how does advertising depend on competition evidence from u s brewing the relationship between market structure and advertising has been extensively studied but has generated sharply opposing theoretical predictions as well as inconclusive empirical findings likely because of severe endogeneity concerns we exploit the 2008 merger of miller and coors in the u s brewing industry to examine how changes in local concentration affect firms advertising behavior well established regional preferences over beer brands and the sharp increase in concentration from the merger make this an excellent setting to analyze this question we find a significant positive effect of local market concentration on advertising expenditures a 100 point increase in the herfindahl hirschmann index measure of concentration increases advertising per capita by about 5 our findings shed light on how and when firms choose to deploy advertising the online appendix is available at https doi org 10 1287 mnsc 2017 2889 this paper was accepted by eric anderson marketing

political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

small firms and the merger mania empirical research has found an average or even superior performance of small firms this seems to be at variance with the secular concentration process and the recurrent merger waves this paper tries to integrate size and merger research higher profitability of small firms is explained by their incentive structure and shorter decision lags but also by lower wages and higher individual risk premia their faster growth in the eighties was in addition fostered by diversification of demand miniaturization of technology and a need for flexibility under uncertainty the merger wave on the other hand does not necessarily prove that large firms are superior managers and shareholders may be seduced by stockmarket optimism a sizeable industry of banks agents and lawyers have their own interests in mergers mergers may be important in declining markets and for the acquisition of technology on average mergers do not improve efficiency profits or internal growth small and large firms serve different purposes performance depends on the market incentives and technology the establishment growth and closure of small firms as well as mergers are attempts to find the optimal organization for utility maximization in a world of severe uncertainty and diverse needs

estimating dynamic games of oligopolistic competition an experimental investigation we evaluate standard assumptions in the estimation of dynamic oligopoly models with laboratory data using an entry exit game we estimate structural parameters under the assumption that the data are generated by a markov perfect equilibrium and subsequently predict counterfactual behavior if behavior was collusive however the assumption would be violated and one would mispredict counterfactuals the laboratory allows us to compare predicted behavior to true counterfactuals implemented as treatments our main finding is that prediction errors due to collusion are modest in size we also document a different deviation from equilibrium behavior inertia that can lead to large prediction errors

market share market value and innovation in a panel of british manufacturing firms this paper examines the empirical relationship between technological innovations market share and stock market value new developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity we find a robust and positive effect of market share on observable headcounts of innovations and patents although increased product market competition in the industry tends to stimulate innovative activity furthermore the impact of innovation on market value is larger for firms with higher market shares we argue that our results are consistent with models where high market share firms have incentives to pre emptively innovate

durable goods theory for real world markets the early 1970s witnessed three major advances in durable goods theory swan 1970 1971 and sieper and swan 1973 on optimal durability coase 1972 on time inconsistency and akerlof 1970 on adverse selection this paper surveys durable goods theory starting with these three contributions where much of the focus is on recent literature and on models that explain real world phenomena in addition to the ideas found in the contributions of swan coase and akerlof topics covered include why producers sometimes practice planned obsolescence the role of adverse selection in new car leasing and reasons for aftermarket monopolization

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

the impact of subsidies on x efficiency in ldc industry theory and an empirical test the x inefficiency costs of protection and industrial concentration have been topics of considerable interest in the literature on economic development balassa 1975 and bergsman 1974 for example have argued that protection by increasing x inefficiency generates a major welfare cost which is not captured by traditional costs of protection calculations and white 1976 has examined the relationship between inappropriate factor intensities which he associates with xinefficiency and industrial concentration the common theme which emerges from each of these studies is that public policy can have a major impact on economic performance not only by influencing factor proportions but also by influencing the intensity with which a non measurable input x efficiency is employed despite the intuitive appeal of the x efficiency concept there have been very few empirical tests of this hypothesis this partly reflects the imprecise nature of the basic concept but also the lack of adequate micro economic data x efficiency clearly relates to efficiency within firms so that the most appropriate tests would rely on data on firm level efficiency in this paper we propose a direct test of the x efficiency hypothesis using firm level data we build on previous work by corden 1970 1974 and martin 1978 who showed how to model x efficiency effects using the concept of managerial leisure we extend these simple models of managerial behavior emphasizing the role of the external managerial labor market the model is then used to explore the relationship between changes in public policy managerial effort and x inefficiency certain predictions of the model are tested using cross section data from a survey of firms in two subsidized industries in ghana efficiency indices are computed on the basis of a translog frontier production function variations in relative efficiency are then correlated with several explanatory variables including the presence or absence of subsidy payments to the firm subsidized firms in both industries are found to exhibit higher relative levels of x inefficiency

a new industrial strategy preparing europe for the turn of the century abstract this paper argues that the present significance of the forces of transnationalism centripetalism and short termism which relate back to an underlying concentration of power in modern economies provides strong grounds for developing a set of coherent industrial strategies within europe the paper goes on to argue that much can be learned from the japanese experience not so much in terms of the details of their strategy but more in terms of their general approach but such strategies have to be informed by a vision of the future europe the suggestion made on grounds of both democracy and efficiency is that we should not support national or european champions but rather aim for an economy in which relatively small dynamic enterprises can survive and prosper

a bargaining theory of inefficient redistribution policies when two policies are available to achieve the same goal why is the relatively inefficient one often observed we address this question in the context of policies used to redistribute income towards special interest groups sigs in a two stage model in the first stage the set of constraints on policy instruments is chosen in the second stage the government and sigs bargain over the level of the available transfer policies restrictions on the use of efficient policies and the use of inefficient ones reduce the surplus over which sigs and governments can bargain there is however an offsetting effect not generally recognized in models of inefficient redistribution an improvement in the government s bargaining position which allows it to capture a larger share of the surplus we show that this positive effect for the government dominates under plausible conditions inefficient policies are the equilibrium outcome under alternative first stage mechanisms for policy selection such as the election of policymakers or in some cases bargaining between sigs and the government jel classification d7 f13 c70 h23

