collusion collective action and protection theory and evidence this paper provides a novel explanation forthe formation of protectionist lobby groupsin imperfectly competitive sectors thelevel of collusion is shown to be a crucialdeterminant of the ability of firms tosustain lobbying we show that greatercollusion reduces firm contributionsto tariff lobbying when the governmentvalues welfare sufficiently and thecross price elasticity between the domesticand foreign goods is sufficiently high the empirical evidence from the u s supports the theory greater collusionreduces the level of pac contributions

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

approximate efficiency of cournot equilibria in large markets this paper establishes necessary and sufficient conditions for the approximate efficiency of cournot equilibria in large markets the analysis is carried out in the partial equilibrium framework of a market for a homogeneous commodity

uniform compliance costs for mineral commodities who gains and who loses changes in energy and nonfuelmineral production consumption and net export revenue that result from environmental protection are estimated by income class and geographic region unlike previous assessments of unilateral adoption of standards i assume that all producers incur equal cleanup costs adjustment is therefore accomplished through changes in prices and quantities rather than altered trade patterns the estimated magnitude of worldwide changes is not large moreover many poor countries are forecast to benefit since their terms of trade improve however the problem of obtaining foreign exchange for investment remains a financing scheme that divorces efficiency from equity is suggested

the competitive effects of partial equity interests and joint ventures abstract antitrust authorities should consider the trade off between enhanced efficiency and reduced competition in cases of partial ownership this paper examines the competitive effects side of that trade off in the context of a modified cournot model we show that in markets where entry is difficult partial ownership arrangements could result in less output and higher prices than otherwise even if the ownership shares are relatively small these effects arise solely because these arrangements link the fortunes of actual or potential competitors producing a positive correlation among their profits in this sense the effects are purely structural they arise not because of increased opportunities for collusion or changes in the concentration of control but because the linking of profits reduces each firm s incentive to compete since these links internalize free rider problems associated with policing collusion and investing in entry deterrence however they could also enhance cartel stability and profitability

an empirical test of the effect of excess capacity in price setting capacity constrained supergames abstract in a multi period game industry excess capacity may act to deter firms from cheating on a non cooperative oligopoly price a model is developed that translates the deterrrent influence of excess capacity into predictions about the relationship between excess capacity and oligopoly price cost margins the model is tested with time series data from the u s aluminum industry results are consistent with those predicted by the model

endogenous trade policy through majority voting an empirical investigation abstract the median voter approach to trade policy determination within a heckscher ohlin framework as in mayer am econ rev 74 5 1984 970 predicts that an increase in inequality holding constant the economy s overall relative endowments raises trade barriers in capital abundant economies and lowers them in capital scarce economies we find support for this prediction using cross country data on inequality capital abundance and diverse measures of protection we perform certain robustness checks that include controlling for the effects of political rights and schooling as well as using alternative datasets on factor endowments

on the presence and absence of free entry in oligopoly equilibria abstract this note provides sufficient conditions for the presence and absence of free entry at cournot equilibria and some other oligopoly equilibria in a market for a homogeneous commodity

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

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

an experimental examination of vertical control and cost predation abstract in recent years there has been renewed interest in and concern about firms use of vertical control as a way to exert market power such behavior could be used to gain a competitive advantage over rivals in input and or output markets this paper uses laboratory experimental methods to examine three questions i is anti competitive behavior by a dominant firm in input markets an observable behavior ii is cost predation an observable laboratory phenomenon and iii if such behaviors are observed what are the efficiency consequences results of this dominant firm experiment indicate that all three questions can be answered in the affirmative and the negative efficiency consequences can be profound

inventories market structure and price volatility abstract the effect of inventories on the level and volatility of price is analyzed under alternative market structures in a fairly general setting it is shown that inventories have no effect on the average level of prices in a cournot duopoly in the absence of depreciation the effect of storage on price volatility is analyzed in a more restrictive linear quadratic setting in which it is found that imperfectly competitive producers make less use of inventories for smoothing random fluctuations than is efficient the effect of market structure on price volatility depends on whether demand shocks or cost shocks are more important

optimal cartel trigger price strategies abstract a dynamical model of industry equilibrium is described in which a cartel deters deviations from collusive output levels by threatening to produce at cournot quantities for a period of fixed duration whenever the market price falls below some trigger price in this model firms can observe only their own production level and a common market price the market demand curve is assumed to have a stochastic component so that an unexpectedly low price may signal either deviations from collusive output levels or a downward demand shock

