durable goods and product obsolescence the issue of product obsolescence is addressed by examining the optimal sales strategy of a monopolist firm that may introduce an improved version of its current product consumers expectations of a forthcoming product lowers the price that they are willing to pay for the current product because of its loss in value due to obsolescence the new product is characterized by consumers increased willingness to pay and by its competitive interaction with the old product these characteristics affect the tradeoff that the firm makes between the cost of waiting for new product sales versus the cost of cannibalizing these sales we analyze the effect of these characteristics of the new product on the firm s optimal sales strategy we consider the various policy measures available to the firm including limiting initial sales in order to lower cannibalization of the new product buying back the earlier version of the product in order to generate greater demand for the new product and announcements of future product introductions we find that for modest levels of product improvement the firm s optimal policy is to phase out sales of the old product while for large improvements a buy back policy is more profitable lastly we find that the firm is better off if it informs consumers whether a new product is forthcoming

diversification and predation one common assumption in the post mcgee 1958 predatory pricing literature has been that the predatory firm must be larger have deeper pockets than the victim of the predation usually an entrant this assumption stems from a model of predation in which the contesting firms sell at levels below cost until one of the firms exits after exhausting its financial resources 1 in such a scenario the firm with greater financial resources will usually still be in business when the other firm exits on this basis some economists and judges would summarily dismiss any case in which the alleged predatee is larger than the alleged predator for example at least two members of the federal trade commission sided with the respondent in the recent ftc v general foods case 2 voicing the view that a smaller firm could

the decline of dominant firms 1905 1929 the theory of dynamic limit pricing implies that a firm maximizes its wealth by gradually sacrificing its dominant market share we extend the theory by simulation methods to show that higher structural entry barriers generally result in both higher profits and a slower sacrifice of market share the model is applied to 42 once dominant firms in u s manufacturing to explain jointly the declines of their market shares and the profit rates earned during 1905 1929 the statistical results agree substantially with the hypothesis that these firms behaved consistently with maximizing their wealth through dynamic limit pricing

entry in greek manufacturing industry athens vs the rest of greece the paper reports an attempt to estimate the determinants of entry in greek manufacturing industry in the 1984 87 period and to identify the differences between locatio nal entry preferences entry in athens is found to be hesitant with respect to factors such as profitability and increased competition conversely entry in the rest of the country is strongly related to expected profits and safe markets negatively affected by relative labour costs and indifferent to international competition threats the healthier approach of regional entry is enhancing regional development prospects and partly justifies the strict regional policies of the 1980s

the relative importance of actual and potential competition empirical evidence from the pharmaceuticals market the relative importance of actual and potential competition empirical evidence from the pharmaceuticals market

regulating stock externalities under uncertainty abstract using a simple analytical model incorporating benefits of a stock costs of adjusting the stock and uncertainty in costs we uncover several important principles governing the choice of price based policies e g taxes relative to quantity based policies e g tradable permits for controlling stock externalities as in weitzman rev econom stud 41 4 1974 477 the relative slopes of the marginal benefits and costs of controlling the externality continue to be critical determinants of the efficiency of prices relative to quantities with flatter marginal benefits and steeper marginal costs favoring prices but some important adjustments for dynamic effects are necessary including correlation of cost shocks across time discounting stock decay and the rate of benefits growth applied to the problem of greenhouse gases and climate change we find that a price based instrument generates several times the expected net benefits of a quantity instrument

differentiating commitments world wide global differentiation of ghg emissions reductions based on the triptych approach a preliminary assessment in the context of global climate negotiations various approaches have been proposed to distribute commitments regarding greenhouse gas emissions mitigation over different countries one of them is the triptych approach which is a sector approach that accounts for differences in national circumstances such as population size and growth standard of living economic structure and fuel mix in power generation it was successfully applied in the negotiations on differentiation of commitments in the european union in 1997 in this study we aim to see what problems we encounter when applying the approach in a wider geographical context in order to reach this aim we establish a test differentiation of co2 emission reduction obligations for a selection of 48 countries the criteria we apply comprise technical emission reduction options only according to our triptych criteria including the choice for particular growth scenarios and a convergence of co2 emissions in the domestic sectors by the year 2030 the sum of co2 emissions in the 48 countries in 2015 is estimated to increase by 8 over 1990 levels with the criteria used the average reduction objective for the oecd will be somewhere between 10 and 20 for economies in transition to a market economy our calculations indicate on average a reduction between 30 and 50 for the developing countries we established increases varying roughly from 40 to 200 the choice for a particular growth scenario as well as the assumption for the period for the convergence of per capita emissions in the domestic sectors are crucial and may effect the outcome of the calculations to a large extent if these problems can be sufficiently solved the triptych approach can serve as a valuable tool to rank countries in a global differentiation scheme

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

the environmental kuznets curve and flow versus stock pollution the neglect of future damages in this paper we offer a possible explanation for the empirical finding that the pollution income relationship pir for flow pollutants is an environmental kuznets curve ekc i e inverted u shaped but that the pir for stock pollutants is monotonically rising we analyse an overlapping generations model with two pollutants the flow pollutant causes immediate damages but the stock pollutant harms the environment only in the future hence a succession of myopic governments lets stock pollution grow with income in contrast the flow pollutant follows an ekc whose downturn might be caused by the neglect of future damages and by ever rising stock pollution without the stock pollutant the pir for the flow pollutant can increase monotonically we also show that the turning point of the ekc for the flow pollutant lies at lower levels of income and of flow pollution if stock pollution is high and harmful this casts doubts on most empirical ekc studies because they assume that the turning point occurs at the same income level in all countries however it is consistent with recent empirical findings that the income level at the turning point of the ekc varies across countries

