profit shifting and trade agreements in imperfectly competitive markets governments have a reason to form a trade agreement when an international externality is associated with their trade policy choices when countries are large if a government raises its import tariff the world offshore price of the imported good is reduced the importing country then enjoys an improvement in its terms of trade and the exporting country suffers a negative terms of tradeexternality asjohnson 1954 argues whengovernmentsmaximizerealnational income and markets are perfectly competitive the associated noncooperative equilibrium is inefficient and governments can achieve greater welfare by forming an appropriately designed trade agreement bagwell and staiger 1999 and grossman and helpman 1995 extend the modeling framework to allow that governments have political economic preferences allowing for a wide range of possible political economic motivations bagwell and staiger 1999 show that the noncooperative equilibrium is inefficient if and only if governments are motivated by the terms of trade consequences of their trade policies building from this finding they then characterize the form that an efficiency enhancing trade agreement might take they show that the principles of reciprocity and nondiscrimination the latter embodied in the most favorednation mfn obligation play a useful role in guiding governments toward efficient policies in this article we move beyond the competitive markets paradigm and expand the analysis to markets with imperfect competition thereby introducing the realistic possibility that firms have market power a firm with market power is itself large in the sense that it does not regard the market price as fixed instead such a firm recognizes that its decisions may influence the price at which its output sells the terms of trade externality is still present in markets with imperfectcompetition butthewell known profit shifting rolefortradepoliciesinimperfectly competitive markets suggests that other international externalities might also be present for a sequence of workhorse models with imperfectly competitive markets we examine the rationale foratradeagreementandconsidertheformthatanefficiency enhancingtradeagreementmight take

movements towards free trade and domestic market performance with imperfect competition this paper studies the response of a dominant domestic oligopoly to the reduction in the rate of a protective tariff the issue here is whether domestic market performance is improved through a movement toward free trade alone put another way is free trade always a substitute for competition policy we find that the lower tariff may lead to inferior domestic market performance the direction of the change and its magnitude are functions of the shape of the import supply function the degree of competition between oligopolists and whether or not entry is possible thus there is reason to believe that a strong competition policy may in some markets be complementary to freer trade

a note on the optimal tariff retaliation and the welfare loss from tariff wars in a framework with intraindustry trade abstract this paper uses krugman s 1980 model of trade with product differentiation and monopolistic competition to examine the effects of a uniform ad valorem tariff the main results are there exists an optimal tariff even for a small economy and the optimal tariff rate is an increasing function of the size of the economy and the degree of production differentiation under reasonable parameter assumptions a tariff war between two countries of equal size in which each country retaliates by imposing its own optimal tariff causes a welfare loss equivalent to a drop in income of about 4 percent

optimum discriminatory tariffs under oligopolistic competition this paper attempts to present a simple cournot model to determine the optimal discriminatory tariff rates when the international market is a homogeneous heterogeneous product market in the model there are two foreign firms located in two different countries competing for sales in a local market when the firms sell a homogeneous product and the home country can impose differential tariffs on imports from different countries then the tariff on the low cost producer should be hgher in particular with constant marginal costs the tariff difference should equal half the cost difference on the other hand if the firms sell differentiated products with symmetric linear demands and technologies then the weaker the degree of product differentiation the greater is the tariff difference compared with the cost difference

domestic export subsidy and foreign welfare abstract in this paper we present an analysis based on imperfect competition to examine the conditions under which an export subsidy of the domestic country will not only increase its own welfare but also raise the welfare of the importing country and hence the world as a whole under these conditions it is then suggested that relaxation of gatt restrictions on export subsidies might be feasible to some extent

strategic trade and competition policies to assist distressed industries a country s unilateral incentive to use strategic trade policies typically conflicts with multilateral interests regarding such intervention i demonstrate that domestic and world interests can coincide if intervention is used to deter exit from a distressed domestic industry in particular a policy of government endorsed collusion between domestic firms can improve domestic welfare while avoiding the usual beggar thy neighbour effects associated with the use of trade policies it also may offer a more incentive compatible means of assisting distressed domestic firms since a unilateral incentive to intervene exists only where the

