threshold effects in price transmission the case of brazilian wheat maize and soya prices recent studies into price transmission have recognized the important role played by transport and transaction costs threshold models are one approach to accommodate such costs we develop a generalized threshold error correction model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium we use monthly wheat maize and soya prices from the united states argentina and brazil to demonstrate this model classical estimation of these generalized models can present challenges but bayesian techniques avoid many of these problems evidence for thresholds is found in three of the five commodity price pairs investigated

innovation and imitation in a duopoly in a duopoly where one firm has the idea for a non patentable innovation the expected profits from the innovation will not be a monotonic function of the cost of innovating furthermore a costly innovation may be undertaken where an inexpensive one would not have been all other things being equal

asymmetry in retail wholesale and shipping point pricing for fresh vegetables the linkage among retail wholesale and shipping point prices for a select group of fresh vegetables is measured using wolffram s asymmetry model procedures for dealing with discontinuous time series are shown and granger s causality test is used to show the direction of the price linkage wholesale prices are shown to lead both retail and shipping point prices asymmetry in the retail wholesale response indicates that wholesale price decreases are reflected at the retail more so than are wholesale price increases wholesale price decreases are more fully passed through to the shipping point relative to wholesale increases

distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

bayesian estimation and selection of nonlinear vector error correction models the case of the sugar ethanol oil nexus in brazil nonlinear adjustment toward long run price equilibrium relationships in the sugar ethanol oil nexus in brazil is examined we develop generalized bivariate error correction models that allow for cointegration between sugar ethanol and oil prices where dynamic adjustments are potentially nonlinear functions of the disequilibrium errors a range of models are estimated using bayesian monte carlo markov chain algorithms and compared using bayesian model selection methods the results suggest that the long run drivers of brazilian sugar prices are oil prices and that there are nonlinearities in the adjustment processes of sugar and ethanol prices to oil price but linear adjustment between ethanol and sugar prices

market institutions and price relationships the case of coffee in the ethiopian commodity exchange while the ethiopian commodity exchange ecx is widely considered a successful market institution very little rigorous empirical investigation has been done on it this paper contributes to filling this knowledge gap using a unique set of spatially disaggregated prices for five different coffee varieties we examine how the ecx has influenced the dynamics of international and domestic prices for coffee the largest traded commodity in terms of trade value on the exchange floor we follow a multivariate generalized autoregressive conditional heteroscedasticity garch approach to assess the extent of market interdependence conditional correlations and volatility transmission we also evaluate structural changes in price dynamics over time our results suggest that contrary to popular media stories the ecx s success in strengthening coffee price relationships has been limited we discuss the underlying reasons and implications of this finding

determination of the international maize price what is the growing role of brazil and ukraine this paper examines the relationships among maize prices for four countries to determine if newly emerging exporters brazil and ukraine influence the international price of maize our work focuses on each market s participation in the price discovery process rather than trying to determine a price leader we find that the united states plays the largest role in price discovery followed by argentina brazil and ukraine we also search for export thresholds and find that ukraine s contribution to price discovery rises slightly when an export threshold of 2 3 million tons is reached no export thresholds were found for brazil export thresholds for argentina were found but only have a minor impact on price relationships we also found that price relationships vary considerably across seasons of the year

imperfect patent protection and innovation the paper studies the effect of strengthening protection on r d incentives in the context of process innovation it shows that for non drastic innovations that do not render the pre existing technology obsolete the innovator might favor imitation if the expected royalty rate determined by the court is sufficiently high since imitation is discouraged for very high levels of patent protection r d investment is maximized for an intermediate level of patent strength this finding provides a theoretical explanation for emerging empirical evidence questioning the effectiveness of strengthening protection on innovation incentives it also serves as a justification for the imperfections of the existing patent system that allows for some infringement

patent policy imitation incentives and the rate of cumulative innovation abstract we study an infinite horizon cumulative innovation model in which patents are characterized by their length and the likelihood of being ruled valid in a patent infringement litigation strengthening patent protection via a greater validity or length has two opposing effects on innovation 1 a negative litigation effect due to increasing the litigation threat for future innovators and 2 a positive competition effect due to reducing profit eroding imitation by competitive firms without innovation capacity the optimal innovation maximizing patent policy balances these two opposing effects for moderate patent validity longer remaining lifetime increases innovation due to the competition effect the opposite is true for higher validity for which the litigation effect dominates moderate validity and infinite patent length maximizes innovation when future profits are subject to greater discounting and r d costs are low while strong validity and finite length stimulates more innovation under lower discounting and higher r d costs

