balancing terrorism and natural disasters defensive strategy with endogenous attacker effort in this paper we apply game theory to identify equilibrium strategies for both attacker and defender in a fully endogenous model of resource allocation for countering terrorism and natural disasters the key features of our model include balancing protection from terrorism and natural disasters and describing the attacker choice by a continuous level of effort rather than a discrete choice i e attack or not interestingly in a sequential game increased defensive investment can lead an attacker to either increase his level of effort to help compensate for the reduced probability of damage from an attack or decrease his level of effort because attacking has become less profitable this can either reduce or increase the effectiveness of investments in protection from intentional attack and can therefore affect the relative desirability of investing in protection from natural disasters

securing the containerized supply chain analysis of government incentives for private investment to mitigate the threat that terrorists smuggle weapons of mass destruction into the united states through maritime containers the u s bureau of customs and border protection cbp inspects containers upon entry to domestic ports inspection driven congestion is costly and cbp provides incentives to firms to improve security upstream in the supply chain thereby reducing the inspection burden at u s ports we perform an economic analysis of this incentive program called customs trade partnership against terrorism c tpat modeling in a game theoretic framework the strategic interaction between cbp trading firms and terrorists our equilibrium results highlight the possibility that a properly run program can efficiently shift some of cbp s security burden to private industry these results also suggest that cbp may have the opportunity to use strategic delay as an incentive for firms to join analysis of comparative statics shows that with increasing capacity membership in c tpat systematically declines

the role of non economic endowments introduction to the special section on what we know and what we should know about international knowledge sourcing recent developments in the pattern of international knowledge sourcing have highlighted a new international division of labor in knowledge production which now is affecting emerging as well as advanced countries the source of this division of labor has been identified as residing in the changing economic endowments of these countries we extend this by suggesting that the new international allocation of knowledge related activities is related strongly to a country s non economic endowments our arguments provide context to the papers in this special section

entry mode organizational learning and r d in foreign affiliates evidence from japanese firms this paper develops hypotheses concerning the role of entry mode and experience based organizational learning as determinants of the r d intensity of foreign affiliates and tests these hypotheses on a sample of 420 japanese manufacturing affiliates abroad entry mode has a major impact on r d activities the r d intensities of acquired affiliates substantially exceed those in wholly owned greenfield affiliates while the r d intensities of minority owned ventures are higher if japanese parent firms lack strong r d capabilities at home for greenfield operations support is found for an incremental growth pattern of foreign r d as a function of organizational learning and affiliate capability building the results are consistent with the view that part of the explanation for japanese firms relative lack of involvement in overseas r d must be sought in their status as latecomers in the establishment of overseas manufacturing networks at the same time a number of japanese firms have actively used foreign acquisitions and joint ventures to gain access to overseas technology and to establish overseas r d capabilities at a faster pace copyright 2002 john wiley sons ltd

the impact of disaster on the strategic interaction between company and government a company allocates a resource between safety effort and production the government earns taxes on production the disaster probability is modeled as a contest between the disaster magnitude and the two players safety efforts the model illustrates that safety efforts are strategic substitutes and inverse u shaped in the disaster magnitude the company s safety effort increases and the government s safety effort decreases in taxation taxation can ameliorate companies free riding on governments safety efforts with sufficiently large production the government prefers and the company does not prefer raising taxation above 0 for the government an upper limit usually exists above which taxation cannot be profitably increased the model shows how both or no players exert safety efforts when the disaster magnitude is small and large respectively and how they free ride on each other s safety efforts when the disaster magnitude is intermediate the company free rides when the unit production cost is low so that the large profits outweigh the negative impact of the disaster with endogenized taxation determined by the government the tax rate decreases in the disaster magnitude the unit production cost the government s unit cost of safety effort and how the company is negatively affected by the disaster the tax rate increases in the company s resource and how the government is negatively affected by the disaster the tax rate is weakly u shaped in the company s unit safety effort the model is illustrated with numerical examples and with the oil spill disasters by bp in 2010 and by exxon valdez in 1989

