the phillips curve macroeconomic policy and the welfare of canadians a review of the two competing paradigms explaining inflation and unemployment fluctuations singles out the keynesian phillips curve as the clear empirical winner over its classic competitors reestimation of the canadian phillips curve for 1957 90 identifies a sharp structural shift toward a high degree of unemployment hysteresis after 1972 the recent attempt of macropolicy to flatten the aggregate demand curve and limit supply side shock accommodation which aims at lower and more stable inflation is then shown to make unemployment higher and more unstable on average to an extent that is an increasing function of the degree of hysteresis understanding and reducing hysteresis and developing a consensus based incomes policy that has a chance of alleviating the dismal trade off should therefore to top research and policy priorities

self enforcing collusion in large dynamic markets abstract the folk theorem in game theory implies that any outcome that is better for all players than some single period nash outcome can be achieved through noncooperative equilibrium in repeated games with discounting whether the folk theorem holds for a repeated cournot oligopoly as the number of firms n increases without bound is investigated it is shown that the folk theorem holds in the limit iff demand increases at the same rate as the number of firms and the cournot price sequence is bounded strictly above by the supremum of marginal cost for large n

are judges leading economic theory sunk costs the threat of entry and the competitive process in this paper we attempt to bring theoretical form to a particular entry argument that has found favor in the courts we suggest that sunk costs may not be a major impediment to entry when a group of customers can commit to an entry enhancing strategy buyers have strong incentives to adopt such strategies because they benefit directly from the resulting lower prices the simplest example involves a large buyer that is able to guarantee an entrant a market for its product long term contracts or even informal purchase commitments backed by customer reputation may also allow the entrant to obtain a guarantee of sufficient business to make the entry profitable once entry is thought likely to occur the existing competitors may be unwilling to attempt a price increase of any magnitude thus the threat of entry can maintain competitive prices even in the presence of sunk costs in section ii we motivate the analysis by discussing the current controversy over the role entry conditions play in an antitrust merger review then we discuss the necessary assumptions for a model of how the threat of entry can deter any price increase in the presence of sunk costs we note that these conditions are different from those commonly used in the economic literature

collusion in multiproduct oligopoly games under a finite horizon applying recent results on finitely repeated games to oligopoly theory the author finds that there exists a class of finite horizon output games in which collusion can be achieved as a subgame perfect equilibrium trigger strategies prevent defection from the cooperative outcome by credibly threatening that the defector will be forced to exit the industry for the case of a multiproduct oligopoly it is shown that collusion in one market can be enforced by the threat of punishment in a second market if someone defects even though the two markets are structurally independent the firms make them strategically interdependent through their strategies copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

sunk costs financial markets and contestability abstract this paper analyzes the proposition that the theory or contestable markets will yield good predictions for markets in which sunk costs although present are unimportant two results are of interest 1 if costs are at all sunk incumbent firms will be able to engage in strategic behavior with respect to entrants 2 if no costs are sunk but firms finance investment by borrowing incumbent firms will be able to engage in strategic behavior with respect to entrants in these cases one must analyze strategic behavior of incumbent firms to analyze market performance

technical efficiency of french nuclear energy plants this article analyses the efficiency of french nuclear energy plants belonging to edf electricity of france from 2004 to 2008 with a dea data envelopment analysis model the convexity model is used to investigate the technical efficiency of a representative sample of nuclear plants the results indicated that some plants have undergone an improvement in technical efficiency while others have regressed in terms of technical efficiency policy implications related to the results are discussed

a simple theory of predation abstractwe propose a simple theory of predatory pricing based on incumbency advantages scale economies and sequential buyers or markets the prey needs a critical scale to be successful the incumbent or predator has an initial advantage and is ready to make losses on earlier buyers to deprive the prey of the scale it needs thus making monopoly profits on later buyers several extensions are considered including cases in which scale economies exist because of demand externalities or two sided market effects and in which markets are characterized by common costs conditions under which predation may or may not take place in actual cases are also discussed