patent damages and spatial competition this paper analyzes price competition between a spatially difierentiated product patentee and an imitator anticipating the possibility of future patent damages we compare the performance of three damage regimes the reasonable royalty regime the only one that yields symmetric equilibrium pricing maximizes static welfare and yields the highest incentives to innovate when patent enforcement is nearly certain the lost proflts regime the only one that may deter infringement yields the highest incentives to innovate when patent enforcement is less than certain and product value is su ciently high the unjust enrichment regime is weakest our results ofier an e ciency argument for abandoning it we also describe new insights into the hypothetical negotiation that the courts use to construct

transaction costs and trade liberalization an empirical perspective from the mercosur agreement abstract studies investigating the effect of trade liberalization policies on transaction costs in agricultural markets are scarce the objective of our paper is to determine whether brazil became more integrated with reduced transaction costs after the introduction of mercosur with respect to its main agricultural trade partners argentina a mercosur member and the united states a non mercosur member using a threshold vector error correction model tvecm we estimate the transaction cost price transmission elasticity and half life adjustments for the most traded agricultural products between brazil argentina and brazil united states from january 1980 to december 2012 our findings suggest a strong mercosur effect with lower transaction costs and higher price transmission elasticity when compared to a non agreement scenario moreover the variations of both parameters are highly heterogeneous across products depending mainly on their degree of differentiation from a policy perspective elements such as the sources of comparative and competitive advantages together with investment policies specific market regulations and agricultural subsidies among others are mainly what influence the extent of transaction cost and market integration our results show that brazil has made progress but still has considerable room for improvement in reducing barriers to agricultural products and as a consequence to achieving the full benefits of the mercosur agreement

high food commodity prices will they stay who will pay much of the public discussion of the food price crisis has focused on the sharply increased use of food commodities for biofuel production framing debate in simple food versus fuel terms reality is more complex multiple forces drove food prices to high levels and according to findings we report in this article these forces will sustain high prices over the medium term we also find that the distinction between high world prices for food commodities and the consumer costs of food is an important one to make food consumers do not buy raw food commodities at international prices the degree to which the price of traded food commodities and the price of food are related depends on a long list of factors most of which operate to dampen price transmission in the search for appropriate policy response it is essential to measure consumer effects correctly and to apportion properly the causes of current high prices

risk sharing in licensing abstract this paper studies the design of linear license contracts under demand or cost uncertainty the optimal contract consists in general of a mix of a fixed fee and royalties the source of uncertainty has a crucial impact on the type of royalties that must be used in particular under demand uncertainty at most two of the instruments are used the contract generally combines a fixed fee with an ad valorem royalty when cost is uncertain a wider variety of cases can arise the contract may involve a combination of either type of royalties coupled with a fixed fee alternatively it may be optimal to use all three available instruments

spatial market arbitrage and threshold cointegration goodwin and piggott reported that corn and soybean prices in spatially separated markets in north carolina exhibited threshold cointegration and that commodity prices in different markets may persistently diverge here a multivariate approach is used to test for threshold cointegration and nonlinear cointegration the results suggest that departures from the law of one price do not persist indefinitely goodwin and piggott gp examined daily corn and soybean prices across spatially separated markets in north carolina and reported that bivariate pairings of prices were threshold cointegrated gp used a twothreshold model in which price differences across markets could persist indefinitely they concluded that empirical models should consider threshold effects in order to adequately characterize spatially integrated markets the purpose of this article is to extend the gp analysis in several directions gp employed the techniques of martens kofman and vorst which involve a multistepped search for thresholds in the residuals of a cointegrating regression this single equation search process is subject to potential misspecification so it is interesting to determine whether the direct multivariate test of threshold cointegration of hansen and seo provides confirmatory evidence in addition gp allowed two thresholds to affect each commodity pair without directly testing for the number of thresholds the second extension uses hansen tests to determine the number of thresholds two thresholds imply no arbitrage bounds that allow persistent departures from the law of one price one threshold is consistent with the traditional view that price differentials are fleeting as arbitrageurs drive excess returns to zero the final extension recognizes that spatially integrated markets might follow a nonlinear relationship that depends on transactions costs peter s sephton is professor school of business queen s university kingston ontario canada the author would like to thank nick piggott for providing his dataset and the dean s research fund in the school of business for financial assistance two anonymous referees provided helpful comments sufficiently large deviations from the law of one price should lead to a reduced price dispersion a direct test of nonlinear cointegration demonstrates that price differences tend to be resolved over time background