new perspectives on the innovation strategies of multinational enterprises lessons for technology policy in europe abstract the aim of this contribution is to learn more about changes in the innovation strategies of large multinational corporations whereby one focus is on internationalization aspects as sources for our analyses we reviewed the main empirical studies and gathered information and insights from 21 corporations our results show firstly that the internationalization of research and technology is still characterized by triadization involving companies from the us the european union and japan secondly qualitative motives are increasingly driving r d location decisions like learning from technological excellence and lead markets and dynamic interactions within the value chain thirdly the process of internationalization in research and technology has been accompanied by an increasingly selective focus on a very few locations and the concentration of innovation activities on worldwide centers of excellence we conclude that these changes in the innovation strategies of large multinational companies put several topics on the agenda for technology policy in europe 1 a stronger focus on extra european collaboration and mobility 2 strengthening the attractiveness of the european union to foreign r d investment and 3 the absorptive capacities of r d organizations in europe 4 a stronger integration of different policy areas and of indirect policy measures 5 as well as the establishment of a transparent and global framework for policy coordination and priority setting worldwide

market and locational equilibrium for two competitors we consider a two stage location and allocation game involving two competing firms the firms first select the location of their facility on a network then the firms optimally select the quantities each wishes to supply to the markets which are located at the vertices of the network the criterion for optimality for each firm is maximizing its profit which is the total revenue minus the production and transportation costs under reasonable assumptions regarding the revenue the production cost and the transportation cost functions we show that there is a nash equilibrium for the quantities offered at the markets by each firm furthermore if the quantities supplied at the equilibrium by each firm at each market are positive then there is also a nash locational equilibrium i e no firm finds it advantageous to change its location

strategic multi store opening under financial constraint abstract this paper analyzes strategic store openings in a situation in which firms can open multiple stores depending on the financial constraints of the firm specifically given any upper limit of the number of store openings that two potentially symmetric firms can open they sequentially determine the number of store openings including their locations to maximize their profits as a result of our analysis in a microeconomic framework we show that the equilibrium strategy can be wholly classified into only two following opposite strategies according to the level of their financial constraints involved when firms can afford to invest significant amounts of money in the market the leader chooses segmentation strategy in which a part of the market can be monopolized by opening a chain of multiple stores and deterring the follower s entry in contrast when the leader has a severe financial constraint so that it can only monopolize less than half of the market the leader chooses minimum differentiation strategy where firms open each of their stores at exactly the same point as the rival s under this strategy the leader necessarily captures just half of the market furthermore we show that regardless of potential symmetry between firms both first and second mover advantages in terms of profit can occur in the equilibrium

international corporate entrepreneurship and firm performance the moderating effect of international environmental hostility abstract globalization of the world economy has encouraged u s companies to leverage their resources and skills by expanding into existing or new foreign markets u s companies have also acquired new capabilities by locating important functional activities overseas and joining with foreign partners in new markets through alliances and joint ventures these opportunities however are tempered by the constraints imposed by the competitive forces that exist in international environments aggressive government intervention technological changes and fierce local rivalries all contribute to hostile international environments for u s firms global expansion success in global business operations requires resourcefulness and entrepreneurial risk taking the activities of u s companies in foreign markets therefore provide a unique opportunity to examine the effects of international corporate entrepreneurship ice efforts on company performance ice is defined as the sum of a company s efforts aimed at innovation proactiveness and risk taking these efforts offer an important means of revitalizing and renewing established companies and improving their performance few studies have empirically examined the effects of ice activities on companies financial performance this study used data from 98 u s companies to 1 determine the impact of ice efforts on firm performance and 2 explore the moderating effect that the perceived hostility of the international environment has on the relationship between ice and company performance the results showed that ice was positively associated with a firm s overall profitability and growth as well as its foreign profitability and growth those firms that aggressively pursued ice in international environments with higher levels of hostility had higher return on assets roa but did not achieve significantly higher levels of growth however as hostility in the international environment continued to intensify roa rose and then fell as companies increased their ice activities thus there was a point of diminishing returns to a company s aggressive pursuit of ice under excessive environmental hostility the results highlight both the rewards and risks of pursuing ice companies benefit from ice activities by achieving higher overall performance as well as foreign profits and growth in revenue however the aggressive pursuit of ice does not always guarantee superior performance our results show that the payoff from ice is moderated by executives perceptions of the hostility of their firm s international business environment our findings highlight the importance of ice for organizational success both overall and in foreign markets yet the results compellingly suggest that there are upper limits to the potential gains a firm achieves from its aggressive pursuit of ice when the international environment in which it competes is hostile