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

pioneers imitators and generics a simulation model of schumpeterian competition a computer simulation model in the tradition of evolutionary models of technical change is developed in this paper it focuses on r d competition in new product introductions and is based on data for the u s pharmaceutical industry during the 1970s the sensitivity of innovation levels to the rate of generic competition regulatory review time and patent life is examined in the computer simulation experiments these factors are found to have significant long run effects on industry structure and innovation levels

the economics of predation what drives pricing when there is learning by doing predatory pricing a deliberate strategy of pricing aggressively in order to eliminate competitors is one of the more contentious areas of antitrust policy and its existence and efficacy are widely debated the purpose of this paper is to formally characterize predatory pricing in a modern industry dynamics framework that endogenizes competitive advantage and industry structure our framework encompasses important phenomena such as learning by doing network effects switching costs dynamic demand and certain types of adjustment costs due to its prominent role in legal cases involving alleged predation we examine learning by doing in more detail we first show that predation like behavior arises routinely in our learning by doing model equilibria involving predation like behavior typically coexist with equilibria involving much less aggressive pricing to disentangle predatory pricing from mere competition for efficiency on a learning curve we next decompose the equilibrium pricing condition and develop alternative characterizations of a firm s predatory pricing incentives we finally measure the impact of these incentives on industry structure conduct and performance we show that forcing a firm to ignore the predatory incentives in setting its price can have a large impact and that this impact stems from eliminating equilibria with predation like behavior along with the predation like behavior however a fair amount of competition for the market is eliminated

european industrial policy and industrial policy in europe among the most vexing problems facing those concerned with the formation and implementation of industrial policy is deciding what it is why it exists and whether there ought to be more or less of it than exists at present any random collection of six economists is sure to produce at least a dozen different opinions on the subject not least because many economists have trouble in reconciling their gut reaction that industrial policy should not exist with the obvious fact that it does the vigorous debate that now rages between those who believe that industrial policy should and those that believe that it should not be consciously pursued by gov ernments is but a pale reflection of the true diversity of opinion that exists on the subject even amongst that group of economists who are enthusiastic about industrial policy the range of specific policy proposals that have been put forth is enormous and the debate within this group is no less active and acrimonious than that between the pros and antis following what is a clear if unintended character istic of many of the contributions to this debate this paper is devoted to complicating ratherthan simpli fying the issues in particular the question that we shall explore is whether there might be a type of industrial policy which should be applied at a supra national level although this question has been actively discussed in europe since the signing of the treaty of rome at least the revival of free marketideologies the looming menace of 1992 and recent discussions of european political union have all added a good deal of fuel to the fire more than a few ambitious european politicians have launched initiatives that apparently usurp national policy prerogatives and the response by many national governments has become increasingly angry and strident traditional liberalism struggled for years to define the boundaries of the state in terms of the

excess capacity and rationalisation in the west european synthetic fibre industry this paper examines the process of rationalisation in an international oligopoly confronted by persistent excess capacity and losses in particular it analyses the pattern of capacity reduction plant closures and product area withdrawals as the firms strove to restore their profitability it compares the actual pattern of rationalisation achieved between 1975 and 1981 with the predicted patterns of rationalisation based on theory both under a cartel with government intervention and in a competitive solution free from such intervention the paper is divided into four sections the first contains a brief outline of developments in the industry 1967 80 the second section examines the producer cartel and government intervention framework the third section is devoted to the development of a predicted competitive pattern of rationalisation finally the fourth section examines the actual pattern of rationalisation and compares this with both the cartel plus government intervention and the competitive pattern predictions

online content pricing purchase and rental markets digitization of content is changing how consumers and firms use purchase and rental markets low transaction costs make accessing content easier for consumers digital technology enables firms to create nondurable rental versions of their content and to restrict content to the purchasing consumer effectively shutting down resale markets to empirically analyze the interaction of purchase and rental markets i design a preference measurement tool to recover consumers intertemporal preferences through current period choices alone i then use these preferences to solve for a dynamic equilibrium between consumers and the firm in the context of the online home video market i find that when the firm is able to commit to holding prices fixed forever providing content through the purchase market alone is sufficient however when the firm is unable to commit it should serve both purchase and rental markets canonical theory models would predict exclusive rentals but the purchase option enables indirect price discrimination in practice i also find that when consumers place a premium on accessing new content they are less likely to intertemporally substitute thereby increasing the firm s pricing power consistent with theory commitment to future prices increases profits considerably this finding supports the rigid pricing structure of such retailers as apple despite studios push toward more pricing flexibility

