are probabilities used in markets abstract working in a complete markets setting a property of asset demands is identified that is inconsistent with the investor s preference being based on probabilities in this way a market counterpart of the ellsberg paradox is provided journal of economic literature classification numbers d00 d80 d81

business ethics in china first i briefly review the emergence and development of business ethics following three stages 1978 1984 1984 1994 1994 to the present and driven by four factors the inheritance of chinese traditional ethics the influence of marxist philosophy and ethics the reflections on the economic reform and the influence of business ethics from abroad then from a practical and a theoretical perspective i discuss the main challenges for business ethics in china issues of the economic system of corporate ethics and of management after commenting on the role of business ethics for the social development in china i offer some reflections about what china can contribute to and learn from other peoples

competition policy burdens and state owned enterprise reform one of the most important remaining issues in china s transition to a market economy is the reform of state owned enterprises soe s when reforms started in late 1978 soe s dominated china s industrial sectors in every aspect after 18 years of gradual transition the soe share in china s total industrial output has declined from 77 6 percent in 1978 to 28 8 percent in 1996 however in 1996 soe s still employed 57 4 percent of urban workers and possessed 52 2 percent of total investment in industrial fixed assets improving soe performance is crucial for social stability and sustained growth in china however over 40 percent of soe s are losing money in this paper we will argue that the root of the soe problem is the separation of ownership and control and that the oftencriticized soft budget constraints arise from various state imposed policy burdens which make the state accountable for the poor perfornance of soe s the key for a successful soe reform is to remove the policy burdens and to create a level playing field so that market competition can provide sufficient information for the managerial performance of the soe s and make the managers incentives compatible with those of the state io competition and the performance of large corporation in a market economy

culture marketization and owner manager agency costs a case of merchant guild culture in china this study explores cultural influence on corporate behavior employing the case of merchant guild culture in china and further the moderating role of marketization using hand collected data on merchant guild culture we find that merchant guild culture is significantly negatively associated with owner manager agency costs suggesting that merchant guild culture in ancient china still has its continuous and remarkable effects on managerial behavior in contemporary corporations this finding also implies that merchant guild culture motivates managers to upgrade the efficiency of controlling operating costs reduces agency conflicts between management and shareholders and eventually mitigates owner manager agency costs moreover provincial marketization level attenuates the negative association between merchant guild culture and owner manager agency costs above results are robust to a variety of alternative measures of merchant guild culture and owner manager agency costs furthermore our findings are still valid after controlling for the potential endogeneity between merchant guild culture and owner manager agency costs

perfection the infinite horizon and dominance abstract consideration of time and independence brought into focus by the example of perfection in the infinite horizon leads the author to a modified contraction by dominance solution for game theory

revealed preference stochastic dominance and the expected utility hypothesis abstract this paper shows that a choice function is either consistent with the expected utility hypothesis or is ex ante dominated for some prior

the role of policy instruments in the innovation and diffusion of environmentally friendlier technologies popular claims versus case study experiences abstract moving towards sustainability will require that new environmentally friendlier technologies are developed and widely adopted policy instruments that promote eco efficiency are therefore necessary some claims frequently made in the literature on the relationship between policy instruments and technological development are examined the claims concern regulations environmental taxation and funding of research and development the claims are explored on the basis of empirical evidence from two sectors the pulp and paper industry and the marine engine industry little support was found for some of the claims in some cases even contradictory findings and for some claims the findings differed between the sectors and even within a sector depending on the issue

rational behaviour in extensive form games it is argued that subgame perfect equilibrium behavior is not an inevitable consequence of common belief of rationality among players in noncooperative extensive form games the argument centers around a particular extensive form game with perfect information in the context of this game it is argued that if rationality is not common belief throughout play of the game then it can be perfectly rational to play contrary to subgame perfection even if rationality is common belief at the beginning of the game it is then shown that it is impossible for rationality to be common belief throughout every play of the game