endogenous market structures in international trade natura facit saltum abstract almost all of the large literature on international trade with imperfect competition assumes exogenous market structures the purpose of this paper is to develop a simple model that generates alternative market structures as nash equilibria for different parameterizations of the basic model equilibrium market structure is a function of the underlying technology familiar configurations such as a duopoly competing in exports or a single multinational producing in both markets arise as special cases small tax policy changes can produce large welfare effects as the equilibrium market structure shifts implying discontinuous jumps in prices quantities and profits

ethnic unemployment rates and frictional markets the unemployment rate in france is roughly 6 percentage points higher for african immigrants than for natives in the us the unemployment rate is approximately 9 percentage points higher for blacks than for whites commute time data indicates that minorities face longer commute times to work potentially reflecting more difficult access to jobs in this paper we investigate the impact of spatial mismatch on the unemployment rate of ethnic groups using the matching model proposed by rupert and wasmer 2012 we find that spatial factors explain 1 1 5 percentage points of the unemployment rate gap in both france and the us amounting to 17 25 of the relative gap in france and about 10 17 5 in the us among these factors differences in commuting distance play the most important role in france though longer commuting distances may be mitigated by higher mobility in the housing market for african workers overall we still conclude that labor market factors remain the main explanation for the higher unemployment rate of africans

neighbors networks and the development of transport systems explaining the diffusion of turnpike trusts in eighteenth century england abstract turnpike trusts were widely employed organizations that improved and maintained toll roads in eighteenth century england they were created by acts of parliament and were promoted by local landowners and merchants the first turnpike was established in 1663 but they were not widespread until 1770 this paper uses survival analysis to show that network effects and inter city competition greatly influenced the diffusion of turnpikes the results show that cities were more likely to adopt turnpikes if other turnpikes were adopted along their route to london and cities were less likely to adopt when their close competitors adopted more generally the findings illustrate the importance of interaction effects under decentralization

dutch book arguments and learning in a nonexpected utility fremework if an individual follows maximin expected utility theory then a smart outsider cannot in general make a bet with him her that is certain to win in a single time period however the author shows that when there are many time periods this is possible in his model unless the decisionmaker uses strategic behavior there are some exceptions in particular for small deviations from expected utility profits may be less than the transactions costs copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the role of free entry in an oligopolistic heckscher ohlin model retaining the basic properties of the heckscher ohlin trade model namely free entry and exit fully integrated international commodity markets and the same number of sectors with that of factors the authors develop a two country model with cournot oligopoly in this economy factor price equalization and the standard heckscher ohlin theorem on comparative advantage hold between two countries which are identical except for size however autarkic prices are different even though the level of trade is zero under the free trade regime nevertheless free trade reduces the oligopoly price and increases welfare copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

are economists traditional trade policy views still valid recent analysis of trade policies under imperfectly competitive market conditions as well as in situations where trade in high technology products is important have raised doubts whether economists should continue their traditional opposition to trade taxes and subsidies this paper evaluates the new theoretical arguments for interventionist trade policies by comparing them with the traditional arguments for and against free trade investigating the empirical evidence supporting the conditions assumed in the new models appraising the realism of the behavior assumptions of these models and the sensitivity of their conclusions to changes in these assumptions and considering the political economy implications of these conclusions the general conclusion is that there are serious practical difficulties with the interventionist arguments of the new trade theorists as they themselves recognize just as there are with such traditional arguments for trade intervention as the terms of trade case for protection however the new industrial organization approach to trade theory has already provided valuable insights into trade behavior in international markets and promises to provide many more as more realistic behavior models are developed this abstract was borrowed from another version of this item

dynamically consistent beliefs must be bayesian abstract experimental evidence such as the ellsberg paradox contradicts the savage model of decision making under uncertainty since the representation of beliefs underlying preferces by a single probability measure leaves no room for the degree of imprecision in information to affect decisions proceeding axiomatically this paper shows that the existence of a bayesain prior is implied even if savage s sure thing principle is deleted if preferences i are based on beliefs and ii admit dynamically consistent updating in response to new information the result raises questions about the appeal of models of preference that feature a separation of tastes and beliefs journal of economic literature classification number d81

