institutional selection in international relations state anarchy as order by the end of the medieval era three new competing institutions attempted to capture gains from trade and reduce feudal particularism sovereign territorial states cityleagues and city states by the middle of the seventeenth century city leagues and city states had declined markedly territorial states survived as the dominant form because they were able to reduce free riding lower transaction costs and credibly commit their constituents the selection process took place along three dimensions first sovereign territorial states proved competitively superior in the economic realm second states increasingly recognized only other sovereign territorial states as legitimate actors in the international system third other actors defected to or copied the institutional makeup of sovereign territorial organization the emergence of discrete territorial units in which only sovereign authorities represented their citizens as the predominant type of organization in international affairs created a new solution to the problem of markets and hierarchies

squaring the circle the domestic sources of international cooperation most theorists of international affairs would argue that international cooperation is a good thing private regarding behavior creates efficiency but some public goods are needed for optimal results be they in producing peace or prosperity it is in the logic of markets and of decentralized systems such as international relations to undersupply those public goods arms races beggar thy neighbor economic policies environmental degradation these are but some examples of actions that take place in the absence of mechanisms to enforce cooperative agreements regimes that can punish defectors are able to do better a good security regime avoids arms races a good trade regime avoids tariffs a good monetary regime avoids aggressive devaluations and instability a good regulatory regime prevents particularistic mercantilism all these arrangements require international cooperation how do we get international cooperation in two ways first through a convergence of policy objectives agreement on the substance of what is sought in trade security or other issues second by credible commitment to institutions that manage policy disputes put in the negative nations conflict when they cannot agree on policy or when they are unable to sustain commitment to agreements that they may make for nations to cooperate on a trade or monetary regime they must agree to the regime convergence of policy preference and they must agree that they will not cheat and will adhere to the regime and to a process of resolving disputes that may occur credibility of commitment

dynamics of dyadic competitive interaction in this study of firms entries into and exits from each other s markets we link research on multipoint competition to the emerging action oriented dyadic approach to interfirm rivalry by specifying market interdependencies between pairs of firms that condition their potential for rivalry over time our dynamic analysis of competitive interactions between pairs of commuter airlines in california reveals the idiosyncratic and asymmetric market microstructures that characterize dyadic competitive relationships and helps explain why firms grapple vigorously with some of their competitors while being passive toward others we show that there is an inverted u shaped relationship between firms rates of entry into and exit from each other s markets and the level of multimarket contact in competitor dyads we also show how this basic curvilinear effect varies from dyad to dyad as a function of relative levels of multimarket contact with competitors in other dyads and the relative sizes of competitors in a focal dyad copyright 1999 john wiley sons ltd

social approval values and afdc a re examination of the illegitimacy debate this paper models the fertility decision of individuals who differ in their wage rate and their intensity of preferences for rearing children and whose utility of having a child out of wedlock depends on the level of social approval associated with doing so this social approval in turn is a function of the fraction of individuals in previous generations that chose to have children out of wedlock the model is a straightforward extension of the typical rational choice model that motivates much of the empirical literature a literature that has cast doubt on a strong link between afdc and illegitimacy however the model introduces elements from epidemic models that many have in mind when arguing for such a link as a result the predictions of this extended model are consistent with empirical findings while at the same time linking the rise in illegitimacy solely to government welfare programs specifically a program similar to afdc is introduced into an economy with low illegitimacy rates and a trans

unfair trade practices the case for a differential response trade distorting practices by other states did not seriously affect u s commercial interests until the mid 1960 s however growing overall and sectoral trade deficits as well as rapid changes in trading patterns have made such practices a more salient political issue the modal and preferred american policy response has been to rely on u s supported liberal institutions notably the general agreement on tariffs and trade gatt to provide a framework for multilateral negotiations designed to eliminate

diversification multi market contact and profitability this paper analyses the relationships between diversification multi market contact and industry profitability it focuses on the link between diversification and multi market contact to show that when diversification establishes or increases the extent to which firms meet in more than one market the effect of such multi market contact is to increase the possibility that collusion emerges as an evolutionary stable strategy as a result multi market contact may increase the potential for tacit collusion and so lead to higher profitability the effects of diversification and multi market contact on the price cost margin and the rate of return to capital are estimated using a specially constructed new database for uk manufacturing industry in 1979 this database provides information on the diversification and multi market contact of 418 firms across 134 manufacturing industries thus linking firm and industry level data the results show a clear positive effect of multi market contact on industry profitability