the commodity terms of trade unit roots and nonlinear alternatives a smooth transition approach market price dynamics for north american oriented strand board markets are examined specifically the role of transactions costs are examined vis a vis the law of one price weekly data for the january 3rd 1995 through april 14th 2006 period are used in the analysis nonlinearities induced by unobservable transactions costs are modeled by estimating smooth transition autoregressions stars results indicate that nonlinearity is an important feature of these markets and that the parity relationships implied by economic theory are generally supported by the star models implications for the efficiency of spatial market linkages are examined by estimating generalized impulse response functions

damages and injunctions in protecting intellectual property we investigate how liability rules and property rules protect intellectual property infringement might not be deterred under any of the enforcement regimes available however counterintuitively a credible threat of infringement can actually benefit the patentholder we compare the two doctrines of damages lost profit lost royalty and unjust enrichment and argue that unjust enrichment protects the patentholder better than lost royalty in the case of proprietary research tools both can be superior to a property rule depending on how much delay is permitted before infringement is enjoined for other proprietary products end user products cost reducing innovations these conclusions can be reversed

nonhomothetic growth models for the environmental kuznets curve we show the role of the elasticity of substitution between general consumption and the environment in environmental degradation specifically our numerical experiments demonstrate for a wide range of models exponential utility generates the environmental kuznets curve without adding any special assumptions with exponential utility the elasticity of substitution and hence the substitution effect between consumption and the environment are both decreasing in income hence when income is low society the government readily gives up environmental quality in return for more consumption but it does not want to substitute consumption for the environment anymore once it becomes wealthy enough

when do more patents reduce r d this paper develops a simple duopoly model in which investments in r d and patents are inputs in the production of firm rents patents are necessary to appropriate the returns to the firm s own r d but patents also create potential claims against the rents of rival firms analysis of the model reveals a general necessary condition for the existence of a positive correlation between the firm s r d intensity and the number of patents it obtains when that condition is violated changes in exogenous parameters that induce an increase in firms patenting can also induce a decline in r d intensity such a negative relationship is more likely when 1 there is sufficient overlap in firms technologies so that each firm s inventions are likely to infringe the patents of another firm 2 firms are sufficiently r d intensive and 3 patents are cheap relative to both the cost of r d and the value of final output this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

spatial equilibrium and price transmission between southern african maize markets connected by informal trade policies regulating the international grain trade in southern africa sa are motivated by uncertainty regarding private sector performance and in turn private sector performance is generally constrained by the policy environment we study spatial price transmission between sa maize markets where trade is dominated by informal product flows this provides an opportunity to study private sector market performance in a largely unregulated market environment contrary to some existing evidence on the performance of sa grain markets connected by formal trade we find that informally trading markets work quite well long run price equilibrium is consistent with competitive trade price transmission is rapid and potential trade constraints have no disruptive impact on long run relationships nevertheless we do find evidence of occasionally high transfer costs that may impede informal trade flows the conclusion is that a policy focus on encouraging informal trade and lowering informal trade costs would lead to improved market performance

cointegration and market integration an application to the indonesian rice market this article suggests improvements in the use of regression analysis to measure spatial market integration the procedure pioneered by ravallion is still widespread but is valid only under certain conditions of exogeneity the alternative offered here is an error correction mechanism which makes it possible to test for exogeneity as well as indicating the direction and strength of causality in price formation between markets the method is illustrated with data on rice prices in different parts of the indonesian market the results confirm among other things that supply sources are more important than demand sources in driving prices

the extent pattern and degree of market integration a multivariate approach for the brazilian rice market the extent pattern and degree of integration are analyzed in a multivariate system with cointegrating restrictions the extent of the market is found by identifying locations that are linked by trade and where prices share identicall ong run information permanent component the pattern of integration characterizes interdependence and is analyzed by estimating a vector error correction model the degree of integration is calculated with persistence profiles of the long run relations we demonstrate that bivariate models are inadequate for capturing the spatial dynamics of price adjustment the methodology is applied to the brazilian rice market and policy implications are

how is the liberalization of food markets progressing market integration and transaction costs in subsistence economies we propose a modification of baulch s parity bounds model to measure the market integration of food markets in developing countries instead of extrapolating a single observation of transaction costs we estimate transaction costs predicted transaction costs compare well with survey data of traders probabilities of market regimes computed on the basis of predicted transaction costs fluctuate significantly and do not support fixed regime probabilities over time the probability of market integration with trade decreases consistently during food shortages increasing either the probability of no trade or loss making trade or the probability of profitable but unexploited trade opportunities the data further support a negative trend in market integration with trade