markets and institutions in financial intermediation national characteristics as determinants abstract given the importance of financial intermediation and the rise of globalization there is little prior research on how national preferences for financial intermediation markets versus institutions are determined by cultural legal and other national characteristics using panel analysis for data on a recent 8 year period for 30 countries this paper documents that national preferences for market financing increase with political stability societal openness economic inequality and equity market concentration and decreases with regulatory quality and ambiguity aversion we confirm with robustness tests that our result for regulatory quality is independent of differences in national wealth and that our result for political stability is independent of both wealth and political legitimacy these results should be of much interest to managers scholars regulators and policy makers

does confucianism reduce minority shareholder expropriation evidence from china using a sample of 12 061 firm year observations from the chinese stock market for the period of 2001 2011 and geographic proximity based confucianism variables this study provides strong evidence that confucianism is significantly negatively associated with minority shareholder expropriation implying that confucianism does mitigate agency conflicts between the controlling shareholder and minority shareholders this finding suggests that confucianism has important influence on business ethics and thus can serve as an important ethical philosophy or social norm to mitigate the controlling shareholder s unethical expropriation behavior moreover my findings reveal that the nature of the ultimate owner attenuates the negative association between confucianism and minority shareholder expropriation suggesting that confucianism s negative impact on minority shareholder expropriation is less pronounced for state owned enterprises than for non state owned enterprises the above results are robust to a variety of sensitivity tests and my findings are valid after controlling for the potential endogeneity between confucianism and minority shareholder expropriation

policy burdens accountability and the soft budget constraint in a socialist economy when a state owned enterprise soe incurs losses the government often provides it with additional funding cuts its taxes and offers other compensations coincidentally the managers of an soe also expect to receive financial assistance from the state such a phenomenon is called the soft budget constraint sbc a term coined by janos kornai 1986 kornai attributes many problems in a socialist economy to the existence of the sbc to achieve successful reform of both the soe s and socialist economies it is imperative to eliminate the sbc however the sbc phenomenon continues to exist in transitional economies even after soe s are privatized world bank 1996 p 45 there is a large literature on the sbc mathias dewatripont et al 1996 and eric maskin 1996 provide surveys on the recent literature according to kornai 1998 there are two types of explanations for the existence of the sbc the exogenous and endogenous explanations of the first type attribute the existence of the sbc to various exogenous reasons including the paternalism of a socialist state and the government s aims for job creation or for gaining political support kornai 1986 explanations of the second type view the sbc as an endogenous phenomenon arising from a time inconsistency problem dewatripont and maskin 1995 for an inefficient uncompleted investment project the state or creditor may have incentives to refinance the investment because the marginal benefit of refinancing exceeds the marginal cost of abandoning it yingyi qian 1994 attributed the shortage of goods in socialist economies to the sbc based on such a timeinconsistency argument in this paper we provide another explanation for the prevalence of the sbc in socialist and transitional economies we will argue that the sbc is rooted in the state s accountability problem the traditional stalinist system was designed to facilitate the establishment of certain strategic soe s which were not viable in a market system to establish the nonviable soe s a socialist government distorted the prices of all kinds of inputs and of outputs and used administrative measures to allocate these inputs and outputs according to plans however due to information and coordination problems the state could make wrong decisions regarding investment production and fail to deliver necessary materials and inputs in time consequently the state instead of soe s was accountable for the failures and needed to allocate additional credits and other assistance to the soe s in order to complete the investment and production as such the sbc arose after the transition to a market economy many strategic firms still remain nonviable in a market economy for strategic purposes the state needs to support these finns moreover most firms in a transitional economy carry many types of policy burdens inherited from the pretransition system lin et al 1998 because the state is accountable for the losses arising from policy burdens the sbc phenomenon persists in a market economy the state s attempts to build nonviable industry and the state s policy burdens on enterprises will also lead to sbc

a test for risk averse expected utility we provide a universal condition for rationalizability by risk averse expected utility preference in a demand based framework with multiple commodities our test can be viewed as a natural counterpart of a classical test of expected utility due to fishburn 1975 in a demand setting

