recursive equilibria in dynamic economies with stochastic production in this paper we prove the existence of recursive equilibria in stochastic production economies with infinitely lived agents and incomplete financial markets we consider a general dynamic model with several commodities which encompasses heterogeneous agent versions of both the lucas asset pricing model and the stochastic neo classical growth model as special cases our main assumption is that there are atomless shocks to fundamentals that have a purely transitory component and a component that does not depend on last period s shocks directly

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

the role of institution building in us industrial modernization programs abstract an important issue for evaluating industrial modernization programs is how well alternative intervention strategies address the underlying problems that contribute to uneven patterns of technology adoption the one on one industrial extension service model where the state agency provides technical assistance directly to individual firms constitutes one approach by contrast institution building approaches emphasize inter firm learning in which government serves as the catalyst for bringing technology developers together with potential users and for providing closer linkages between organizations that are the technology leaders and those that tend to be followers programs that support such inter firm learning opportunities stand a better chance of contending with the underlying problems retarding technology transfer are more likely to gain acceptability by both technology leaders and followers and are more likely to garner funds from the private sector

competitive dynamics and economic learning an extended resource based view in this paper a conceptual framework for the analysis of economic learning is developed economic learning by analogy with organizational learning results in the development of economic competences or capabilities shared between firms which rest on a foundation of economic resources from which value is generated and economic routines through which resources are utilized it is the mobility of resources and their exchange and production dynamics along evolutionary pathways which underpins the plausibility of a notion of economic learning the paper elaborates this framework as a resource based view rbv of the economy as a whole as an extension of the rbv of the firm such a framework captures the dynamics of exchange and circulation of technologies know how and intangible assets as well as of tangible assets and capital goods it is concerned with investment behavior by entrepreneurs rather than with the behavior of producers and consumers in goods and services markets within this resource economy framework it is possible to generate an account of the resource dynamics that underpin production of goods and services including resource propagation diffusion imitation replication and recombination these processes encompass evolutionary pressures experienced through resource variation selection and retention entrepreneurial initiatives take the form of resource recombinations while resource innovation captures the creation of new economic resources such as technological standards such a perspective brings into focus the resource specialization and configurations that drive real economies within firms and between firms that translates into enhanced or diminished performance of the economy as a whole copyright 2003 oxford university press

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

stationary markov perfect equilibria in discounted stochastic games abstract the existence of stationary markov perfect equilibria in stochastic games is shown under a general condition called decomposable coarser transition kernels this result covers various earlier existence results on correlated equilibria noisy stochastic games stochastic games with finite actions and state independent transitions and stochastic games with mixtures of constant transition kernels as special cases a remarkably simple proof is provided via establishing a new connection between stochastic games and conditional expectations of correspondences new applications of stochastic games are presented as illustrative examples including stochastic games with endogenous shocks and a stochastic dynamic oligopoly model

discounted stochastic games with no stationary nash equilibrium two examples we present two examples of discounted stochastic games each with a continuum of states finitely many players and actions that possess no stationary equilibria the first example has deterministic transitions an assumption undertaken in most of the early applications of dynamics games in economics and perfect information and does not possess even stationary approximate equilibria or markovian equilibria the second example satisfies in addition to stronger regularity assumptions that all transitions are absolutely continuous with respect to a fixed measure an assumption that has been widely used in more recent economic applications this assumption has been undertaken in several positive results on the existence of stationary equilibria in special cases and in particular guarantees the existence of stationary approximate equilibria

towards a dynamic schumpeterian welfare economics knowledge plays an increasingly important role in shaping the dynamics of an economy a static paretian welfare economics is therefore inadequate and needs to be supplemented by a dynamic schumpeterian welfare theory a dynamic welfare economics acknowledges the role of knowledge and communication as knowledge develops cumulatively in a social environment knowledge may not be readily diffused or exchanged different costs of communication need to be considered each affecting the creation of new knowledge recent developments in intellectual property right ipr law are evaluated to determine the extent to which they affect communication costs and thus future economic welfare