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

vertical cross shareholding theory and experimental evidence abstract this paper analyzes vertical cross shareholding that is the mutual holding of a minority of shares between vertically related firms first we explore the issue in a game theoretic model and show that cross shareholding is sufficient to obtain efficient outcomes we then test the model s predictions in an experiment theory predicts the seller decisions accurately but the buyer decisions only to a small extent buyers are more likely to agree on cross shareholding than sellers in an attempt to avoid the winner s curse cross shareholding occurs more frequently than predicted and it increases the likelihood of trade

individual learning and cooperation in noisy repeated games we investigate whether two players in a long run relationship can maintain cooperation when the details of the underlying game are unknown specifically we consider a new class of repeated games with private monitoring where an unobservable state of the world influences the payoff functions and or the monitoring structure each player privately learns the state over time but cannot observe what the opponent learned we show that there are robust equilibria in which players eventually obtain payoffs as if the true state were common knowledge and players played a belief free equilibrium we also provide explicit equilibrium constructions in various economic examples copyright 2014 oxford university press

the cyclical behavior of price elasticity of demand the mark up of price above marginal cost can vary either procyclically or countercyclically across the business cycle depending upon competitive variations among industries the nature of aggregate demand growth international trade market elasticities and other factors the influence of the business cycle and changes in industry growth on market elasticities can in turn impact market performance via the inverse relationship of market elasticity of demand to price cost margin this paper provides evidence on the cyclical behavior of domestic price elasticity of demand for a panel of 38 four digit u s food manufacturing industries from 1972 to 1987 this is a sector that has been found in earlier studies to exhibit countercyclical price cost margins over this period recent theoretical work on business cycles under imperfect competition suggests that one reason for countercyclical profit margins is that elasticities of demand may become less elastic during recessions estimates of price elasticities of demand are used as the dependent variable in a regression model examining the influence of the business cycle and other variables on demand elasticity

horizontal integration in the dutch financial sector in this paper the consequences of cross shareholding in an n firm industry are analyzed our attention focuses on the case where firms have silent interests in each other these interests can be direct or indirect we analyze the effects of cross shareholding on the price cost margins in a cournot and a bertrand setting in all cases competition is reduced due to shareholding interlocks as an empirical example the dutch financial sector is used comparing the case of shareholding with the case of no shareholding the price cost margins are found to be up to 2 higher in a bertrand market and at least 8 higher in a cournot market c 2000 elsevier science b v all rights reserved jel classification g20 l13 l41

effect of partial cross ownership on supply chain performance abstract partial cross ownership pco in a dyad supply chain refers to a situation where each firm holds a portion of its partner s shares we study this topic in push and pull supply chains and prove that neither the supply chain s nor any member s profit changes with the percentage of the leader s shares the follower holds however while the profits of the chain and the leader increase with the percentage of the follower s shares held by the leader the follower s profit does not necessarily increase or decrease as a result both partners can always achieve a win win by setting a proper price for transferring the follower s shares to the leader moreover the equilibrium wholesale price may be greater than the retail price in the push chain but less than the marginal production cost in the pull chain contradicting the usual results found in the literature we also derive a necessary and sufficient condition on the structure of pco allowing a pull chain to perform better than a push one this extends cachon 2004 s result that a pull chain always performs better than a push one without pco finally pco can coordinate a chain if and only if each one holds half of the other s shares

determinants of automobile pac contributions to house incumbents own versus rival effects this paper examines pac contributions by the big threeu s automakers and japanese auto dealers to houseincumbents a regression model is estimated where paccontributions are a function of a firm s own ties toan incumbent s district as measured by firmemployment and those of rivals for the big three own and u s rival effects are positive further theresults do not indicate the presence of a free ridereffect employment by a foreign subsidiary has no neteffect on u s contributions for the japanesedealers japanese plant employment has a positiveimpact on contributions and that of the big three anegative

