the impact of ict investment and energy price on industrial electricity demand dynamic growth model approach the authors investigate the effects of information and communications technology ict investment electricity price and oil price on the consumption of electricity in south korea s industries using a logistic growth model the concept electricity intensity is used to explain electricity consumption patterns an empirical analysis implies that ict investment in manufacturing industries that normally consume relatively large amounts of electricity promotes input factor substitution away from the labor intensive to the electricity intensive moreover results also suggest that ict investment in some specific manufacturing sectors is conducive to the reduction of electricity consumption whereas ict investment in the service sector and most manufacturing sectors increases electricity consumption it is concluded that electricity prices critically affect electricity consumption in half of south korea s industrial sectors but not in the other half a finding that differs somewhat from previous research results reasons are suggested to explain why the south korean case is so different policymakers may find this study useful as it answers the question of whether ict investment can ultimately reduce energy consumption and may aid in planning the capacity of south korea s national electric power

policy watch infrastructure investment and economic growth in the late 1980s david aschauer 1989 triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in u s productivity that occurred in the 1970s was precipitated by declining rates of public capital investment my own work confirmed these results munnell 1990a spending advocates seized on these findings as support for increased public investment the enthusiasm among policymakers for the early aschauer results was matched if not surpassed by skepticism on the part of many economists critics of these studies charged that the methodology was flawed that the direction of causation between public investment and output growth is unclear and that even if the historical empirical relationships were estimated correctly they provide no clear indications for current policy who s right what do we know and not know about the link between public infrastructure and productivity and what are the implications of these results for policy

the non dynamic equivalence of monetary and exchange rate rules under imperfect capital mobility and rational expectations abstract in the present paper we introduce a model in which the dynamic adjustment of the real exchange rate and other real variables depends on whether the economy follows a monetary or an exchange rate rule this result stands in opposition to the monetarist models of the open economy where there is a dynamic equivalence between the two rules

advertising effects in complete demand systems a rationale for including advertising in complete demand systems is presented an advertising analogue of the slutsky equation is derived and properties of the expenditure and indirect utility functions characterized empirical estimates of a complete demand system incorporating dynamic advertising effects support neoclassical restrictions we do not reject homogeneity or symmetry at the 1 level this represents surprisingly strong support for neoclassical theory relative to prior parametric studies

collapsing exchange rate regimes and exchange rate dynamics some further examples abstract this paper extends some recent perfect foresight models of balance of payments crises and exchange rate realignments to a world of smart speculators sticky prices and restricted international capital movements the likelihood and timing of a regime collapse are shown to depend upon initial foreign reserve endowments monitary policy speeds of market adjustment and future exchange rate policy these factors are also shown to influence the dynamic behavior of the exchange rate and prices during a transitional period of floating

causal relationship between telecommunications and economic growth in china and its regions shiu a and lam p l causal relationship between telecommunications and economic growth in china and its regions regional studies this paper studies the causal relationship between telecommunications development and economic growth of china its result indicates that there is a unidirectional relationship running from real gross domestic product gdp to telecommunications development at the national level causality running from telecommunications development to real gdp is found only in the provinces in the affluent eastern region but not in the low income central and western provinces the results imply that an improvement in telecommunications infrastructure alone is not sufficient for stimulating growth in the central and western provinces it is equally important for the chinese government to develop and enhance other complementary factors like business environments transportation networks education and manpower training in order to make the best use of the telecommunications systems in the ce

measuring and testing advertising induced rotation in the demand curve advertising can rotate the demand curve if it changes the dispersion of consumers valuations we provide an elasticity form measure of the advertising induced demand curve rotation in five demand models and test for its presence in the us nonalcoholic beverage market the almost ideal demand system aids model reveals that doubling advertising spending rotates the demand curves clockwise for milk and coffee and tea with associated slope changes of 7 and 12 soft drink advertising rotates its demand curve counterclockwise our policy suggestion is that milk and soft drink firms time advertising to coincide with high and low price periods respectively