competition in durable goods markets the strategic consequences of leasing and selling in marketing durable goods manufacturers use varying degrees of leasing and selling to consumers e g cars photo copiers personal computers airplanes etc the question that this raises is whether the distinction between leases and sales is simply one of price or whether the proportion of leases and sales effects a firm s ability to compete in the market in this paper we use two approaches to argue that leasing and selling create strategic consequences that extend beyond prices first we develop a stylized theoretical model that shows that the optimal proportion of leases and sales depends on the competitiveness of the market and on the inherent reliability of the firm s product and second we find support for the implications of our theoretical model with data from the automobile industry the u s automobile industry has seen a large increase in leasing over the last five years however the extent to which leasing has been embraced varies widely across manufacturers for example in 1993 the sport utility segment had the following lease percentages ford explorer 29 jeep grand cherokee 24 toyota 4 runner 11 and chevrolet blazer 9 in addition manufacturers often vary lease percentages across models for example in 1993 ford leased 22 of its crown victoria model 35 of its taurus model and 42 of its probe model a popular argument for why we see these differences is that higher priced cars are leased more often because leasing makes them more affordable however this rationale is not compelling in the face of our data for example the ford probe was priced significantly lower than the crown victoria and yet it was leased almost twice as often to develop a better understanding of why we observe differences in the proportion of leasing we develop a two period model of a duopoly in which each manufacturer chooses its optimal quantity and the fraction of units it wants to lease we find that in equilibrium neither firm leases all its units either they use a mix of leasing and selling or they use only selling our analysis suggests that the fraction of leased cars decreases as the manufacturers products become more similar and the competition between them increases the intuition for this result is that a higher fraction of leases puts the firm at a competitive disadvantage in the future this occurs because unlike firms that sell their product firms that lease are at a price disadvantage another important finding in this paper is that the extent of leasing chosen by a manufacturer depends on the reliability of its product in particular all else being equal the lower a product s reliability the lower its proportion of leases within the context of the automobile industry this suggests that more expensive cars may be leased more often because they are of higher quality and not necessarily because they are more expensive finally we test the implications of our theoretical model with data from the u s automobile market in particular for 1993 model year cars we develop a measure of reliability using data from consumer reports in addition we develop a measure of the extent of competition in each segment of the automobile market we support our hypotheses by finding that the extent to which a car model is leased depends strongly on its predicted reliability and on the competitive intensity within the segment

assessing the impact of unilateral trade policies eba and agoa on african beneficiaries exports using matching econometrics the existing literature studying the impact of non reciprocal preferential trade agreements nrptas assumes implicitly nrptas are non randomly assigned without showing the evidence of that using a matching methodology this paper investigates whether the african growth and opportunity act agoa and the everything but arms eba unilateral trade concessions have had an impact and in what magnitude on the exports of african beneficiary countries in the light of the evidence of the non random nature endogeneity of nrptas methodologically previous studies using the matching procedure focused on bi or multilateral trade agreements our work focuses on nrptas that depend only on donors conditions accordingly we show that for nrptas gravity covariates cannot be used for the matching procedure we propose to use political variables as determinants for obtaining non reciprocal trade preferences in order to address the endogenous nature of nrpta assignment our main results confirm that a country becomes eligible for a nrpta only when it meets certain conditions defined by their donors such as political stability and economic regulation for agoa and freedom of expression and human development for eba results also show that both agoa and eba policies have had a positive impact on african beneficiary countries exports to nrpta s providers even if the magnitude impact of eba is significantly lower than that of agoa

protection for sale in a developing country democracy vs dictatorship for a genuine small open economy that has experienced both dictatorship and democracy we find support for the predictions of the grossman helpman 1994 protection for sale model in contrast to previous studies we use various protection measures including tariffs the direct measure of the theoretical model and perform both single year and panel regressions using turkish industry level data the government s weight on welfare is estimated to be much larger than that on contributions more importantly we find that this weight is generally higher for the democratic regime than for dictatorship

computable markov perfect industry dynamics we provide a general model of dynamic competition in an oligopolistic industry with investment entry andexit toensurethatthereexistsacomputationallytractablemarkov perfectequilibrium we introduce firm heterogeneity in the form of randomly drawn privately known scrap values and setup costs into the model our game of incomplete information always has an equilibrium in cutoff entry exit strategies in contrast the existence of an equilibrium in the ericson and pakes model of industry dynamics requires admissibility of mixed entry exit strategies contrary to the assertion in their article that existing algorithms cannot cope with in addition we provide a condition on the model s primitives that ensures that the equilibrium is in pure investment strategies building on this basic existence result we first show that a symmetric equilibrium exists under appropriate assumptions on the model s primitives second we show that as the distribution of the random scrap values setup costs becomes degenerate equilibria in cutoff entry exit strategies converge to equilibria in mixed entry exit strategies of the game of complete information

mergers and merger policy the impact of the merger alan hughes take over activity in the united kingdom mervyn a king the market for corporate control the divestment option mike wright et al mergers take overs and the enforcement of profit maximization dieter r helm shareholder wealth effects of uk take overs implications for merger policy julian r franks and robert s harris the empirical analysis of market structure and performance james a fairburn and paul a geroski the evolution of merger policy in britain james a fairburn merger policy in the us george a hay and rod j nydam merger policy current policy concerns sir gordon borrie merger policy certainty or lottery john swift qc do we need a merger policy kenneth d george myths and merger policy stephen c littlechild appendix the commission s merger reports