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

economies of scale and barriers to entry dixit has recently presented a model in which established firms select capacity to discourage entry but cannot employ threats they would not rationally execute after entry entry deterrence in a slight modification of this model involves the classical limit price output under linear or concave demand however the capital cost of a firm of minimum efficient scale is an upper bound on the present value of the monopoly profit stream that can be shielded from entry it is argued that this suggests the general unimportance of entry barriers erected by scale economies

an analysis of preemptive behavior in the titanium dioxide industry abstract much of the recent theoretical work on oligopoly theory focuses on preemptive capital expansion this paper continues this work by testing whether dupont s behavior in the titanium dioxide industry was consistent with the capital commitment model between 1972 and 1977 this is different from previous empirical papers analyzing preemptive capital expansion because it focuses on strategic behavior in a specific industry and because the hypothesis tests in this paper are based on a formal model of firms optimizing behavior the results lend support to the conclusion that dupont committed capital to preempt the smallest five firms in the industry between 1972 and 1977

endogenous sequential entry in a spatial model in this paper we simulate a sequential entry of firms in a differentiated industry a la hotelling firms select a product location once for all they are aware of the unique price equilibrium that will take place after entry has occurred and take into account the behaviour of subsequent entrants it is found that early entrants will systematically locate around the centre but in such a way as not to induce later competitors to locate in between them location choices are also investigated as an instrument for entry deterrence which is feasible because of a fixed cost we identify several ranges of fixed cost for which entry is innocently deterred corresponding to a natural monopoly duopoly triopoly entry deterrence is then typically used to stretch the range of fixed cost for which a given number of firms can be sustained deterrence strategies are consistently such that firms locate at more regular intervals

innovation and the durable goods monopolist the optimality of frequent new version releases when an improvable durable good such as packaged software saturates the market the seller could be tempted to release new versions too frequently hurting her profit a novel contractual device which i term as a free new version rights warranty free nvr warranty can help the seller overcome this temptation in a two period game theoretic model involving a monopolist firm facing heterogeneous consumers i derive conditions under which a rational monopolist can act suboptimally she could face a commitment problem and offer the new version even if doing so lowers her overall profit profit is hurt because when consumers expect a new version a fewer consumers buy the initial version and b the monopolist is forced to charge a lower price for the initial version i show how the free nvr warranty which requires the monopolist to offer consumers the right to receive the new version for free for a limited period can solve her commitment problem this is a new surprising finding by bundling new version rights with the initial version the monopolist at first appears to be denying herself future revenue i derive conditions under which this apparently unprofitable action is optimal which is my main contribution when free nvr is offered consumer surplus decreases and social surplus increases this work extends prior literature on durable goods and the coase conjecture to innovative durable goods with network externalities the findings have important practical implications for firms selling new versions of innovative durable goods subject to network effects as well as for their consumers

advertising sunk costs and barriers to entry this paper tests hypotheses about the entry deterring effects of advertising the model isolates three separate effects of advertising on entry the effect on the irrecoverable costs of entry the effect on the uncertainty underlying the entry environment and the effect on the measured rates of profit we find that advertising impedes entry since necessary advertising expenditures give rise to a sunk cost which raises the risk of entry however we also find a countervailing force due to advertising in that the entrant perceives a greater likelihood of success in markets where advertising is important our analysis shows that the overall impact of advertising on entry is positive

excess capacity as a barrier to entry an empirical appraisal this paper examines excess capacity barriers to entry and investment dynamics in a sample of thirty eight chemical product industries logit and log linear models of investment behavior are estimated and specific case examples are considered the results show that incumbents rarely built excess capacity pre emptively in an effort to deter entry in general entrants and incumbents exhibited similar investment behavior

why would a durable good monopolist also produce a cost inefficient nondurable good abstract we develop both commitment and time consistent stationary policies for a monopolist who produces a mixture of goods distinguished by production costs and degree of durability under commitment only the cost efficient durable good is produced and the monopoly output is realized each period for the time consistent stationary case there is an interval for the degree of durability where only the durable good is produced and a higher non overlapping interval where both the cost efficient durable and the cost inefficient nondurable good are produced for any period length when the degree of durability is such that both durable and nondurable goods are provided combined output is less than the competitive output and decreases in the degree of durability approaching the single period monopoly output when both goods are produced the coase conjecture does not hold

taxation within cournot oligopoly abstract when the production of output causes pollution we often consider taxation as a means to reduce it this paper examines various forms of taxation to control pollution within cournot oligopoly it shows that two commonly used forms can actually increase pollution in contrast both of these forms unambiguously reduce pollution within the competitive model the paper provides conditions in terms of demand and technology that make taxation effective in the cournot oligopoly case another implication of the analysis is that outside the price taking framework asymmetry of cost functions is particularly important and deserves careful attention when we examine the effect of taxation