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

testing a model of technological trajectories abstract in this paper we test a model of technological trajectories quantitative predictions are based on some qualitative statements described in pavitt s taxonomy research policy 1984 13 343 373 the test concerned both the realism of the predicted associations between industrial sectors and patterns of technical change and the predictive power of the model the data come from central statistical office of italy istat national research council of italy cnr a survey on technological innovation in the italian manufacturing industry the results of the test do not seem inconsistent with the model s predictions although one of them turned out to be of little significe from a statistical standpoint the variability of innovative behaviour at firm level is confirmed once again thus making more challenging the task of those searching for useful theories on industrial patterns of technological innovation

continuous stochastic games of capital accumulation with convex transitions abstract we consider a discounted stochastic game of common property capital accumulation with nonsymmetric players bounded one period extraction capacities and a transition law satisfying a general strong convexity condition we show that the infinite horizon problem has a markov stationary subgame perfect equilibrium and that every finite horizon truncation has a unique markovian equilibrium both in consumption functions which are continuous and nondecreasing and have all slopes bounded above by 1 unlike previous results in strategic dynamic models these properties are reminiscent of the corresponding optimal growth model journal of economic literature classification codes c73 o41 q20

cooperation between rivals informal know how trading it has long been recognized that it is difficult for an innovating firm to fully appropriate the benefits arising from its innovations and that desired research might therefore not be performed nelson 1959 pp 297 306 one sometimes possible solution to this dilemma is cooperative r d conducted by firms who share the costs and benefits of particular r d projects johnson 1973

stable coalition structures with open membership and asymmetric firms i study games of coalition formation with open membership where firms form associations in order to decrease their costs before competing on the market according to previous analyses only the grand coalition forms at the nash equilibrium of such games i show that this result hinges on the assumption of symmetric firms i therefore introduce asymmetric firms in a game where only two associations can form i demonstrate that there exists a coalition proof nash equilibrium coalition structure in this game and that when the equilibrium involves two associations all the members of an association have a higher taste for this association than all nonmembers do journal of economic literature classification numbers c70 c72 l13

how national institutions influence technology policies and firms knowledge building strategies a study of fuel cell innovation across industrialized countries abstract the central thesis advanced in this study is that firms knowledge building strategies can be usefully explained by the variations in their national institutional contexts using an inductive approach a study of fuel cell innovation across the u s france japan and norway demonstrates how countries socio political institutions characterized by their levels of statism and corporatism contribute to variations in technology policies pertaining to investment collaboration internationalization and diversity these technology policies are sources of advantages and disadvantages for firms with implications for their knowledge building strategies the proposed theoretical framework is especially relevant in the context of industry emergence and r d internationalization

location decentralization and knowledge sources for innovation when firms seek to innovate they must decide where to locate their innovation activity this location choice requires firms to make a simultaneous choice about the organizational structure of innovation activity almost by definition multiple locations per firm imply some degree of decentralization we compare predictions of the knowledge based view with the predictions of organizational economics regarding the location and decentralization of r d using firm level data on r d locations in finland we examine the conditions under which firms with multiple r d locations also have greater innovation output our results indicate that multilocation of r d activity is positively associated with imitative innovation output and is strongly correlated with greater external knowledge sourcing we also find that the positive association between multiple r d locations and innovative output does not apply to new to the market innovations the results are consistent with the interpretation that multilocation of r d enables firms to access a broad set of external sources of knowledge in pursuit of imitative rather than new to the market innovation moreover these findings imply heterogeneity in r d strategies between firms pursuing new to the market innovation and firms pursuing imitative innovation it is thus important to distinguish between new to the market and imitative innovations because their determinants may differ

deterring fraud the role of resale price maintenance the economics of fraud like the economics of information itself enjoys a limited but growing literature while economists since alfred marshall have recognized the importance of brand name capital and reputation in protecting consumers against fraud marshall 1949 4 xi only recently has the profession been able to build rigorous models for analyzing market transactions in which the quality of traded goods is subject to uncertainty and deception in a pioneering paper george akerlof 1970 presented a model in which buyer skepticism about the quality of privately offered used cars becomes so intense that all potential sellers of nonlemon used cars are driven from the market leaving it entirely populated with lemons as analyzed by michael spence 1973 this phenomenon may occur because nonlemon owners lack adequate signaling mechanisms specifically an effective signal would be an activity or characterusing a model like that of klein and leffler s we demonstrate theoretically that a manufacturer s desire to signal relative quality differences by relative retail price differences may be thwarted by the misleading markups of independent retailers resale price maintenance is one instrument that a manufacturer can use to avoid this problem we present empirical evidence from a recent antitrust case in which forcing a manufacturer to drop resale price maintenance did lead to misleading and also higher markups