spatial price equilibrium with information asymmetry in quality and minimum quality standards abstract a spatial price equilibrium model with information asymmetry in quality is developed in both static and dynamic versions producers at the supply markets are aware of the quality of their products whereas consumers located at the demand markets are aware only of the average quality of the products that are shipped to their demand markets minimum quality standards are also captured in order to assess the impacts of such policy interventions we establish qualitative results in the form of existence uniqueness and stability analysis an algorithm is proposed along with a convergence proof it is then utilized to compute solutions to a spectrum of spatial price equilibrium numerical examples in order to explore the impacts of information asymmetry under different scenarios the numerical examples which are of quite general functional forms reveal that as the number of supply markets increases the anonymizing effect leads to a decrease in the average quality on the other hand as the number of demand markets increases the pressure to improve quality increases and the average quality increases finally we demonstrate that after the imposition of minimum quality standards the average quality at the demand markets increases and the prices also increase

upstream innovation and product variety in the u s home pc market this article investigates the welfare implications of the rapid innovation in central processing units cpus and asks whether it results in inefficient elimination of basic personal computer pc products i analyse a game in which firms make multiple discrete product choices and tackle challenges such as partial identification and sample selection estimation results demonstrate that the demand for pcs is highly segmented and that fixed costs consume a substantial portion of the per unit producer profit the estimated model implies that intel s introduction of its pentium m chip contributed significantly to the growth of the mobile pc segment and to consumer welfare the lion s share of the benefits to consumers was enjoyed by the 20 least price sensitive consumers i also find that the pentium m crowded out the pentium iii and pentium 4 technologies and that the benefits to consumers from keeping those older products on the shelf would have been comparable to the added fixed costs while total welfare cannot be increased by keeping older technologies on the shelf such a policy would have allowed the benefits from innovation to trickle down to price sensitive households improving their access to mobile computing

the distributive impact of land markets in uganda abstract this article presents first hand evidence about land distribution and the impact of land markets in central uganda this area is characterized by unequal distribution of land inheritance rural rural migration and active land markets we show that land markets and particularly land purchases tend to reduce the initial inequality in the initial inherited distribution of land land purchases by landless farmers in their native village represent an important part of this adjustment

indigenous land rights in sub saharan africa appropriation security and investment demand abstract we discuss the links between rights appropriation tenure security and investment demand in sub saharan africa common assertions regarding indigenous tenure are 1 a insecurity of tenure leads to suboptimal investment incentives and 2 b appropriation of land rights in the public domain is rent dissipating we argue that land use and investment decisions among african farmers often have two motives productivity and rights appropriation the usual assertions thus seem contradictory we offer a conceptual model to show that indigenous tenure may provide equal or higher investment incentives than private rights and may promote modes of rights appropriation that are productive rather than wasteful

distortion triggered lobbying and welfare a contribution to the theory of directly unproductive profit seeking activities abstract the paper considers the normative implications of lobbying for non exclusive income generated by an exogenously specified policy intervention such lobbying activities are a subset of what bhagwati has termed directly unproductive profit seeking dup activities it is demonstrated that the welfare effects of lobbying triggered by a policy distortion depend critically on whether the direct impact of the policy constraint is on price or an quantity it is also shown that several standard comparative static welfare analyses of alternative policy distorted states are significantly affected once the policy intervention is assumed to be continuously accompanied by lobbying for the associated non exclusive income

r d appropriability opportunity and market structure new evidence on some schumpeterian hypotheses one of the largest bodies of literature in the field of industrial organization is devoted to the interpretation and testing of several hypotheses advanced by joseph schumpeter 1950 concerning innovation and industrial market structure one set of hypotheses focuses on the role of firm size as a determinant of r d spending and the rate of technological advance another set focuses on the effect of market concentration on r d and technological advance in this paper we reexamine the latter set of hypotheses at the industry level using new data on r d appropriability and technological opportunity collected by levin et al 1984 in a survey of r d executives in 130 industries

micro heterogeneity of firms and the stability of industrial growth abstract in the micro macro m m model moses real swedish firms make independent decisions in markets schumpeterian innovative activities and wicksellian capital market disequilibria generate a growth cycle production and investment decisions in firms are dynamically coordinated by markets for products labor and capital under different market regimes as to speed intensity of competitive processes and of innovative activity by varying market regime ceteris par leux long term growth rates of the economy can be generated at cliffe as much as between the industrial countries during the last 50 years high speed market processes increase output growth for long periods but make the model economy sensitive to disturbances that eventually generate a severe depression simulation results suggest the importance for stable macroeconomic growth of a steady input of innovative technical change through new investment new entry and exit to preserve micro diversity of structures

intertemporal price discrimination with complementary products e books and e readers this paper studies intertemporal price discrimination ipd with complementary products in the context of e readers and e books using individual level data 2008 2012 i estimate a dynamic demand

innovation and technology diffusion in competitive supply chains abstract innovations in consumer products frequently rely on technological advances across multiple tiers in a supply chain considering the consumer market demand and downstream investment conditions as input we model a game in a two tier supply chain where downstream firms choose to adopt different levels of an upstream technology and an upstream technology leader determines its pricing policy we identify two necessary but distinct elements for the successful development adoption and diffusion of upstream technologies that are sold to lower tiers as components within final products 1 the level of technology demanded by the market we develop a measure technological potential which describes the highest level of an upstream technology demanded by consumer markets 2 a sufficiently rich return to an upstream innovator as a function of different levels of technology from these two elements we show that the relative magnitudes of two competing sets of consumer market factors determine the technological potential whereas the overall magnitude of the factors in both sets determines the return to the upstream developer we discuss how this difference in consumer market factors influence on these two elements may determine how different technologies fare in the supply chain our results have managerial implications for investors in research and development project selection in identifying profitable technologies that are also demanded at higher capability levels and for governments in defining more targeted public policies for example in choosing the right tier of a supply chain to provide subsidies to encourage market support for certain technologies

