investment and market dominance we analyze a model of oligopolistic competition with ongoing investment special cases include incremental investment patent races learning by doing and network externalities we investigate circumstances under which a firm with low costs or high quality will extend its initial lead through investments to this end we derive a new comparative statics result for general games with strategic substitutes which applies to our investment game finally we highlight plausible countervailing effects that arise when investments of leaders are less effective than those of laggards or in dynamic games when firms are sufficiently patient

capacity constraints and voluntary output cutback in dynamic cournot competition abstract this paper considers cournot competition in which duopolists play a quantity setting game with sticky prices and capacity constraints a feedback subgame perfect equilibrium is derived and analyzed with sufficient differentiability the paper shows the existence and the uniqueness of symmetric feedback equilibrium we show that there arises a range of constraints defined by two threshold values in which the firms outputs are below the constraint level in the steady state yet the outputs depend nontrivially on the constraint for outside observers the constraint does not seem to be binding but the constraint is binding in that a marginal change in the level of capacity constraint affects firms steady state outputs the result implies that under this constraint the firms cut back their steady state outputs voluntarily more than stipulated by the constraint we also show that the procedure to construct a constrained solution from an unconstrained solution by truncation may not always be appropriate this paper s analysis utilizes the concept of connectable points associated with the solutions to the auxiliary equation of the hamilton jacobi bellman equation since the concept of connectable points and their characterization does not directly rely upon the linear quadratic structure of this game the method can be modified and applied to other differential games with restrictions on the control space s

production with learning and forgetting in a competitive environment abstract it has been shown that learning by doing enables firms to reduce marginal production costs but that this effect weakens due to organizational forgetting in order to assess the impact of both learning and forgetting on long term competitiveness and a firm s profitability we model an experience accumulation process with depreciation and consider two competing firms that produce fully substitutable products in this model unit production costs decrease with the firm s experience due to the proprietary learning process as well as the spillover of experience from the competing firm firms can either share or hide from each other their information about the state of their respective experience throughout the game we found that in an equilibrium steady state if the organizational forgetting is sufficiently large larger than the spillover rate value then information sharing compared to information hiding results both in less competitiveness and increased profits for firms conversely if the organizational forgetting is small and the spillover opportunities are relatively large then information sharing promotes both long term competitiveness and firm profits accordingly firms are better off in the long term by deliberately limiting expanding their experience accumulation process whenever organizational forgetting is relatively large small a high ability of proprietary learning however can interfere in this relationship so that limiting the firms experience process will always be compatible with higher profitability

the aftermath of civil war using an event study methodology this paper analyzes the aftermath of civil war in a cross section of countries it focuses on those experiences where the end of conflict marks the beginning of a relatively lasting peace the paper considers 41 countries involved in internal wars in the period 1960 2003 in order to provide a comprehensive evaluation of the aftermath of war the paper considers a host of social areas represented by basic indicators of economic performance health and education political development demographic trends and conflict and security issues for each of these indicators the paper first compares the post and pre war situations and then examines their dynamic trends during the post conflict period it conducts this analysis both in absolute and relative terms the latter in relation to control groups of otherwise similar countries the paper concludes that even though war has devastating effects and its aftermath can be immensely difficult when the end of war marks the beginning of lasting peace recovery and improvement are indeed achieved jel code 010 057

computational economics and economic theory substitutes or complements abstract this essay examines the idea and potential of a computational approach to theory discusses methodological issues raised by such computational methods and outlines the problems associated with the dissemination of computational methods and the exposition of computational results we argue that the study of a theory need not be confined to proving theorems that current and future computer technologies create new possibilities for theoretical analysis and that by resolving these issues we will create an intellectual atmosphere in which computational methods can make substantial contributions to economic analysis

aid policy and growth in post conflict societies countries emerging from civil war attract both aid and policy advice this paper provides the first systematic empirical analysis of aid and policy reform in the post conflict growth process it is based on a comprehensive data set of large civil wars and covers 27 countries that were in their first decade of post conflict economic recovery during the 1990s the authors first investigate whether the absorptive capacity for aid is systematically different in post conflict countries they find that during the first three post conflict years absorptive capacity is no greater than normal but that in the rest of the first decade it is approximately double its normal level so ideally aid should phase in during the decade historically aid has not on average been higher in post conflict societies and it has tended to taper out over the course of the decade the authors then investigate whether the contribution of policy to growth is systematically different in post conflict countries and in particular whether particular components of policy are differentially important for this they use the world bank policy rating database the authors find that growth is more sensitive to policy in post conflict societies comparing the efficacy of different policies they find that social policies are differentially important relative to macroeconomic policies however historically this does not appear to have been how policy reform has been prioritized in post conflict societies