in good times and bad reciprocity in an uncertain world axelrod s work has demonstrated that tit for tat is an extremely robust strategy in the repeated two person prisoner s dilemma however most analyses and experiments of the repeated game have assumed perfect monitoring each player either can observe his partner s choice directly or can infer it perfectly after observing the outcome yet in many real dilemmas outcomes are functions of exogenous events as well as the players moves and it is often difflcult to disentangle intended and unintended effects with certainty in the first model of this paper the performance of tit for tat under uncertainty is compared to the performance of other behaviorally plausible backward looking strategies the second model uses game theory to analyze the equilibrium properties of tit fortat in a game with incomplete information in both models introducing a small amount of uncertainty makes a big difference

why are some international agreements informal verbal contracts samuel goldwyn once said aren t worth the paper they re written on yet informal agreements and oral bargains suffuse international affairs they are the form that international cooperation takes in a wide range of issues from exchange rates to nuclear weapons take monetary affairs for instance except for the regional european monetary system there have been no formal comprehensive agreements on exchange rates since the downfall of the bretton woods system in 1971 a prolonged effort to resurrect the pegged rate system failed although new treaties were drawn up and duly signed private financial markets simply overwhelmed these official efforts and central bankers eventually conceded the point the one comprehensive agreement since then concluded in 1976 in jamaica merely ratified a system of floating rates that had emerged unplanned for the past fifteen years monetary arrangements have been a succession of informal agreements of indefinite duration most recently the plaza communique and the louvre accord designed to cope with volatile currency movements the bretton woods system itself depended on such agreements in its declining years it was held together by the tacit agreement of european central banks not to convert their major dollar holdings into gold the system fell apart when germany and france abandoned that commitment they did so because they believed that the united states had abandoned its own tacit commitment to restrain inflation and to avoid large current account deficits

the function of authority in transaction cost economics abstract this paper questions the transaction cost characterization of observed authority relations as efficient governance structures various inadequacies in the transaction cost account of work organization and the limits of firm size are traced to its neglect of the possibility that authority may be abused opportunistically this exemplifies a more general propensity in the transaction cost literature that of explaining economic organization in functionalist terms with little attention to the causal mechanisms through which efficient governance structures might actually arise three such mechanisms are considered but none is found to provide an adequate rationale for the imputation of efficiency to observed structures

the evolutionary stability of cooperation is cooperation without central authority stable if so how robust is it despite what might be the conventional wisdom the evolution of cooperation did not solve this problem deductively in fact results obtained later by others seem to have contradicted the book s main message reexamining this exceptionally influential work yields a new picture part of axelrod s evolutionary story turns out to be false but the main intuition that retaliatory strategies of conditional cooperation are somehow advantaged proves correct in one specific and significant sense under a standard evolutionary dynamic these strategies require the minimal frequency to stabilize hence they support the most robust evolutionary equilibrium the easiest to reach and retain moreover the less efficient a strategy the larger is its minimal stabilizing frequency hobbesian strategies of pure defection are the least robust our main theorems hold for a large class of games that pose diverse cooperation problems prisoner s dilemma chicken stag hunt and many others

firms and tariff regime change explaining the demand for protection although it is commonly argued that there is a connection between tariff levels and business conditions this hypothesis has not been subjected to systematic empirical analysis or given any theoretical basis the author presents two complementary theories of the movement of tariff levels in response to changing business conditions both explain tariff changes in terms of the changing political demands of business firms and both rely on the business cycle to drive these changing demands one theory is a conventional argument about changing opportunities for entry and exit the other treats firms as satisficers the theories yield similar predictions preliminary empirical analysis while consistent with both does not differentiate between them

public choice and the economic analysis of anarchy a survey public choice economists began studying anarchy in the 1970s since then the amount of research on anarchy has burgeoned this article surveys the important public choice contributions to the economics of anarchy following early public choice economists many economists are researching how individuals interact without government from non public interested explanations of the creation of government to historical studies of internalizing externalities under anarchy public choice scholars are arriving at a more realistic perspective of human interaction with and without government although the economics of politics receives more attention the economics of anarchy is an important area of research in public choice