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

tenure security investment and productivity in gambian agriculture a generalized probit analysis the determinants of investment input use and productivity are investigated under customary tenure in peri urban areas of the gambia a structural model is specified to investigate the role of tenure security on farm investments and input use and thereby on yield testing of the structural form hypotheses requires simultaneous equation estimation containing both continuous and discrete endogenous variables the model is estimated as a feasible generalized least squares amemiya s generalized probit some of the positive relationships hypothesized between tenure security investment and yields are corroborated in particular tenure security is found to enhance long term investments which in turn enhance yields

a framework for dynamic oligopoly in concentrated industries in this article we introduce a new computationally tractable framework for ericson and pakes style dynamic oligopoly models that overcomes the computational complexity involved in computing markov perfect equilibrium mpe first we define a new equilibrium concept that we call moment based markov equilibrium mme in which firms keep track of their own state the detailed state of dominant firms and few moments of the distribution of fringe firms states second we provide guidelines to use mme in applied work and illustrate with an application how it can endogenize the market structure in a dynamic industry model even with hundreds of firms third we develop a series of results that provide support for using mme as an approximation we present numerical experiments showing that mme approximates mpe for important classes of models then we introduce novel unilateral deviation error bounds that can be used to test the accuracy of mme as an approximation in large scale settings overall our new framework opens the door to study new issues in industry dynamics

forest tenure reform in china a choice experiment on farmers property rights preferences decentralization experiments are currently underway in the chinese forestry sector however researchers and policy makers tend to ignore a key question what do forest farmers really want from reform this paper addresses this question using a survey based choice experiment to investigate farmers preferences for various property rights attributes of a forestland contract we found that farmers are highly concerned with the types of rights provided by a contract reducing perceived risks of contract termination and introducing a priority right for the renewal of an existing contract significantly increases farmers marginal willingness to pay for a forest contract

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

divestiture requirements as a tool for competition policy a case from the swedish beer market we investigate the effect of divestitures on prices and welfare following the carlsberg pripps merger in the swedish beer market both difference in difference estimation and simulations using a random coefficients logit model suggest that divestitures are important for dampening price increases prices of divested brands fall by around 3 and the predicted price increase for carlsberg falls from 3 to 1 6 as a result of the divestitures to guide practice on divestitures we investigate the role of the recipient and the number and characteristics of the divested products by simulating post merger outcomes for all relevant cases we find that in this setting with large multiproduct firms the competition authority s most effective means to dampen adverse post merger outcomes are to aim for a small recipient firm and attain a large number of divested products enforcing larger divestitures in terms of market share and raising the average cross price elasticity between the merging parties divested and retained products strengthen the dampening effect further

learning by doing organizational forgetting and industry dynamics learning by doing and organizational forgetting have been shown to be important in a variety of industrial settings this paper provides a general model of dynamic competition that accounts for these economic fundamentals and shows how they shape industry structure and dynamics previously obtained results regarding the dominance properties of flrms pricing behavior no longer hold in this more general setting we show that forgetting does not simply negate learning rather learning and forgetting are distinct economic forces in particular a model with learning and forgetting can give rise to aggressive pricing behavior market dominance and multiple equilibria whereas a model with learning alone cannot

measuring the sensitivity of parameter estimates to estimation moments we propose a local measure of the relationship between parameter estimates and the moments of the data they depend on our measure can be computed at negligible cost even for complex structural models we argue that reporting this measure can increase the transparency of structural estimates making it easier for readers to predict the way violations of identifying assumptions would affect the results when the key assumptions are orthogonality between error terms and excluded instruments we show that our measure provides a natural extension of the omitted variables bias formula for nonlinear models we illustrate with applications to published articles in several fields of economics

differing patterns of industrial dynamics new zealand ohio and sweden 1978 1994 new zealand ohio and sweden have experienced sharply divergent macroeconomic developments since the early 1970s during the 1980s new zealand went from being the most heavily regulated and protectionist oecd country to one of the least regulated and most open economies in the world ohio suffered severe economic downturns when its major industries steel automobiles and machinery went through devastating crises since then a major restructuring has taken place and manufacturing output exports and employment have generally grown faster than in the united states as a whole sweden had an outstanding industrial growth record for several decades until the mid 1970s but then suffered economic setbacks from which it has not yet fully recovered industrial output declined for several years resumed growth in the early 1980s but then stagnated again in the early 1990s

the impact of landownership security theory and evidence from thailand this article develops a model of farmers land acquisition and investment decisions the model clarifies the relation between land values landownership security and credit markets the risk of eviction of untitled lands and the advantages in access to credit associated with titled land are shown to account for the higher price of titled land furthermore observed land prices are distorted when credit is priced below the opportunity cost of capital and the risk of eviction is positive therefore social benefit analysis of land titling cannot utilize land prices without correcting for these distortions the article offers formulas for performing such corrections econometric estimates of the value of legal ownership in three provinces of thailand using cross section land price data show a statistically significant effect of ownership security on land price the econometric estimates of ownership security are combined with the formulas generated by the model to yield estimates of the social benefit of land titling in the three provinces the analysis implies that granting full legal ownership to squatters can be a socially beneficial policy in many provinces