short and long term effects of united nations peace operations earlier studies have shown that united nations peace operations make a positive contribution to peacebuilding efforts after civil wars but do these effects carry over to the period after the peacekeepers leave and how do the effects of un peace operations interact with other determinants of peacebuilding in the long run the author addresses these questions using a revised version of the doyle and sambanis dataset and applying different estimation methods to estimate the short term and long term effects of un peace missions he finds that un missions have robust positive effects on peacebuilding in the short term un missions can help parties implement peace agreements but the un cannot fight wars and un operations contribute more to the quality of the peace where peace is based on participation than to the longevity of the peace where peace is simply the absence of war the effects of un missions are also felt in the long run but they dissipate over time what is missing in un peacebuilding is a strategy to foster the self sustaining economic growth that could connect increased participation with sustainable peace

capital accumulation games of infinite duration abstract consider a market in which firms accumulate capital according to the nerlove arrow capital accumulation equation each player chooses a path of investment and thus an induced path of capital to maximize his total discounted profits which depend on his own capital and the capital stocks of his rivals existence is proved for such a nonzero sum infinite horizon differential game and conditions under which the game converges to a particular stationary point regardless of the initial conditions are shown thus the game possesses the property of conditional global asymptotic stability

pricing competition with inventory considerations in a hazard rate prone market of durables abstract this paper addresses bertrand type pricing competition between two firms producing partially differentiated durables over a finite planning horizon the demand for durables characterized by increasing returns of scale to a price reduction is led by the hazard rate while the effect of inventories on pricing of non durables is widely recognized the management and marketing literature typically overlooks this effect in regard to horizontally competing firms for durables in this paper we show that the pricing trajectory of durables may significantly alter when inventory dynamics are accounted for in particular the price may hike upwards before dropping gradually grow or even stay at the same level over the entire product life while it would only decline if inventories and related costs are disregarded furthermore the well known optimal pricing strategy of following the pattern of sales does not necessarily confirm even for symmetric equilibria when the competing firms have either an inventory surplus or shortage

dynamic advertising and pricing in an oligopology a nash equilibrium approach a general dynamic oligopolistic price advertising model is formulated and open loop nash solutions are derived as a main result a generalisation of the well known dorfman steiner theorem to heterogenous oligopoly markets is presented furthermore a detailed discussion of long run equilibrium solutions is given for an important special case of the general model formulation it is shown that the optimal advertising policies are constant over time and constitute degenerated feedback solutions

drugs guns and targeted competition abstract we consider a dynamic competition game involving three players in which each player can vary the extent of his competition on a per rival basis we call such competition targeted we show that if the players are myopic then the weaker players eventually lose the game to their strongest rival if instead the players are sufficiently far sighted then all three players converge in their power and stay in the game we develop our model in application to drug wars but the approach of targeted competition can be applied to competition between firms or political parties or to warfare

open loop and feedback models of dynamic oligopoly abstract a simple method of estimating the degree of oligopoly power in dynamic markets using either open loop or feedback subgame perfect strategies is developed new theoretical results are presented for families of oligopoly models differences between discrete time and continuoustime models and open loop and feedback models are demonstrated the effects of increasing the number of firms or adjustment costs are examined

technological leadership and persistence of monopoly under endogenous entry static versus dynamic analysis abstract we build a dynamic oligopoly model with endogenous entry in which a particular firm leader invests in an innovation process facing the subsequent entry of other firms followers we identify conditions that make it optimal for the leader in the initial oligopoly situation to undertake pre emptive r d investment strategic predation eventually resulting in the elimination of all followers compared to a static model the dynamic one provides new insights into the leader s intertemporal investment choice its optimal decision making and the dynamics of the market structure over time we also contrast the leader s investment decisions with those of the social planner

export restraints in a model of trade with capital accumulation abstract this paper examines the impact of voluntary export restraints vers in an international duopoly modeled as a differential game with a ramsey capital accumulation dynamics the game admits multiple steady states and a ver cannot be voluntarily employed by the foreign firm in case of cournot behavior in demand substitutes hence the dynamic framework confirms the results of the vers literature with static interaction in output levels in the case of price behavior the adoption of an export restraint may increase the profits of both firms if products are substitutes and the steady state is market driven however contrary to the acquired wisdom based upon the static approach the dynamic analysis also admits an equilibrium outcome identified by the ramsey golden rule where the incentive to adopt a ver is ruled out irrespective of whether firms are quantity or price setters

looking ahead optimally in allocating aid summary the collier dollar approach to aid allocation among countries has been less than fully embraced by donors even those focused on poverty reduction partly because it conflicts with the approach to aid allocation implied by the millennium development goals these two approaches are shown to be special cases of a more general model of aid allocation in which donors care about future as well as current poverty this model is illustratively applied to data for developing regions adding a poverty decline adjustment to the allocation formulae used by donors could resolve the conflict between the two approaches