does confucianism reduce board gender diversity firm level evidence from china this study extends previous literature on the association between confucianism and corporate decisions by examining confucianism s influence on board gender diversity using a sample of chinese listed firms during the period of 2001 2011 and geographic proximity based confucianism variables i provide strong and consistent evidence to show that confucianism is significantly negatively associated with board gender diversity suggesting that the proportion of women directors in the boardroom is significantly lower for firms surrounded by strong confucianism atmosphere than for firms located in regions with weak confucianism atmosphere this finding also implies that confucian philosophical system has important impacts on business ethics and women s status in corporate governance moreover gdp per capita the proxy for economic development level in a province in which a firm is located attenuates the negative association between confucianism and board gender diversity above results are robust to different measures of confucianism and board gender diversity and are still valid after controlling for the potential endogeneity between confucianism and board gender diversity

dynamic governance of clean energy markets how technical innovation could accelerate climate policies abstract this article explores the governmental means to accelerate technical progress in climate protection it is based on selected best practice cases in which the diffusion of low carbon technologies has been accelerated by ambitious policies the empirical cases involve not just renewable energies but also energy efficiency the latter being considered more difficult in terms of governance the examples are taken from advanced oecd countries as well as from emerging economies this article will explore which factors have caused this dynamic development the conclusion reached will show that the interaction of positive feedback mechanisms which has already been described as virtuous cycle provides only a plausible theoretical explanation if the policy cycle is added to the market cycle and the innovation cycle climate policy should not only define ambitious targets but also address all three feedback mechanisms

guanxi versus the market ethics and efficiency guanxi refers to a chinese system of doing business on the basis of personal relationships and it is representative of the way that business is done throughout much of the non western world in this paper we first evaluate guanxi from an ethical perspective and then attempt to shed light on the sources of its economic advantages and disadvantages through the use of a simple mathematical model finally we point out how eastern and western business practices may already be converging toward systems based on more complete models of trust to deal with the conditions of progress coupled with uncertainty that form our new economic reality

understanding carbon lock in abstract this paper narrative argues that industrial economies have been locked into fossil fuel based energy systems through a process of technological and institutional co evolution driven by path dependent increasing returns to scale it is asserted that this condition termed carbon lock in creates persistent market and policy failures that can inhibit the diffusion of carbon saving technologies despite their apparent environmental and economic advantages the notion of a techno institutional complex is introduced to capture the idea that lock in occurs through combined interactions among technological systems and governing institutions while carbon lock in provides a conceptual basis for understanding macro level barriers to the diffusion of carbon saving technologies it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration the question of escaping carbon lock in is left for a future paper

risk preferences and the macroeconomic announcement premium this paper develops a revealed preference theory for the equity premium around macroeconomic announcements stock returns realized around pre scheduled macroeconomic announcements such as the employment report and the fomc statements account for 55 of the market equity premium we provide a characterization theorem for the set of intertemporal preferences that generates a nonnegative announcement premium our theory establishes that the announcement premium identifies a significant deviation from time separable expected utility and provides asset market based evidence for a large class of non expected utility models we also provide conditions under which asset prices may rise prior to some macroeconomic announcements and exhibit a pre announcement drift

corporate environmental responsibility in polluting industries does religion matter using a sample of chinese listed firms in polluting industries for the period of 2008 2010 we empirically investigate whether and how buddhism china s most influential religion affects corporate environmental responsibility cer in this study we measure buddhist variables as the number of buddhist monasteries within a certain radius around chinese listed firms registered addresses in addition we hand collect corporate environmental disclosure scores based on the global reporting initiative gri sustainability reporting guidelines using hand collected buddhism data and corporate environmental disclosure scores we provide strong and robust evidence that buddhism is significantly positively associated with cer this finding is consistent with the following view buddhism can serve as social norms to evoke the consciousness of social responsibility and thereof strengthen cer our findings also reveal that the positive association between buddhism and cer is attenuated for firms with higher law enforcement index the results are robust to various measures of buddhism and a variety of sensitivity tests

do favorable land price policy affect renewable energy industry evidence from photovoltaics abstract renewable energy is necessary for sustainable social and economic development this is particularly so with global energy shortages the continuous deterioration of ecosystems and the environment as well as the world population explosion this article qualitatively and quantitatively analyzes the effects and problems of chinese favorable land price policy on photovoltaics in examining the favorable land price policy in china this study develops a multiple linear regression model to study the effects of favorable land price policy on photovoltaic power and photovoltaic industry data used in this research was mainly collected from 20 provinces in china it is found that the development of pv in china has been greatly affected by the favorable land price policy in the end it is highly recommended that favorable land price policy should be continued for renewable energy systemic deficiencies can be overcome through continual reform and innovation of mechanisms