an analysis of substitution bias in measuring inflation 1959 851 we analyze the substitution bias in laspeyres type price indexes such as the cpi using 1959 1985 nipa consumption data for 101 commodities we employ two methodological approaches to calculation of the bias first we construct the tightest theoretical bounds on the col by applying nonparametric methods using algorithms developed by afriat and by varian second following diewert we construct superlative price index formulas namely tomqvist and fisher s ideal indexes under a chain as well as a fixed base specification homothetic preferences are found to be consistent with the data and sensitivity tests indicate that this result is not vacuous if the hypothesis of homotheticity is maintained the col bias has upper and lower limits of 0 22 and 0 14 percent per year respectively using the superlative indexes as the measure of the col the bias is about 0 18 percent per year for the period 1959 85 this estimate is somewhat larger than found in earlier studies our use of more disaggregated data is found to be responsible for part of the difference with the size of the estimated bias directly related to the extent of the aggregation

linking local business with global growth opportunities the role of infrastructure infrastructure is instrumental when it comes to linking local businesses with their global growth opportunities this paper shows that by making this link the transport network can act as a catalyst for regional economic growth using a novel approach we find that firms in regions with a more developed transport infrastructure are better placed to benefit from positive growth opportunities than those in regions with a less well developed transport network this advantage is most pronounced in times of economic slack making a better transport network a key ingredient for economic recovery it is against this background that the recent slowdown in infrastructure investment in europe is worrisome but it is through this channel among others that the substantial ramp up of activity by the european investment bank is expected to foster growth and enhance competitiveness in europe

the role of acquisitions in reshaping business capabilities in the international telecommunications industry this paper focuses on the relationships between observed processes of post acquisit ion activities within four cross border horizontal acquisitions that occurred in the telecommunications equipment manufacturing sector between 1988 and 1992 we discuss the desirability of such acquisitions from a corporate and social welfare standpoint we report a detailed survey of the context post acquisition activities and outcomes of the four acquisitions the acquisition context includes industry characteristics target characteristics target strengths and acquisition motives post acquisition activities include several dimensions of business restructuring resource redeployment and creation of integration mechanisms acquisition outcomes include impact on business capabilities financial performance and judgments of overall success we conclude that the results provide stronger support for strategic reconfiguration and productive efficiency explanations for horizontal acquisitions than they do for market power target mismanagement or resource appropriation explanations

estimates of price elasticity of demand for urban freeway use with high frequency control variables the case of santiago chile estimates are presented of toll and fuel price elasticities of demand for urban freeway use in santiago chile high frequency toll and vehicle data were collected from four urban freeways for different route segments and times of day estimation was performed using log linear regression models whose explanatory variables were tolls fuel prices city traffic levels and sets of dichotomous variables to control for daily weekly and monthly seasonality city traffic is a high frequency control of the activity level of the city the elasticities to changes in tolls and fuel were all low in absolute value the toll elasticities were below 0 05 for two freeways and 0 16 for the third while for the fourth which had more alternative routes it was 0 47 the fuel price elasticities were also heterogeneous with values of approximately 0 45 for two freeways and 0 21 for the third whereas for the fourth which had the fewest alternatives it was 0 07

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

telecommunications and economic growth an empirical analysis of sub saharan africa we examine the effect of mobile cellular phones on economic growth in sub saharan africa where a marked asymmetry is present between land line penetration and mobile telecommunications expansion this study extends previous research along two important dimensions first we allow for the potential endogeneity between economic growth and telecommunications expansion by employing a special linear generalized method of moments gmm estimator second we explicitly model for varying degrees of substitutability between mobile cellular and land line telephony so that greater expansion of mobile telecommunications can have a different impact whenever the level of land line penetration differs we find that mobile cellular phone expansion is an important determinant of the rate of economic growth in sub saharan africa moreover we find that the contribution of mobile cellular phones to economic growth has been growing in importance in the region and that the marginal impact of mobile telecommunication service