environmental emissions and production economics implications of the materials balance in modeling emissions the literature has usually specified an explicit emission function or treated emissions as a production input we examine the validity of these approaches taking into account the materials balance principle we show that a technology can equivalently be described by i a production function with material and nonmaterial inputs and bounded marginal product of the material input ii a well behaved production function with emissions as an input and iii a well behaved emission function if the materials balance is accounted for as an additional condition we offer a forma derivation of common but not rigorously established modeling approaches

testing market integration new approaches with case material from the west bengal food economy given the inferential dangers of received methods a new methodology is introduced to provide a sequence of tests using weekly spot prices to examine the dynamic relationship of market commodity prices in three locations in west bengal tests suggest that the markets are integrated but a lower degree of integration of paddy and rice prices is identified the hypothesis of full market integration is rejected structural and institutional factors which affect the specifics of performance are identified physical isolation the institutional complexity of marketing systems and contractual forms the polarisation of assets assets specificity the institutional control of information and price formation the underdevelopment of linked markets and the idiosyncratic implementation of state regulatory policy and auto regulatory responses enter the explanation

the transmission of world maize price to south african maize market a threshold cointegration approach this article seeks to provide an explanation for the relationship between domestic maize price in south africa and world maize prices in order to evaluate comovement and transmission of world prices to domestic prices in sub sahara african countries this is done by comparing nested and nonnested models that capture different forms of nonlinearity in the price spread adopting a bayesian approach that allows for comparison of models using bayes factor we found that the relationship between south african price and world price for maize indicates the presence of nonlinearity in price transmission with three regimes that is triggered by the price spread in previous period

cointegration market integration and market efficiency abstract this paper uses a standard dynamic general equilibrium asset pricing model to study the relationship among the concepts of efficient markets integrated markets and cointegrated prices within this setting we show that these concepts are independent of one another and any zero one two or three of these characteristics can emerge in equilibrium depending upon taste endowment and technology parameters in particular the results of tests of cointegration among asset prices have no implications about market efficiency or market integration without additional restrictions on the economy or economies

legal expenditure as a rent seeking game legal expenditures at a civil trial constitute an interesting type of rent seeking contest in civil litigation there is a natural interaction between the objective merits of the case and the outcome of the contest institutions such as fee shifting do not generally have a counterpart in other rent seeking contests the endogenous decision to participate in the rent seeking contest corresponds to the decision by the plaintiff to bring a case and the decision by the defendant to defend it the desirability of fee shifting is very sensitive to the value of the parameter which describes the legal technology

asymmetry in farm retail price transmission for major dairy products an econometric model is used to estimate the net relationship between changes in the farm level price of milk and changes in the retail prices of four major dairy products fluid milk butter cheese and ice cream results indicate that the farm retail price transmission process in the dairy sector is asymmetric retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases the role in pricing asymmetry of retail demand versus farm supply shifts is tested via a chow type test asymmetry is tested using the houck procedure for estimating nonreversible functions

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

wheat export restrictions and domestic market effects in russia and ukraine during the food crisis abstract studies investigating the effects of wheat export controls on the domestic market in the exporting country itself are scarce this paper analyses the domestic market impact of wheat export controls in russia and ukraine during the 2007 2008 global food crisis within a spatial price transmission approach using a markov switching vector error correction model we contrast our estimation for russia and ukraine with germany and the usa two countries that did not intervene in their wheat export markets an explicit crisis regime during times of export controls is exclusively identified for russia and ukraine we find that export restrictions temporarily reduced the degree of integration of russian and ukrainian domestic markets in world wheat markets which pushed the growers prices below their long run equilibrium level further domestic markets were disconnected from their equilibrium and market instability increased these effects were even more pronounced and long lasting in ukraine export quota than in russia export tax the negative market effects discouraged private investors thereby preventing russia and ukraine from maximizing their grain potential and contributing to global food security

output emissions and technology some thoughts abstract the principal goal of this article is to identify the implications of a binding emission constraint on a firm s optimal capital labor ratio and to determine whether it is appropriate to write a firm s production function as an increasing function of its emissions alone i find that even though a firm s supply curve may be written as a positive function of its emissions it is not appropriate to write the production technology as an increasing function of only its emissions except under special circumstances