stackelberg and marshall this paper advocates a generalized n firm stackelberg model as a plausible testable alternative description of oligopoly a pure strategy equilibrium must exist for this model the main result is that efficiency obtains in the limit as the scale of each firm is shrunk relative to demand this is demonstrated for the case of u shaped average cost and also for that of natural monopoly copyright 1990 by american economic association

a study of the impact of sectoral shifts on aggregate unemployment in canada the recent trend in macro economic literature has been to explain cycles in aggregate output and employment in terms of unexpected nominal shocks only in these models the natural rate of unemployment is constant this paper diverges from this approach and following a recent paper by david lilien 1982 considers the impact of real as well as nominal variables the main findings are 1 a significant part of the fluctuations in the canadian unemployment over the 1957 83 period was caused by real shocks to the economy and 2 most of the transmission of the business cycle from the united states to canada is effected through real variables as well une etude de limpact de deplacements sectoriels sur le niveau de ch6mage agrege au canada dans la litterature macroeconomique recente on a eu tendance a expliquer les cycles dans le niveau de la production et de l emploi a peu pres strictement en termes de chocs nominaux non anticipes dans ces modeles le taux de ch6mage naturel est constant ce memoire prend des distances par rapport a cette approche et suit pluto t la direction suggeree par un memoire recent de david lilien qui considere l impact des variables reelles tout autant que celui des variables nominales les resultats principaux sont 1 une portion significative des fluctuations dans le niveau du chomage canadien entre 1957 et 1983 a et causee par des chocs reels subis par l economie 2 le gros de h1 transmission du cycle economique des etats unis vers le canada se fait par le truchement des variables reelles

capacity signals and entry deterrence abstract if potential entrant firms are well informed they will generally not believe incumbent s threats to expand output when experiencing entry but this expectation underlies most excess capacity models we demonstrate an asymmetric information equilibrium in which potential entrants rationally fear output expansion by oligopolists with excess capacity less effective collusive oligopolies may be destabilized expanding output upon entry one symptom of less effective collusion is excess capacity hence excess capacity becomes a signal of the potential for output expansion in a rational expectations equilibrium this signal may also be mimicked by oligopolies which would not otherwise carry excess capacity

contestability queues and governmental entry deterrence this paper demonstrates that a perverse kind of entry deterrence can result when government subsidized production is combined with non price rationing in the form of queuing even though queuing leads to a total cost to the consumer not including the tax cost that is higher than the cost of an unsubsidized private supplier and even though the government s money price is rigid the market is not contestable the key to the result is that the waiting cost portion of the consumer s acquisition cost declines immediately upon entry and losses would be forced upon the entrant privatization would negate the entry deterrence thus leading to entry increased output at lower full prices lower average production costs decreased waiting costs increased profits and increased consumer surplus

noncooperative behavior by a cartel as an entry deterring signal recent work has investigated the effect of a potential entrant s uncertainty about postentry profits on the likelihood of his entering the market it has always been assumed that the potential entrant knows the type of postentry solution but lacks information on cost or as to whether the postentry solution will be cooperative or noncooperative we find that entry is more likely the greater is the preentry profit rate in equilibrium the threat of entry then forces the incumbent firms to act more competitively to deter entry

the modern view of macroeconomics some critical reflections david romer has proposed a new basic macroeconomic framework the is mp ia model its proponents claim that it represents the modern view of macroeconomics we show that the new framework remains closely attached to the neoclassical synthesis and in addition does not take account of i the empirical evidence on the output inflation trade off ii the evidence on the interdependence of aggregate demand and supply iii the institutional limits of monetary policy and iv the implications for macroeconomic policy of i ii and iii once these aspects have been incorporated short run stabilisation policy is not neutral in the long run the notion of a natural rate of interest becomes untenable and aggregate demand turns into the crucial exogenous variable copyright 2005 oxford university press

wages and employment in a segmented labor market this paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a competitive secondary sector either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and under reasonable specifications of key parameters to cause greater fluctuations of primary sector employment than secondary sector employment this pattern agrees with the stylized facts of the u s economy