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

risk self protection and ex ante economic value abstract we develop three propositions about the ex ante value of reduced risk if there is a continuous outcome distribution and if self protection influences outcome probability and severity then 1 unobservable utility terms cannot be eliminated from the ex ante value expressions 2 knowledge of the convexity or the nonconvexity of dose response functions is insufficient to sign changes in these expressions and 3 self protection expenditures need not be a lower bound measure of these expressions therefore many restrictions applied in recent empirical work on the economic value of risk changes are not immediately transferable to settings where endogenous risks prevail

location choice product proliferation and entry deterrence within a slightly modified version of hotelling s model we reconsider the claim that the threat of entry induces existing firms to produce a larger number of products than they would otherwise we show that entry deterrence although optimal need not be achieved through product proliferation in some cases the incumbent monopolist resorts to an entry deterring strategy based on location choice rather than product proliferation we also show that in some cases the number of products chosen by the incumbent facing the threat of entry is strictly greater than the minimum number required to deter entry

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

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

bifurcation analysis of zellner s marshallian macroeconomic model the marshallian macroeconomic model in zellner and israilevich 2005 provides a novel way to examine sectoral dynamics through the introduction of a dynamic entry exit equation in addition to the usual demand and supply functions found in models of this class in this paper we examine the possibility of cyclical behavior in the marshallian macroeconomic model and investigate the existence of a hopf bifurcation with respect to the parameter in the entry exit equation

optimal timing problems in environmental economics abstract because of the uncertainties and irreversibilities that are often inherent in environmental degradation its prevention and its economic consequences environmental policy design can involve important problems of timing i use a simple two period model to illustrate these optimal timing problems and their implications for environmental policy i then lay out and solve a continuous time model of policy adoption in which the policy itself entails sunk costs and environmental damage is irreversible the model generalizes earlier work in that it includes two stochastic state variables one captures uncertainty over environmental change and the other captures uncertainty over the social costs of environmental damage solutions of the model are used to show the implications of these two types of uncertainty for the timing of policy adoption

carbon dioxide emissions allocation a review carbon dioxide co2 emissions allocation plays a fundamental role in determining reduction responsibility at economy level or emission permits at firm level past decades have seen the development and applications of various methods for co2 emissions allocation this paper provides a literature review of co2 emissions allocation with emphasis on the evolution of allocation methods used it begins with a summary of the most popular allocation principles and criteria that lay a foundation for the development of allocation methods we then classify the existing allocation methods into four groups namely indicator optimization game theoretic and hybrid approaches the main features and findings of past studies are identified and summarized while the fairness principle prevails in earlier studies the efficiency principle has been found to receive increasing attention recently we also present a comparison of the empirical results based on ten popular indicator methods to show how indicator choice affects the allocation results issues related to selecting appropriate methods in co2 emissions allocation are finally discussed further research may be carried out to strike a balance between fairness and efficiency so that the allocation results become more widely acceptable and economically feasible

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

oligopolies and product durability abstract we analyze a simple two period quantity setting model where firms rent all of their output we compare the durability chosen by an oligopolist to the competitive socially optimal durability the model shows in subgame perfect equilibria the durability chosen by oligopolists will be cost minimizing independent of their output levels thus swan s independence result can be extended to oligopoly markets if the firms rent their output we also demonstrate the independence result can be extended to certain corner solutions

capacity outpl t and sequential entry comment two behavioral assumptions that are often made in the industrial organization literature are that an established firm or group may deter entry either through limit pricing the sylos postulate or by holding excess capacity the excess capacity hypothesis in an interesting recent article in this review 1981 daniel spulber examines these behavioral assumptions to see whether they are consistent with rational behavior by an established firm spulber s analysis is based on a two firm two period game model in which the established firm is given a first in advantage by introducing this dynamic element into the model spulber is able to explicitly address the issue of the optimality of entry deterring behavior spulber finds that the use of limit pricing and or excess capacity to deter entry is rational only under a very limited set of circumstances in particular when the second period outcome is determined by a cournot nash equilibrium he derives the following results 1 the first period output of the established firm is always less than or equal to the first period output produced by a firm not anticipating entry the established firm essentially accommodates entry and limit pricing does not occur 2 the established firm never holds more capital than the amount that would minimize its production costs given its output choices in periods one and two this comment takes issue with spulber s conclusions about the cournot nash case it will be shown that the two results cited above may be reversed when the production technology is characterized by variable proportions this reversal hinges on the particular type of nash equilibrium employed in the analysis of the two period model spulber implicitly uses a nash equilibrium that is not subgame perfect 2 it is shown below that when one requires the nash equilibrium to be subgame perfect both limit pricing and excess capital investment outcomes are possible for the variable proportions technology case the subgame perfection property thus seems to capture an important strategic element in decision making for the established firm in some cases this type of strategic behavior leads to entry barriers that would not exist under innocent profit maximization by the established firm strategic entry barriers are discussed by steven salop 1979 spulber s notation and assumptions about demand and costs are adopted below

