sophisticated entry in a model of spatial competition we analyze free entry equilibrium in a model of spatial competition in which locations of established firms are fixed and entrants profit expectations are rational our most interesting results concern large economies economies in which the number of firms is arbitrarily large when the average cost function is u shaped free entry equilibrium is unique socially optimal and characterized by zero profit in contract when there are no diseconomies of scale even large economies are stubbornly imperfect firms can earn substantial pure profit and free entry equilibrium is neither unique nor socially optimal

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

endogenous federal grants and crowd out of state government spending theory and evidence from the federal highway aid program contrary to simple theoretical predictions existing evidence suggests that federal grants do not crowd out state government spending a legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods this correlation has likely biased existing work against measuring crowd out to correct for such endogeneity the model motivates instruments based on the political power of state congressional delegations exploiting this exogenous variation in grants the instrumental variables estimator reports crowd out that is statistically and economically significant this endogeneity may explain the flypaper effect a nonequivalence between grant receipts and private income jel d70 h40 h77

competitive outcomes in product differentiated oligopoly structure firms anticipate the competitive effects of market structure when making their entry and product type decisions the market structure variables used to explain the observed outcomes therefore derive from the related entry and product choice stage of the game as a result it is crucial to allow for correlation between unobserved factors that affect the entry and product type decisions of firms and unobservables in the outcome regressions to correct for the potential bias caused by this correlation an econometric model of equilibrium market structure is employed as a selection equation in a two step estimation procedure the second step outcome regressions are modified to reflect the market structure selection this alternative approach emphasizes the logical relationship among firms entry and product choice behavior market structure and price competition following this introduction i provide some background for the analysis of competitive outcomes in motel oligopolies section iii presents the two step estimation procedure developed to measure the effects of concentration and differentiation on outcomes this procedure is used to analyze the observed outcomes of motels located along interstate highways the data are outlined in section iv in section v i present the estimation results evidence from the analysis of these outcomes help demonstrate why motel firms find differentiation a profitable product choice strategy section vi provides some concluding remarks

parochial interests and the centralized provision of local public goods evidence from congressional voting on transportation projects abstract local public goods financed from a national tax base provide concentrated benefits to recipient jurisdictions but disperse costs creating incentives for legislators to increase own district spending but to restrain aggregate spending due to the associated tax costs while these common pool incentives underpin a variety of theoretical analyses which tend to predict inefficiencies in the allocation of public goods there is little direct evidence that individual legislators respond to such incentives to test for reactions to such incentives this paper analyzes 1998 congressional votes over transportation project funding the empirical results provide evidence that legislators respond to common pool incentives the probability of supporting the projects is increasing in own district spending and decreasing in the tax burden associated with aggregate spending having found that legislators do respond to such incentives i use the parameter estimates to calculate the efficient level of public goods which suggest over spending in aggregate especially in politically powerful districts and large associated deadweight loss

the regional allocation of infrastructure investment the role of equity efficiency and political factors abstract this paper analyses the main determinants of the regional allocation of infrastructure investment the estimated investment equation is derived from a general specification of the government s objective function berhman and craig am econom rev 77 1987 315 which accounts both for the equity efficiency trade off and for deviations from this rule that arise because of political factors the reaction of investment to changes in the regional output provides information about the strength of the equity efficiency trade off the main political factor considered is a measurement of the electoral productivity of funds invested in each region the equation is estimated from panel data on investment and the capital stock of transportation infrastructure i e roads rails ports and airports for the spanish departments nuts3 during the period 1987 1996 we use a dynamic specification of the equation that allows for slow adjustment and which is estimated by gmm methods arellano and bond rev econom stud 58 1991 277 the results suggest that efficiency criteria play only a limited role in the geographical distribution of government infrastructure investment specific regional infrastructure needs and political factors both appear to be factors that do explain the regional allocation of infrastructure investment

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

contribution to productivity or pork barrel the two faces of infrastructure investment abstract this paper proposes a simultaneous equation approach to the estimation of the contribution of transport infrastructure accumulation to regional growth we model explicitly the political economy process driving infrastructure investments in doing so we eliminate a potential source of bias in production function estimates and generate testable hypotheses on the forces that shape infrastructure policy our empirical findings on a panel of france s regions over 1985 92 suggest that electoral concerns and influence activities were indeed significant determinants of the cross regional allocation of transportation infrastructure investments by contrast we find little evidence of concern for the maximization of economic returns to infrastructure spending even after controlling for pork barrel

product differentiation and location decisions under demand uncertainty we investigate hotelling s duopoly game of location then price choices with quadratic transportation costs and uniformly distributed consumers under the assumption that firms are uncertain about the exact location of demand we characterize the unique equilibrium and the socially optimal locations contrary to the individual level random utility models location uncertainty is a differentiation force in equilibrium increases in the variance of the uncertainty lead to greater differentiation higher expected equilibrium prices and profits and a greater welfare loss