analysis on the growth of telecommunication services a global comparison of diffusion patterns with the development of the internet the telecommunication market has seen a rapid shift from voice based services to data based services relationships of substitutability and complementarity have emerged among communications technology services such as internet service mobile phone service and fixed telephone service the article analyses the diffusion patterns of communication services in different continents a modified logistic growth model is estimated using panel data for the years 1975 2004 the research forms a valuable framework for forecasting demand for new services based on the diffusion of incumbent services and can inform strategies for entering the communications network industry

welfare implications of increased us beef promotion demand estimates from a rotterdam model are combined with a muth type equilibrium displacement model of the us meat sector to isolate the impacts of increased beef advertising on quasi rents at the farm gate results suggest beef and pork producers gained at the expense of poultry producers the negative externalities generated in the poultry sector are of sufficient magnitude to suggest that under certain conditions the beef advertising programme may be welfare decreasing for meat producers as a group the broader social welfare implications of increased beef advertising in terms of its impacts on the environment heart disease celebrity and consultant income madison avenue profits or the quality of television programming are not considered in this research

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

how large is too large implications of the city size literature for population policy and research in the development literature of the late 1960s and 1970s urbanization and urban problems were often taken to be synonymous both the theories and the preliminary empirical studies of the period appeared to connect urbanization directly with unemployment2 and with crowding congestion social stress and pollution the high visibility of such disamenities coupled with their political implications persuaded developing country governments of the necessity to constrain or even reverse urban growth 3 the antiurbanization perspective achieved its high point in the declarations of the 1974 world population plan of action at bucharest since that time it has gradually been supplanted by more balanced assessments of the contribution made by cities to economic growth 4 even so the potential benefits of urban growth have not yet received the emphasis given to the potential costs whether in policy discussions or in much of the literature on third world urbanization 5 this is unfortunate for it can be argued that agglomeration economies those external returns in production that occur when firms cluster together spatially provide an economic

divestiture and its implications for innovation and productivity growth in u s telecommunications this study has sought to determine the impact of policy changes that led to the breakup of the monopoly structure of u s telecommunications on productivity and research activities of at t a simultaneous equations model is used to examine the relationship between research intensity market share firm size and total factor productivity tfp before and after divestiture the results show that the effect of divestiture on productivity is negative but that competition has a significantly positive effect contrary to popular argument competition led to significant increases in r d investment by at t the study also finds a strong and positive relationship between r d and productivity in the postdivestiture period marked by its absence in the predivestiture years scale economies remain important indicating the industry continues to favor large firms

modern telecommunications infrastructure and economic activity an empirical investigation this study focuses on the impact of telecommunication infrastructure on economic activity in two sectors flare insurance and real estate and manufacturing results indicate that modernization of the telephone network is associated with more fire insurance and real estate activity in the local region while it is not associated with more manufacturing once other determinants of growth are controlled for a doubling of optic fiber cable leads to at least a 10 and possibly a much higher increase in the level of economic activity in fire insurance and real estate this result implies that the level of modernization of a telecommunications network has an economically important influence on the amount of high tech white collar activity in a region while it is less important for manufacturing activity which typically employs less modern telecommunications services copyright 1995 by oxford university press

transaction costs telecommunications and the microeconomics of macroeconomic growth the sources of differences in growth rates across nations are unclear this observation constitutes one of the central intellectual challenges of our time why is the whole world not developed consequently a host of scholars offer various explanations for growth or nongrowth including cultural factors politics and economics 2 the objective of this article is to determine whether a link exists between transaction costs telecommunications and economic growth the article builds on recent research on the macroeconomic determinants of growth as well as on research regarding the significant economic effects of telecommunications on transaction costs it is organized as follows section i reviews the theory of transaction costs section ii the link between transaction costs and telecommunications section iii contains the empirical analysis and section iv some conclusions