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

making book against oneself the independence axiom and nonlinear utility theory an individual with known preferences over lotteries can be led to accept random wealth distributions different from his initial endowment by a sequential process in which some uncertainty is resolved and he is offered a new lottery in place of the remaining uncertainty this paper examines the restrictions that can be placed on an individual s preferences by axioms that stipulate that such a process not be able to generate a new wealth distribution that is prima facie inferior to the original the relationship of these axioms to the independence axiom of von neumann and morgenstern and to the quasi convexity of preferences in the wealth distribution are explored

public policy as a part of transforming energy systems framing bioenergy in finnish energy policy abstract government interventions have been identified as important for energy systems change because they can either facilitate or hinder transitions toward more sustainable energy systems this article analyses how bioenergy options have been framed in finnish policy strategies and how the framing has changed over time the empirical material includes the content of 15 government programmes and nine national energy climate strategies on the basis of this assessment both the link between bioenergy framings in strategies and the actual transformation of finnish bioenergy systems are explored on the basis of bioenergy framings the development of energy policy can be divided into three phases support for domestic energy sources in 1979 1991 support for wood and industry based bioenergy in 1992 1998 and diversified bioenergy in the context of climate change in 1999 2010 for two decades primarily wood based bioenergy was supported despite alternative technological developments occurring elsewhere after the turn of the millennium the importance of climate policy increased and alternative bioenergy sources were raised on the government policy agenda also resulting in some new policy instruments rather than adopting a visionary outlook to guide system transformation climate and energy policy has strengthened those technological options that have been selected elsewhere if public policies are to enhance the shift toward low carbon sustainable energy systems they would need to be more comprehensive be more consistent over time and emphasise energy use more

innovation processes in large technical systems market liberalization as a driver for radical change abstract electricity supply is a large technical system which exhibits strong path dependencies and high barriers for radical innovations recent market liberalization however has initiated a fundamental restructuring the paper analyzes how liberalization has altered innovation processes in the field of electricity supply we examine three radical innovations under monopoly conditions and contrast the findings with the results from a survey on the innovation behavior of electric utilities in liberalized markets we argue that the selection environment for innovations has changed in various respects in our sample new options open to innovation activities have emerged at the level of the firm and utility strategies turn out to be more heterogeneous this may be interpreted as an increase in the variety of search processes which may lead to a mid term decrease of path dependencies

testable implications of subjective expected utility theory abstract i show that the predictive content of the hypothesis of subjective expected utility maximization critically depends on what the analyst knows about the details of the problem a particular decision maker faces when the analyst does not know anything about the agent s payoffs or beliefs and can only observe the sequence of actions taken by the decision maker any arbitrary sequence of actions can be implemented as the choice of an agent that solves some intertemporal utility maximization problem under uncertainty

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

does religion mitigate tunneling evidence from chinese buddhism in the chinese stock market controlling shareholders often use inter corporate loans to expropriate a great amount of cash from listed firms through a process called tunneling using a sample of 10 170 firm year observations from the chinese stock market for the period of 2001 2010 i examine whether and how buddhism china s most influential religion can mitigate tunneling in particular using firm level buddhism data measured as the number of buddhist monasteries within a certain radius around chinese listed firms registered addresses this study provides strong evidence that buddhism intensity is significantly negatively associated with tunneling this finding is consistent with the view that buddhism has important influence on corporate behavior and can serve as a set of social norms and or an alternative mechanism to mitigate controlling shareholders unethical tunneling behavior in addition my findings also reveal that the negative association between buddhism intensity and tunneling is attenuated for firms that have high analyst coverage the results are robust to various measures of buddhism intensity and a variety of sensitivity tests