demand for differentiated durable products the case of the u s computer printer market i introduction this paper aims to provide a theoretical and empirical description of consumer behavior in a dynamic market for differentiated durable goods the computer hardware industry serves as an example of the type of market we consider markets for computer systems and components as well as for many other high technology products exhibit some striking similarities that are of particular concern for an empirical economist as follows products are differentiated in multiple dimensions in addition to price products are durable yielding consumption services over multiple periods product quality rapidly improves over time empirical work on estimating differentiated product demand systems has been dominated by static discrete choice models with random utility see berry levinsohn and pakes 1995 goldberg 1995 and nevo 2001 among others however markets for durable goods exhibit several features at odds with their assumption of myopic consumer behavior first traditional static discrete choice models implicitly assume that consumers participate in the market every period choosing one of the available products or an outside option thus the fraction of consumers who do not buy any product in a given period could only be explained by the high value they assign to the outside alternative for durable goods however purchases are made infrequently and result in a consumer s exiting the market for a significant period of time hence the model needs to account for consumers outflow from the market arising from their purchase decisions second a static framework may give a misleading picture of the aggregate sales time pattern in a dynamic industry in many markets for durable products it is not uncommon to see rapidly improving product quality and falling prices given any reasonable set of consumer preferences over the product characteristics space static discrete choice models for such an industry will tend to predict an upward trend in aggregate sales this fails to account for a variety of patterns commonly seen in the data third the evolution of product quality leads to the possibility of intertemporal demand substitution by forgoing a current purchase the consumer retains the option to buy a potentially better product in the future hence the decision of when to buy may be just as important for consumers as the decision of what to buy this trade off cannot be accounted for in the static framework the purpose of this paper is to remedy these shortcomings of static discrete choice models in durable goods markets with particular attention paid to technological change and the dynamics of new products adoption the paper presents a dynamic model of consumer demand for differentiated durable products that explicitly accounts for consumers expectations of future product quality and consumers outflow from the market that arises endogenously from their purchase decisions in this model the consumer faces a sequence of static discrete choice problems over a non stationary choice set we show that for a subclass of random utility models which include the multinomial logit and the mcfadden 1978 generalized extreme value gev model there exists a scalar valued sufficient statistic that determines the value of the option to postpone the purchase this allows us to model industry evolution over a vastly reduced state space and to formalize the consumer s decision of when to buy as an optimal stopping problem a solution to that problem defines the hazard rate of product adoptions while the nested discrete choice model determines the alternative specific purchase probabilities integrating individual decisions over the population distribution generates rich dynamics of aggregate and product level sales the paper proceeds to present monte carlo evidence that ignoring the time dimension of consumer choice will induce a downward bias in the estimates of consumer preferences over quality sometimes reversing the sign of the coefficients

a critical assessment of the political preference function approach in agricultural economics abstract the policy preference function ppf approach has become popular with economists seeking to explain the origin of government policies in this paper a distinction between positive and normative work with the ppf concept is made positive work is shown to suffer from a variety of shortcomings including the misspecification of traditional ppfs and the failure to consider the importance of institutions constraints and the interaction between different commodity policies these weaknesses are reflected in the counter intuitive results of a simple ppf model designed to reflect the interaction between the ec s wheat and barley policies furthermore it is demonstrated that ppf weights change as a result of both political preferences and market parameters hence changes in ppf weights cannot be attributed to changes in preferences alone test of the axioms of revealed preference theory are used to demonstrate that even though ppf weights derived for the ec s wheat and barley markets have fluctuated considerably since the early 1970s we are not able to conclude that there has been a shift in political preferences the paper concludes with some comments about the use of ppfs in a normative framework the underlying assumption that policy makers optimise seems not surprisingly often to lead practitioners to the conclusion that observed policies are not so bad after all economists should also beware of the tendency to overlook possible differences between the ppf and the social welfare function

leaders and followers perspectives on the nordic model and the economics of innovation abstract what kinds of social and economic systems are most conducive to innovation we formulate a simple model in which countries can close the gap with the technological leader but where the cost of doing so may be so high that the country chooses to remain laggards observed disparities in productivity may be the result of a recognition that the cost of closing the gap exceeds benefit and there may therefore exist an international equilibrium in which there are leaders and followers even if it is granted that the united states is the leader and scandinavia are followers there are theoretical grounds for arguing that the nordic model may in fact be better for innovation suggesting that if the us adopted some of the nordic institutions innovations would be higher and societal welfare would be improved even more

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

property rights regimes in complex fishery management systems a choice experiment application the tonle sap wetland fishery was previously divided into 3 different management zones for conservation open access fishing and private fishing rights to the private fishing zone involved auctions for exclusive rights to temporarily designated plots this paper aims to explore the auction based system by investigating how this fishery management system affects different groups of small scale fishermen and how different characteristics of the fishing lots affect the bidding a choice experiment approach was used to model fishermen s choices in a hypothetical auction market by offering fishermen the choice between purchasing different potential fishing lots and a no purchase option implying fishing only in the communal fishing grounds the preferred latent class model with two segments of fishermen showed that the bidding behavior of the more privileged group out competes the other group irrespective of the lot characteristics this result suggests that it is unlikely that the redesign of the auction system itself would be an effective way of securing access to fishing resources for the two observed groups of fishermen this implies that open access fishing grounds and or other regulations may also be needed in future management as they serve an important role for the poorer segments

a dynamic model of competitive entry response i develop a dynamic investment game with a memoryless research and development process in which an incumbent and an entrant can invest in a new technology and the entrant can also invest in the old technology i show that an increase in the probability of successfully implementing a technology can cause the incumbent to reduce its investment under certain conditions if the success probability is high the incumbent allows the entrant to win the new technology so that firms reach an equilibrium in which they use different technologies and threats of retaliation prevent attacks but if the success probability is low such an equilibrium cannot be sustained and both firms eventually implement both technologies