tariffs versus quotas with strategic investment the relative efficiency of tariffs versus quotas is analyzed in a cournot oligopoly with strategic investment introducing quota licence fees to neutralize the international distributional effect when such licence fees remove quota rents from foreign firms then for the case of constrained entry with a sufficiently large number of firms quotas frequently hold a welfare advantage since tariffs relatively aggravate the inefficiency from overinvestment in the case of free entry and exit however tariffs hold a welfare advantage since there is greater benefit of increasing returns to scale to the economy by avoidance of excessive entry of firms

analysis of uncertainty as opposed to risk an experimental approach the paper illustrates the scope for enhancing the conceptual apparatus used by agricultural economists to analyse decision making under conditions of uncertainty selected empirical results from experiments on student subjects from three universities are reported three issues are considered first the reasons for choice and the understanding of a choice problem are examined second attitudes towards different levels of uncertainty are measured third the possibility that apparently non normative psychological factors influence choice is explored the paper serves to illustrate and support a number of methodological points the major points are that a risk uncertainty distinction is useful contrary to the aging conventional wisdom of economic theory that laboratory experiments can potentially provide data of use to agricultural economists and that predictive models of choice under uncertainty may be more accurate if they take account of psychological variables which influence the decision making processes of human subjects

oligopoly and trade what how much and for whom abstract this paper integrates the cournot oligopoly model with the ricardian comparative advantage model the ricardian trade pattern is robust and only can be reversed in extreme conditions trade volume increases substantially with increases in competition in world export industries in a symmetrical world a threshold level of competition determines whether capitalists as a group usually gain or lose from trade under all circumstances workers never lose even if a country has a comparative disadvantage in a perfectly competitive world industry but workers gain less in that country than they do in the rest of the world

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

trade policy with increasing returns and imperfect competition contradictory results from competing assumptions abstract a number of recent papers derive different results about the effects of trade and industrial policy on imperfectly competitive industries this paper sets out a single model within which policy under different market structures can be examined we consider the four types of market structure generated by oligopoly versus free entry and segmented markets versus integrated markets we conclude that the effects of policy are greater when markets are segmented than when they are integrated and that if transport costs are small policy is more potent when the number of firms is fixed than when there is free entry

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

inadequacies of the strategic rationale of export subsidies a major attraction of strategic trade theory is that it appears to explain governments desire to subsidise exports we argue that this appearance is illusory

rent shifting and rent sharing a re examination of the strategic industrial policy problem this paper reexamines the market structure problem in the strategic trade policy literature it is shown that rent sharing between the home union and the home firms raises total home industry rents regardless of whether the international duopoly is cournot or bertrand furthermore home welfare also rises with cooperation if the international industry consists of more than two firms if the industry is faced with entry and if there is domestic consumption this paper shows that rent sharing can be a robust strategic industrial policy and can be interpreted as a solution to the market structure dilemma

international equity markets and trade policy abstract this paper derives optimal trade policies for exporting and importing countries when a market is imperfectly competitive and firms are internationally owned it is shown that an increase in foreign ownership of firms lowers both the optimal export subsidy of the exporting country and the optimal import tariff of the importing country at the same rate foreign ownership also affects the distribution of world welfare between countries however it does not affect trade patterns and firm values

the quality of export products and optimal trade policy this paper demonstrates that voluntary export restraints may be socially desirable to upgrade the quality of export products when informational externalities in the recognition of quality result in suboptimal production of quality by competitive firms and the enforcement of socially desirable quality is very costly optimal trade policy calls for export restrictions these restrictions apply to both size and number of firms in the export industry export licenses combined with a specific production tax cum subsidy represent a suitable pair of instruments copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the first review of european union antidumping reviews the literature on antidumping ad has documented various aspects of this protectionist tool however a peculiar feature of ad has not received much attention these measures are endogenous to the behaviour of the exporting firms which can adjust the dumping margin by changing their export price and ask the authority to amend the ad measures accordingly the objective of this paper is to fill part of this gap in the literature by analysing the ad reviews conducted by the european union for affirmative petitions initiated in 1980 2009 to this end a novel data set of all such reviews has been assembled summary statistics reveal that more than a third of all petitions concluded with the imposition of ad measures are reviewed at least once before their expiration and most reviews lead to lower ad duties although almost 20 per cent of the firms investigated through interim reviews see their duties increase there are significant differences in the outcome of the reviews depending on the party requesting them i e reviews lodged by european producers are less likely to lead to lower duties these conclusions are confirmed by the econometric analysis which also shows that chinese firms see their duties reduced significantly less than those of firms from other countries