are there limits to growth a simple theoretical model of pollution is developed that generates an inverted u shape relationship between per capita income and environmental quality this model is then used to study long run growth the same inverted u shape is shown to appear in time series and the prospects for sustained growth are shown to hinge on whether increasingly strict environmental regulation is compatible with a constant rate of return on capital implementation is also studied tax and voucher schemes are shown to have an advantage over direct regulation because they provide the correct incentives for capital accumulation copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

nonlinear mean reversion in the term structure of interest rates abstract the expectations hypothesis implies that the yield curve provides information on the future change in the short term interest rate however transaction costs exist in the financial market which prevent investors from realizing the arbitrage opportunity when the arbitrage does not fully cover the transaction costs the purpose of this paper is to assess the effect of transaction costs on the predictability of the term structure by using the threshold vector error correction model which allows for the nonlinear adjustment to the long run equilibrium relationship a significant amount of threshold effect is found and the adjustment coefficients are regime dependent the empirical result supports the nonlinear mean reversion in the term structure of interest rates

market analysis methods are our enriched toolkits well suited to enlivened markets the past fifteen years have brought historic reduction of government intervention in agricultural markets in the developing world most economists and policy makers believe these reforms enliven markets previously fettered by excessive government authority nonetheless the impact of market oriented reforms on the spatial and intertemporal extent and the competitiveness of markets remains an inherently empirical question meanwhile there also have been major innovations in methods used to analyze markets and prices due largely to the rapidly emerging time series econometric literature agricultural economists toolkits have changed nearly as rapidly and dramatically as have developing economy markets but can these enriched toolkits answer the

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

the trade reducing effects of market power in international shipping abstract developing countries pay substantially higher transportation costs than developed nations which leads to less trade and perhaps lower incomes this paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs in the presence of market power shipping prices depend on the demand characteristics of goods being traded we show theoretically and estimate empirically that ocean cargo carriers charge higher prices when transporting goods with higher product prices lower import demand elasticities and higher tariffs and when facing fewer competitors on a trade route these characteristics explain more variation in shipping prices than do conventional proxies such as distance and significantly contribute to the higher shipping prices facing the developing world a simple back of the envelope calculation suggests that eliminating market power in shipping would boost trade volumes by 5 9 for the us to 15 2 for latin america our findings are also important for evaluating the impact of tariff liberalization cargo carriers decrease shipping prices by 1 2 for every 1 reduction in tariffs

a dynamic game of r and d patent protection and competitive behavior a theory of dynamic optimal resource allocation to r and d in an n firm industry is developed using differential games this technique represents a synthesis of the analytic methods previously applied to the problem static game theory and optimal control the use of particular functional forms allows the computation and detailed discussion of the nash equilibrium in investment rules this paper addresses the problem of resource allocation to research and development among the important issues that a firm engaging in r and d must evaluate are uncertainty regarding the feasibility and profitability of a particular innovation the possibility of a protracted development period the possibility that a rival firm may innovate first capturing either a patent or a significant share of the new market the possibility that a rival firm may imitate the innovation and appropriate some of the profits in the new market in what follows we will develop a theory of optimal resource allocation to research and development which incorporates the aspects of r and d enumerated above we will use a dynamic game theoretic analysis determining the nash equilibrium strategies for n identical firms the availability of perfect patent protection is shown to accelerate development of the innovation and the effect of increasing rivalry is addressed the impact of increasing rivalry on nash equilibrium investment in r and d depends upon the degree of appropriability of rewards if patent protection is perfect then increasing the number of nash rivals results in increased r and d effort however when imitation is rewarded the opposite may be true finally some notions of competitive and perfectly competitive equilibrium are examined in the context of the model developed below

nonlinearities in the u s corn ethanol oil gasoline price system we use a smooth transition vector error correction model to assess price relationships within the u s ethanol industry monthly ethanol corn oil and gasoline prices from 1990 to 2008 are used in the analysis results indicate the existence of long run relationships among the prices analyzed strong links between energy and food prices are identified