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

foreign aid the real exchange rate and economic growth in the aftermath of civil wars foreign aid the real exchange rate rer and economic growth are three key variables that shape the aftermath of civil wars in many developing countries panel estimations drawn from a sample of 39 conflict and 44 non conflict countries between 1970 and 2004 indicate that although post conflict countries receive larger aid flows and exhibit moderate rer overvaluation after peace is attained overvaluation cannot be traced to aid yet foreign aid is among the significant determinants of the equilibrium rer an id is also an important determinant of economic growth particularly after peace is reached aid exhibits decreasing returns however and interacts negatively with rer overvaluation rer overvaluation reduces growth but this effect is ameliorated by financial development post conflict policies should therefore aim to use aid prudently avoid rer misalignment and support financial and capital market development to achi eve high and stable growth in the aftermath of war and beyond

post conflict transitions an overview in the two to five years immediately following end of conflicts united nations un peacekeeping operations have succeeded in maintaining peace while income and consumption growth rates have been higher than normal and recovery on key education and health indicators has been possible aid also has been super effective in promoting recovery not only by financing physical infrastructure but also by helping in the monetary reconstruction of post conflict economies however sustaining these short term gains was met with two difficult challenges first long term sustainability of peace and growth hinges primarily on the ability of post conflict societies to develop institutions for the delivery of public goods which in turn depends on the capacity of post conflict elites to overcome an entrenched culture of political fragmentation and form stable national coalitions beyond their immediate ethnic or regional power bases second after catch up growth runs its course high levels of aid can lead to overvalued real currencies at a time when growth requires a competitive exchange rate and economic diversification successful peace building will therefore require that these political and economic imperatives of post conflict transitions be accounted for in the design of un peacekeeping operations as well as the aid regime

nonlinear strategies in dynamic duopolistic competition with sticky prices abstract we discuss nonlinear strategies in an infinite horizon duopoly game with sticky prices where firms maximize their discounted sum of profit we construct a stationary feedback equilibrium without guessing value functions and feedback strategies that solve the hamilton jacobi equation for this purpose we study the auxiliary equation that is derived from the hamilton jacobi equation we show that the domain of the state space plays an crucial role in characterizing feedback equilibria and discuss several implications of this observation in particular we find that when the upper bound of the state space is not very high previously unknown feedback equilibria emerge

strategic investment and conjectural variations abstract this paper analyzes investment decisions under the alternative assumptions of competitive collusive open loop non cooperative and feedback non cooperative behavior steady state capital stocks prices and outputs are obtained and compared the paper shows that one of the linear feedback equilibrium decision rule coefficients is a dynamic version of a contemporaneous conjectural variation the same decision rule coefficients are shown to imply a particular value for the contemporaneous conjecture the implied conjecture embodies subgame perfection and approaches the competitive value as the number of firms in the industry increases

time consistent protection with learning by doing abstract can a government induce efficiency gains in his domestic industry by protecting it against foreign competition would such trade protection be time consistent the present paper builds a dynamic equilibrium model that accounts for learning by doing effects that link firms strategies over time the model shows that the existence of dynamic economies of scale suffices to overcome the traditional government s lack of commitment of its tariff policy this paper compares the infinite horizon markov perfect equilibrium of this game with the dynamic equilibrium under commitment as well as the static nash equilibrium equilibrium strategies are derived in closed form by solving a linear quadratic differential game optimal trade policy involves higher tariff levels than in the static setup in order to account for future gains in efficiency under reasonable assumptions the unique stable mpe is characterized by a domestic price and tariff that decrease as experience accumulates thus supporting the future liberalization of trade as an equilibrium feature of this dynamic game

the closed loop effect and the profitability of horizontal mergers we study the profitability of horizontal mergers in a dynamic competition context with sticky prices it is shown that when firms use open loop strategies a merger is profitable only if the share of the market that merges is significant enough in the case where firms use closed loop strategies we provide a method to conduct analytically the study of the profitability of horizontal mergers we first prove the existence of an equilibrium of the game when a subset of firms merges when firms use feedback strategies mergers are profitable even when the share of the market that

a differential oligopoly game for optimal production planning and water savings abstract a production planning single decision problem is extended to a production planning and water saving dual decision problem a differential oligopoly game in which product prices are sticky and water right trading occurs is used to study this problem unlike previous studies appeared in the literature the decisions in this study are affected simultaneously by both the product and the water right prices static open loop closed loop and feedback equilibria are analyzed to show optimal production plans and water saving decisions the impact of oligopoly competition on the social welfare is finally analyzed different optimal solutions as the values of the parameters change are also simulated numerically the results show that the firms optimal production plans and water saving decisions are strongly influenced by the water efficiency initial water right allocations and water right reservation prices

a dynamic game model of strategic capacity investment in the cruise line industry abstract in this paper the cruise line industry is characterized as an oligopoly where a finite number of cruise lines compete to maximize their profits over a fixed planning horizon the oligopolistic competition is modeled as a n person nonzero sum noncooperative dynamic game the noncooperative nash equilibrium capacity investment strategies of cruise lines are theoretically analyzed under the open loop information structure the necessary conditions for an open loop nash equilibrium solution are derived using a pontryagin type maximum principle and the sufficient conditions are also established the economic interpretation of the optimality conditions is given so as to demonstrate the difference between the static and dynamic oligopoly problems the dynamic oligopolistic competition of three cruise lines in a hypothetical setting is also numerically analyzed by using the iterative algorithm numerical results provide a number of important managerial guidelines for cruise capacity investment decisions the paper concludes with a discussion on future research directions