making book against oneself the independence axiom and nonlinear utility theory an individual with known preferences over lotteries can be led to accept random wealth distributions different from his initial endowment by a sequential process in which some uncertainty is resolved and he is offered a new lottery in place of the remaining uncertainty this paper examines the restrictions that can be placed on an individual s preferences by axioms that stipulate that such a process not be able to generate a new wealth distribution that is prima facie inferior to the original the relationship of these axioms to the independence axiom of von neumann and morgenstern and to the quasi convexity of preferences in the wealth distribution are explored

externalities and technology transfer through multinational corporations a theoretical analysis abstract this paper examines the optimal behavior of a multinational firm s subsidiary in a host country when learning of its production techniques by its native rivals occurs in a dynamic framework it is shown among other things that a it is worthwhile for the subsidiary to import better technology from its parent firm and that b such technology transfer may not benefit the firms of the host country despite their learning while the host country as a whole does benefit

profit shifting and trade agreements in imperfectly competitive markets profit shifting and trade agreements in imperfectly competitive markets do new rationales for trade agreements arise once imperfectly competitive markets are allowed we consider several trade models that feature imperfectly competitive markets and argue that the basic rationale for a trade agreement is in fact the same rationale that arises in perfectly competitive markets in all of the models that we consider and whether or not governments have political economic objectives the only rationale for a trade agreement is to remedy the inefficient terms of trade driven restrictions in trade volume we also show that the principles of reciprocity and nondiscrimination continue to be efficiency enhancing in these settings

tariff limit pricing relative plant scale and the eastman stykolt hypothesis this paper provides a formal basis for the widely held proposition sometimes called the eastman stykolt effect that the interaction of tariff protection and small domestic market size prevents canadian firms from achieving scale efficiency it considers a free entry cournot nash equilibrium in a homogeneous goods industry protected by tariffs the model demonstrates that the tariff limit pricing effect can arise without appeal to collusion or product differentiation moreover it is not appropriate to test for the eastman stykolt effect by simply including the interaction of market size and tariffs in a regression explaining relative plant scale

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

the economics of trade agreements in the linear cournot delocation model abstract existing theories of trade agreements suggest that gatt wto efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments building on the cournot delocation model first introduced by venables 1985 we derive new results from this model and use these results to develop a more benign interpretation of efforts to restrain export subsidies in trade agreements and we suggest that the gradual tightening of restraints on export subsidies that has occurred in the gatt wto may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated together with existing theories the cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements

import share under international oligopoly with differentiated products japanese imports in u s manufacturing this paper seeks to identify the determinants of the japanese impor t share in the u s market from the assumptions of international oligopoly and internationally differentiated products a theoretical model is developed where import share is considered as a cournot nash equilibrium the relative position of the reaction functions is determined by the previous commitments of both domestic and foreign firms on advertising r d and tangible investment as well as by artificial and natural trade barriers using a sample of twenty four three digit import competing u s industries matched to japanese industries the empirical analysis provides evidence supporting the model s predictions that the relative strategic expenditures and market structures of both partners explain the japanese import share in u s markets copyright 1988 by mit press

welfare costs of the u s antidumping and countervailing duty laws abstract the antidumping ad and countervailing duty cvd laws in the united states have become the most pervasive form of import relief sought by domestic producers this paper estimates the collective economic effect of the hundreds of active u s ad cvd orders using a computable general equilibrium model we estimate that the collective net economic welfare cost in 1993 of these orders to be 4 billion this welfare estimate is sensitive to various modeling assumptions which are explored in the paper with the implementation of the uruguay round agreements the ad cvd laws remain one of the costliest programs restraining u s trade

an empirical assessment of the welfare effects of reciprocal dumping abstract can two way trade in similar products lead to lower welfare than if such trade was banned theory answers yes to empirically investigate this proposition we examine swedish imports of bottled water assuming one shot bertrand and cournot competition we can use the estimates from a structural model of demand to uncover marginal costs we simulate the effect on consumer and producer surplus of banning imports we do not find convincing evidence that banning imports would increase overall welfare given our choice of market this suggests we should not be overly concerned with the welfare effects of two way trade in consumer goods that are close to homogenous