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

optimal dynamic durability abstract consider a firm that adjusts its production and the choice of durability for its products instantaneously we show that when the marginal cost with the respect to durability is nonincreasing a the optimal durability for both the competitive firm and the monopolist decreases over time and b the monopolist will produce a good with lower durability than the competitive firm we thus lend support for empirical findings and causal observations that found the phenomenon of declining durability over time

emissions taxation in durable goods oligopoly this paper examines the use of taxation to control external damage due to pollution when product durability is endogenously determined a special form of the emissions function is also examined which is equivalent to an excise tax on output the dynamic oligopoly model indicates that many conventional results in the durability and taxation literature need not hold when durability is endogenously determined in particular the analysis shows durability may not be independent of industry structure nor will firms minimize their manufacturing costs of providing service in addition the second best tax on imperfectly competitive firms is not necessarily less than the tax on a competitive firm when firms choose their product s durability

learning by doing and product durability many durable goods industries are industries that have significant learning affects i examine a monopolist s and social planner s cost minimizing durability choice in both the short and the long run when learning effects are present the model indicates that the relationship between durability and learning depends crucially upon whether or not knowledge decays and on learning s impact on the marginal cost of durability in particular this model demonstrates that swan s 1970 1971 independence result will hold in the long run if knowledge does not decay but will not hold if knowledge does decay thus whether or not monopolists will manufacture products with the same durability or quality as a social planner depends to a large extent on the type of learning process in the industry and on whether or not quality and durability directly influence this learning process

durable good monopoly and best price provisions best price provisions guarantee buyers that the prices they pay are the lowest available if the seller subsequently cuts price then each previous buyer is entitled to a refund a durable good monopolist who offers certain forms of these provisions can construct a consistent plan yielding the same profits as rental agreements and contracts with explicit quantity commitments the provisions require special circumstances to be practical but they are simple and effective and appear in a variety of economic settings three applications are discussed international commodity agreements markets for electric turbogenerators and markets for financial claims copyright 1990 by american economic association

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines

excess capacity and entry some empirical evidence recent articles by spence i977 dixit i979 and schmalensee i98i have elaborated on wenders i97i1 proposition that excess capacity can act as a barrier to entry the intent of all of these treatments is to suggest that firms may rationally invest in excess capacity with the expectation that excess capacity will be seen by potential entrants either as a signal of aggressive intent or as a credible threat 2 when excess capacity does not lead to creation of a credible threat it may still act as a barrier to entry by shifting the risk return perceptions of potential entrants enough to divert the potential entrants investments into other industries 3 alternatively investment in excess capacity by incumbent firms may reduce the prospects of an active market for the used equipment of a defunct entrant and thereby help to convert fixed costs into sunk costs consequently raising entry barriers 4 this paper represents an exploratory effort to investigate empirically the prevalence and efficiency of excess capacity in deterring entry first a simple and traditional model of entry is presented this is followed by the description of the data used to explore the excess capacity investment concept a combined results and comments section follows the description of the data

cost raising strategies advantage rivals by raising their costs in this paper we show that strategies designed to raise rivals costs have a number of advantages over predatory pricing they are credible do not necessarily require the victim to exit and do not necessarily require the existence of classical market power the paper sets up a general model proves a number of general results and then applies the model to specific strategies involving overbuying inputs and vertical integration

effort sharing in ambitious global climate change mitigation scenarios abstract the post 2012 climate policy framework needs a global commitment to deep greenhouse gas emission cuts this paper analyzes reaching ambitious emission targets up to 2050 either 10 or 50 from 1990 levels and how the economic burden from mitigation efforts could be equitably shared between countries the scenarios indicate a large low cost mitigation potential in electricity and industry while reaching low emission levels in international transportation and agricultural emissions might prove difficult the two effort sharing approaches triptych and multistage were compared in terms of equitability and coherence both approaches produced an equitable cost distribution between countries with least developed countries having negative or low costs and more developed countries having higher costs there is however no definitive solution on how the costs should be balanced equitably between countries triptych seems to be yet more coherent than other approaches as it can better accommodate national circumstances last challenges and possible hindrances to effective mitigation and equitable effort sharing are presented the findings underline the significance of assumptions behind effort sharing on mitigation potentials and current emissions the challenge of sharing the effort with uncertain future allowance prices and how inefficient markets might undermine the efficiency of a cap and trade system

an economic theory of planned obsolescence planned obsolescence is the production of goods with uneconomically short useful lives so that customers will have to make repeat purchases however rational customers will pay for only the present value of the future services of a product therefore profit maximization seemingly implies producing any given flow of services as cheaply as possible with production involving efficient useful lives this paper shows why this analysis is incomplete and therefore incorrect monopolists are shown to desire uneconomically short useful lives for their goods oligopolists have the monopolist s incentive for short lives as well as a second incentive that may either increase or decrease their chosen durability however oligopolists can generally gain by colluding to reduce durability and increase rentals relative to sales some evidence is presented that appears to be generally consistent with the predictions of the theory

limit price entry prevention when complete information is lacking abstract this paper extends an earlier paper by the author in which there were two economic agents an established firm and a potential entrant operating under complete information each agent being assumed to know the profit functions of both firms the present paper extends some of the results of the earlier work to a model in which it is not known with certainty to either agent what the profit functions would be after the entrant would come into the market

excess capacity as a barrier to entry in the us titanium industry abstract the purpose of this paper is to construct and empirically test a model designed to determine the impact if any of expected excess capacity on the probability of entry the analysis is conducted within the context of a single oligopoly specifically the us titanium metal industry using time series data an empirical model is developed and estimated in order to determine expected values of the components of excess capacity capacity and production by disentangling the components of excess capacity and estimating them separately it is possible to separate any incumbent actions that may preempt entry from the effects of underlying cycles in demand and production these predicted values are utilized in a logit model generating results which indicate that expected levels of capacity expansion appear to diminish the probability of firm entry into the titanium industry