symmetric equilibrium existence and optimality in differentiated product markets abstract equilibrium existence and optimality are analysed in a market for products differentiated by their variety a game of three stages is analysed firms enter in the first stage choose varieties in the second stage and choose prices in the third stage the existence of subgame perfect equilibria is established at equilibrium products are symmetrically located in the space of characteristics and are offered at equal prices the surplus maximizing solution is characterized and it is shown that surplus maximizing product diversity is lower than the equilibrium one

supermarket choice and supermarket competition in market equilibrium multi store firms are common in the retailing industry theory suggests that cross elasticities between stores of the same firm enhance market power to evaluate the importance of this effect in the u k supermarket industry we estimate a model of consumer choice and expenditure using three data sources profit margins for each chain a survey of consumer choices and a data set of store characteristics to permit plausible substitution patterns the utility model interacts consumer and store characteristics we measure market power by calculating the effect of merger and demerger on nash equilibrium prices demerger reduces the prices of the largest firms by between 2 and 3 8 depending on local concentration mergers between the largest firms lead to price increases up to 7 4

roads to prosperity assessing the link between public capital and productivity does the positive correlation between infrastructure and productivity reflect causation if so in which direction the author finds that when growth in roads the largest component of infrastructure changes productivity growth changes disproportionately in u s industries with more vehicles that vehicle intensive industries benefit more from road building suggests that roads are productive at the margin however road investments do not appear unusually productive intuitively the interstate system was highly productive but a second one would not be road building thus explains much of the productivity slowdown through a one time unrepeatable productivity boost in the 1950s and 1960s

commercial lending and distance evidence from community reinvestment act data a number of large banking organizations have substantially broadened the distances at which they are willing to extend commercial loans but there is also evidence to suggest that this has occurred primarily at the high side of the distribution of lending distances in this paper we employ a new source of data to examine the relationship between lending decisions and distance between lender and borrower for that part of the distance distribution where arguably most of the competitive interactions among lenders still occur we report three basic findings 1 distance operates as a deterrent to lending even within areas traditionally defined as local markets 2 distance is more of a deterrent for small banks than for larger organizations even within these areas and 3 for those commercial loans made within areas currently treated by regulators as markets distance has not been declining in importance indeed a preponderance of the evidence suggests that it is becoming if anything more of a factor possible explanations and policy implications are discussed

how entry threats induce slack abstract profits of incumbent firms are often observable to potential entrants and signal profit opportunities in a market incumbents therefore have an incentive to strategically manipulate profit reports since owners of firms typically derive utility only from profits incumbent firms have to balance the benefit of large profits against the possibility of entry it is shown that owners will generally accept below maximum profit performance i e tolerate slack in order to deter entry and furthermore that such entry deterring behaviour is successful even if it is anticipated by rational entrants

party formation in single issue politics we study the implications of economies of party size in a model of party formation we show that when the policy space is one dimensional candidates form at most two parties this result does not depend on the magnitude of the economies of party size or sensitively on the nature of the individuals preferences it does depend on our assumptions that the policy space is one dimensional and that uncertainty is absent we study how modifications of these assumptions affect our conclusions

endogenous lobby formation and endogenous protection a long run model of trade policy determination this paper provides a theory of lobby formation within a framework in which trade policy is determined through political contributions under certain conditions free trade turns out to be an equilibrium outcome either when the government has a high affinity for political contributions or when it cares a great deal about social welfare moreover greater inequality in asset distribution results in a greater number of lobbies and in most cases more protection for each of these lobbies furthermore industries with higher levels of capital stock fewer capitalists more inelastic demand and smaller geographical dispersion are the ones that get organized

the politics of infrastructure investment the role of product market competition abstract in spatial competition public infrastructure plays a crucial role in determining product market outcomes in our model consideration of infrastructure s impact on the product market drives the preferences of consumers in their dual role as voter taxpayers the spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes however across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly collusion furthermore competition s boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment

spatial externalities and the common pool resource mechanism abstract this paper expands the common pool resource cpr game of walker et al 1990 to incorporate spatial structure with two spatially linked common pool resources subjects participated in a five player common pool resource game under three alternative spatial structures non spatial bi directional and uni directional linkages within the experiment results indicate that behavior in the uni directional cpr game yielded the highest average yields whereas those in the bi directional game were lower than in the non spatial game furthermore investment patterns in the uni directional game were proportionally lower in the sink cpr than those in the source cpr this behavior is consistent with the individual incentives of the game and highlights the importance of understanding the spatial structure present within our natural resources