does religion matter to owner manager agency costs evidence from china in china buddhism and taoism are two major religions using a sample of 10 363 firm year observations from the chinese stock market for the period of 2001 2010 i provide strong and robust evidence that religion i e buddhism and taoism on the whole is significantly negatively associated with owner manager agency costs in particular using firm level religion data measured by the number of religious sites within a radius of certain distance around a listed firm s registered address i find that religion is significantly negatively positively associated with expense ratio asset utilization ratio the positive reverse proxy for owner manager agency costs this finding is consistent with the following view religiosity has remarkable effects on the way how an individual thinks and behaves and thereof can curb managers from unethical business practices moreover my findings suggest that the negative association between religion and owner manager agency costs is attenuated for firms with strong external monitoring mechanisms such as higher marketization and high quality auditors furthermore after separating buddhism from taoism my finding indicates that above conclusions are only available for buddhism suggesting that different religions may have asymmetric influence on owner manager agency costs above results are robust to various measures of religiosity and a variety of robustness checks

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

does religion matter in corporate decision making in america abstract we examine how corporate culture influences firm behavior prior research suggests a link between individual religiosity and risk aversion we find that this relationship also influences organizational behavior firms located in counties with higher levels of religiosity display lower degrees of risk exposure as measured by variances in equity returns or returns on assets they exhibit a lower investment rate and less growth but generate a more positive market reaction when they announce new investments finally chief executive officers are more likely to join a firm with a similar religious environment as in their previous firm when they switch employers

savage in the market we develop a behavioral axiomatic characterization of subjective expected utility seu under risk aversion given is an individual agent s behavior in the market assume a finite collection of asset purchases with corresponding prices we show that such behavior satisfies a revealed preference axiom if and only if there exists a seu model a subjective probability over states and a concave utility function over money that accounts for the given asset purchases

small streams diverse sources who invests in renewable energy in finland during the financial downturn this article addresses the investment gap in renewable energy sources identified by several authors examining the case of a country finland which introduced policy measures to diversify its renewable energy portfolio we analyse the development of investments in renewable heat and power in response to new policy measures and contextual factors during the downturn period 2009 2013 we investigate investor heterogeneity i e the diversity of logics employed by different types of res investors in spite of a severe financial recession we find an emergence of new sources of investment among these new investor types we find diversity in investment drivers and available options these include investors mobilized by the feed in tariff to seek profitable targets and investors such as real estate owners investing in heat pumps for their own use and benefiting from low interest rates we find that the diversification of investors supports the diversification in res sources and brings in new investors undeterred by the financial downturn our findings imply that policy makers should recognize that the responses to distinct incentives and pressures vary by investor types this also means that a mix of policies is required to maximize the contribution of different sectors to filling the renewable energy investment gap

the green factor in european manufacturing a case study of the spanish ceramic tile industry this paper analyses how environmental issues have affected and are continuing to affect the evolution of european manufacturing industries based on the example of the spanish ceramic tile industry scti 1 the ceramic tile industry cti 2 in europe became very competitive and innovative in the early 1990s with the italian and the spanish sectors which are cluster based becoming world leaders however since 2008 this leadership position is being eroded we provide an in depth analysis of the scti focusing on the influence of new european environmental regulations the cti has a major impact on the environment and has been the focus of environmental regulations we also consider the innovation system and socioeconomic effects of the industry in order to analyse the relationship between the environmental issues and innovation the empirical part of the paper builds on research on scti including the industry value chain and the innovation system and how it functions we take account of the views of industry experts on the scti innovation system its environmental impact and the constraints on the sector current research at the local level suggests that the environmental impacts of the industry are outweighed by its huge contribution to socioeconomic wellbeing the transition from national environmental legal frameworks towards eu wide regulation has had a clear effect on both the strategic goals and the management of the industry and the new regulation combined with a more complex international economic scenario is jeopardizing european manufacturing industries this applies especially to traditional industries the case study demonstrates that the capacity of the scti to adapt to new scenarios will be vital for its future survival and success