the design of durable goods the use of a durable good is limited by both its physical life and usable life for example an electric car battery can last for five years physical life or 100 000 miles usable life whichever comes first we propose a framework for examining how a profit maximizing firm might choose the usable life physical life and selling price of a durable good the proposed framework considers differences in usage rates and product valuations by consumers and allows for the effects of technological constraints and product obsolescence on a product s usable and physical lives our main result characterizes a relationship between optimal price cost elasticities and opportunity costs associated with relaxing upper bounds on usable and physical lives we describe conditions under which either usable life or physical life or both obtains its maximum possible values examine why a firm might devote effort to relaxing nonbinding constraints on usable life or physical life consider when price cuts might be accompanied with product improvements and examine how a firm might be able to cross subsidize product improvements

the triptych approach revisited a staged sectoral approach for climate mitigation abstract the triptych approach is a method for allocating future greenhouse gas ghg emission reductions among countries under a post 2012 international climate mitigation regime based on technological criteria at the sector level and accounting for structural differences the emission allowances are decomposed according to sectors thereby enabling the link to real world emission reduction strategies to be more concrete the new triptych approach presented here is a refinement of an earlier version in terms of an increased transparency and allowing a delayed participation for developing countries initial participation of developing countries with incentives but no penalties through no lose targets or sustainable development policies and measures for this article we calculated the emission reductions for countries for two technology oriented scenarios which stabilize ghg concentrations at 450 and 550 ppm co 2 eq respectively the reductions are ambitious but nonetheless compatible with existing technical reduction potentials as growth is allowed but efficiency has to be improved

market structure and the durability of goods a basic proposition in microeconomics is that a monopolist tends to produce less output than would be produced by a competitive industry with this proposition in mind it is tempting to suggest that monopolistic producers of durable goods will produce goods with less durability than would be produced by a competitive industry this result was derived by martin 1962 kleiman and ophir 1966 levhari and srinivasan 1969 and schmalensee 1970 however swan 1970 showed that monopolists would choose the same degree of durability for their goods as would competitive producers the reason that earlier writers had reached a different result was that they had focused on long run equilibrium profits and ignored the role of initial conditions in optimizing decisions the swan independence result that durability is independent of market structurewas first derived under the assumption of constant returns to scale specifically the average cost of production was assumed to be an increasing function of durability but independent of the level of output the constant returns to scale assumption was first relaxed by sieper and swan 1973 by introducing a fixed capacity cost they showed that with finitely lived capacity which required replacement the independence result continued to hold in the very long run although market structure could affect durability before attainment of long run equilibrium no systematic results were derived kamien and schwartz 1974 introduced rising average cost curves and resurrected the result of earlier writers that a monopolist would choose a lower durability than competitive firms however swan 1977 pointed out that the kamien schwartz analysis is flawed by not allowing the monopolist access to the same technology as the competitive industry if the monopolist is allowed to choose the optimal number of plants then swan s independence result holds finally auernheimer and saving 1977 introduced costs of adjusting the rate of output and the durability of output they showed that if long run increasing costs arise from pecuniary external diseconomies then the independence result is preserved as remarked by schmalensee 1979 in his survey the general message of

deterrence by market sharing a strategic incentive for licensing the potential of an incumbent firm to retain its dominant position in a market is a focal point of the modem theory of industrial organization a recent literature examines this issue for markets in which challengers threaten an incumbent s position by engaging in research for a new technology richard gilbert and david newbery 1982 show that an incumbent firm with a firstmover advantage will preempt potential entrants by inventing a new technology slightly earlier than would its rivals in a stochastic r d therefore its introduction does not alter the decision to research when the pre innovation market is characterized by an incumbent and potential entrants stephen salant 1984 shows that licensing ex post to innovation can alter the research decision as anticipation of the returns from future licensing encourages research by the entrant as a counterpoint to the salant result i find that licensing ex ante to research may discourage further research by the entrant indeed this strategic incentive for licensing may be so strong as to persuade the incumbent as well as the entrant to terminate research activity to isolate this incentive for licensing from the one discussed by salant a simple model is constructed in which licensing of future technologies is not desirable anecdotal evidence suggests that the strategic incentive does lead innovators in some markets to license their technologies examples of this information sharing are prevalent in markets where technological change is rapid in the 1940 s standard oil of new jersey discovered a process for synthetic rubber it traded patent rights on this process for a synthetic oil production process discovered by farben a german rubber company in both the synthetic oil and synthetic rubber markets rival companies were department of economics scarsborough college university of toronto toronto ontario canada m5s lal i thank jon cohen and ron saunders for discussions that inspired this paper i am also grateful to yehuda kotowitz andy mclennan jennifer reinganum ralph winter myma wooders two anonymous referees and seminar participants at the university of toronto for helpful comments on earlier drafts

durability choice under demand uncertainty this paper examines the impact of demand uncertainty on a monopolist s durability choice within a simple two period framework the analysis shows that the firm will produce the socially optimal durability if its output is rented and demand uncertainty is small but that it may produce units with inefficiently short life spans if output is sold however the model reveals that this planned obsolescence may be reduced from certainty levels depending upon the impact of uncertainty on future demand thus uncertainty may actually increase the firm s product durability relative to certainty levels