advertising and us alcoholic beverage demand system wide estimates the effects of advertising on consumption of alcoholic beverages in the us are analysed the goal is to obtain evidence on the importance of advertising at the level of beverage demand beer wine spirits and for total consumption of alcohol per capita gallons of ethanol a three equation conditional demand system is estimated that includes own and cros beverage advertising as explanatory variables four models of the differential demand system are estimated including the rotterdam aid cbs and nbr models using annual us data for the period 1964 90 on beverage consumption prices expednitures and real advertising estimates are obtained of the complete matrix of own and cross elascities for each beverage price and advertising at the beverage level the results indicate a positive butr very small effect of advertising on beverage consumption with most of the impact due to wine advertising and non due to beer advertising there is no efect of advertising in the composite demand function for al

speeding up the internet regulation and investment in european fiber optic infrastructure in this paper we study how the coexistence of access regulations for legacy copper and fiber networks shapes the incentives to invest in network infrastructure to this end we develop a theoretical model explaining investment incentives by incumbent telecom operators and heterogeneous entrants and test its main predictions using panel data from 27 eu member states over the last decade our theoretical model extends the existing literature by among other things allowing for heterogeneous entrants in internet access markets as we consider both other telecom and cable tv operators as entrants in the empirical part we use a novel data set including information on physical fiber network investments legacy network access regulation and recently imposed fiber access regulations our main finding is that more stringent access regulations for both the legacy and the fiber networks harm investments by incumbent telecom operators but in line with our theoretical model do not affect cable tv operators

does human capital constrain the impact of foreign direct investment and remittances on economic growth in ghana this article empirically investigates whether human capital constrains the impact of foreign direct investment fdi and remittances on economic growth in ghana an economic growth model for ghana is specified and estimated using fully modified ordinary least squares fmols estimator and employing annual data spanning the period 1965 to 2008 empirical results indicate that fdi and remittances are key determinants of economic growth in ghana results indicate that human capital enhances the impact of fdi and remittances on economic growth although both government expenditure and trade openness are growth enhancing government expenditure appears to crowd out private investment empirical results also indicate that domestic inflationary pressures unstable political environment and volatile global economy exert a negative impact on economic growth in ghana

growth effects of currency mismatches evidence from emerging economies this article investigates empirically the effects of currency mismatches on economic growth and volatility of growth in emerging market economies using the arellano bond dynamic panel data approach the analyses provide evidence on the presence of adverse growth effects of currency mismatches this illustrates the crucial role played by foreign currency denominated debts in the propagation mechanism of contractionary depreciations in emerging economies in the last decade further evidence from estimations implies that the adverse effects of mismatches on growth and growth volatility are more pronounced with higher exchange rate fluctuations

mobile telecommunications and the impact on economic development using annual data from 192 countries over the period 1990 2007 we assess the impact of mobile telecommunications on economic growth we find that this impact is smaller for countries with a low mobile penetration usually low income countries while in low income countries the mobile telecommunications contribution to annual gdp growth is 0 11 for high income countries this is 0 20 the increasing returns from mobile adoption are also emerging when assessing the impact on productivity growth to promote mobile telecommunications penetration liberalization policies along with appropriate regulatory frameworks are recommended such policies should be pursued more forcefully in cases where serious shortcomings exist harald gruber and pantelis koutroumpis

roads to prosperity assessing the link between public capital and productivity does the positive correlation between infrastructure and productivity reflect causation if so in which direction the author finds that when growth in roads the largest component of infrastructure changes productivity growth changes disproportionately in u s industries with more vehicles that vehicle intensive industries benefit more from road building suggests that roads are productive at the margin however road investments do not appear unusually productive intuitively the interstate system was highly productive but a second one would not be road building thus explains much of the productivity slowdown through a one time unrepeatable productivity boost in the 1950s and 1960s