comparative dynamics in a productive asset oligopoly abstract we build a subgame perfect nash equilibrium of a common property productive asset oligopoly and analyze separately the impact of a change in the implicit growth rate of the asset and a change in the number of firms exploiting the asset we show that the steady state level of asset can be a decreasing function of the asset s implicit growth rate this phenomenon arises when the initial stock of asset is below a certain threshold in the short run we show that firms exploitation rate can be a decreasing function of the implicit growth rate we study the impact of a change in the number of firms that share access to the asset reducing the number of firms can result in the long run in higher industry production in the short run it can result in an increase of the industry s exploitation and a decrease of the level of the asset s stock

why environmentalists resist trade liberalization we build a two country differential game model of polluting oligopoly to consider the effects of trade liberalization as in static models the opening of trade promotes competition but expands global pollution characterizing open loop and feedback strategies we derive a sufficient condition for losses from trade this losses from trade proposition could provide a rationale for persistent resistance to globalization by environmentalists

the panzar rosse revenue test and market power in banking abstract the panzar rosse h statistic is a commonly used measure of market power in banking it is widely believed that h 0 is inconsistent with significant market power this study rigorously disproves that perception instead the possibility of h 0 under conditions of substantial market power turns out robust to the timing of banks actions relative costs choice of strategic variable degree of product differentiation strategy static or dynamic and degree of heterogeneity in banks conduct collusive versus fringe and hence may be common in practice

dynamic duopoly with adjustment costs a differential game approach abstract this paper develops a differential game model of duopoly in which firms incur costs associated with how fast they change their level of output the analysis solves for a subgame perfect equilibrium to the model in which the steady state level of output lies strictly between the static cournot and perfect competition solutions furthermore we demonstrate that the limit game in which the speed of adjustment parameter approaches zero does not tend toward the static cournot equilibrium

stock options and the strategic use of managerial incentives in cournot based oligopoly models there is an incentive for firms to pursue overly aggressive behavior resulting in prices and profits below those of the cournot equilibrium compensating managers in proportion to a combination of profits and sales provides one mechanism through which aggressive behavior emerges however when the profit component of managerial compensation comes in the form of stock options the aggressive behavior is restrained or even eliminated in equilibrium this result relies only on the nonlinearity of the stock option generalizations to other forms of compensation are discussed copyright 1993 by american economic association

dynamic oligopoly in the rice export market a linear quadratic dynamic oligopoly model is used to estimate the competitiveness of the rice export market the model nests various market structures using either open loop or feedback strategies the estimated feedback model implies a less competitive market structure than the estimated open loop model the rice export market is oligopolistic but it is closer to competitive than collusive copyright 1989 by mit press

dynamic duopolistic competition with sticky prices the authors study duopolistic competition in a homogeneous good through time under the assumption that its current desirability is an exponentially weighted function of accumulated past consumption this implies that the current price of the good does not decline by as much to accommodate any given level of current consumption our an alysis is conducted in terms of a differential game it is found that the equilibrium price corresponding to the open loop nash equilibriu m strategies approaches the static cournot equilibrium price while th e equilibrium price corresponding to the closed loop nash equilibrium strategies which are subgame perfect approaches a price below it copyright 1987 by the econometric society

effective foreign aid following civil war the nonstrategic desperation hypothesis when does aid foster development after civil war a testable model is needed to account for the uneven outcomes in postconflict development this article proposes and empirically tests the novel nonstrategic desperation hypothesis an explanation based on the varied incentives that fragile postconflict governments face when confronted with donor development goals paradoxically incentives to meet development goals only exist when donors have little strategic interest in the recipients and when recipients lack income from resource rents and are therefore desperate for income ten year data on infant mortality changes following civil wars ending 1970 96 and a variety of robustness checks support the hypothesis by focusing on how income sources constrain the choices of aid recipients and how these constraints can provide incentives to meet donor development goals the nonstrategic desperation hypothesis explains how the good use of aid can take place following civil war when institutions are weak

postconflict monetary reconstruction during civil wars governments typically resort to inflation to raise revenue a model of this phenomenon is presented estimated and applied to the choices and constraints faced during the post conflict period the results show that far from there being a fiscal peace dividend post conflict governments tend to face even more pressing needs after than during war as a result in the absence of post conflict aid inflation increases sharply frustrating a more general monetary recovery aid decisively transforms the path of monetary variables in the post conflict period enabling the economy to regain peacetime characteristics post conflict aid thus achieves a monetary reconstruction analogous to its more evident role in infrastructure

aid allocation by german ngos does the degree of official financing matter using a new data set for 41 german non governmental organisations ngos we analyse the allocation of ngo aid across recipient countries in a tobit regression framework by identifying for each ngo the degree of official financing we address the largely unresolved issue of whether financial dependence on the government impairs the targeting of ngo aid it turns out that german ngos are more active in poorer countries while they do not complement official aid by working under difficult local conditions beyond a certain threshold rising financial dependence weakens their poverty orientation and provides an incentive to engage in easier environments in addition we find that the ngos follow the state as well as ngo peers when allocating aid this herding behaviour is however hardly affected by the degree of official financing