technology debt and the exploitation of growth options abstract this paper analyzes the effect of the firm s technology on the agency costs of debt it is shown that for an important class of technologies agency costs are not a uniformly rising function of leverage for these technologies relatively high leverage can be consistent with a small tax subsidy the effect of technology on the exploitation of real options by a levered firm is examined the analysis provides a framework for a direct test of the agency cost of debt hypothesis using cost data

regional allocation of co2 emissions allowance over provinces in china by 2020 the mitigation efforts of china are increasingly important for meeting global climate target since the rapid economic growth of china has led to an increasing share in the world s total co2 emissions this paper sets out to explore the approach for realizing china s national mitigation targets submitted to the unfccc as part of the copenhagen accord that is to reduce the intensity of co2 emissions per unit of gdp by 40 45 by 2020 as well as reducing the energy intensity and increasing the share of non fossil fuel consumption through regional allocation of emission allowance over china s provinces since the realization of china s mitigation target essentially represents a total amount emission allowance allocation problem an improved zero sum gains data envelopment analysis optimization model which could deal with the constant total amount resources allocation is proposed in this study by utilizing this model and based on several scenarios of china s economic growth co2 emissions and energy consumption a new efficient emission allowance allocation scheme on provincial level for china by 2020 is proposed the allocation results indicate that different provinces have to shoulder different mitigation burdens in terms of emission intensity reduction energy intensity reduction and share of non fossil fuels increase

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

would hotelling kill the electric car in this paper we show that the potential for endogenous technological change in alternative energy sources may alter the behaviour of resource owning firms when technological progress in an alternative energy source can occur through learning by doing resource owners face competing incentives to extract rents from the resource and to prevent expansion of the new technology we show that in such a context it is not necessarily the case that scarcity driven higher traditional energy prices over time will induce alternative energy supply as resources are exhausted rather we show that as we increase the learning potential in the substitute technology lower equilibrium energy prices prevail and there may be increased resource extraction and greenhouse gas emissions we show that the effectiveness and the incidence of emissions reduction policies may be altered by increased potential for technological change our results suggest that treating finite resource rents as endogenous consequences of both technological progress and policy changes will be important for the accurate assessment of climate change policy

sequential entry and deterrence with competitive spatial price discrimination abstract this paper analyzes sequential entry with perfect foresight in a competitive spatial price discrimination model with both an exogenous and an endogenous number of firms the spne locations do not coincide with the social cost minimizing locations

action characteristics as predictors of competitive responses a central question in competitive dynamics is whether a competitive response can be predicted this study links various characteristics of actions with the total number and the time lag of competitors responses the hypothesized relationships were tested with a sample of competitive moves among u s airlines the results suggested that responses are influenced by the characteristics of the actions that evoked them specifically the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses strategic as opposed to tactical actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals counteractions finally contrary to prediction competitors who have a high stake in the markets under attack by a competitive move react slowly

the learning curve and optimal production under uncertainty this article examines the implications of the learning curve in a world of uncertainty we consider a competitive firm whose costs decline with cumulative output because the price of the firm s output evolves stochastically future production and cumulative output are unknown and are contingent on future prices and costs we derive an optimal decision rule that maximizes the firm s market value produce when the price exceeds a critical level which is a declining function of cumulative output we show how the shadow value of cumulative production the total value of the firm and the decision to produce depend on the volatility of the price and other parameters uncertainty increases the critical price required for the firm to produce but also increases the value of thefirm thus during periods of high volatility firms facing a learning curve ought to be producing less but are worth more

estimating country specific environmental kuznets curves from panel data a bayesian shrinkage approach designing an efficient global climate policy turns out to be a difficult yet crucial task since there are noteworthy cross country differences in energy and carbon intensities in this article the environmental kuznets curve ekc hypothesis is tested for carbon dioxide co2 emissions and as a modelling technique the iterative bayesian shrinkage procedure is employed to handle the cross country differences the results suggest that first the ekc hypothesis is rejected for 47 out of the 51 countries considered when the heterogeneity in countries energy efficiencies and cross country differences in the co2 emissions trajectories are accounted for second a classification of the results with respect to the development levels of the countries concerned reveals that the emergence of an overall inverted u shaped curve is due to the fact that in high income countries increase in gross domestic product gdp decreases emissions while in low income countries emissions and gdp are positively correlated

costs of alternative policies for the control of nitrogen dioxide in baltimore abstract the costs of meeting alternative one hour nitrogen dioxide standards in baltimore are simulated for alternative pollution control policies applied to the 200 point sources with the largest emissions and compared to a similar study for the chicago area the least cost spatially differentiated policy is found to be quite closely approximated by an effluent fee varying only by source type and a policy that combines features of a regulatory and an economic incentive policy the uniform fee or its market permit analogue results in relatively high costs because of severe overcontrol