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

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

when are cartels stable contracts why do some industry cartels survive for decades while others are quickly undermined by price wars and entry variation in cartels longevity can be explained by differences in their costs of self enforcement and service value to members analyzing legal cartel contracts formed under the webb pomerene export trade act i find that longer lived cartels tended to export to small buyers to have wide industry coverage to operate in periods of stable prices and growing demand and to sell under side agreements with foreign competitors contracts in which the cartel centralized its control through a common sales agency tended to be more stable however cartels usually grew less stable with age and when there was a recent and long history of cartelization in the industry finally cartels whose primary rationale was to fix price tended to be particularly unstable because these contracts invited fringe competition and entry

the effects of reform on china s bank structure and performance abstract this paper investigates the relationship between market structure and performance in china s banking system from 1985 to 2002 a period when this sector was subject to gradual but notable reform using panel data estimation techniques both the market power and efficient structure hypotheses are tested in addition the model is extended to consider issues such as the impact of bank size ownership and whether the big four banks enjoy a quiet life on average x efficiency declined significantly and most banks were operating below scale efficient levels estimation of the structure performance models lends some support to the relative market power hypothesis in the early period the reforms had little impact on the structure of china s banking sector though the joint stock banks became relatively more x efficient there was no evidence to support the quiet life hypothesis probably because strict interest rate controls prevented the state banks from earning monopoly profits thus the ongoing liberalisation of interest rates should be accompanied by reduced concentration overall to improve competitive structure new policies should be directed at encouraging market entry and increasing the market share of the most efficient banks

perfectly competitive markets as the limits of cournot markets a perfectly competitive partial equilibrium market for a single homogeneous good with a bounded continuum of infinitesimal firms is considered cost functions are essentially unrestricted and are allowed to vary smoothly across firms a sequence net of cournot markets each with a finite number of firms which converge smoothly to the perfectly competitive limit in terms of both the inverse demand functions and the distributioon of firm technologies is introduced and it is shown that all markets sufficiently far along the sequence have a cournot equilibrium and all the cournot equilibria converge to the perfectly competitive equilibrium of the limit market

collusion and predation under almost free entry abstract this study investigates the degree of cooperation that firms can support in the absence of significant barriers to entry a free entry subgame perfect equilibrium is defined by q n where q is the collusive output rate and n is the number of active firms such that there is no incentive for an active firm to deviate output from q and there is no incentive for a potential entrant to enter the industry it is shown that for all n 1 if the discount factor is sufficiently high there exists a free entry equilibrium in which active firms sustain a non trivial degree of cooperation cooperation is supported by active firms credibly threatening to respond to entry with a period of aggressive competition

the joint profit maximum as a free entry equilibrium outcome abstract this study investigates the degree of collusion that can be sustained at a free entry equilibrium when the number of active firms is endogenous an increase in the discount factor is found to have two counter acting effects on the incentive for active firms to deviate from the collusive arrangement holding the number of firms fixed a higher discount factor reduces the incentive for cheating according to the standard argument however a higher discount factor also makes entry more profitable since entry entails an initial loss the cost of entry and a future stream of positive profits raising the discount factor then increases the number of active firms which tends to increase the incentive for firms to cheat our analysis shows that the first effect dominates so that the joint profit maximum can be sustained as a free entry equilibrium outcome when the discount factor is sufficiently high

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

entry sunk costs and market structure typically models that study the role of sunk costs suppose that incumbent firms face entry by a single firm each period in this paper the set of equilibrium market structures that result when all firms are free to enter or exit and set prices each period are characterized the effect of sunk costs on the market structure is examined and it is shown that sunk costs can take on various forms each having a different effect on the set of equilibrium market structures costs that are sunk due to the existence of product specific capital do not in general deter entry rather entry deterrence is a necessary outcome only when costs are sunk due to the time it would take to leave the market

subsidizing rent seeking antidumping protection and the byrd amendment abstract this paper argues that a recent u s law which distributes the tariff revenue resulting from successful antidumping petitions to firms that supported the petitions increases the amount of antidumping protection requested by u s firms in two ways first by increasing the total benefits accruing to industries filing successful petitions the law subsidizes rent seeking second by awarding these subsidies only to those firms that actively support the petition it mitigates the free rider problem traditionally associated with collective actions empirical results provide strong evidence that industries have filed more antidumping petitions under the new law moreover the average proportion of firms in the industry filing these petitions increased under the law suggesting that the law at least partially alleviates free riding incentives

what do facilitating practices facilitate an empirical investigation of most favored nation clauses in natural gas contracts long term contracts often include most favored nation clauses mfns which are nondiscrimination guarantees that obligate a buyer or seller to treat all trading partners symmetrically in pricing decisions recent theoretical work has shown that such clauses can facilitate tacit collusion by increasing the cost of selective price changes aimed at attracting new business an alternative view is that mfns serve to facilitate efficient price adjustment in extended exchange relationships we test these competing hypotheses using data from long term natural gas contracts many of which employ mfns our conclusion is that the pattern of mfn adoption in conjunction with the structure of the nondiscrimination regions and the parallels with other nonstrategic price escalation provisions lends strong support to the efficiency rationale