unilateral production restrictions in a dynamic duopoly abstract this paper examines a dynamic game of exploitation of a productive asset by a duopoly a closed loop nash equilibrium of the game is constructed and used to analyze the effects of a unilateral production restriction surprisingly such unilateral action may result in a decrease of the long run asset s stock we also exhibit production restrictions that can result simultaneously in an increase of the asset s stock and the long run profits of the firm that is being imposed the production restriction moreover a unilateral decrease of the production of one firm can induce its rival to also decrease its production

strategic incentives in dynamic duopoly abstract we compare steady states of open loop and locally stable markov perfect equilibria mpe in a general symmetric differential game duopoly model with costs of adjustment strategic incentives at the mpe depend on whether an increase in the state variable of a firm hurts or helps the rival and on whether at the mpe there is intertemporal strategic substitutability or complementarity a full characterization is provided in the linear quadratic case then with price competition and costly production adjustment static strategic complementarity turns into intertemporal strategic substitutability and the mpe steady state outcome is more competitive than static bertrand competition

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

the value of commuting time in an empirical on the job search model an application based on moments from two samples this article estimates the value of commuting time voct among swedish males in an empirical on the job search model it uses a large sample of employee establishment linked data obtained from administrative registers the sample lacks information on mode choice for the journey to work we therefore estimate a mode choice model on another sample and use this model to link the administrative data to the relevant set of travel times costs and distances the voct is found to be 1 8 times the net hourly wage rate in the sample the relatively high estimate results from a high voct among cohabiting men

markov puppy dogs and related animals abstract it is shown that steady state markov perfect equilibria of discrete time infinite horizon quadratic adjustment cost games differ from equilibria of their infinitely repeated counterpart games with zero adjustment costs even though no adjustment costs are paid in the steady state in contrast to continuous time games the limit of these equilibria as adjustment costs approach zero is the same as the equilibria of their static counterpart games a classification scheme is presented and it is shown that the taxonomy is identical to that of analogous two stage games such as those analyzed by fudenberg and tirole american economic review papers and proceedings 1984 74 361 366 this classification is useful in that it implies that steady state equilibria need not be explicitly calculated to analyze qualitatively the effects of adjustment costs in strategic environments it is also argued that estimated conjectural variations parameters may capture a well defined property of strategic interaction in a dynamic game

a differential oligopoly game with differentiated goods and sticky prices we investigate a dynamic oligopoly game where goods are differentiated and prices are sticky we study the open loop and the closed loop memoryless nash equilibrium and show that the latter equilibrium entails a larger level of steady state production as compared to the former both equilibria entail a larger level of production in steady state than the static game we also study the effects of price stickiness and product differentiation upon the steady state equilibrium allocation and profits the per firm equilibrium output is increasing in both product differentiation and price stickiness while profits are increasing in both product differentiation and the speed of price adjustment the steady state social welfare monotonically increases in the speed of price adjustment and the overproduction entailed by dynamic competition has beneficial effect from a social standpoint

duopoly can be more anti competitive than monopoly abstract we prove two results on feedback equilibria under dynamic renewable resource duopoly the linear feedback output is smallest which sharply contrasts to the existing literature where it is largest moreover prices in two feedback equilibria are higher than under monopoly

assessing the economic vulnerability of small island developing states and the least developed countries macro vulnerability of the small island developing states sids as well as of least developed countries ldcs has been an increasing concern for the international community this has led to the design of an economic vulnerability index evi to assess the structural economic vulnerability resulting from natural or external shocks we first explain how vulnerability affects growth development and poverty reduction particularly in small developing countries we then examine how the evi has been designed and how it can be used to compare sids and ldcs we argue that evi is a relevant tool not only for identification of ldcs but also for geographical aid allocation to favour vulnerable countries including ldcs and sids even though not all sids qualify as ldcs

efficiency inducing taxation for polluting oligopolists abstract we show that there exists a time independent tax rule that guides polluting oligopolists to achieve the socially optimum production path the optimal tax is dependent on the current pollution stock and it may be negative when the pollution stock is low a surprising result is that the optimal tax rule may give firms a subsidy for an initial time interval even though under laissez faire their output always exceeds the socially optimal output this subsidy however induces firms to produce less than they would under laissez faire

the closed loop motive for voluntary export restraints this paper examines the effects of voluntary export restraints in a dynamic game model of duopolistic competition it is shown that the imposition of a voluntary export restraint at the free trade level of imports increases the market price and the profits of all firms in the industry if free trade is identified as the closed loop subgame perfect cournot equilibrium of the game hence the authors conclude that the predictions of static cournot competition do not carry over to the dynamic case