auctioning incentive contracts this paper draws a remarkably simple bridge between auction theory and incentive theory it considers the auctioning of an indivisible project among several fi rms the firms have private information about their future cost at th e bidding stage and the selected firm ex post invests in cost reduct ion the authors show that 1 the optimal auction can be implemented by a dominant strategy auction that uses information about both the first bid and the second bid 2 the winner faces a linear incenti ve contract 3 the fixed transfer to the winner decreases with his announced expected cost and increases with the second lowest announce d expected cost and 4 the share of cost overruns borne by the winn er decreases with the winner s announced expected cost copyright 1987 by university of chicago press

on the value of exposure and secrecy of defense system first mover advantage vs robustness abstract it is commonly accepted in the literature that when facing with a strategic terrorist the government can be better off by manipulating the terrorist s target selection with exposing her defense levels and thus moving first however the impact of terrorist s private information may significantly affect such government s first mover advantage which has not been extensively studied in the literature to explore the impact of asymmetry in terrorist s attributes between government and terrorist on defense equilibrium we propose a model in which the government chooses between disclosure sequential game and secrecy simultaneous game of her defense system our analysis shows that the government s first mover advantage in a sequential game is considerable only when both government and terrorist share relatively similar valuation of targets in contrast we interestingly find that the government no longer benefits from the first mover advantage by exposing her defense levels when the degree of divergence between government and terrorist valuation of targets is high this is due to the robustness of defense system under secrecy in the sense that all targets should be defended in equilibrium irrespective of how the terrorist valuation of targets is different to government we identify two phenomena that lead to this result first when the terrorist holds a significantly higher valuation of targets than the government s belief the government may waste her budget in a sequential game by over investing on the high valued targets second when the terrorist holds a significantly lower valuation of targets the government may incur a higher expected damage in a sequential game because of not defending the low valued targets finally we believe that this paper provides some novel insights to homeland security resource allocation problems

new silicon valleys or a new species commoditization of knowledge work and the rise of knowledge services clusters this paper explores knowledge services clusters kscs as a distinct and increasingly important form of geographic cluster in particular in developing countries kscs are defined as geographic concentrations of lower cost skills serving global demand for increasingly commoditized knowledge services based on prior research on clusters and services offshoring and data from the offshoring research network orn major properties and contingencies of ksc growth are discussed and compared with both high tech clusters and low cost manufacturing clusters special emphasis is put on the ambivalent effect of commoditization of knowledge work on ksc growth it is proposed that kscs attract most client projects if service commoditization is medium whereas higher or lower commoditization either increases global competitive pressure or lowers demand and economies of scale and scope ksc attractiveness is further related to the perceived availability of skills at relatively low costs and cluster connectedness with client economies through corporate networks and professional communities findings not only advance current debates on clusters global services sourcing and the geography of knowledge production but also have important policy implications

multiple product firms a nested logit approach this paper proves the existence of a symmetric equilibrium with multiproduct firms using a nested logit model of demand the demand model is parameterized by two variables that characterize different dimensions of preference for variety these reflect intragroup heterogeneity and intergroup heterogeneity a group or nest being the set of products produced by a firm there are then two dimensions to market performance the total number of firms and the range of products produced per firm it is shown that the market equilibrium involves an excessive number of firms but each firm provides too few products copyright 1992 by blackwell publishing ltd