the bayesian foundations of solution concepts of games abstract we transform a noncooperative game into a bayesian decision problem for each player where the uncertainty faced by a player is the strategy choices of the other players the priors of other players on the choice of other players the priors over priors and so on we provide a complete characterization between the extent of knowledge about the rationality of players and their ability to successively eliminate strategies which are not best responses this paper therefore provides the informational foundations of iteratively undominated strategies and rationalizable strategic behavior b d bernheim econometrica 52 1984 1007 1028 d pearce econometrica 52 1984 1029 1050 sufficient conditions are also found for nash equilibrium behavior and a result akin to r j aumann econometrica 55 1987 1 18 on correlated equilibria is derived with different hypotheses

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

how natural is canada s high unemployment rate abstract a reduced form price equation for canada 1956 1984 yields a stable estimate of 4 9 percent for the natural unemployment rate of men aged 25 and over with strong evidence against hysteresis once structural influences are accounted for the resulting profile for the aggregate natural unemployment rate rises smoothly from 5 5 percent in 1961 to a maximum of 8 0 percent in 1977 1978 and then declines rapidly to 6 4 percent in 1985 calculations based on an estimated production structure for the aggregate non energy sector of canada provide additional evidence against the excess real wage hypothesis and for the view that the recent fluctuations in canada s unemployment rate are mostly of the keynesian variety

keynesian economic policies for the new millennium in this paper we outline an approach to economic policy in which there is an emphasis on the need for both demand side and supply side policies to secure full employment our approach can be considered keynesian in the sense that its policy implications arise from the perception of the role of aggregate demand in setting the level of economic activity and the lack of automatic forces leading a market economy to full employment our conception of the operations of a market economy is briefly outlined in section 2 this we further elaborate upon in section 3 by considering the constraints on achieving full employment that operate in a market economy this leads into section 4 in which we outline and analyse the nature of keynesian policies relating both to the demand and supply side of the economy the final main section 5 considers some of the constraints and ways of overcoming them on the implementation of the type of keynesian policies which we are advocating there are two key elements of keynes 1936 on which we draw the first is the contention that a laissez faire market economy will not usually generate full employment the obstacles to the achievement of full employment are not some imperfections like monopolistic competition or trade union activity which could potentially be removed through government action cf shapiro 1996 it is rather that a laissez faire market economy would exhibit elements of instability and does not usually generate a level of aggregate demand consistent with full employment the second is that a less unequal distribution of market power income and wealth is another desirable goal in its own right and a vehicle for increasing general prosperity as keynes 1936 remarked the outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes p 372

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

electricity as a traded good abstract electric power has traditionally been classified as a non traded good produced and consumed within the country of origin more recently electricity has been traded across national borders and in certain cases viz bhutan has been the dominant export in other situations it is used to repay debts owed to neighboring countries this paper investigates the role of electricity as the primary export analyzes its valuation and then goes on to evaluate the impact on the terms of trade we conclude that in the medium term the electric power exporting economy would be better off developing its manufacturing sector to diversify its exposure and to protect its trade interests the case of bhutanese hydro electricity exports to india is studied and the change in trade advantage with every increase in power tariff is ascertained it is found that a 1 26 annual increase in non food consumer prices is correlated with a 1 increase in electricity export tariff while the causality from electric power tariff to indian manufactures prices is not established statistically a change in manufactures prices feeding back into consumer prices in bhutan is statistically significant suggestions are offered for bhutan to reduce dependence on indian imports and to diversify its export market exposure

when does predation dominate collusion i study repeated competition among oligopolists the only novelty is that firms may go bankrupt and permanently exit the probability that a firm survives a price war depends on its financial strength which varies stochastically over time under some conditions including no entry an anti folk theorem holds when firms are patient so that strength levels change relatively quickly every nash equilibrium involves an immediate price war that lasts until at most one firm remains surprisingly the possibility of entry may facilitate collusion as may impatience the model can explain some observed patterns of collusion and predation