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

world market integration for export and food crops in developing countries a case study for mali and nicaragua using a generalized error correction model this article measures and compares market integration for export cash crops versus imported food crops for mali and nicaragua and computes transmission elasticities between changes in the goods border and domestic prices both mali and nicaragua obtain the bulk of their export revenue from a particular agricultural commodity cotton for mali and coffee for nicaragua and both import the same key staple food of rice to reap the economic gains from this trade specialization the two countries agriculture must be well integrated into world markets the two countries present an important policy contrast that affects their degree of world market integration and price transmission in mali a parastatal enterprise controls its cotton industry while nicaragua has less state direction over agriculture reflecting this difference the results show that for both its main export and import commodity nicaragua is more integrated into world markets and has higher price transmission than mali the results for nicaragua also show much higher integration and price transmission for its main agricultural export coffee than its major import rice

the estimation of threshold models in price transmission analysis the threshold vector error correction model is a popular tool for the analysis of spatial price transmission and market integration in the literature the profile likelihood estimator is the preferred choice for estimating this model yet in certain settings this estimator performs poorly in particular if the true thresholds are such that one or more regimes contain only a small number of observations if unknown model parameters are numerous or if parameters differ little between regimes the profile likelihood estimator displays large bias and variance such settings are likely when studying price transmission for simpler but related threshold models greb et al 2011 have developed an alternative estimator the regularized bayesian estimator which does not exhibit these weaknesses we explore the properties of this estimator for threshold vector error correction models simulation results show that it outperforms the profile likelihood estimator especially in situations in which the profile likelihood estimator fails two empirical applications a reassessment of the the seminal paper by goodwin and piggott 2001 and an analysis of price transmission between german and spanish markets for pork demonstrate the relevance of the new approach for spatial price transmission analysis

r d rivalry with licensing or imitation the authors study the rivalry between two firms to develop an innovation in a dynamic setting that allows for post development dissemination of the innovation such as licensing or imitation this dissemination may cause the noninnovating firm to benefit from the discovery when this occurs conventional results in the economics of r d no longer need apply they find that industry leaders will tend to develop minor innovations but will develop major innovations only if imitation is difficult copyright 1987 by american economic association

how strong are weak patents economists usually conceive of patents as property rights that prevent others from practicing the patenting technology unless they first obtain a license from the patent holder even for ironclad patents i e for patents that are certain to be valid the existing literature has shown that the analysis of equilibrium licensing contracts is surprising subtle and complex 1 for example the analysis is quite different depending upon whether one firm s licensing contract is observable to the other firms likewise equilibrium outcomes are quite different if royalties must be linear than in the case where two part tariffs and other non linear royalties are permitted in that literature a downstream firm that refuses to sign a contract with the upstream supplier either exits the industry in the case that the upstream supplier controls an essential input or must rely on more costly inputs in the case of a non essential input in other words the downstream firm s threat point is to use some backstop technology in practice however patents are issued after a brief examination by the patent office to see if they meet the statutory requirements for novelty and non obviousness mounting evidence indicates that many weak patents i e patents unlikely to be found valid if challenged in court are issued by the u s patent and trademark office uspto 2 some observers view this with great alarm arguing that uspto is handing out undeserved monopolies others by contrast have suggested that these weak patents are of little concern because they will have little commercial impact because they will be licensed at commensurately low royalty rates or not enforced at all we study the commercial impact of weak patents more precisely we define a patent s strength as the probability that it will be found valid if challenged in court and we examine the relationship between a patent s strength and the royalties that it can command the distinctive

north american oriented strand board markets arbitrage activity and market price dynamics a smooth transition approach price dynamics for north american oriented strand board osb markets are examined the role of transactions costs are explored vis a vis the law of one price weekly data february 3rd 1995 through october 9th 2009 are used in the analysis nonlinearities induced by unobservable transactions costs are modeled by estimating time varying smooth transition autoregressions tv stars results indicate that nonlinearity and structural change are important features of these markets price parity relationships implied by economic theory are generally supported by the estimated models implications for the efficiency of spatial market linkages and the dynamics associated with price adjustments are also examined

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

welfare optimal patent royalties when imitation is costly we identify welfare optimal patent royalties in a model of costly imitation entry and imperfect competition when the social planner may impose a compulsory license optimal royalties either blockade imitation facilitating unregulated monopoly or yield an aggregate zero profit efficient duopoly when duopoly is optimal the optimal per unit royalty pins the equilibrium price at the aggregate average cost and the optimal fixed royalty shifts surplus so the patentee and imitator break even efficient duopoly yields higher welfare than monopoly for sufficiently low invention cost and may also yield higher welfare than a prize system interestingly royalty payments may be negative because of this efficient duopoly may not be feasible if the planner must instead direct the courts to use such royalties