an interpretive history of challenges to neoclassical microeconomics and how they have fared contemporary microeconomics has witnessed a resurgence of behavioral institutional and evolutionary critiques of the neoclassical mainstream that came to dominate the field during the 1980s today s critiques and proposals for reform have a long tradition in economics while synthesizing the intellectual history of these challenges this article explores the reasons why such critical strands of microeconomics fared poorly in the past and in contrast what factors may account for their partial acceptance into the mainstream in recent times

alfred chandler and knowledge management within the firm this essay examines the role of knowledge management defined as the management of processes affecting the creation communication distribution and exploitation of knowledge concerning corporate strategy markets product and process technologies and management practices within the corporation in alfred d chandler s work on the modern corporation along with efforts to avoid transaction cost problems the management of firm specific information and knowledge was central to the 19th century transformation of us corporate structure that chandler examined in the visible hand knowledge management also played a key role in the creation of intrafirm organizations for managing the creation of knowledge management of innovation and acquisition of technologies from external sources industrial r d and the product diversification that emerged from the in house r d facilities of many of these firms contributed to the development of the so called m form corporation examined by chandler in strategy and structure in which corporate management and strategy formulation were organizationally differentiated and separated from functional management finally chandler s last work on the success and failure of united states japanese and western european firms in the modern electronics pharmaceuticals and chemicals industries emphasized the role of the integrated learning base within these firms and the varying degrees of success with which established firms were able to sustain these learning bases and or apply them to new markets and technologies copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

innovation and cooperation implications for competition and antitrust n k robel laureate robert solow and his colleagues on mit s industrial productivity commission recently noted dertouzos lester and solow 1989 p 7 undeveloped cooperative relationships between individuals and between organizations stand out in our industry studies as obstacles to technological innovation and the improvement of industrial performance and later p 105 that interfirm cooperation in the u s has often though not always been inhibited by government antitrust regulation these striking conclusions warrant further exploration unfortunately industrial organization textbooks still discuss horizontal cooperation and competition almost exclusively in terms of standard cartel theory on the other hand vertical cooperation contracting is viewed differently and some textbooks provide treatments of supplier buyer relationships in which cooperation is viewed as enhancing efficiency both in the textbooks and in policy discussion among economists cooperation among competitors is highly suspect being perhaps the last bastion of what was once referred to as the inhospitality tradition in antitrust as a result very little literature addresses how cooperation among competitors can promote competition notwithstanding that cooperation among competitors may sometimes be essential if innovating firms are to compete in today s increasingly global markets imai and baba 1989 such cooperation is already important in japan and in europe 1

leveraging research and development assessing the impact of the u s advanced technology program this paper examines the factors that affect a firm s chances of winning an award from the advanced technology program atp and the subsequent impact of the award on a firm s success in raising additional funds for its research and development rd the halo effect from the award increases the success of these firms in attracting additional funding from other sources our conclusion is that the atp is leveraging activities that have a strong potential for broad based economic benefit

on the strategic accumulation of intangible assets the resource based view holds that firms can earn supranormal returns if and only if they have superior resources and those resources are protected by some form of isolating mechanism preventing their diffusion throughout industry one isolating mechanism that has been proposed for intangible assets is their accumulation process the hypothesis is that intangible assets are inherently inimitable because would be imitators need to replicate the entire accumulation path to achieve the same resource position thus entrants can never catch up to incumbents an interesting challenge to this hypothesis is counterfactual evidence that entrants sometimes outperform incumbents such counterfactual evidence should not exist if the theory is strictly correct this paper attempts to reconcile resource accumulation theory with the counterfactual evidence we do so by building an intermediate good production function for a firm s intangible asset stocks we test the contribution of the intangible asset stock to the firm s final good production function and examine the extent to which that asset stock deters rival mobility in the pharmaceutical industry we find that the asset accumulation process itself cannot deter rivals because asset stocks reach steady state rather quickly entrants can achieve an incumbent s intangible asset stock merely by matching its investment until steady state thus we conclude that the accumulation process per se is not an isolating mechanism while this is perhaps the most important contribution another contribution is an empirical methodology for characterizing the accumulation function

corrigendum to discounted stochastic games with no stationary nash equilibrium two examples levy 2013 presented examples of discounted stochastic games that do not have stationary equilibria the second named author has pointed out that one of these examples is incorrect in addition to describing the details of this error this note presents a new example by the first named author that succeeds in demonstrating that discounted stochastic games with absolutely continuous transitions can fail to have stationary equilibria