coordination and collaboration regimes in an anarchic world the study of regimes can contribute to our understanding of international politics only if regimes represent more than international organizations and less than all international relations the conceptualization of regimes developed here accepts the realist image of international politics in which autonomous self interested states interact in an anarchic environment yet there are situations in which rational actors have an incentive to eschew unconstrained independent decision making situations in which individualistic self interested calculation leads them to prefer joint decision making regimes because independent self interested behavior can result in undesirable or suboptimal outcomes these situations are labeled dilemmas of common interests and dilemmas of common aversions to deal with these states must collaborate with one another or coordinate their behavior respectively thus there are different bases for regimes which give rise to regimes with different characteristics coordination is self enforcing and can be reached through the use of conventions collaboration is more formalized and requires mechanisms both to monitor potential cheating and to insure compliance with the regime the article elucidates the assumptions of such an interest based approach to regimes assimilates alternative explanations into this framework and develops the implications for regime maintenance and change

using game theory to model competition the article is an exposition of the basic concepts of noncooperative game theory and their application to advertising product and price competition

agent based analysis of capacity withholding and tacit collusion in electricity markets this paper employs agent based simulation to study energy market performance and in particular capacity withholding and the emergence of tacit collusion among the market participants the energy market is formulated as a repeated game where each stage game corresponds to an hourly energy auction each hourly energy auction is cleared using locational marginal pricing generators are modeled as adaptive agents capable of learning through the interaction with their environment following a reinforcement learning algorithm the sa q learning algorithm a modified version of the popular q learning is used test results on a two node power system with two and eight competing generator agents demonstrate the development of tacit collusion among generators even under competitive conditions

political quid pro quo agreements an experimental study we experimentally study the common wisdom that money buys political influence in the game one special interest i e a corporate firm has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates the success of the investment depends on whether or not the candidates are willing and able to collude on low tax policies that do not harm their relative chances in the elections in the experiment successful political influence never materializes when the firm and candidates interact just once by contrast it yields substantially lower redistribution in about 40 of societies with finitely repeated encounters however investments are not always profitable and profit sharing between the firm and candidates depends on prominent equity norms our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few firms do actually attempt to influence policymaking

commitment deference and legislative instutions j nformational theories of legislative institutions have demonstrated the potential collective gains from committee specialization due to the use of restrictive amendment procedures for these 5 benefits to be realized however the floor majority must overcome a commitment problem i demonstrate that in a multistage game majority rule combined with the fact that generations of legislators overlap allows the legislature to solve the commitment problem and to sustain legislative norms and institutions even if legislators are finitely lived the model suggests that rather than restrictive amendment procedures it is the committee s expectation of floor deference that sustains committee specialization as a consequence legislative norms may collapse due to an unexpected influx of new members even if the distribution of preferences in the legislature does not change finally i discuss consequences for a comparative study of legislative institutions

strategizing niceness in co opetition the case of knowledge exchange in supply chain innovation projects abstract in this paper we take a novel approach to address the dilemma of innovation sharing versus protection among supply chain partners the paper conducts an exploratory study that introduces factors affecting a firm s optimum supply chain innovation strategy we go beyond the conventional prisoners dilemma with its limiting assumptions of players preferences and symmetry to explore a larger pool of 2 2 games that may effectively model the problem after classifying firm types according to collaboration motive and relative power we use simulation to explore the effects of firm type opponent type and payoff structure on repeated innovation interactions or equivalently long term relations and optimality of niceness surprisingly we find that opponent type is essentially irrelevant in long term innovation interactions and focal firm type is only conditionally relevant the paper contributes further by introducing reciprocation of strategy type nice versus mean showing that reciprocation is recommended while identifying and explaining the exceptions to this conclusion

on the formation of industry lobby groups abstract this paper provides a step towards a more complete theory of lobbying extending the menu auction model of grossman and helpman grossman g m helpman e 1994 american economic review 84 833 850 a new explanation is proposed for why more concentrated industries more easily overcome the free rider problem inherent in political collective action instead of focusing on transactions costs as olson olson m 1965 the logic of collective action harvard university press cambridge ma we show that more collusive industries with higher collusive profits have a greater incentive to form lobby groups and to contribute to industry lobbying moreover more polluting industries also have a greater incentive to form and contribute to a lobby group