collusion and predation under almost free entry abstract this study investigates the degree of cooperation that firms can support in the absence of significant barriers to entry a free entry subgame perfect equilibrium is defined by q n where q is the collusive output rate and n is the number of active firms such that there is no incentive for an active firm to deviate output from q and there is no incentive for a potential entrant to enter the industry it is shown that for all n 1 if the discount factor is sufficiently high there exists a free entry equilibrium in which active firms sustain a non trivial degree of cooperation cooperation is supported by active firms credibly threatening to respond to entry with a period of aggressive competition

the joint profit maximum as a free entry equilibrium outcome abstract this study investigates the degree of collusion that can be sustained at a free entry equilibrium when the number of active firms is endogenous an increase in the discount factor is found to have two counter acting effects on the incentive for active firms to deviate from the collusive arrangement holding the number of firms fixed a higher discount factor reduces the incentive for cheating according to the standard argument however a higher discount factor also makes entry more profitable since entry entails an initial loss the cost of entry and a future stream of positive profits raising the discount factor then increases the number of active firms which tends to increase the incentive for firms to cheat our analysis shows that the first effect dominates so that the joint profit maximum can be sustained as a free entry equilibrium outcome when the discount factor is sufficiently high

dynamic oligopoly behaviour in the airline industry abstract this paper examines the dynamic interaction between united airlines and american airlines on a set of duopoly routes we estimate quarterly conduct parameters or conjectural variations and test constant behaviour bertrand cournot and collusive models we also test two regimeswitching models derived from the green porter price war model one based on reversion to bertrand behaviour during price wars the other on reversion to cournot behaviour the three constant behaviour models are all rejected the regime switching models can both describe the data but the cournot based version is preferred

entry sunk costs and market structure typically models that study the role of sunk costs suppose that incumbent firms face entry by a single firm each period in this paper the set of equilibrium market structures that result when all firms are free to enter or exit and set prices each period are characterized the effect of sunk costs on the market structure is examined and it is shown that sunk costs can take on various forms each having a different effect on the set of equilibrium market structures costs that are sunk due to the existence of product specific capital do not in general deter entry rather entry deterrence is a necessary outcome only when costs are sunk due to the time it would take to leave the market

electricity market integration redistribution effect versus resource reallocation in countries with a significant amount of low variable cost generation capacity the integration of electricity markets poses a real problem with respect to consumers interests in such cases consumers face a significant price rise compared with consumers in countries where low cost capacities are lacking this paper analyses this problem both in the short and long term focusing on a market dominated by nuclear and hydro production when there are too many restrictions on new capacity developments in low cost technologies market integration will lead to surplus redistribution without any production reallocation this really makes it legitimate to contemplate redistributive compensations towards local consumers in countries which benefited from low variable cost generators at the moment of liberalisation this paper examines two alternative ways of rent reallocation one by income with a windfall tax on nuclear producers and the allocation of this revenue to energy efficiency policy funds and another by price by giving drawing rights on the existing nuclear generators production to small commercial and domestic consumers at a level equivalent to the one necessary to maintain regulated prices 2009 elsevier ltd all rights reserved

searching for a will o the wisp an empirical study of the nairu in canada abstract this paper demonstrates the uncertainty surrounding estimates of the non accelerating inflation rate of unemployment nairu a reduced form phillips curve is used to develop a generic model of the nairu which nests competing hypotheses about the specific form of the inflation unemployment relationship empirical results for the canadian economy show that the range of prime age male nairu s generated by statistically satisfactory and economically reasonable estimating equations covers almost the entire range of canadian post war prime age male unemployment experience estimates of the nairu depend heavily on the form of the estimating equation the operational definition of key variables and the data sample period