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

land without opportunity public goods investment and land markets in rural mexico i address the question when do peasants on collectively owned land demand private titles by analyzing a land titling program in mexico i argue mexico s punishment regime in the 20th century influences the capacity of peasants to invest in a private title in the 21st century where commercial farmers were more powerful the state issued fewer land grants to peasants and invested in public goods to capture electoral support from commercial farmers fewer peasants received land in these areas but those who did had access to public goods that reduced socioeconomic marginalization and increased their capacity to invest in a private title using a technique called causal mediation analysis i show that a higher percentage of arable land granted to the peasant sector during the 20th century directly reduces the likelihood of land privatization in the 21st century and indirectly reduces privatization through farm productivity and human development levels

land tenure security and investment incentives puzzling evidence from burkina faso abstract the commonsense logic associating higher land security and higher incentives to invest has been recently called into question in the case of african agriculture to be meaningful empirical tests have to be carefully designed so as to take account of the possible endogeneity of the land rights variable this is done in this paper by applying suitable econometric methods to the original data collected in burkina faso the results obtained cast doubt on the existence of a systematic influence of land tenure security on investment by reviewing the justifications for scepticism in the recent literature we are able to conclude that the traditional village order where it exists provides the basic land rights required to stimulate small scale investment

dynamic demand for new and used durable goods without physical depreciation the case of japanese video games we develop a new dynamic demand model for new and used durable goods and quantify the impact of used goods markets on producers profits and consumer welfare

competition imitation and growth with step by step innovation is more intense product market competition and imitation good or bad for growth this question is addressed in the context of an endogenous growth model with step by step innovations in which technological laggards must first catch up with the leading edge technology before battling for technological leadership in the future in contrast to earlier schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate here we find first that the usual schumpeterian effect of more intense product market competition pmc is almost always outweighed by the increased incentive for firms to innovate in order to escape competition so that pmc has a positive effect on growth second that a little imitation is almost always growth enhancing as it promotes more frequent neck and neck competition but too much imitation is unambiguously growth reducing the model thus points to complementary roles for competition anti trust policy and patent policy

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

long run market configurations in a dynamic quality ladder model with externalities abstract we study the impact of standard setting by introducing an externality that increases product compatibility in the presence of asymmetric returns to investment in a dynamic quality ladder type model we classify the long run multi modal probability distributions over different market structures that arise from this model in some cases the lagging firm may remain in the market in the long run depending on the strength of the externality in the case where only the laggard invests in compatibility it is possible that the laggard becomes a monopolist if the leader has a relatively low r d capability and the two firms are almost symmetric in this same regard this variety of multi modal long run distributions may have important consequences for the estimation and the simulation of this class of dynamic models

the dynamics of bertrand price competition with cost reducing investments the authors would like to acknowledge the funding received from the danish council for independent research and innovation fund denmark fedor iskhakov gratefully acknowledges the support from the australian research council projects ce110001029 and fl110100247 as well as from frisch centre project 1307 financed by the ministry of labor norway

dynamics in research joint ventures and r d collaborations abstract we investigate the short and long term effects of different types of r d collaborations on firms consumers and the industry to that end we consider a differentiated product market in which firms compete a la bertrand and invest in process innovation in order to lower the production cost over time investments are stochastic and there can be cartelization or competition strategies among firms at the moment of making the decision on the amount to invest in r d our results show that in equilibrium the long run welfare is larger under a research joint venture than under other environments discounted present value profits increase with the level of the spillover but there are asymmetries that depend on the firms asymmetry on marginal costs

endogenous lobby formation and endogenous protection a long run model of trade policy determination this paper provides a theory of lobby formation within a framework in which trade policy is determined through political contributions under certain conditions free trade turns out to be an equilibrium outcome either when the government has a high affinity for political contributions or when it cares a great deal about social welfare moreover greater inequality in asset distribution results in a greater number of lobbies and in most cases more protection for each of these lobbies furthermore industries with higher levels of capital stock fewer capitalists more inelastic demand and smaller geographical dispersion are the ones that get organized

nordic economic policies in the 1970s and 1980s although the nordic countries are small open economies they were able to benefit considerably from the expansion of the world economy during the golden age of the 1950s and 1960s they achieved industrial diversification and consolidated welfare state reforms throughout this period several economic policy routines were institutionalized these routines may be analyzed as parts of a specific economic policy model determined by the economic structure and the pattern of political mobilization it seems more fruitful to distinguish five such models rather than to use the generalizing notion of a scandinavian model in the 1970s the world economic crisis posed new challenges for the nordic countries in the first phase of the crisis economic policies continued to operate in accordance with the established routines but structural problems new patterns of political mobilization and new forms of external pressure forced governments to shift towards austerity policies in the late 1970s the extent and the specificities of these shifts are compared and the degree to which the economic policy models have changed assessed such an analysis is a first step to answer some crucial questions now facing the nordic countries was their flexible adjustment merely the result of favorable conditions during the 1960s or is it a permanent trait are they now trapped between large industrial nations and dynamic newly industrializingcountries if so what will be the fate of their advanced welfare sectors