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

optimal investment in human capital under conditions of nonstable population the paper analyses optimal investment in physical and human capital when the exogenous rate of population growth changes the growth model describes a closed economy with overlapping generations and homogeneous human capital the optimal growth path is characterized by two groups of optimality conditions a generalized golden rule for optimal investment in physical capital and a continuum of golden rules of education corresponding to the continuum of active generations these conditions for optimal investment in human capital can be interpreted in terms of the familiar equality of discounted costs and returns the model is illustrated with a numerical simulation

the dynamic adjustment of optimal durability and quality they don t make them like they used to is a well known adage which is investigated in this paper we show that when the marginal cost with respect to durability or quality per unit of production does not increase with production then a a competitive firm and a monopolist will choose an optimal durability or quality path that decreases over time b the more likely it is that quality and quantity are substitutes either in consumption or production the more likely it is that quality will deteriorate over time as the market approaches the steady state c substitutability of quality and durability will tend to drive quality down even faster when durability declines

strategic behaviour of incumbent firms in the uk abstract the main purpose of this paper is to examine the incidence of strategic behaviour in the uk by means of a questionnaire study performed across three broad manufacturing industries food electrical engineering and chemicals of the strategies which have received substantial theoretical attention r d and advertising appear widely used patenting pricing and excess capacity much less so vertical instruments such as purchasing policy also stand out as important but possibly only a minority of firms in our sample actively pursue strategic instruments

one is almost enough for monopoly it has been argued that two factors product durability and potential entry may force a monopolist to price at marginal cost this article shows that when these two forces coexist the tendency toward competition may be negated first we prove that durable goods oligopolists without commitment powers may attain joint profits arbitrarily close to those of a monopolist with perfect commitment power second we demonstrate that the presence of a potential entrant may enable a durable goods monopolist to act as if he had commitment power thus potential as well as actual entry may restore monopoly power

strategic deterrence of sequential entry into an industry industrial entry deterrence is typically studied in a setting where an established firm or firms confront and attempt to deter a single potential competitor during the evolution of most industries however a sequence of firms enters or attempts to enter at distinct points in time consideration of issues arising from sequential entry fundamentally alters the qualitative nature of the deterrence decision undertaken by incumbent firms within a sequential setting counterintuitive behavior may be observed specifically numerous government policies designed to decrease industrial concentration penalties for anticompetitive practices subsidization of entry consent decrees restructuring industries may have the opposite effect

commentaries and rejoinder to measuring the impact of negative demand shocks on car dealer networks by paulo albuquerque and bart j bronnenberg this series of discussions presents commentaries and a rejoinder on strategic and managerial issues arising from albuquerque and bronnenberg albuquerque p b j bronnenberg 2012 measuring the impact of negative demand shocks on car dealer networks marketing sci 31 1 4 23

achieving demand side synergy from strategic diversification how combining mundane assets can leverage consumer utilities we explore the overlooked issue of how certain strategic level interindustry diversification options might increase consumer utility discussions of inter industry diversification typically focus on producer synergies obtainable from economies of scope or from skill transfer across business units discussions of intra industry product diversification generally the province of marketing typically focus on synergies obtainable from product bundling which lowers producer costs or provides convenience for consumers we take a different tack by linking interindustry diversification and consumer utility we first separately examine two possible consumer benefits of interindustry diversification 1 facilitating consumers accomplishment of two tasks simultaneously or 2 attracting diverse consumer groups to a common platform when intergroup externalities exist we then assess a simple empirical context that shows potential for simultaneous consumer utilities and two sided market utility together we analyze this context and concurrently develop a mathematical model showing how these demand side synergies can create unique business value we next introduce asymmetric preferences among consumer subgroups and we refine our arguments by comparing their conclusions with the empirical data we learn that combinations of otherwise mundane i e commonplace assets can create consumer value superior assets are not necessary moreover common ownership is necessary for the pricing flexibility required to deliver and capture maximum value through interindustry diversification especially when consumer groups preferences may change the negotiations and settling up required for cooperation through alliances will without common ownership increase costs and reduce responsiveness we discuss the sustainability of demand side advantages and the implications of these ideas for future research and practice

excess capacity and limit pricing an empirical test entry may be inhibited by expectations that incumbents have lower marginal costs incumbents may be able to use limit pricing or excess capacity to further this expectation we construct an empirical model of oligopoly capacity and pricing decisions and of entrant responses the results support the hypothesis that both lower prices and greater excess capacity inhibit entry they further support limit pricing but provide no evidence that oligopolies deliberately install excess capacity to deter entry the results suggest however that limit pricing firms may exploit the entry inhibiting effects of unintended excess capacity by raising their limit prices

the learning curve and pricing in the chemical processing industries data on 37 chemical products are used to test a number of hypotheses about the learning curve and industrial price behavior the results document a strong and consistent learning effect learning is found to be a function of cumulated industry output and cumulated investment rather than calendar time standard economies of scale appear significant but small in magnitude relative to the learning effect variations in the slope of the learning curve are linked to differences in r d expenditures and capital intensity market concentration is found to be a strong influence on price flexibility and the timing of learningrelated price changes

optimal management of environmental externalities with time lags and uncertainty many environmental externalities occur with time lags that can range from a few days to several centuries in length and many of these externalities are also subject to uncertainty in this paper we examine the key features of an optimal policy to manage environmental externalities that are both lagged and stochastic we develop a two period two polluter model and obtain closed form solutions for optimal emissions levels under different combinations of damage functions and stochastic processes these solutions show that it is not obvious whether greater control should be exerted on polluters that generate externalities with longer lags or on polluters that generate externalities with shorter lags we find that the optimal ranking of polluters with respect to the length of the time lag associated with their externality will depend on a the discount rate b conditional expectations of future states of the polluted resource c persistence of the pollutant and d initial conditions