local impacts of a global crisis food price transmission consumer welfare and poverty in ghana abstract this paper takes a local perspective on global food price shocks by analyzing food price transmission between regional markets in ghana it also assesses the impacts of food price increases on various household groups taking the 2007 2008 global food crisis as an example we show that prices for domestic grain products are highly correlated with world market prices this is true both for products for which ghana is highly import dependent e g rice and the products for which ghana is self sufficient e g maize the econometric results also show that price transmission is high between regional producer markets and markets located in the country s largest cities and the distance between producer and consumer markets and the size of consumer markets matter in explaining the price transmission the welfare analysis for households as consumers shows that the effect of world food prices appears relatively modest for the country as a whole due to relatively diverse consumption patterns within country however the national average hides important regional differences both between regions and within different income groups we find that the poorest of the poor particularly those living in the urban areas are hardest hit by high food prices the negative effect of the food crisis is particularly strong in northern ghana the main explanations for this regional variation in the price effect is the different consumption patterns and much lower per capita income levels in the north of ghana compared to other regions in the country

smooth transition effects in price transmission the case of international wheat export prices international wheat prices are tested for cointegration allowing for exponential smooth transition adjustment the results suggest that owing to transactions costs it is plausible that arbitrage will be greater the further the prices deviate from each other

modeling spatial price transmission in the grain markets of ethiopia with an application of ardl approach to white teff following the agricultural market liberalization policy there is an emerging grain market structure in ethiopia in which the central wholesale market exhibits concentration of power and spatial integration with the local markets due to this it is hypothesized that the central wholesale market influences the long run price movements in the local markets the relationship can be modeled as spatial price equilibrium with the aim to guide subsequent policy decisions with regard to public intervention in the post liberalization period in this study we modeled the spatial equilibrium relationship between the producer and the wholesale prices of white teff a major staple in ethiopia using the autoregressive distributed lag modeling approach to cointegration analysis first the existence of a nonspurious long run relationship in levels between the producer prices in the local market and the wholesale prices in the central market is confirmed second the long run relationship and the error correction model for the producer price are estimated the results reveal that the wholesale price of white teff in the central consumer market is a major short and long run determinant of the producer price in the local supply markets therefore the institutional role of the government with the aim of improving producers marketing margin and the overall performance of the grain markets in the post liberalization period can be influenced through targeted interventions at the central wholesale market

fees versus royalties and the private value of a patent we compare how much profit an owner of a patented cost reducing invention can realize by licensing it to an oligopolistic industry producing a homogeneous product by means of a fixed fee or a per unit royalty our analysis is conducted in terms of a noncooperative game involving n 1 players the inventor and the n firms in this game the inventor acts as a stackelberg leader and it has a unique subgame perfect equilibrium in pure strategies it is shown that licensing by means of a fixed fee is superior to licensing by means of a royalty for both the inventor and consumers only a drastic innovation is licensed to a single producer

the economics of product patents this paper develops a model of product patents in which the patent changes the nature of market entry behavior rather than preventing entry entirely the model incorporates three levels of action namely the innovator s patenting decision the potential entrant s location decision and possible court action the analysis demonstrates how the characteristics of the patents system and the enforcement framework can influence rivals variety choices and thus the market equilibrium it also considers how the system can in principle be adjusted to improve social welfare copyright 1990 by american economic association

a transaction level analysis of spatial arbitrage the role of habit attention and electronic trading despite the central role of arbitrage in finance and economic theory there is limited evidence of the factors that create and eliminate arbitrage opportunities how often arbitrage occurs and how profitable it is we address these gaps via a transaction level analysis of spatial arbitrage in the wholesale automotive market we investigate why arbitrage opportunities are created by analyzing how sellers choose where to sell vehicles we find that the attention sellers pay to the distribution of a vehicle is negatively related to the probability that it is arbitraged arbitrage occurs in approximately 1 of transactions although electronic trading is making arbitrage less prevalent by improving buyer seller matching across locations arbitrage yields a 5 6 return on average although arbitrageurs take a loss 14 of the time our results contribute to the literature on arbitrage the effect of attention allocation on market outcomes and the effect of information technology on market efficiency this paper was accepted by brad barber teck ho and terrance odean special issue editors

how broad should the scope of patent protection be i explore the trade off between a patent s length that is its lifetime and its width that is its scope of coverage a wider patent generally reduces the distortion of consumers choices between the patented brand of the product and unpatented lower priced varieties sold by competitors but also permits higher prices which increase relative to profits the deadweight losses from consumers switching consumption out of the product class i show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short lived but very broad patents are optimal