polluters and collective action theory and evidence 1 introductionthe seminal theory by olson 1965 predicts that industries with fewer firms have a greater ability to undertake collective action they organize cooperative political action more easily because greater concentration lowers the cost of political action 1 the empirical evidence is inconclusive however andres 1985 masters and keim 1985 heywood 1988 and humphries 1991 find positive effects of industry concentration on the probability of making political action committee pac contributions see also mckeown 1994 pittman 1976 finds that concentrated industries generate greater contribution levels grier munger and roberts 1991 find an inverted u shaped relationship between the level of pac formation and industry concentration with a maximum political participation rate occurring at a four firm concentration ratio around 0 45 esty and caves 1983 and zardkoohi 1985 report ambiguous effects of concentration on pac contributions 2in this paper we suggest an alternative perspective on firms ability to organize collective action which to our knowledge has been ignored so far the novel argument is that industries that face multiple regulations a greater number of policy issues find it easier to overcome collective action problems and sustain lobbying in particular we focus on the difference between firms in polluting and clean industry sectors using a simple repeated game framework similar to spagnolo 2000 we argue that firms in industries that are naturally polluting because of their input requirements and therefore incur pollution abatement costs will face an additional policy battle compared with other industries everything else equal 3 this enables such industries to sustain greater cooperation and lobbying this is because firms seeking to form a lobby group face a free riding problem due to a limited amount of enforcement power available to punish deviation and ensure cooperation firms that face multiple areas of regulation have an advantage in the formation of lobby groups because they have a greater amount of enforcement power available to reallocate between policy issues when joint lobbying gives large gains in environmental policy this surplus can be reallocated to trade policy for example free riding behavior on trade policy lobbying may more easily be disciplined the prediction that emerges from our theoretical model is that polluting industries are relatively less affected by the free riding problems involved in organizing political action and we thus expect the level of political contributions to be higher in these sectors 4we evaluate this prediction using a cross section data set of u s manufacturing industries our empirical model builds on a multiple equation model by gawande and bandyopadhyay 2000 who test the well established theory of grossman and helpman 1994 on the pattern of protection their theory takes lobby group formation as given we augment gawande and bandyopadhyay s model with an additional equation for environmental policy stringency 5 the empirical results lend support to our theory industry pac contributions and thus the level of lobby group cooperation are greater in industries with larger pollution abatement costs this result is robust to several measures of lobby group formation and environmental policy the present paper contributes to the recent literature on the formation of lobby groups in the area of pollution taxation damania and fredriksson 2000 argue that collusive industries may more easily form lobby groups that oppose such taxes using a related setup damania and fredriksson 2003 discuss the effect of exogenous trade liberalization on environmental policy formation when lobby group formation is endogenous pecorino 1998 and mitra 1999 discuss the formation of trade lobby groups 6 neither of these papers explore the relationship between collective action and the number of policy instruments however

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

forward trading and storage in a cournot duopoly a dynamic game is presented that models the effects of forward trading and storage in an imperfectly competitive market it is shown that the pro competitive effects of forward trading found in previous work are weakened by the addition of storage but not eliminated the price level lies between that of a cournot game and that of a game with forward trading but without storage

costly distribution and the non equivalence of tariffs and quotas when governments impose a quota or tariff on imports it is well known that the resulting rents and revenues trigger costly rent seeking and revenue seeking activities which are welfare reducing and may be economically more significant than the efficiency losses resulting from the protectionist induced resource misallocation repeated interaction among firms can eliminate wasteful rent and revenue seeking expenditures through cooperation we show that while aggregate outcomes are equivalent under tariffs and quotas if cooperation arises the conditions under which cooperation arises differ by policy this difference arises because a firm must incur additional cost to physically import and distribute the goods associated with additional quota licenses whereas there is no such cost when it comes to consuming additional tariff revenue thus quotas and tariffs are non equivalent we provide a simple sufficient condition under which cooperative elimination of rent seeking under quotas is easier than cooperative elimination of revenue seeking under tariffs and therefore a quota is the preferred policy whenever the policy admits cooperation

