoly production

tri criterion modeling for constructing more sustainable mutual funds one of the most important factors shaping world outcomes is where investment dollars are placed in this regard there is the rapidly growing area called sustainable investing where environmental social and corporate governance esg measures are taken into account with people interested in this type of investing rarely able to gain exposure to the area other than through a mutual fund we study a cross section of u s mutual funds to assess the extent to which esg measures are embedded in their portfolios our methodology makes heavy use of points on the nondominated surfaces of many tri criterion portfolio selection problems in which sustainability is modeled after risk and return as a third criterion with the mutual funds acting as a filter the question is how effective is the sustainable mutual fund industry in carrying out its charge our findings are that the industry has substantial leeway to increase the sustainability quotients of its portfolios at even no cost to risk and return thus implying that the funds are unnecessarily falling short on the reasons why investors are investing in these funds in the first place