telecommunications infrastructure and economic development a simultaneous approach in diesem beitrag wird untersucht welchen einflus die telekommunikations infrastruktur auf die wirtschaftliche entwicklung ausubt diese wichtige frage hat im zusammenhang mit der diskussion um informationsautobahnen aktualitat erlangt in der vorliegenden studie wird der einflus der telekommunikations infrastruktur fur 21 oecdlander fur die vergangenen 20 jahre analysiert es wird ein strukturgleichungsmodell geschatzt in dem investitionen in die telekommunikations infrastruktur als endogene variable erfast werden und in einem mikromodell angebot und nachfrage nach telekommunikations investitionen spezifiziert werden das mikromodell wird dann zusammen mit der makro wachstumsgleichung geschatzt als ergebnis stellen die autoren dann eine positive kausalbeziehung zwischen telekommunikations investitionen und wirtschaftlicher entwicklung fest wenn eine kritische masse an telekommunikations infrastruktur existiert

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

telecommunications and economic growth a panel data approach telecommunication investment is increasingly identified as one with a strong potential to improve economic productivity and growth the objective of this study is to investigate the long run relationship between telecommunications infrastructure and economic growth using data from 22 oecd countries a dynamic panel data method is used for estimation which corrects for omitted variables bias of single equation cross section regression the fixed effects specification accounts for country specific differences in aggregate production functions the results show a significant and positive correlation between telecommunications infrastructure and growth after controlling for a number of other factors

externalities information costs and social benefit cost analysis for economic development an example from telecommunications the analytics of achieving a socially optimal allocation of investment resources has been a continuing problem in the field of economic development early work on this subject focused on externalities and on the need to include in the analysis a project s indirect promotional effects later research in what came to be called social benefit cost analysis sbca has added an emphasis on shadow prices on uncertainty and increasingly on income distribution effects 2 in principle these diverse concerns of social benefit cost analysis are complementary rather than competitive in the conditions of a less developed country ldc an investment project s side effects on income creation can be very significant 3 similarly an investment project s indirect impact on income distribution may also be substantial consequently an analysis incorporating externalities is necessary to take indirect social benefits and costs into account in practice however the more recent concerns of sbca have sometimes been accompanied by diminished interest in externalities 4 this paper presents an example that illustrates the importance of including externalities in considering both the efficiency and the equity consequences of investment choice our example analyzes the welfare effects of investment in telecommunications primarily telephone facilities in developing countries 5 investments that make available additional telephones in ldcs are often viewed as having welfare effects similar to increased availability of consumer durables like color television or air conditioning those goods are primarily an added convenience for the upper classes and their availability enlarges further the

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

financing off grid sustainable energy access for the poor this paper examines the role of public instruments in promoting private finance to achieve off grid sustainable energy access renewable energy technologies are increasingly becoming the cheapest solutions for off grid energy access the dramatic uptake of mobile phones in developing countries shows how quickly decentralized services can develop on a commercial basis under the right conditions and raises the prospect that private finance could also drive decentralized energy access for the poor indeed there are already a number of instances of clean energy solutions such as solar portable lights household biogas units or solar home systems that have managed to scale up through leveraging private finance however the experience gained from first generation market development projects show that in almost all cases significant public resources have been necessary to increase the affordability of clean energy technologies provide access to financing for the poor and remove non economic barriers such public interventions may be funded by international public finance domestic budgets and carbon finance despite mounting fiscal constraints facing governments worldwide the emergence of new sources of climate finance and the political momentum in support of energy subsidy reforms as well as new programming modalities offer opportunities to leverage additional resources to achieve universal energy access by 2030

optimal investment choice for developing countries rational theory and rational decision making abstract this paper analyzes a key feature of the conceptual process that governments use for making major investment choices in the developing countries both through their direct investment activities and through the special incentives e g credit foreign exchanage and tax subsidies they provide governments typically play a large role in the allocation of investment resources in ldc s consequently the public investment choice process has significant effects on the efficiency of capital formation and on economic growth in developing countries although the feature of the investment choice process on which we focus has important theoretical and practical implications it has so far received little analytical attention

advertising and consumer demand a differential approach abstract this paper uses a differential approach to derive demand equations to deal with advertising and show that the demand equations are natural extensions of the usual differential demand equations