patterns of internationalisation of corporate technology location vs home country advantages given the trends towards increasing globalisation of markets and of production the globalisation of technology remains a subject of considerable interest to analysts and policy makers in the 1990s this paper provides some new empirical observations for debate and discussion on the patterns of technological activities of large firms outside their home countries it is based on a systematic analysis of the us patenting activities of 220 of the most internationalised firms in terms of their technology in the 1990s although firms are active outside their home countries in the high technology fields such as computers pharmaceuticals telecommunications image and sound and materials quite a sizeable proportion of their foreign activities are concerned with process and machinery technologies moreover a comparison of the technological advantage of the company at home and the advantage of the location shows that in a large majority of cases firms tend to locate their technology abroad in their core areas where they are strong at home these results suggest that adapting products and processes and materials to suit foreign markets and providing technical support to off shore manufacturing plants remain major factors underlying the internationalisation of technology they are also consistent with the notion that firms are increasingly engaging in small scale activities to monitor and scan new technological developments in centres of excellence in foreign countries within their areas of existing strength however there is little evidence to suggest that even these most internationalised firms routinely go abroad to compensate for their weakness at home

localised production of technology for global markets given the trends towards increasing globalization of markets and of production the globalization of technology remains a subject of considerable interest to analysts and policymakers in the 1990s the main conclusion of this paper is that there is no systematic evidence to suggest that widespread globalization of technological activities occurred in the 1980s the evidence based on the u s patenting activities of 569 of the world s largest firms based in 13 countries and covering 17 product groups shows that for an overwhelming majority of them technology production remains close to the home base the analysis also shows the dangers of generalizing on the basis of anecdotal evidence from a small sample of firms from a particular country or sector c 1995 academic press inc copyright 1995 by oxford university press

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

the changing structure of the us national innovation system implications for international conflict and cooperation in r d policy abstract the paper summarizes recent trends in the structure of the us national innovation system among these trends is a decline in r d spending by the federal government largely due to reductions in defense related r d spending another important shift in the profile of us r d spending is the reduction in the share of basic research funded by industry other policy related changes are the introduction of federal programs that have sought to strengthen civilian technology capabilities by subsidizing and promoting joint research and collaboration between us universities and industry and the federal laboratories and us industry the paper claims that sporadic efforts to limit the international dissemination of the results of publicly funded r d have in many cases been frustrated similar efforts to restrict foreign firms access to eu r d programs have had little effect it further concludes that the efforts to restrict foreign participation in us or eu publicly funded r d programs seem to be ill advised and infeasible considerable evidence suggests that the critical competitive weakness for both us and eu firms lie more in the translation of r d advances into commercial products rather than in the r d capabilities per se consequently the participation of non european firms in eu technology development projects and non us firms in publicly funded technology projects could convey powerful learning and demonstration benefits

the paradox of technological capabilities a study of knowledge sourcing from host countries of overseas r d operations we investigate the factors that influence the extent to which a multinational corporation s headquarters mnc hq sources knowledge from the host countries of its r d labs we propose that the technological capabilities held by mnc hqs present a paradox on the one hand they enhance mnc hqs learning capabilities on the other hand they reduce mnc hqs motivations to outsource knowledge from host countries we also argue that it is important to consider both relative and absolute levels of technological capabilities because relative levels can influence mnc hqs motivations to source knowledge from host countries statistical findings generally support our arguments

awarding monopoly franchises the authors analyze how to award a monopoly franchise when the objective is to maximize expected consumers surplus net of transfer payments to the producer potential producers initially possess independent private information about uncertain production costs only the chosen producer subsequently observes realized production costs after awarding the franchise to the producer with the lowest expected costs prices are optimally set above realized marginal cost these ex post distortions foster more competitive bidding ex ante the distortions for any bid cost pair are invariant to the number of bidders n though expected distortions and profits decline with n copyright 1987 by american economic association