capital accumulation and the current account in a two country model abstract this paper examines the joint determination of international debt and capital accumulation in a two country model national rates of time preference are endogenous adjusting along an optimal path to come into equality with one another in the steady state the characteristics of short run current account dynamics are crucially linked to world capital accumulation and to a country s long run net external asset position steady state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries this gives rise to possible non monotonic adjustment in the current account and consumption

anti dumping and countervailing duties under oligopoly abstract this paper constructs a conjectural variations model of international oligopoly in which the home country s optimal policy responses to the foreign government s subsidies and foreign firms dumping can be calculated some theoretical support is found for tariffs that countervail part of the foreign export subsidy the optimal fraction depends on the size of own and cross effects in demand and on the extent of market competition however no normative case is found for anti dumping duties

climate change policy market structure and carbon leakage abstract the 1997 kyoto protocol on climate change obliges the industrialized countries to initiate the international effort of abating anthropogenic greenhouse gas ghg emissions if such an initiative is to be taken the associated competitive effects may lead to significant relocation of developed countries energy intensive production this paper examines this issue i adopt an oligopolistic structure combined with increasing returns to scale production technologies to represent the strategic interaction among the firms producing energy intensive products this representation is then embedded within a multi regional computable general equilibrium model which in turn is used for quantifying these relocational effects the results suggest that significant relocation of energy intensive industries away from the oecd may occur depending on the type of market structure with leakage rates as high as 130 in which case ghg control policies in the industrialized countries actually lead to higher global emissions

vertical foreclosure and international trade policy international differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm this paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a cournot or bertrand market for the final product the vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports optimal policy by the exporting country may require a tax on both exports or a subsidy on both exports countries that are dependent on imports of a key intermediate product or raw material from a dominant world supplier are often concerned about the price and the availability of imports a notable current example involves the computer industry japanese suppliers with the help of the japanese government recently restricted the exports of dram semiconductors substantially raising their price these suppliers control about 80 of the market for semiconductors and the higher prices and shortage in supply have forced u s producers of computers to curtail production and increase prices vertically integrated japanese firms such as toshiba and n e c have benefitted both from increased profits in the export market for semiconductors and from the improvement in their competitive position in the market for final computers as this example indicates the price and availability of imported supplies can depend on both public and private incentives in the exporting country in this paper we first examine the private incentives for a vertically integrated firm to export an intermediate product to a higher cost rival lowering its rival s costs the exporting firm may choose vertical foreclosure thus fully cutting off supplies we then consider the public interest of the exporting country does the exporting country gain by encouraging the export of the intermediate product or alternatively might government foreclosure occur the government is in a position to affect the quantity of exports of both the input and the final product by an appropriate choice of export tax and subsidy policies

endogenous market structures and strategic trade policy we characterize the optimal export promoting policies for international markets whose structure is endogenous contrary to the ambiguous results of strategic trade policy for markets with a fixed number of firms it is always optimal to subsidize exports as long as entry is endogenous under both competition in quantities and in prices with homogenous goods the optimal export subsidy is a fraction 1 of the price where is the elasticity of demand the exact opposite of the optimal export tax in the neoclassical trade theory a similar argument can be applied to show the general optimality of r d subsidies and of competitive devaluations to promote exports in foreign markets where entry is endogenous

a more robust definition of subjective probability the goal of choice theoretic derivations of subjective probability is to separate a decisionmaker s underlying beliefs subjective probabilities of events from their preferences attitudes toward risk classical derivations have all relied upon some form of the marschak samuelson independence axiom or the savage sure thing principle which imply that preferences over lotteries conform to the expected utility hypothesis this paper presents a choice theoretic derivation of subjective probability in a savage type setting of purely subjective uncertainty which neither assumes nor implies that the decisionmaker s preferences over lotteries necessarily conform to the expected utility hypothesis copyright 1992 by the econometric society