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

global gatekeeping representation and network structure a longitudinal analysis of regional and global knowledge diffusion networks this paper argues that structural characteristics of knowledge diffusion networks such as density levels centralization levels and the presence of global knowledge brokers contribute to the emergence of dominant designs and the competitiveness of countries firms and industries it further suggests that national institutional structures and firm specific attributes influence the development of these knowledge diffusion networks six propositions developed from examination of one industry s networks and previous scholarly literature specify these arguments

national innovation systems and the intermediary role of industry associations in building institutional capacities for innovation in developing countries a critical review of the literature abstract developed over the past three decades the national innovation system concept nis has been widely used by both scholars and policy makers to explain how interactions between a set of distinct nationally bounded institutions supports and facilitates technological change and the emergence and diffusion of new innovations this concept provides a framework by which developing countries can adopt for purposes of catching up initially conceived on structures and interactions identified in economically advanced countries the application of the nis concept to developing countries has been gradual and has coincided in the nis literature with a move away from overly macro interpretations to an emphasis on micro level interactions and processes with much of this work questioning the nation state as the most appropriate level of analysis as well as the emergence of certain intermediary actors thought to facilitate knowledge exchange between actors and institutions this paper reviews the nis literature chronologically showing how this shift in emphasis has diminished somewhat the importance of both institutions particularly governments and the political processes of institutional capacity building in doing so the paper suggests that more recent literature on intermediaries such as industry associations may offer valuable insights to how institutional capacity building occurs and how it might be directed particularly in the context of developing countries where governance capacities are often lacking contributing to less effective innovation systems stagnant economies and unequal development

capitalism as an engine of progress economists from marx to schumpeter have touted capitalism as an engine of technical progress but what kind of an engine is it what are its key components how does it work

a model of vertical restriction and equilibrium in retailing one sort of economic behavior that continues to engage the attention of economists is the imposition by some manufacturers of restrictions on their wholesalers and retailers why would manufacturers want to impose minimum retail prices and why would they want to control the locations at which their goods are distributed to consumers an application of simple economic principles suggests that manufacturers with a monopoly in a product this could be a monopoly achieved through patents for exampleshould charge the profit maximizing wholesale price and let retailers fend for themselves and if more stores want to carry the product so much the better because this increases the likelihood that consumers will run across it a widely accepted explanation for the desire of manufacturers to be able to stipulate resale prices is based on the possibility that manufacturers of branded goods often want retailers to provide some joint service that cannot easily be charged for the clearest example is sales or promotional effort the effect of a minimum retail price in these cases is to establish an incentive to provide jointly supplied services that no individual retailer would otherwise provide this model of distribution provides a rationale for restrictions placed on retailers by manufacturers the manufacturer s customers are located uniformly along a road and retailing operations are subject to increasing returns three difficulties arise first retailers acting in concert can earn positive profits at the expense of the manufacturer and consumers second costless relocation free entry and competition will not result in the store density and retail price favored by the manufacturer third store locations fixed in the short run imply that price cutting would undermine the density of stores preferred by the manufacturer

lessons from an economy with limited market functions r d in hungary in the 1980s abstract in the former socialist countries science developed as a leading force hungary became a special case since its science policy in the last two decades served the idea of new economic mechanism introduced in 1968 market oriented socialism still remained a shortage economy with lack of competition and of market demand for technical development the r d institutions had adjusted to the economic environment and had developed a great deal of business oriented activities to survive the falling budget support the relationship between academia and industry was unbalanced as a special kind of science push model due to the economic environment of shortage the original model was upside down instead of leading economic growth r d institutions had to adjust to the lower technical level of the industry facing political and economic transitions the scientific and business interests and values have been mixed or are overlapping and are both in danger if the market economy does not soon develop