collusion profitability and welfare theory and evidence abstract in a differentiated oligopoly model with free entry the static welfare loss from collusion is larger the lower the entry cost the larger the market size and the higher the degree of product differentiation the cartel overcharge is larger the lower the entry cost and the larger the market size and is independent of the degree of product differentiation these theoretical results are consistent with evidence from a natural experiment of policy reform the introduction of cartel law in the uk in the late 1950s price cost margins declined after the breakdown of cartels in low capital and larger sized industries relative to capital intensive and smaller sized ones there is weaker evidence of a fall in price cost margins in consumer good and advertising intensive relative to producer good and low advertising industries crucially these effects are not observed for industries that were not affected by the cartel law a comparison of these findings with evidence on the incidence of collusion suggests that the welfare loss from collusive pricing may often be smaller in industries where cartels tend to form than in those where collusion is more difficult to sustain

the economic impacts of a submarine hvdc interconnection between norway and great britain in the present paper we analyze the profitability of different hvdc interconnection alternatives between norway and great britain for present and future scenarios the analysis is done from a merchant and a social welfare perspective the analyses include interconnections between norway and scotland and southern great britain respectively as well as an alternative link to a future offshore wind farm from a social welfare perspective the northern interconnection alternative is profitable under all sets of assumptions the southern alternative is profitable under present conditions but less than the northern alternative the alternative link to the offshore wind park is not profitable but this result is highly dependent on market conditions from a merchant perspective none of the alternatives is profitable clearly illustrating that leaving investments to commercial parties does not realize all projects that increase social welfare

causes of the current stagflation since 1975 labour slack has been unusually high in the oecd countries and yet inflation has not diminished the less favourable mix of unemployment and rate of change of inflation which we call stagflation is explained by a fall in the feasible rate of growth of real wages unmatched by a reduction in the constant term in phillips curve to investigate this mechanism conventional wage and price equations are estimated for 19 countries and then used for simulation stagflation has been caused in roughly equal amounts by rising relative import prices and by the fall in the rate of productivity growth in the basic model the phillips curve is assumed not to adapt to falls in feasible real wage growth but in a final section an adaptive wage equation is estimated which confirms that the process of adaptation is slow

structure and performance with profit measures based on stock market prices the theory that there is a causal relationship between industry structure conduct and performance is the fundamental premise in the field of industrial organization the most carefully researched component of that general theory is the hypothesis that increasing industrial concentration will give rise to increasing profits this traditional view is important not only because of its prominence in the academic analysis of industrial markets but also because of its implications for government policy especially antitrust policy the traditional view typically has been tested by treating an accounting based measure of industry profit as the dependent variable with concentration and other structural variables as independent variables within a cross section of manufacturing industries at a given point in time numerous papers have found that concentration has a positive impact on profits the methodology adopted in this paper is different the profit measures are based on stock market prices and are adjusted for risk this is an improvement because accounting methods are so poorly adapted to the measurement of economic profit and because risk may vary with concentration 2 39 another methodological innovation is the choice of time series over cross section analysis the question asked is whether the change over time in each industry s level of concentration had an impact on profits this minimizes the problem of omitted or inaccurately measured independent variables since there should be less change in basic structural characteristics over short time periods within an industry than between industries at a single point in time 2 a second important advantage is freedom from a basic assumption of crosssection studies the assumption that the relationship between concentration and profit is homogeneous across industries if the assumption is invalid empirical results are subject to bias two tests 7 26 have firmly rejected the homogeneity assumption 3

william j baumol an entrepreneurial economist on the economics of entrepreneurship william j baumol is the 2003 winner of the international award for entrepreneurship and small business research throughout his career baumol has urged the profession to pay attention to the instrumental role of entrepreneurship in economic renewal and growth at the same time he has insisted that economists continue to use their usual tool box when the purview of analysis is extended to entrepreneurship hence baumol can be characterized as a revolutionary from within in this article we present and discuss baumol s research contribution in the areas of entrepreneurship and small business economics notably from a growth perspective in addition to placing his work in these areas into the wider context of his full contribution we emphasize baumol s findings that growth cannot be explained by the accumulation of various factors of production per se human creativity and productive entrepreneurship are needed to combine the inputs in profitable ways as a result an institutional environment that encourages productive entrepreneurship and human experimentation becomes the ultimate determinant of economic growth