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

tacit bargaining and arms control astate bargains tacitly with another state when it attempts to manipulate the latter s policy choices through its behavior rather than by relying on formal or informal diplomatic exchanges the process is tacit because actions rather than rhetoric constitute the critical medium of communication it is bargaining and not coercion because the actions are aimed at influencing an outcome that can only be achieved through some measure of joint voluntary behavior obviously states rarely rely on either purely tacit or purely formal negotiation however the theory of tacit bargaining does not become totally inapplicable when there is verbal or written communication between the principals it simply becomes increasingly relevant as states rely more on actions than on conventional negotiation examples of tacit bargaining are plentiful in international relations a retaliatory tariff is announced in response to trade barriers a state at war refrains from using chemical weapons or from bombing nonmilitary targets in the hope that its opponent will behave similarly an austerity program is implemented by a financially troubled government in order to convince foreign banks that they should continue to extend credit

the emergence of cooperation among egoists this article investigates the conditions under which cooperation will emerge in a world of egoists without central authority this problem plays an important role in such diverse fields as political philosophy international politics and economic and social exchange the problem is formalized as an iterated prisoner s dilemma with pairwise interaction among a population of individuals results from three approaches are reported the tournament approach the ecological approach and the evolutionary approach the evolutionary approach is the most general since all possible strategies can be taken into account a series of theorems is presented which show 1 the conditions under which no strategy can do any better than the population average if the others are using the reciprocal cooperation strategy of tit for tat 2 the necessary and sufficient conditions for a strategy to be collectively stable and 3 how cooperation can emerge from a small cluster of discriminating individuals even when everyone else is using a strategy of unconditional defection

rational actors tit for tat types and the evolution of cooperation abstract evolutionary models in economics have often been criticized for failing to allow for rational maximizing behavior the present paper represents a step toward correcting this deficiency by introducing rational actors into an evolutionary model of the finitely repeated prisoners dilemma at the same time the model endogenizes the uncertainty postulated in the classic model of kreps et al 1982 thus explaining cooperation by rational actors in the finitely repeated prisoners dilemma a testable implication of the model is that the level of voluntary cooperation in a society will be relatively high where geographical mobility is relatively low

the coexistence of conventions abstract the paper presents a model of repeated anonymous play of a 2 2 game with two strict nash equilibria one of which risk dominates the other stage games differ according to their location in a social space players receive noisy signals of these locations the dynamics of the model are such that strategy choices conditional on any signal gravitate towards whichever strategy maximizes expected utility social space need not be uniform certain kinds of non uniformity in social space can allow stationary states in which the two equilibria coexist each being played in a different region

alternate approaches to the political economy of endogenous trade liberalization abstract trade liberalization is puzzling from the perspective of standard political economy models why would a government find it optimal to remove protection that it previously found optimal to impose this paper reviews two types of approaches to answering this question approaches that view liberalization driven by strenghtened anti protection forces and approaches that view liberalization driven by an erosion of pro protection forces

the political economy of trade liberalization in the transition abstract baldwin and baldwin 1996 review explanations for trade liberalization in developed market economies in particular exchange of market access appears important hillman and moser 1996 for economies in transition technological inferiority and contemporaneous privatization distinctly form part of the scenario for trade liberalization and are basic ingredients in a model describing liberalization policies we begin here with background observations and proceed to a model which ties together politically constrained trade liberalization opportunities and privatization of technologically disadvantaged enterprises the model draws on a more extensive presentation in hillman et al 1996

strategy complexity and economic rent this paper discusses important friction forces that future theories of strategy must incorporate some of these are technological and environmental but the most important ones it is argued are psychological the view is developed that strategy at its core concerns the development and testing of heuristics for high stake decisions in environments too unstable and complex to be optimized the paper especially highlights the behavioral dimension in the belief that strategies should incorporate both the rational and suboptimal aspects of human behavior the rational approach is in many ways the easier as there may be only one way to be right yet the great variety in which people and companies can err gives strategy its creative and real world challenge the tension between the rational and behavioral components is what the field of strategy should seek to exploit