social protection 2 0 exploring issues evidence and debates in a globalizing world abstract this paper reviews the growing literature on social protection while not new the concept evolved remarkably in recent years it is approached from a multitude of perspectives and intersects with broader bodies of literature particularly around public policy pro poor growth rights humanitarian strategies and aid effectiveness as well as feeding into specific programmatic issues e g conditionality targeting and transfer selection this blend of challenges and approaches has often made debates elusive and polarized the paper examines the evolution and definitions of social protection and unbundles critical policy institutional and implementation quandaries taken together these considerations shape a set of context specific models of social protection the paper s five core conclusions may help chart future directions for social protection research and practice

competitive versus efficient extraction of a common property resource the groundwater case abstract in this paper socially optimal and private extraction of a common property aquifer are compared open loop equilibrium and feedback equilibrium in linear strategies have been computed to characterize private extraction the use of these two equilibrium concepts allows us to distinguish between cost and strategic externalities as long as the open loop solution captures only the cost externality and the feedback solution captures both the results show that strategic behaviour increases the overexploitation of the aquifer compared to the open loop solution however if the groundwater storage capacity is large the difference between the socially optimal and private extraction the latter characterized by a feedback equilibrium is negligible

eliciting gps preferences for pecuniary and non pecuniary job characteristics abstract this study examines general practitioners preferences for pecuniary and non pecuniary job characteristics in the context of choosing a general practice in which to work a discrete choice experiment is used to test hypotheses about the nature of the utility function marginal rates of substitution between income and non pecuniary characteristics are calculated the results suggest that policies aimed at influencing general practitioners location choices should take account of both non pecuniary and pecuniary factors particularly out of hours work commitments

nation building and economic growth nation building the joint provision of economic and military aid in conflict or postconflict areas has been used as an important and expensive foreign policy tool yet despite the huge costs of these investments the growth effects of nation building operations for recipient nations remain underexplored while recent literature documents the negative growth effects of conflict yamarik johnson and compton 2010 and the positive effects of economic aid after conflict collier and hoeffler 2002 very little has been done on the confluence of different kinds of aid and the effectiveness of such joint efforts during times of turmoil this paper attempts to answer the following three questions regarding the growth effects of nation building operations does the joint provision of economic and military assistance help a country grow when it is embroiled in conflict does such joint provision

the evolution of consistent conjectures in this paper we model the evolution of conjectures in an economy consisting of a large number of firms which meet in duopolies the duopoly game is modelled by the conjectural variation cv model an evolutionary process leads to more profitable conjectures becoming more common payoff monotonic dynamics under this class of selection dynamics convergence occurs to a small set of serially undominated strategies containing the consistent conjecture this set can be made arbitrarily small by appropriate choice of the strategy set if the game is dominance solvable then the dynamics converge globally to the unique attractor

explicit solutions of optimization models and differential games with nonsmooth asymmetric reference price effects models in marketing with asymmetric reference effects lead to nonsmooth optimization problems and differential games which cannot be solved using standard methods in this study we introduce a new method for calculating explicitly optimal strategies open loop equilibria and closed loop equilibria of such nonsmooth problems application of this method to the case of asymmetric reference price effects with loss aversive consumers leads to the following conclusions 1 when the planning horizon is infinite after an introductory stage the optimal price stabilizes at a steady state price which is slightly below the optimal price in the absence of reference price effects 2 the optimal strategy is the same as in the symmetric case but with the loss parameter determined by the initial reference price 3 competition does not change the qualitative behavior of the optimal strategy 4 adopting an appropriate constant price strategy results in a minute decline in profits

feedback equilibria in a dynamic renewable resource oligopoly pre emption voracity and exhaustion abstract we revisit a recent literature on productive asset exploitation describing a differential oligopoly game of resource extraction under static linear feedback and nonlinear feedback strategies where we explicitly allow for the possibility of resource exhaustion we show that i feedback rules entail resource exhaustion for a finite number of firms and ii feedback strategies are more aggressive than static ones as long as the resource stock is large enough in accordance with the acquired view based on the traditional pre emption argument associated with feedback information

tariffs and quotas under dynamic duopolistic competition abstract this paper analyzes tariffs and quotas in a differential game model of duopolistic competition for a homogeneous good equal import tariffs and quotas are compared with respect to resulting domestic prices the open loop and closed loop subgame perfect equilibria are derived the open loop game leads to domestic price equivalence however the closed loop game does not unless firms are myopic or the number of domestic firms becomes large thus we prove that the equivalence for static cournot competition does not carry over to the dynamic case

brand loyalty and market equilibrium two concepts of brand loyalty are defined inertial brand loyalty resulting from time lags in awareness and cost based brand loyalty resulting from intertemporal utility effects their market level implications are formally derived in a continuous time model it is found that inertial brand loyalty leads to equilibria with price dispersion while cost based brand loyalty also may allow single price equilibria in all cases as brand loyalty vanishes so does the difference between the average trading price and the price which obtains with no brand loyalty consistent with empirical results the theory predicts that the relationship between market share and performance is positive in cross sectional studies but flat in time series studies the theory is also consistent with the view that market share is an asset in itself after developing the theory several strategic implications are drawn in the end some questions for further theoretical and empirical research are raised