a more robust definition of subjective probability the goal of choice theoretic derivations of subjective probability is to separate a decisionmaker s underlying beliefs subjective probabilities of events from their preferences attitudes toward risk classical derivations have all relied upon some form of the marschak samuelson independence axiom or the savage sure thing principle which imply that preferences over lotteries conform to the expected utility hypothesis this paper presents a choice theoretic derivation of subjective probability in a savage type setting of purely subjective uncertainty which neither assumes nor implies that the decisionmaker s preferences over lotteries necessarily conform to the expected utility hypothesis copyright 1992 by the econometric society

government affiliated intermediary organisations as actors in system level transitions the article draws from two theoretical fields innovation intermediation and sustainability transitions to examine the role of government affiliated intermediary organisations in system level transitions the role of intermediaries working between actors producers and users entrepreneurs and adopters idea generators and funders has seldom been specifically addressed in the transitions literature thus the role of intermediary organisations in enacting change in socio technical regimes particularly of intermediaries falling between traditional public sector and private sector actors is of interest in this article empirical analyses of two finnish organisations sitra and motiva show that government affiliated intermediaries are likely to engage in strategic niche management processes in diverse ways each organisation having its own distinct characteristics the analysis also points out that to get from niches to transition sustained systemic intermediaries are crucial in articulating new visions and expectations government affiliated intermediaries may make an important contribution to sustainability transitions by initiating and managing new policy or market processes and by acting as an impartial contact point or voice for new networks of actors while independence from public administration is likely to facilitate networking too neutral a stance or limited temporal engagement may reduce the transition facilitating effects

cournot and the oligopoly problem cournot s recherches sw les principes mathpmatiques de la thiorie des richesses 1838 contribution to economic theory ranges from the formulation of the concept of demand function to the analysis of price determination in different market structures from monopoly to perfect competition he is credited for being the pioneer in the use of mathematics in economic analysis nevertheless cournot is most known for his theory of oligopoly cournot claimed that prices would also be determined under oligopolistic rivalry he envisioned firms the celebrated mineral water producers competing independently deciding about their production levels and bringing to the market the output where a price emerges from the interaction of supply and demand an equilibrium is reached when the output of any firm is a best response to the other firms outputs that is when each firm chooses an output level that maximizes profits given the outputs chosen by the rivals the equilibrium involves a price above the marginal cost of production cournot thought furthermore that this equilibrium would be stable in the sense that a departure from it would be self correcting through a series of reactions of the firms the disequilibrium dynamics would be governed by the best response functions of the firms that is by the functions that give the optimal output of a firm in terms of the outputs of the rivals cournot also evoked the question of why is it that firms do not come to an understanding and agree on sharing the market at the monopoly price the answer is that from the point of view of a firm if the rivals follow the agreement it is in the interest of the firm to depart from it since this way it can increase its profits in other words there is an incentive to cheat cournot thought that monopoly or cartel type agreements could only be maintained by means of a formal engagement p 83 our author also considered competition of

energy related taxation as an environmental policy tool the finnish experience 1990 2003 abstract finland has over 10 years experience of environment based energy taxation the design and level of the co 2 and energy tax scheme has been changed several times on an ad hoc basis in recent years finland has introduced more and more tax departures i e deviations and exceptions from an ideal type of environmental tax examples of this include fuel specific and user specific exemptions or lowered tax levels taxes on electricity production from non fossil energy sources plus refund systems for fossil fuel and electricity users thus it is apparent that finnish energy taxation aimed at improving the environment has developed ineffectively increases in the level of co 2 tax on fossil fuels have served mostly fiscal purposes with reduced co 2 emissions being only a side benefit no systematic follow up or ex post analysis on the impacts of the co 2 and energy taxes has been carried out from the perspective of greenhouse gas mitigation the discussion on economic instruments has shifted from co 2 taxation towards emissions trading in the international context of the european union and the kyoto protocol