a continuous model for multistore competitive location this paper presents a simple model to determine the location strategies of two retail firms planning to open a number of stores in a geographical market firms try to maximize their profit under a leader follower type competition in which the number of stores is made endogenous by the introduction of fixed costs a novel methodology is developed in which firms strategies are defined in terms of their location densities this methodology leads to a model that is solvable analytically and to several results on competitive location strategies first it is shown that if the follower decides to enter a market he enters at least as strongly as the leader second the leader can effectively deter entry even if she is severely cost disadvantaged however in some cases the leader is better off by allowing the follower to enter the market third the leader may also let the follower enter the market in some situations where she has a cost advantage it is also shown that in situations where both firms enter the market their location strategies are quite insensitive to model parameters

balancing congestion and security in the presence of strategic applicants with private information concerns on security and congestion appear in security screening which is used to identify and deter potential threats e g attackers terrorists smugglers spies among normal applicants wishing to enter an organization location or facility generally in depth screening reduces the risk of being attacked but creates delays that may deter normal applicants and thus decrease the welfare of the approver authority manager screener in this paper we develop a model to determine the optimal screening policy to maximize the reward from admitting normal applicants net of the penalty from admitting bad applicants we use an m m 1 queueing system to capture the impact of security screening policies on system congestion and use game theory to model strategic behavior in which potential applicants with private information can decide whether to apply based on the observed approver s screening policy and the submission behavior of other potential applicants we provide analytical solutions for the optimal non discriminatory screening policy and numerical illustrations for both the discriminatory and non discriminatory policies in addition we discuss more complex scenarios including imperfect screening abandonment behavior of normal applicants and non zero waiting costs of attackers

national scientific capacity and r d offshoring abstract this paper presents new evidence regarding the role of national scientific capacity in driving patterns of r d offshoring using a larger and more comprehensive dataset than has hitherto been used and applying it in a gravity model framework our results unambiguously support the importance of inventor country scientific capacity in attracting offshored r d as expected the home country s scientific capacity is also found to play a positive role we find that in fact on average firms source technology from less technologically advanced nations suggesting that firms offshore to access niche skills

institutions supporting technical advance in industry elsewhere 1982 economists beliefs that modern capitalism is a fine innovation generating machine have no intellectual grounding in contemporary neoclassical theory the twin theorems take technologies as given the apparent effectiveness of capitalism in this arena must reside in characteristics and mechanisms other than those featured in the microeconomic theory textbooks in our book we attempt to analyze these it also is true that the capitalist engine is a much more complicated one than many economists seem to think i presently am

modeling secrecy and deception in a multiple period attacker defender signaling game abstract in this paper we apply game theory to model strategies of secrecy and deception in a multiple period attacker defender resource allocation and signaling game with incomplete information at each period we allow one of the three possible types of defender signals truthful disclosure secrecy and deception we also allow two types of information updating the attacker updates his knowledge about the defender type after observing the defender s signals and also after observing the result of a contest if one occurs in any given time period our multiple period model provides insights into the balance between capital and expense for defensive investments and the effects of defender private information such as defense effectiveness target valuations and costs and also shows that defenders can achieve more cost effective security through secrecy and deception possibly lasting more than one period in a multiple period game this paper helps to fill a significant gap in the literature in particular to our knowledge no past work has studied defender secrecy and deception in a multiple period game moreover we believe that the solution approach developed and applied in this paper would prove useful in other types of multiple period games