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

when is it rational for firms to acquire silent interests in rivals abstract the cartelizing effects of firms shareholding in rivals have been well established theoretically yet empirical instances of such are rate to nonexistent it is argued here that if the stock market is efficient in the sense that share prices reflect post share trading product market equilibria then acquiring shares in rivals is not subgame perfect for cournot oligopolies but is subgame perfect for some bertrand oligopolies acquiring a silent interest in a rival is an example of the fat cat ploy that the stock market is not a cartel maker is consistent with cournot having wide empirical application but not with bertrand

collusive market structure under learning by doing and increasing returns learning by doing and increasing returns are often perceived to have similar implications for market structure and conduct we analyse this in the context of an infinite horizon price setting game learning is shown to not reduce the viability of market sharing collusion between a given number of firms whereas intra period increasing returns invariably does we subsequently develop a model where the number of active firms is determined endogenously under the assumption that the post entry game is collusive in this model learning has no effect on concentration while scale economies increase concentration

a new methodology linking concentration dynamics to current and steady state profits examining korean industrial policy during take off abstract we model the dynamics of industrial structure and market power using korean manufacturing data during the take off period 1978 82 structure conduct performance scp methodologies have been criticized for using accounting data and because a few superior firms may have greater shares and greater profits both are argued to present possible spurious correlations between concentration and profits this paper follows earlier work which shows that market structure responds to observed accounting profits as if these were accurate indices of real profits and not as if leading firms are perceived to have unmatchable advantages the methodological contribution of this model is a new latent variable for steady state profits derived from the speed of structural adjustment long run profits are identified by the hypothesis that structural adjustment will be more rapid when industries are farther from steady state levels we analyze the long run profits latent variable finding strong support for this hypothesis the speed of adjustment is greater for positive and negative deviations from steady state structure we show that the profits and structural adjustment relationship is non monotone the scp criticisms above are based on spurious correlations which are monotone in profits and structure positing spurious correlations which are at the same time monotone in structure and non monotone in structural adjustment seems less plausible than accepting the scp results which are consistent with both our analysis also is new in that it is the first direct econometric analysis of korean industrial policy during its take off years we note that in korea unlike elsewhere industrial policy was hypothesized to lead to concentration and market power in the popular press and by professional economists ours is the first direct econometric analysis of this hypothesis and we find it supported

the political economy of the european customs classification customs classification is an important element in a country s trade policy how a good is classified can affect the rate of duty that applies the coverage of non tariff barriers and the formulation and application of rules of origin reclassifications can occur because of the introduction of a new product but also because of protectionist motives this paper is the first attempt at explaining these reclassifications focusing on the european union i examine whether the number of tariff lines in an industry result from the introduction of new products or from protectionist lobbying the analysis focuses on 90 manufacturing industries over 12 years results suggest that protectionist lobbying does play a role in explaining changes in the eu s customs classification

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

dynamic collusion in an open economy abstract this paper provides an example of how opening a country to trade may decrease competition in an industry this result counter to conventional theory occurs when one considers multi period games

vertical integration and collusive incentives an experimental analysis abstract we consider vertically related industries with multiple downstream markets firms make simultaneous output choices in a repeated game upstream duopolists merge with producers in one of the downstream markets that also is a duopoly experimental duopoly markets are constructed to assess the effects of vertical integration upon outputs and profits we find that integration raises outputs in both downstream and upstream markets although only the upstream effect is statistically significant integrated profits are lower and consumer welfare is higher the integrated markets tend to equilibrate more quickly

constitutional prohibitions in a rent seeking model i extend the standard rent seeking model to allow lobbying fora constitutional prohibition on wealth transfers i examinetwo issues 1 the ability of special interests withsignificant political capacity to block constitutional change and 2 the effect of adding a constitutional stage on totallobbying expenditures defeating a prohibition on wealthtransfers is a public good for rent seekers success inconstitutional politics merely allows them to lobby for wealthtransfers the resulting collective action problem for rentseekers in constitutional politics offsets the generalinterest s free rider problems reducing the probability oftransfers and expected total lobbying expenditures compared tothe traditional rent seeking contest introduction of aconstitutional stage also reverses several comparative staticsresults from the rent seeking game an increase in the numberof rent seekers or the general interest s consumers abilityto organize increase lobbying in the rent seeking game butgenerally reduce expected lobbying in the constitutionalprohibition game

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

endogenous trade policy and lobby formation an application to the free rider problem abstract this paper develops a model in which tariffs are determined through bargaining between a utility maximizing policy maker and an industry lobby individual firms only contribute to the lobbying effort if it is in their own self interest so that both trade policies and lobby formation are endogenous by introducing bargaining between the industry and the government the paper provides microfoundations for the tariff formation function approach taken by many authors in the political economy literature applied to the free rider problem the model identifies general conditions under which increasing the number of firms in an industry makes cooperation between them more difficult