sticky prices in a dynamic oligopoly an investigation of s s thresholds abstract the strategic implications of costly price adjustment are investigated empirically i assume that managers are engaged in a state space game and ask if the dynamic considerations that arise when they condition their choices on the state cause prices to be more or less rigid than when players use more myopic pricing rules the answer to this question depends on a parametric specification of the problem that lends itself to empirical assessment the micro panel data used to investigate this issue consist of weekly prices sales costs and promotional activity for three brands of saltine crackers sold by four chains of grocery stores in a small us town i find that in this market strategic behavior exacerbates price rigidity the thresholds are wider and the time between changes is longer than would be observed in a more myopic setting

fixed rules and decision rules time consistency and subgame perfection the paper investigates the relationship between time consistency and subgame perfection we show that despite some suggestions in the literature the two are not equivalent subgame perfection is a stronger refinement the paper also discusses the classes of games in which time consistency and subgame perfection are equivalent

prisoner s dilemma on behavioral choices in the presence of sticky prices farsightedness vs myopia abstract when making decisions in a dynamic environment myopic supply chain members tend to ignore the future effects of their decisions on the evolution of state dynamics by contrast far sighted decision makers consider about the impacts of current decisions on both current profits and future profits in order to study how behavioral choices affect the operation decisions and profits of supply chain members we develop a differential game with sticky prices where one manufacturer purchases components from one supplier and makes final products for end customers the supplier decides on its wholesale price while the manufacturer sets its production quantity either of supply chain members has two behavioral choices myopia and farsightedness we derive and compare equilibrium solutions under four different behavioral combinations our analysis shows that there always exists a prisoner s dilemma caused by behavioral choices farsightedness is a dominant strategy for either the supplier or the manufacturer but both to act myopically makes both of them better off furthermore comparing with other scenarios the whole supply chain obtains the highest profit when both players are myopic in addition we introduce a revenue sharing contract with static wholesale price to mitigate the adverse impacts of the prisoner s dilemma

mixed oligopoly with consistent conjectures abstract in this paper we consider a model of mixed oligopoly with conjectural variations equilibrium cve the agents conjectures concern the price variations depending upon their production output s increase or decrease we establish existence and uniqueness results for the conjectural variations equilibrium called an exterior equilibrium for any set of feasible conjectures to introduce the notion of an interior equilibrium we develop a consistency criterion for the conjectures referred to as influence coefficients and prove the existence theorem for the interior equilibrium understood as a cve with consistent conjectures to prepare the base for the extension of our results to the case of non differentiable demand functions we also investigate the behavior of the consistent conjectures in dependence upon a parameter representing the demand function s derivative with respect to the market price

dynamic oligopoly with capacity adjustment costs abstract the literature on strategic investment emphasized the case of completely irreversible investment this paper considers an oligopoly model in which investment is reversible and capacity is subject to adjustment costs an n player linear quadratic differential game is analyzed existence and characterization results for perfect equilibrium feedback strategies are provided feedback strategies provide incentives for each player to invest strategically so as to preempt subsequent expansion by rivals a larger set of perfect equilibria is constructed by using memory dependent trigger strategies equilibria of this type are shown to support joint value maximization for some initial states and asymmetric steady states

dynamic demand and noncompetitive intertemporal output adjustments abstract this paper integrates dynamics on the demand and on the supply side which are characteristic for many goods in particular fuels due to costly adjustments furthermore firms often pursue a quantity strategy and decide on output adjustments additional capacities etc instead of fixing prices e g opec moved from posting prices to adjusting output in 1986 this paper provides a corresponding framework surprisingly ignored in the literature and derives intertemporal market equilibria cooperative and noncooperative in open loop and in markov strategies the equilibrium in markov strategies is different mostly opposite to the much discussed sticky price models the qualitative properties are non trivial and some of them are even surprising e g increased demand sluggishness can raise supply

aid allocation and poverty reduction the authors derive a poverty efficient allocation of aid and compare it with actual aid allocations they build the poverty efficient allocation in two stages first they use new world bank ratings of 20 different aspects of national policy to establish the current relationship between aid policies and growth onto that they add a mapping from growth to poverty reduction which reflects the level and distribution of income they compare the effects of using headcount and poverty gap measures of poverty they find the actual allocation of aid to be radically different from the poverty efficient allocation in the efficient allocation for a given of poverty aid tapers in with policy reform in the actual allocation aid tapers out with reform in the efficient allocation aid is targeted disproportionately to countries with severe poverty and adequate polices the type of country where 74 percent of the world s poor live in the actual allocation such countries receive a much smaller share of aid 56 percent than their share of the world s poor with the present allocation aid is effective in sustainably lifting about 30 million people a year out of absolute poverty with a poverty efficient allocation this would increase to about 80 million people even with political constraints introduced to keep allocations for india and china constant poverty reduction would increase to about 60 million reallocating aid is politically difficult but it may be considerably less difficult than quadrupling aid budgets which is what the authors estimate would be necessary to achieve the same impact on poverty reduction with existing aid allocations