absorptive capacity coauthoring behavior and the organization of research in drug discovery we examine the interface between for profit and publicly funded research in pharmaceuticals firms access upstream basic research through investments in absorptive capacity in the form of in house basic research and pro publication internal incentives some firms also maintain extensive connections to the wider scientific community which we measure using data on coauthorship of scientific papers between pharmaceutical company scientists and publicly funded researchers connectedness is significantly correlated with firms internal organization as well as their performance in drug discovery the estimated impact of connectedness on private research productivity implies a substantial return to public investments in basic research

collective invention during the british industrial revolution the case of the cornish pumping engine in this paper we argue that together with individual inventors and firms what robert c allen 1983 has termed as collective invention settings that is settings in which rival firms freely release each other pertinent technical information were also a crucial source of innovation in the industrial revolution period until now this has been very little considered in the literature this paper focuses on one of these cases the cornish mining district in cornwall during the early nineteenth century a notable collective invention setting gradually emerged this case is particularly remarkable because it was capable of generating a continuous and sustained flow of improvements in steam pumping technology which in the end greatly contributed to improve the thermodynamic efficiency of the steam engine in this paper we study in detail the specific economic circumstances that led to the formation of this collective invention setting and we analyses its consequences for the rate of technological innovation

industrial research and sources of innovation a cross industry analysis of italian manufacturing firms abstract this paper deals with sources of innovation in the italian manufacturing industry it uses an extensive database on 8 220 firms which developed technological innovations during the period 1981 85 r d turns out to be a major source of innovation for a limited number of innovating firms non r d performers mainly rely upon the acquisition of external technology equipment and machinery the paper shows that there is not a statistically significant difference between innovation sources in r d firms versus non r d firms this suggests that the presence of an r d laboratory does not make any difference in how the overall technological information is gathered by innovating enterprises the analysis of the role played by r d activities in innovation development shows that it accounts only for 17 9 percent of costs while production investment absorbs 51 5 percent of total financial resources as a conclusion r d activity being only one phase of the innovation process cannot be an accurate indicator of a firm s commitment to technological innovation r d is often a minor source of innovation and policy measures should not concentrate just on r d support encouraging and financing innovative suppliers and users may be more effective than helping manufacturers of final products

knowledge and competitive advantage the coevolution of firms technology and national institutions this issue of jibs offers reviews of two books that analyse the dynamic interaction between the business environments and business strategies in very different ways the institutional underpinnings for business strategies are a major research topic for comparative management aiming to explain why in different contexts firms pursue different strategies and with different implications for performance j peter murman in knowledge and competitive advantage takes a historical perspective focusing on the co evolutionary processes between national innovation systems business strategies and performance this books thus adds to the industry level longitudinal research reviewed in jibs no 4 2003 tom murtha et al s managing new industry creation and david mckendrick et al s from silicon valley to singapore

sequential equilibria in a ramsey tax model this paper presents a full characterization of the equilibrium value set of a ramsey tax model more generally it develops a dynamic programming method for a class of policy games between the government and a continuum of households by selectively incorporating euler conditions into a strategic dynamic programming framework we wed two technologies that are usually considered competing alternatives resulting in a substantial simplification of the problem

the roles of science in technological innovation abstract one of the central issues in science policy during the past decade has been the extent to which the national levels of expenditure on scientific education and research influence the standard of living this paper provides empirical evidence to show that the pay off from this investment in science is more complex and indirect than previously supposed

the incidence of regulatory rents in the motor carrier industry this article focuses on two questions in the debate over motor carrier regulation first did regulation create eliminate or have no effect on monopoly rents in the trucking industry second ifthere were rents what was their incidence were they received by owners oftrucking firms dissipated through higher costs or captured by the teamsters union data on share price responses to deregulation announcements reveal declines in expected profits of 8 19 of totalfirm value this suggests that regulation created monopoly profits and indicates that at least some of these rents accrued to owners of trucking firms firms responses to regulatory change are modelled as functions of company s operating characteristics and measures of unionization operating efficiency and service characteristics are shown to affect the impact of deregulation on share values