collusive equilibria in oligopolies with finite lives abstract it is generally accepted that collusive agreements cannot be sustained in oligopolies with finite lives in this paper it is shown that provided the number of competitors is neither too small nor too large the most restrictive output i e the monopoly output can be sustained as a perfect nash equilibrium if the number of firms is too small only sequences of the nash equilibria of the constituent market game can appear as perfect nash equilibria if the number of firms is too large the power of the cartel falls sharply

unemployment getting the questions right in my opinion the form and conception of this conference exemplifies the right instinct for modern macroeconomics there is a fact a big unmistakable unsubtle fact essentially everywhere in the modern industrial capitalist world unemployment rates are much higher than they used to be two or three decades ago why is that if macroeconomics is good for anything it ought to be able to understand and explain that fact we should be able to produce a fairly convincing analytical account of the occurrence and persistence of unusually high unemployment rates you might think that to be a mere commonplace to what other sort of end would anyone organize a conference my experience however is that most high powered academic conferences are stimulated by purely technical developments or less often by ideological or political promotion rather than by the need to deal with an outstanding fact i do not blame anyone for this state of affairs we may not be blessed with many significant observations too big to be quibbled over and technical innovations do need to be thrashed out by experts anyway it is good to be faced by a brute fact that needs explanation it is what macroeconomics ought to be about i compliment the organizers also on a second aspect of the agenda the country by country organization of the papers we can all hope to learn something from cross country comparisons one of the few good ways we have to test analytical ideas is to see whether they can make sense of international differences in outcomes by appealing to international differences in institutional structure and historical environment the right place to start is within each country separately studied by someone who knows the peculiarities of its history and its data you might think that this too ought to be obvious but in fact the usual approach is just the opposite more often than not we fail to take institutional differences seriously one model is supposed to apply everywhere and always each country is just a point on a cross section regression or one among several essentially identical regressions leaving only grumblers to worry about what is exogenous and what is endogenous and whether simple parametrizations do justice to real differences in the way the economic mechanism functions in one place or another i have no way of knowing whether this organized effort will get anywhere in explaining high unemployment but it seems to be set up to give itself the best chance for better or worse probably for the better theoretical and empirical work are closely intertwined in macroeconomics scratch a macro theorist and you find a casual econometrician scratch a macro econometrician and you find a casual theorist usually you do not have to scratch very hard thus the discussion of the issues central to the conference has already hardened into certain characteristic forms there are questions already lying on the table that the individual country papers will be trying to answer i suspect that some

cartel pricing dynamics in the presence of an antitrust authority cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed balancing concerns about maintaining the stability of the cartel with those of avoiding detection the cartel may either i gradually raise price to its steady state level or ii gradually raise price and then have it decline to its steady state level antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices

contestability a revisionist view many claims have been made about the significance of the contribution of contestability theory to industrial organizat ion this paper concludes that contestability theory leaves unanswere d questions about the identity of entrants and the source of their re sources a modification to the theory is proposed rather than as a h indrance to potential entry sunk costs are viewed as being of key si gnificance for the disciplining of oligopolists through potential ent ry with the proposed modification the analysis of the costs of mult iproduct firms may be more easily integrated with recent developments in industrial organization copyright 1988 by the london school of economics and political science

contestability vs competition analyzes the ultra free entry as normative contribution to industrial organization ultra free entry in context of the evolving field of industrial organization assessment of the conceptual validity of william baumol elizabeth bailey john panzar and robert willig s analysis in representing the nature of competition empirical issues in measuring and testing ultra free entry ebsco

measuring the impact of market coupling on the italian electricity market abstract this paper evaluates the impact on the italian electricity market of replacing the current explicit auction mechanism with market coupling maximising the use of the cross border interconnection capacity market coupling increases the level of market integration and facilitates the access to low cost generation by consumers located in high cost generation countries thus it is expected that a high priced area such as italy could greatly benefit from the introduction of this mechanism in this paper the welfare benefits are estimated for 2012 under alternative market scenarios employing the optimal dispatch model elfo the results of the simulations suggest that the improvement in social surplus is likely to be significant especially when market fundamentals are tight