dynamic voluntary provision of public goods abstract the paper considers a dynamic public goods problem in which individuals contributions are accumulated over time analyzing the infinite duration dynamic game with continuous contributions and flow benefits the paper demonstrates that the free riding problem is aggravated when players contributions are conditional on the observable collective contributions hence without commitment an additional incentive to depress contributions arises a current contributor can free ride on all future contributions as well as on current ones

on the markovian efficiency of bertrand and cournot equilibria we characterize and compare closed loop feedback price and quantity strategies within a full fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset unlike previous papers on the strategic exploitation of productive assets we allow for imperfect product substitutability which enables us to deal with price competition we show that the traditional result that the bertrand equilibrium is more efficient than the cournot equilibrium does not necessarily hold in a markovian environment either in the short run or at the stationary equilibrium or using the discounted sum of welfare as a criterion for relative efficiency

measurement of travel time values and opportunity cost from a discrete choice model section 1 of the paper introduces discrete choice models which contain elements of becker and deserpa theories section 2 outlines the concepts of quality adjusted value of travel time and the uniform or unadjusted shadow price of time sections 3 and 4 explain how values and shadow price of time can be measured using the discrete choice models described in section 2 section 5 explains the importance of the so called model specific constants in a mode choice model in the light of the empirical results of sections 3 and 4 trrl

dangerous interactions problems in interpreting tests of conditional aid effectiveness there is now a substantial empirical literature examining the determinants of aid effectiveness a large part of this makes inferences based on a regression incorporating aid as a share of recipient gdp interacted with some institutional or policy variable recently some authors have questioned the statistical robustness of such regressions pointing out that results vary according to the way aid is measured and the estimator applied to the data moreover the regression equations used to test hypotheses about the determinants of aid effectiveness are often introduced without any corresponding formal theory we explore aid policy interaction terms in the context of a simple theoretical model showing how different nonlinearities may be conflated the resulting difficulties in the interpretation of aid growth regressions are illustrated in the context of a seminal paper in the conditional aid effectiveness literature one simple change in the way that aid is measured in per capita terms rather than as a fraction of gdp completely changes the regression results this indicates that adding interaction terms to otherwise linear regression equations is an inadequate way of capturing the nonlinearities in the growth process our aim is to re emphasise the importance of grounding

large shareholders monitoring and ownership dynamics toward pure managerial firms abstract we study ownership dynamics when the manager and the large shareholder both risk neutral simultaneously choose effort and monitoring level respectively to serve their non congruent interests we show that there is a wedge between the valuation of shares by atomistic shareholders and the large shareholder s valuation at the markov perfect equilibrium the large shareholder divests her shares if the incongruence of their interests is mild divestment is drastic all her shares are sold immediately if their interests diverge sharply the divestment is gradual in order to prevent a sharp fall in share price in the limit the firm becomes purely managerial

competition in a duopoly with sticky price and advertising abstract this paper develops a differential duopolistic game where price is sticky and firms can invest in market enlarging promotional activities which have a public good nature one finding indicates that advertising and not output as in fershtman and kamien econometrica 55 1987 1151 1164 is responsible for the higher stationary price found in the open loop equilibrium relative to the linear feedback one that is free riding is more intense when firms play linear markov feedback strategies however the collusive outcome can be approximated and opportunism eliminated if firms can engage in preplay negotiations where they select a nonlinear markov perfect strategy for output and advertising achieving the collusive outcome requires as in the folk theorem for infinitely repeated games the discount rate to be sufficiently small

could myopic pricing be a strategic choice in marketing channels a game theoretic analysis abstract we identify the conditions under which a myopic pricing behavior could be a profit enhancing tool in the distribution channel a channel member is myopic when he ignores the evolution of the retail prices when actual and past retail prices affect consumers purchasing decisions a differential game is formulated where channel members control transfer and retail prices we start by examining a bilateral monopoly and then introduce competition at the manufacturing level the competing manufacturers play a la nash and can be both myopic both farsighted or one myopic while the other is farsighted we show that for a bilateral monopoly myopia enhances total channel profit when the effect of the reference price is small enough this remains true under competition at the manufacturing level when products are differentiated enough

oligopoly exploitation of a private property productive asset abstract in this paper we build a closed loop nash equilibrium of a private property productive asset oligopoly we compare and contrast private with common property in terms of exploitation rates and social welfare and provide a comparative dynamic analysis with respect to the number of firms in the industry contrary to previous studies on oligopolistic exploitation of productive assets before exploitation begins the resource is parcelled out each firm privately owns and manages the assigned parcel over the entire planning horizon compared with the common property regime we find a new set of results both in the short and in the long run as for social welfare we provide conditions on the implicit growth rate and the initial asset stock under which the socially optimal allocation of the resource implies a natural monopoly

international aspects of pollution control pollution is a by product of production is only gradually dissolved by the environment and crosses national borders the market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution in practice governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra national social planning absence of precommitment leads to lower emission charges less cleaning up activities and more pollution appropriate levels of emission charges under the various outcomes are a result of this analysis attention is also paid to investment in clean technology the debate between optimists who believe that higher production is compatible with sound environmental policy and pessimists can be analysed in this way