the optimal carbon sequestration in agricultural soils do the dynamics of the physical process matter the kyoto protocol which came into force in february 2005 allows countries to resort to supplementary activities consisting particularly in carbon sequestration in agricultural soils existing papers studying the optimal carbon sequestration recognize the importance of the temporality of sequestration but overlook the fact that it is an asymmetric dynamic process this paper takes explicitly into account the temporality of sequestration its first contribution lies in the modelling of the asymmetry of the sequestration de sequestration process at a micro level and of its consequences at a macro level its second contribution is empirical we compute numerically the optimal path of sequestration de sequestration for specific damage and cost functions and a calibration that mimics roughly the world conditions we show that with these assumptions sequestration must be permanent and that the error made when sequestration is supposed immediate can be very significant

durable goods monopoly with discrete demand we analyze a dynamic game between consumers and the sole seller of a durable good unlike previous analyses we assume that there exists a finite collection of buyers rather than a continuum none of the main conclusions of the literature on durable goods monopoly survives this change in assumption coase s conjecture that a durable goods monopolist cannot earn supracompetitive profits in the continuous time limit bulow s proposition that renting a durable is always more profitable than selling it and stokey s proposition that precommitting to a time path of prices is always optimal are all false when the set of buyers is finite thus the assumption of a continuum of consumers so innocuous and useful a simplification in other contexts has proved misleading in the context of durable goods monopoly

caveat innovator strategic and structural characteristics of new product introductions abstract the assumptions underlying models of strategic behavior by incumbents are evaluated using a case study of a ground coffee product introduction the assumption underlying earlier strategic models that the entrant does not know the incumbent s payoffs after strategic have been tested does not appear to apply instead strategic behavior is observed to hinge on ex ante uncertainty about the structure of the payoff matrix and the incremental decision making which this uncertainty spawns in this environment strategies which create noise can slow learning and delay entry

input choices under price uncertainty theory shows that depending on risk preferences and technological parameters price uncertainty may alter firms choice of capital intensity this paper presents an empirical analysis of the effect of price uncertainty on firms choices of capital and labor stocks empirical results from a cross section of manufacturing industries as well as within industries over time show that greater price uncertainty increases an industry s capital labor ratio it appears that risk aversion does not dominate firms decision making these empirical findings have implications for the analysis of factor demand and productivity and capacity utilization rates

fixed costs sunk costs entry barriers and sustainability of monopoly this paper shows that i fixed costs of sufficient magnitude assure the existence of a vector of sustainable prices for the products of a natural monopolist prices making him invulnerable against entry ii nevertheless fixed costs do not constitute barriers to entry that is they need not have undesirable welfare consequences iii indeed in market forms that we call perfectly contestable large fixed costs are completely compatible with many desirable attributes of competitive equilibrium iv sunk costs do however constitute barriers to entry and v finally the profit and welfare consequences of entry barriers are described formally in this paper it is shown that i fixed costs of sufficient magnitude assure the existence of a vector of sustainable prices a set of product prices that make a natural monopolist invulnerable against successful entry ii nevertheless costs that are truly fixed do not constitute barriers to entry that is they do not have the welfare consequences normally attributed to barriers to entry iii indeed there are markets of a form which we call perfectly contestable markets and whose properties may be approximated in practice in which large fixed costs are completely compatible with many if not most of the desirable attributes of competitive equilibrium iv sunk costs do however constitute barriers to entry and v finally the resource allocation problems that stem from fixed costs are formally identical with those that accompany public goods both their sources and their character are the same thus the rationale for public supply of public goods may be no different from that pertaining to nationalization of natural monopolies

research note the role of production lead time and demand uncertainty in marketing durable goods firms often have to make their production decisions under conditions of demand uncertainty this is especially true for product categories such as automobiles and technology goods where the lead time needed for manufacturing forces firms to make production decisions well in advance of the selling season once the firm has produced the goods the available production volume affects the firm s subsequent marketing decisions in this paper we study the relationship between the firm s production and marketing decisions for a durable goods manufacturer we develop a dynamic model of a durable product market in which the demand functions are developed from a micromodeling of consumer utility functions and an equilibrium analysis of consumer strategies after taking into account the demand uncertainty as well as the potential for cannibalization of future sales the manufacturer makes its production and sales decisions we find that the firm s optimal inventory level is u shaped in the durability of the product and that the firm suffers a larger loss due to uncertainty when it is leases rather than sells its products furthermore unlike the case for nondurables for durable goods we find that the effect of uncertainty persists even after the uncertainty has been resolved

differences in social and public risk perceptions and conflicting impacts on point nonpoint trading ratios if stochastic nonpoint pollution loads create socially costly risk then an economically optimal point nonpoint trading ratio the rate point source controls trade for nonpoint controls is adjusted downward a risk reward for nonpoint controls encouraging more nonpoint controls however in actual trading programs ratios are adjusted upward in response to nonpoint uncertainties a risk premium for nonpoint controls this contradiction is explained using a public choice model in which regulators focus on encouraging abatement instead of reducing damages the result is a divergence of public and social risk perceptions and a trading market that encourages economically suboptimal nonpoint controls copyright 2001 oxford university press

the persistence of monopoly an investigation of the effectiveness of the united kingdom monopolies commission a sample of twenty eight markets investigated by the uk monopolies and mergers commission is taken and market share changes are analysed for subsequent erosion of dominance the evidence points to a modest erosion for leading firms but only rarely to a loss of leadership although there is no significant difference between the rates of decline for leading firms in the mmc sample and a control group the achievement of some erosion of dominance in markets where entry barriers were reduced may represent some limited success for competition policy