cooperation among egoists in prisoners dilemma and chicken games axelrod has developed an evolutionary approach to the study of repeated games and applied that approach to the prisoners dilemma we apply this approach with some modifications in the treatment of clustering to a game that has the prisoners dilemma and chicken as special cases to analyze how the evolution of cooperation differs in the two games we find that the main barrier to the evolution of cooperation in chicken is that cooperation may not always be correctly thought of as socially optimal but that strong forces do push the players toward socially optimal action we derive some of the results on mixed populations for any game with pairwise interaction

the political economy of restructuring and privatization in eastern europe this paper reports some of the recent research in the political economy of transition in central and eastern europe with special emphasis on restructuring and privatization this line of research is concerned with the political feasibility of reform packages and the effect of political constraints on the design of reforms political constraints appear to play a major role in economic transition 2 in poland transition started with a homogeneous solidarity led government enjoying great legitimacy l balcerowicz the finance minister who had launched reform in january 1990 had however to leave office and part of his policies are now being reversed parliament is fragmented government duration is becoming increasingly short workers are striking against privatization plans czechoslovakia is breaking up partly because the slovak population is not ready to follow the rhythm of reforms initiated by v klaus in prague the support for e gai dar s transition program in russia has dwindled among the population conservative forces are gathering momentum alarming neonazi manifestations in east germany are an indicator of the low tolerance of the population for the changes imposed on them some countries are doing better hungary is doing comparatively well with a more stable political situation and relative successes in reforms allowing it to attract foreign direct investment china is experiencing a rapid expansion of the non state sector and smooth advances in the reform process in a context of sustained economic growth qian and xu 1992 these two countries

adaptive behavior and economic theory the relationship between psychological and economic views of behavior once a subject of heavy dispute is now understood in a very similar way by practitioners of both these disciplines and of our sister social sciences in general terms we view or model an individual as a collection of decision rules rules that dictate the action to be taken in given situations and a set of preferences used to evaluate the outcomes arising from particular situation action combinations these decision rules are continuously under review and revision new decision rules are tried and tested against experience and rules that produce desirable outcomes supplant those that do not i use the term adaptive to refer to this trial anderror process through which our modes of behavior are determined if one is interested in modeling particular decisions in any very explicit way it is obviously necessary to think about rather narrow aspects of an individual s entire set of decision rules his or her personality experimental psychology has traditionally focused on the adaptive process by which decision rules are replaced by others in this tradition the influence of the subject s or as an economist says the agent s preferences this essay uses a series of examples to illustrate the use of rationality and adaptation in economic theory it is argued that these hypotheses are complementary and that stability theories based on adaptive behavior may help to narrow the class of empirically interesting equilibria in certain economic models an experiment is proposed to test this idea

cooperation in prices and capacities trade associations in brewing after repeal this study s main contribution is examination of the excess capacity held by brewers during a period in which they tacitly cooperated on price the analysis covers the industry in the united states between repeal of prohibition in 1933 and wartime rationing of raw materials in 1942 from april 1933 to may 1935 destructive price cutting among brewers was illegal under the national industrial recovery act subsequent rivalry among trade associations facilitated the development of tacitly cooperative pricing arrangements the trade associations appear to have adopted a different agenda as cooperation spread among all brewers instead of just facilitating cooperation on price the associations may have facilitated cooperation in the distribution of responsibility for enforcement members apparently distributed responsibility by coordinating the allocation of excess capacity these and other results are interpreted to suggest additional avenues for research on the distribution of responsibility for punishme

why firms exploitation of consumer myopia may benefit myopic consumers myopic consumers underestimate the likelihood with which they will require follow on services for products they purchase firms have an incentive to exploit this behavioral bias by skewing their price structure toward high add on charges inadvertently this skewed price structure provides myopic consumers with a monetary incentive mechanism that tends to inhibit rather than propel inefficient consumption decisions

environmental ethics and information asymmetry among organizational stakeholders this paper addresses the conflicting environmental interests of a firm and the community an important stakeholder the short term profit maximization objective of a firm may stand in contrast with what the community wants a safe and clean environment this paper argues that the information regarding the environmental impact of a firm s products processes and waste may be asymmetrically distributed between the firm and the community the resultant information asymmetry may influence the probability of a firm acting opportunistically and ultimately a firm s ethical behavior the paper identifies information asymmetry between a firm and community as well as that within the community the perceived information asymmetry across various community segments may perhaps be a determinant of environmental discrimination the paper further contends that information asymmetry may diminish in the long run finally it examines the implications of information asymmetry for firms and government policy