market emergence and transition arbitrage transaction costs and autarky in china s grain markets using trimonthly chinese provincial grain prices from 1988 to 1995 we estimate a parity bounds model of interregional trade for four subperiods to characterize how multiple aspects of market performance change during the process of economic transition for each period we estimate the extent to which arbitrage opportunities are realized by traders the transaction costs between location pairs and the likelihood that regions do not trade trade restrictions cannot explain the pattern of uneven market development over time infrastructure bottlenecks managerial incentive reforms and production specialization policies all were likely important factors affecting market performance

general licensing schemes for a cost reducing innovation optimal combinations of upfront fees and royalties are considered for a cost reducing innovation in a cournot oligopoly for both outside and incumbent innovators it is shown that for any nondrastic innovation a the license is practically sold to all firms ensuring full diffusion of the innovation b consumers are better off firms are worse off and the social welfare is improved c the optimal licensing policy involves positive royalty for relatively significant innovations d compared to an incumbent firm an outsider invests more in r d and has higher incentive to innovate and e as a function of the magnitude of the innovation the industry size that provides the highest incentive to innovate is u shaped

transfer costs spatial arbitrage and testing for food market integration conventional tests for food market integration ask often misleadingly whether prices in different locations move together in this paper an alternative methodology the parity bounds model pbm is developed which uses information on transfer costs in addition to food prices to assess the efficiency of spatial arbitrage monte carlo experiments using data generated by a point space spatial price equilibrium model show the pbm to be statistically reliable an application to philippine rice markets demonstrates that the pbm detects efficient arbitrage when other tests do not

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

comparative analysis of litigation systems an auction theoretic approach a simple auction theoretic framework is used to examine symmetric litigation environments where the legal ownership of a disputed asset is unknown to the court the court observes only the quality of the case presented by each party and awards the asset to the party presenting the best case rational litigants influence the quality of their cases by hiring skilful attorneys this framework permits us to compare the equilibrium legal expenditures that arise under a continuum of legal systems the british rule continental rule american rule and some recently proposed legal reforms are special cases of our model

does the law of one price really hold for commodity prices in spite of the empirical failure of the law of one price it is usually assumed that commodity prices are perfectly arbitraged at least in the long run this paper argues that this assumption is counterfactual and that much of the empirical evidence provided to support it is flawed and affected by econometric shortcomings spurious regressions nonstationarity in the data inappropriate use of first differences an alternative methodology co integration by which a long run relationship between nonstationary series can be tested is proposed tests of nonstationarity and co integration for a group of commodities show quite uniformly that the law of one price as a long run relationship fails and that deviations from the pattern are permanent

patent litigation as an information transmission mechanism patent litigation reveals important information about the validity of the contested patent to other potential entrants this paper explores the implications of such informational externalities for entry dynamics in the presence of multiple potential entrants the nature of the entry game can be one of either waiting or preemption depending on the degree of patent protection therefore the payoffs for the patentee and the initial imitator are discontinuous in the degree of patent protection furthermore strengthening intellectual property rights is not necessarily desirable for the patentee the analysis may also help explain the apparently puzzling practice of delaying patent suits copyright 1998 by american economic association

threshold cointegration and spatial price transmission when expectations matter we examine the performance of the threshold cointegration approach specifically band tvecm to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices because trade takes time we find that following a standard inference strategy a large portion of three regime cases are not identified as such results show that transfer costs are systematically underestimated particularly in three regime models the speed of price transmission is also biased in three regime models furthermore inferences about occurrence of trade are poor with estimated models suggesting far lower market integration than is true in the data generating process

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated

spatial market integration in the presence of threshold effects a large body of research has evaluated price linkages in spatially separate markets much recent research has applied models appropriate for nonstationary data such analyses have been criticized for their ignorance of transactions costs which may inhibit price adjustments and thus affect tests of integration this analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs we evaluate daily price linkages among four corn and four soybean markets in north carolina nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks our results confirm the presence of thresholds and indicate strong support for market integration though adjustments following shocks may take many days to be complete in every case the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored a large amount of empirical research has evaluated the extent to which spatially separate markets are integrated though the term is used loosely in the literature tests of market integration usually consider the extent to which shocks are transmitted among spatially separate markets the integration of markets can have important implications for price discovery and the operation of the market since persistent deviations from integration may imply riskless profit opportunities for spatial traders

on market integration and liberalisation method and application to ethiopia the article suggests further improvements in the methodology to analyse market integration it provides corrections to and methodological extensions of recent work in this journal it also presents a way of applying market integration techniques to the analysis of shocks such as market liberalisation and war the method is applied to the effects of liberalisation and the end of the civil war on food markets in ethiopia the conclusion is that liberalisation had important effects on the long run and short run integration of food markets