exchange rate pass through for strategic pricing and advertising abstract this paper builds a model in the new empirical industrial organization framework bresnahan t 1989 industries and market power in schmalensee r willig r eds handbook of industrial organization north holland amsterdam to estimate exchange rate pass through in price and advertising price cost margins market structure and firm conduct are estimated endogenously allowing for precise estimation of the degree of and reasons for incomplete pass through i demonstrate that price and advertising pass through are functions of demand cost and market conduct in the short run in the long run the market conduct and cost technologies are in turn determined by the exchange rate movements 1997 elsevier science b v

colluding on excluding abstract in an oligopoly characterized by barriers to re entry a finite horizon complete information convex costs and the presence of three identical firms i show that in subgame perfect equilibrium two of them the predators can choose to charge an initial price that is so low that the third the prey decides to exit immediately in this predatory pricing equilibrium the predators can enjoy higher profits than in the best collusive equilibrium with three firms thus a coalition of two firms can benefit from colluding on excluding

contestability vs competition once more baumol willig and other advocates of contestability theory continue to urge the idea not only for its insights but also as a clear basis for many antitrust and regulatory decisions yet the limits of the theory remain the three key assumptions are extremely strict and two of them are in mutual conflict the theory is not robust to imperfections in order to displace effective competition with contestability baumol must adopt a sequence of implausible propositions which unfortunately have little analytical or empirical basis

contestability reconsidered the meaning of market exit costs abstract this paper analyses the main result of the contestable market approach namely that potential competition reaches its maximum power if market entry and exit is costless and newcomers can use the hit and run strategy different time lag structures are considered average cost pricing turns out to be no equilibrium if there are no market exit costs furthermore exit costs don t necessarily create a barrier to entry but may even strengthen the discipline arising from the threat of entry

the impact of cyclical demand movements on collusive behavior recent work by rotemberg and saloner 1986 investigates the effect of the business cycle on optimal collusive pricing by specifying that demand is subject to i i d shocks an implication of the i i d assumption is that firms expectations on future demand are unrelated to the current level of demand we put forth a model that allows for both the level of current demand and firms expectations on future demand to change over time thus it captures two important properties of the business cycle our analysis reveals that while the gain to deviating from a collusive agreement is greatest during booms firms find it most difficult to collude during recessions as the forgone profits from inducing a price war are relatively low an implication of this effect for pricing behavior is that at the same level of demand price is lower when demand is declining than when demand is rising consistent with previous theoretical work we find that firms price countercyclically for a range of values for the discount factor however numerical simulations reveal a greater tendency for firms to price countercyclically during recessions than during booms

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

the nairu unemployment and monetary policy this paper examines the precision of conventional estimates of the nairu and the role of the nairu and unemployment in forecasting inflation the authors find that although there is a clear empirical phillips relation the nairu is imprecisely estimated forecasts of inflation are insensitive to the nairu and there are other leading indicators of inflation that are at least as good as unemployment this suggests deemphasizing the nairu in public discourse about monetary policy and instead drawing on a richer variety of leading indicators of inflation

unemployment benefit duration and incentives in britain how robust is the evidence abstract recent years have seen considerable advances in the econometric treatment of micro data in models of unemployment duration this paper examines the evidence from such models concerning the effects of unemployment benefits on incentives to work in britain widely accepted results of a small but significant benefit effect are reproduced using a sample of 1 231 unemployed men however these results are only found when benefit receipt is assumed to follow a hypothetical pattern which is shown to be unrealistic and over generous when more realistic calculations of benefits are used no benefit effect is found the paper also argues that search theory is of little help in determining the choice between competing functional forms and explanatory variables results concerning benefits are shown to be sensitive to the latter