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

dynamics of consumer demand for new durable goods most new consumer durable goods experience rapid prices declines and quality improvements suggesting the importance of modeling dynamics this paper specifies a dynamic model of consumer preferences for new durable goods with persistently heterogeneous consumer tastes rational expectations and repeat purchases over time we estimate the model on the digital camcorder industry using panel data on prices sales and characteristics we find that the 1 year elasticity in response to a transitory industrywide price shock is about 25 percent less than the 1 month elasticity standard cost of living indices overstate welfare gain in later periods due to a changing composition of buyers

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

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

the political economy of productivity thai agricultural development 1880 1975 the economic history of thailand between 1880 and 1975 contrasts sharply with the development experiences of other third world countries between the opening of trade in 1850 and 1941 when war halted economic activity thailand became a major exporter of rice in the world market although conditions for further growth seemed highly favourable thailand s rapid integration into the world economy failed to improve living standards and rice yields actually declined in examining the causes of the underdevelopment of thai agriculture over the last 100 years feeny introduces supply and demand models of technical and institutional change to analyse why the rice export boom did not result in more development this book much of which is based on primary research in the thai national archives is one of the few quantitative economic histories of a less developed country

durable good monopolies with rational expectations and replacement sales a monopoly producer of a durable good is examined under the previously uninvoked assumption that the good depreciates and hence that replacement sales must occur if a fixed stock of the good is to be maintained we find two ways in which the no depreciation result that the monopoly will always at least eventually produce a stock equal to that produced by a competitive market may not hold if the length of the trading period is nonzero the limiting stock produced by the firm will be lower than the competitive stock to ensure the profitability of future replacement sales if the firm is able to constrain its production capacity it may choose a constraint that always binds in the sense that it will be impossible for the firm to achieve a stock equal to the competitive stock

interest rates and the market for new light vehicles we study the impact of interest rates changes on both the demand for and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates an increase in the consumers interest rate raises their cost of financing and thus lowers the demand for new vehicles an increase in the manufacturers interest rate raises their cost of holding inventories both channels have equilibrium effects that are amplified and propagated over time through inventories which serve as a way to both smooth production and facilitate greater sales at a given price through the estimation of a dynamic stochastic market equilibrium model we find evidence of both channels at work and of the important role played by inventories a temporary 100 basis point increase in both interest rates causes vehicle production to fall 12 percent and sales to fall 3 25 percent at an annual rate in the short run

does amd spur intel to innovate more we estimate an equilibrium model of dynamic oligopoly with durable goods and endogenous innovation to examine the effect of competition on innovation in the personal computer microprocessor industry firms make dynamic pricing and investment decisions while consumers make dynamic upgrade decisions anticipating product improvements and price declines consistent with schumpeter we find that the rate of innovation in product quality would be 4 2 percent higher without amd present though higher prices would reduce consumer surplus by 12 billion per year comparative statics illustrate the role of product durability and provide implications of the model for other industries

comparative statics in general equilibrium models with a unionized sector this paper uses a simple theory of union behavior to examine the consequences of unionization for the basic comparative statics properties of the specific factors and heckscher ohlin trade models many of the standard results continue to emerge despite the union however in contrast to the competitive theory an increase in the price of the unionized commodity can unambiguously lower the real wages of union workers in the short run and in the long run can raise the real rewards of all factors employed in the union sector

keeping it fresh strategic product redesigns and welfare abstract product redesigns happen across virtually all types of products yet there is little evidence on the market and welfare effects of redesigns we develop a model of redesign decisions in a dynamic oligopoly model and use it to analyze redesign activity in the u s automobile market we find automobile model redesigns are frequent despite an estimated average cost around 1 billion our estimates also suggest that redesigns lead to large increases in profits and welfare due to the strong preferences consumers have for redesigns we show that welfare would be improved if redesign competition were reduced allowing redesign activity to be more responsive to the planned obsolescence channel the net effect of these changes would reduce total redesigns by roughly 10 increasing total welfare by roughly 3 the high valuation that consumers put on newly designed models drives frequent redesigns and gives automobile manufacturers fairly substantial market power with a 2 to 1 ratio of firm profits to consumer surplus

land ownership security and farm productivity evidence from thailand the article discusses the impact of land ownership security on farmers input use and output value economic theory suggests that farmers with secure legal ownership will have more incentives and better ability to invest due to a lower perceived risk and a favourable access to institutional credit this leads to higher variable inputs use and higher output per unit of land the article uses farm level data from three provinces in thailand to test the above propositions the data pertain to samples of squatters who lack secure legal ownership as contrasted with legally titled farmers the results confirm that the provision of secure ownership in ldcs can increase productivity significantly

financial market efficiency in an agrarian economy microeconometric analysis of the pakistani punjab the shadow price of capital in production is a useful indicator of the efficacy of the rural financial system using data on participants and non participants in a small farm credit programme from the pakistani punjab this article estimates the shadow price of capital endogenous switching regressions techniques are employed to control for the likely heterogeneity of borrowers versus non borrowers results indicate that an individual selected at random from the population of small farmers would experience a 200 per cent rate of return on the first rupee borrowed from the small farm credit programme indicating a high shadow price of capital and a prima facie case for small farm credit programmes

exclusive contracts and market dominance we propose a new theory of exclusive dealing the theory is based on the assumption that a dominant firm has a competitive advantage over its rivals and that the buyers willingness to pay for the product is private information in this setting the dominant firm can impose contractual restrictions on buyers without necessarily compensating them implying that exclusive dealing contracts can be both profitable and anticompetitive we discuss the general implications of the theory for competition policy and illustrate by examples its applicability to antitrust cases jel d21 d43 d82 d86 k21 l13 l40