the management of common property resources collective action as an alternative to privatisation or state regulation can locally based collective action be a viable way to manage common property resources many writers on collective action and common property are sweepingly pessimistic about the ability of the people who face problems of common property to organize sustainable patterns of use for themselves this paper shows with reference to prisoners dilemma garett hardin s tragedy of the commons and mancur olson s logic of collective action that the analytical basis for this pessimism is weak in many situations of village based common property resource use there can thus be no general presumption that the collective action route to common property resource management will fail any more than there can be a general presumption that it will work the paper suggests a number of general factors to do with the characteristics of the resources the user group and group state relations on which chances of success depend

uncertainty and open access implications from the repeated prisoners dilemma game open access refers to situations in which individuals are not excluded from using a scarce resource where natural resources are concerned open access is usually believed to promote depletion as individuals rush to obtain as much as they can before other claims are made this phenomenon has been blamed for many important natural resource problems including overexploitation of fisheries johnson and libecap decimation of tropical forests by wood gatherers eckholm and excessive grazing on rangeland libecap and johnson in such cases the exercise of selfinterest runs counter to the collective interest of all resource users and if pursued generally is self defeating solutions to such problems must begin with restraints on the actions of interested parties but what will lead fishers or woodgatherers or shepherds to develop such restraints are the incentives for voluntary restraints sufficiently strong or must the restraints be imposed by authoritarian rules that can override individual interests i am interested here in whether uncertainty encourages or discourages voluntary restraint in the use of open access resources two types of uncertainty may influence the emergence of voluntary restraints first there is behavioral or strategic uncertainty individuals who are interdependent as in open access situations may be presumed to act based on their expectations of others actions if those actions cannot be perfectly predicted and assured each participant must plan according to some probability distribution over the actions available to others it has been argued that uncertainty may facilitate voluntary agreements among parties for whom noncooperative behavior is clearly rational and whose interactions are repeated axelrod and kreps et al this argument and its implications for open access resource problems are examined critically in the next section of this paper the second type of uncertainty stems from ature and markets for example forage or ish stocks may fluctuate from season to season from natural causes prices of livestock or fish may vary because of economic forces these exogenous sources of variability create uncertainty of outcomes apart from behaviors of others the importance of this kind of uncertainty is considered in the third section of this paper to assess the consequences of these sources of uncertainty i refer to the repeated prisoners dilemma game e g axelrod kreps et al and taylor in this framework pursuit of self interest is always dominant economically in the short term although it results in suboptimal collective returns the stark conflict between individual and collective interests appears to reflect conditions with open access however three major limitations of the model should be noted at the outset first it allows only for binary choices and a fixed number of players many open access problems involve continuous choices and an unrestricted number of players second the game does not permit forward contracting or side payments between individuals this precludes many devices used in reality to facilitate voluntary transactions third the game remains the same period after period no intertemporal externalities are reflected these john b braden is an associate professor department of agricultural economics university of illinois this research has been supported by grants from the illinois agricultural experiment station no 1 6 53491 and the illinois water resources center no 1 11381 uncertainty is used here interchangeably with risk both refer to variability of outcomes due to forces beyond an individual s control

internationalization of the renminbi what it means for the stability and flexibility of the international monetary system the central question this paper addresses is whether internationalization of the rmb would be sufficient for the international monetary system ims to provide greater stability and flexibility than today s ims whether chinese efforts to internationalize the rmb culminate in the currency achieving reserve status will be for china to realize the path to reserve currency status however is not one that the chinese can pursue unilaterally internationalization entails an interaction between private and public decision making and is a function of private sector confidence as much as public policy the outcome will be the result of strategic interplay involving public policies across systemically important countries and confidence building among global savers and investors the paper argues that international cooperation especially among reserve currency countries on policy frameworks to achieve the common objectives of economic growth full employment price stability and sustainable fiscal positions will define a coherent and well functioning ims copyright 2013 oxford university press