on generic vs brand promotion of farm products in foreign markets farm groups and their governments spend millions of dollars each year advertising agricultural products in international markets intuitively country of origin or brand advertising should be more profitable than generic advertising in that it enhances product differentiation and reduces free riding however unlike generic advertising brand advertising decreases the demand for competing imports and lowers their prices when supplies are upward sloping in addition to inviting retaliation the decline in the prices of competing products erodes the price of the advertised product through second round or market feedback effects in this study we develop a generalized model for assessing the relative effectiveness of generic and brand promotion in the international market when products are differentiated by source origin and supplies are uncontrolled applying the model to us beef promotion in japan we find that when brand and generic advertising are equally efficient in the sense that they cause equiv

agricultural biotechnology and poverty reduction in low income countries summary while biotechnology innovation is concentrated in high income tier i countries international diffusion of innovations to improve the diet health and incomes of the poorest will be largely driven by tier ii innovators such as china and brazil adoption of beneficial biotechnologies in tier ii and tier iii countries will increase as more transgenic versions of conventionally grown varieties become available and as costs decline which in turn will depend upon regulatory approvals being needed only once for each transformation event and transaction costs for accessing technologies being minimized investments in higher education and intellectual property clearinghouse institutions can greatly facilitate technology transfer

a model of exchange rate dynamics this model treats the exchange rate as an asset price that depends on expectations concerning exogenous real and monetary factors that will affect relative prices and absolute price levels in future periods changes in exchange rates reflect both expected changes in these exogenous factors and changes in expectations occasioned by new information the model explains the random component in exchange rate behavior the source of divergences from purchasing power parity the anticipatory response of exchange rates to future expected disturbances and the causes of exchange rate overshooting

information multiprice search and cost of living index theory this paper derives the cost of living index of an individual who faces imperfect and costly information about prices traditional cost of living in dexes assume that the consumer passively accepts prices as given the authors derive a multiprice search model in which the consumer choos es the search strategy that minimizes the expected cost of buying a g iven level of utility in contrast to existing search models the mod el allows the consumer to change the allocation of expenditures among goods as information about prices changes and enables them to constr uct a cost of living index for an agent who searches across distribut ions of offer prices unlike traditional cost of living measures that ignore search behavior the searcher s cost of living index depends on search costs copyright 1987 by university of chicago press

the random utility hypothesis and inference in demand systems in this paper the authors examine the consequences of adopting the random utility hypothesis as an approach for randomizing a system of demand equations random utility models are appealing since they allow the usual assumption of deterministic utility maximizing behavior by each consumer to coexist with the apparent randomness across individuals that is exhibited by data their results show that the use of random utility models implies that the disturbances of the demand equations may not be homoskedastic but must be functions of prices and or income copyright 1989 by the econometric society

distributional impacts of generic advertising on related commodity markets a neglected aspect of the advertising spillover issue is the levy s role for example if two goods are substitutes a per unit levy on one of the goods to fund an advertising scheme will cause the demand for the other good to increase with upward sloping supply and abstracting from the advertising effect the price of the substitute good increases which confers a welfare benefit to producers of the competing product this welfare benefit is typically ignored when assessing advertising spillover e g kinnucan xiao and hsia piggott piggott and wright a related issue is that it is often assumed or implied that if advertising decreases the demand for a substitute good it will decrease the welfare of producers of that good e g green carman and mcmanus in reality competing producer welfare may increase or decrease depending inter alia on the strength of substitution effects between the advertised

network competition with income effects i generalize the workhorse model of network competition to include income effects in demand empirical work has shown income effects to be positive and statistically significant income effects deliver theoretical results consistent with regulatory concern about excessive termination rates unregulated network operators competing in nondiscriminatory retail contracts negotiate termination rates above cost for any positive income effect this also holds when operators discriminate between on net and off net calls if networks are differentiated operators profit from increasing termination rates above cost under second degree price discrimination if a sufficient share of consumers prefer on net off net contracts and their subscription demand is relatively inelastic