nontariff trade controls and leader follower relations in international competition a simple duopoly model is constructed in which leader follower relations arise as part of a subgame perfect equilibrium in a game of endogenous timing the author shows that in the absence of policy intervention cost asymmetries between firms can help sustain collusive hierarchical organization of markets on the basis of this model he then analyzes the effects of voluntary export restraints and import quotas in the presence of foreign and international duopolies the author s analysis reveals that in contrast to the existing literature these nontariff trade controls can break the stability of leader follower relations and thereby raise an importing country s welfare copyright 1996 by the london school of economics and political science

trade flows in a spatial oligopoly gravity fits well but what does it explain large distance and border effects on trade flows in some industries may result from the collusive division of geographic markets in the brazilian cement industry traditional gravity equations fit the data well yet limited regional flows are due to firms strategic behaviour thanks to a unique institutional setting and an unusually rich data set i directly control for trade costs which despite their importance cannot account for the observed segmentation of local markets at current prices the paper highlights how collusive behaviour can magnify the effects of distance as firms use geography to coordinate on higher prices and less cross hauling les effets de grande distance et de frontieres sur les flux de commerce dans certaines industries peuvent etre le resultat d une division collusive des marches geographiques dans l industrie bresilienne du ciment les equations de gravite s ajustent bien aux donnees mais les flux regionaux limites entre regions sont attribuables au comportement strategique des firmes gr ce a un contexte institutionnel unique et a une base de donnees inhabituelles l auteur a pu prendre en compte directement les couts du commerce qui malgre leur importance ne peuvent pas expliquer la segmentation observee des marches locaux aux prix courants le memoire met en lumiere comment le comportement de collusion peut magnifier les effets de distance a proportion que les firmes utilisent la geographie pour assurer une coordination fondee sur des prix plus eleves et moins de transport transfrontalier

nash equilibrium tariffs for the united states and canada the roles of country size scale economies and capital mobility a theoretical analysis of optimal nash equilibrium tariff rates is presented a numerical general equilibrium model is then used to find nash equilibrium tariff rates for the united states and canada the nash equilibrium tariffs are small relative to partial equilibrium estimates 18 percent for the united states and 6 percent for canada the united states is essentially indifferent between the nash equilibrium and free trade while canada is better off at the latter by 4 billion empirical results support theoretical predictions that the optimal tariff is smaller when the country is smaller there are scale economies and free entry and capital is internationally mobile

voluntary export restraints and strategic technology transfers abstract this paper investigates the effects of voluntary export restraints vers in the presence of potential entrants and technology transfers it builds a model of a licensing game in a cournot oligopoly market and examines conditions under which vers induce restrained foreign firms to transfer technologies to potential suppliers i show that a ver can decrease the profit and output of the domestic incumbent by perturbing the no licensing equilibrium reached under free trade and inducing the market to move to a licensing equilibrium

international competition downsizing and wage inequality a country with cournot competition and free entry experiences an increase of its market size either due to economic growth or international integration of its goods markets this implied increase in competition leads to shrinking mark ups and forces firms to reduce overhead costs relative to output this implies a reallocation at the aggregate level from administrative to productive activities relative factor rewards change and wage inequality increases the factor which loses in relative terms can even lose in real terms from a quantitative perspective international competition is demonstrated to be the more plausible cause of rising wage inequality c 2007 published by elsevier b v

temporal risk and the nature of induced preferences abstract it has been known since the work of h markowitz portfolio selection efficient diversification of investments yale univ press 1959 and j mossin amer econ rev 59 1969 172 174 that even an individual whose underlying preferences satisfy the von neumann morgenstern axioms will not choose over delayed i e temporal risky prospects in a manner which can be modelled as expected utility maximizing since most economically important instances of risk taking insurance real investment agriculture career training involve delayed as opposed to immediately resolved risk the standard use of expected utility theory to model such decisions must be questioned in this paper the technique of generalized expected utility analysis m j machina econometrica 50 1982 277 323 and the theory of support functions r t rockafellar convex analysis princeton univ press 1970 are applied to exactly model and hence determine the nature of preferences over temporal risky prospects