arms versus allies trade offs in the search for security nations have two methods of increasing their security building arms and forming alliances both methods present different political costs that must be incurred to raise security building arms requires shifting economic resources to the military forming alliances requires abandoning interests that conflict with those of the ally each of these strategies produces domestic opposition a nation s response to a threat to its security must weigh the relative attractiveness of arms versus allies both in terms of their effects on internal politics and on their external benefits three cases are examined in the light of this argument the response of austria and france to the unification of germany in the 1860s is the central case theories of alliance formation based on neorealism and the offense defense balance predict that austria and france should have allied against the mutual threat of prussia this article argues that they did not form an alliance because arming separately presented lower political costs world wars i and ii likewise are analyzed from the perspective of the argument above

determinants of taiwan s trade liberalization the case of a newly industrialized country abstract this paper attempts to account for the success of policy reform in taiwan s trade liberalization through an investigation of the periods 1986 92 and 1992 95 the objective is to undertake an empirical examination of haggard et al s the political feasibility of adjustment in developing countries development centre of the oecd oecd paris 1995 strategies for minimizing the political costs involved in implementing policy reforms empirical evidence supports the haggard et al arguments that is indirect compensation is used to facilitate the implementation of trade liberalization for downstream industries while the speed of trade liberalization within certain specific industries is comparatively slow furthermore in a democratic regime the pressure brought to bear by well organized domestic interest groups along with the pressure from international interest groups can strongly influence the pattern of trade liberalization policies

environmental norms society and economics abstract environmental norms seem to be on the upsurge everywhere norm orientation is however neglected in neoclassical economics which is fixed on homo economicus as the model of human behaviour the paper addresses the question whether homo economicus needs to give way to a norm oriented concept in environmental economics this question is tackled in an interdisciplinary and evolutionary approach using economics concepts forces are identified which are detrimental to or which promote environmental norms in the process of civilisation this investigation provides some clues on the likely importance of environmental norms in a future ecologically oriented society these clues provide in turn one answer to the fundamental question posed whether the neoclassical concept of human behaviour will likely remain or cease to be the standard tool in environmental economics rather than tackling the question in greatest generality the analysis takes recourse to an example the problem of the commons the commons is particularly suited for this investigation because it is well roamed by all the disciplines which are of relevance for the undertaking

non transboundary pollution and the efficiency of international environmental co operation abstract the standard view is that situations where no transborder environmental externalities occur are most efficiently dealt with by national environmental policies rather than by international co operation though this may be the general case non coordinated national policies do not always produce the most efficient international allocation this paper presents four cases in which the allocative outcome of non coordinated domestic policy choices can be improved upon by international environmental co operation the first case refers to the use of environmental policy as a strategic trade instrument the other cases refer to the existence of discrete technologies set up costs and increasing returns to scale the form of international environmental co operation should be adapted to the situation formal international agreements between countries are characterised by high transaction costs and may not always be the most efficient form of co operation

every shroud has a silver lining the visible benefits of hidden surcharges abstract opportunities for shrouded pricing drive down upfront price as firms compete to capture new customers unless the surcharge is sufficiently high consumers are worse off if the practice is banned assuming cournot nash equilibrium and isoelastic demand

time inconsistency of protectionist programs protectionist trade policies have long been advocated as second best instruments to achieve certain national objectives in situations where there is a market imperfection in essence protection provides time and resources for firms to undertake cost reducing investments recently there has been an emergence of new arguments to justify the implementation of a national industrial policy to encourage investment and to ensure the competitiveness of targeted industries also at the theoretical level a new argument known as strategic trade policy has emerged according to this argument protectionism gives domestic firms strategic advantage against foreign firms to capture a greater share of export markets where rents are not competed away actually the performance of protectionist programs has been grim industries have not adapted and protection has had to be renewed again and again arguments justifying protection have avoided this issue by implicitly assuming that authorities can credibly precommit to eliminate protection this is a very strong assumption in fact government actions are not exogenous but they are rather the result of an optimization process or they are best responses to political pressures as stressed in the public choice literature 2 therefore if authorities capitulate to protectionist pressures in the present they are unlikely to resist them in the future in the event that the targeted firm would not have adapted the inability of authorities to precommit to the unconditional elimination of protection generates a trade off for the firm if during the program the firm does not invest sufficiently in cost