trade liberalization in a multinational dominated industry abstract existing theoretical models in the trade industrial organization literature assume almost exclusively that firms are national enterprises so that there is no international coordination by multinational firms we develop a model in which multinationals compete among themselves but coordinate production pricing and sales decisions across multiple plants and markets free entry and exit is assumed and cases in which the multinationals can and cannot segment markets are considered the model is simulated using data from the north american auto industry results are compared with a counter factual model calibrated to the same data which assumes national ownership of firms

the markup and inflation evidence in oecd countries in this paper we evaluate the dynamic inconsistency argument put forth by kydland and prescott 1977 and barro and gordon 1983 as an explanation for differences in the average inflation experience across oecd countries the focus is on the empirical evidence relating the overall degree of competition among firms as measured by the markup of price over marginal cost and inflation over the 1973 88 period the prediction is that higher markups raise the monetary authority s incentive to increase output leading to higher equilibrium rates of inflation we find that the markup does well in explaining cross country differences in average inflation jel classification e31 e58 d43 l ecart du prix par rapport au cout marginal et l inflation resultats pour les pays de l ocde ce memoire examine l argument mis de l avant par kydland et prescott 1977 et barro et gordon 1983 pour expliquer les differences dans le taux moyen d inflation entre les pays de l ocde on porte une attention speciale aux resultats empiriques qui relient le degre general de concurrence entre les entreprises mesure par l ecart du prix par rapport au cout marginal et le niveau d inflation entre 1973 et 1988 la prediction est que des ecarts prix cout marginal plus eleves augmentent l incitation des autorites monetaires a accroitre le niveau de production ce qui entraine des taux d inflation d equilibre plus eleves il s avere que l ecart du prix par rapport au cout marginal tend a expliquer bien les differences dans le niveau moyen d inflation entre pays

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

tax competition in imperfectly competitive markets abstract the literature on strategic trade policy has shown that in imperfectly competitive markets governments have an incentive to subsidize exports of their own firms yet the consequence of the departure from laissez faire is a wasteful subsidy race in contrast this paper shows that even in imperfectly competitive markets there is a strong tendency for laissez faire to prevail the driving force is the firms willingness to exploit tax or subsidy differentials by relocating production a small tax differential induces firms to change their place of production the change in market structure has a negligible effect on the oligopoly equilibrium but a non negligible impact on government revenues when tax policy is non discriminatory governments gain lose by attracting all firms when production is taxed subsidized hence laissez faire is the only equilibrium since from the point of view of the two producing countries laissez faire nondiscrimination pareto dominates the intervention equilibrium discrimination nondiscrimination is a simple device to result in a mutual beneficial outcome

entry and entry deterrence in penetrable markets this paper presents a game theoretic model of entry a potential entrant into a given market is postulated to be a currently produci ng firm whose product is a substitute on the production side for the good being sold in the market an entrant is capable of switching pr oduction between markets faster than firms in general can adjust thei r total outputs to some extent a market faced with entry as such wi ll resemble a contestable market and limit pricing behavior will occ ur copyright 1988 by the london school of economics and political science

effects of the customs union with the european union on the market structure and pricing behaviour of the turkish manufacturing industry turkey established a customs union with the european union in 1996 this study aims to analyse the effect of that customs union on the market structure and the pricing behaviour of the turkish manufacturing industry for the period 1994 to 2000 to that end the price cost mark up equation of 12 manufacturing industry sectors is estimated using the import and export ratios with european union countries together with control variables a second equation is also estimated for the concentration ratio index taking the trade ratios with european union countries as explanatory variables the estimation method is panel data covering eight years and 12 cross section units estimation outcomes indicate that the export and import ratios of trade with european union countries have a negative relation with the price cost mark up in the manufacturing sector it is concluded that increased imports with union countries have created a positive wealth and efficiency effect upon the turkish manufacturing industry due to f

on money pumps abstract the question of whether money pump arguments justify standard consistency assumptions about behavior has remained unresolved partly because of the absence of an appropriate analytical framework we present a new framework which fills this gap provide a formal definition of invulnerability to money pumps and formulate a requirement of maximal opportunism we show that behavior which satisfies none of the standard consistency assumptions can be both invulnerable and maximally opportunist we present two conditions which combined with maximal opportunism imply the existence of a choice function rationalized by an ordering and satisfying the sure thing principle journal of economic literature classification numbers b41 c73 d81