regionalization of r d activities dis economies of interdependence and inventive performance abstract this paper examines the impact of the extent of the regionalization of mnes r d activities on their inventive performance by joining the regionalization theory with the recombinant view of invention we challenge the implicit assumption that all foreign knowledge seeking activities will necessarily offer new knowledge to the firm we introduce the dis economies of interdependence defined as the dis advantages that the firm derives due to the interdependence among countries within a region as a new theoretical mechanism explaining the benefits and costs of regionalization our analysis of global pharmaceutical firms shows that an inverted u shaped relationship exists between the number of regions in which a firm has r d activities and its inventive performance our results also indicate that a firm s recombinant capability moderates the inverted u shaped relationship in such a way that when a firm s recombinant capability is high it reaches its turning point in a larger number of regions and the inverted u shaped relationship is flatter these results underscore that recombinant capability significantly influences the firm s ability to derive benefits and reduce costs from the regionalization of its r d activities our findings suggest that it is through the consideration of the dis economies of interdependence that offers the essential reasoning needed to unwind the inferred assumption that all foreign knowledge seeking activities will offer access to new knowledge

multi objective stackelberg game model for water supply networks against interdictions with incomplete information abstract water supply networks are infrastructures pivotal to economic development and living standards of which the increasing complexity and interdependencies have brought challenges for the protection and enhancement of water supplies we address the problem on how to defend water supply networks with hydraulic characteristics against an interdictor by building a multi objective stackelberg game model with incomplete information in this model the defender and the interdictor both considered as rational players choose a subset of network components to defend or interdict based on their payoffs the defender with incomplete information on the interdictor s efforts initiates to trade off the two objectives of maximizing the expected network satisfaction rate and of minimizing defense efforts whereas the interdictor with no information on network operational capacity follows to trade off the objectives of minimizing the expected network efficiency and of minimizing interdiction efforts the algorithm of determining the final optimal defense strategies is presented which consists of three steps 1 develop the strategy sets by the assessments of network vulnerability and resilience 2 analyze the equilibrium through a nested heuristic genetic algorithm and 3 determine the final optimal defense strategy based on the minimax regret approach a case study of d town water supply network demonstrates the practical significance of the proposed approach furthermore the impacts of the incomplete information are analyzed to provide suggestions on the defense strategy making

a game theoretic model for resource allocation among countermeasures with multiple attributes abstract we study a strategic two player sequential game between an attacker and defender the defender must allocate resources amongst possible countermeasures and across possible targets the attacker then chooses a type of threat and a target to attack this paper proposes a model for determining optimal resource allocation by combining game theory with a simple multi attribute utility model given a set of possible attributes representing goals or preferences we allow each player to choose a weight for each attribute where the subset of attributes with nonzero weights represents that player s preferences every countermeasure is given a score for its effectiveness at both mitigating the effects of an attack in terms of each attribute and reducing the probability of the success of an attack furthermore the consequences of each possible attack are scored in terms of each attribute the multi attribute utility aspect of this model uses these scores along with the players weights to form the basis of the utility or disutility for each player we find that i the zero sum game where the attacker s and defender s weights are identical results in the worst losses for the defender ii in general cases the defender s equilibrium strategy has the result of making the attacker indifferent between multiple attacks and iii the use of target independent countermeasures i e countermeasures which operate at national levels as opposed to operating at differing levels for each target can increase the cost effectiveness of countermeasures

features of experimentally observed bounded rationality abstract on the basis of experimental evidence reported in the literature the paper draws conclusions about the bounded rationality exhibited by human economic behaviour among the topics discussed are presentation effects caused by superficial analysis strategic reasoning and strategy construction based on reciprocity and fairness avoidance of circular concepts in step by step strategic reasoning ex post rationality and learning direction theory presence of both adaptive and analytic approaches to repeated decision tasks and the absence of quantitative expectations and optimization in typical repeated game strategies

cheap talk with two audiences these problems have in common a simple structure an informed sender says something to two interested but uninformed receivers who then take actions based on their beliefs these actions affect the sender as well as the receivers in this paper we study how costless nonverifiable claims cheap talk can affect these beliefs and hence the actions and how the incentives for truthful revelation to one receiver are affected by the presence of the other we then ask how welfare is affected by whether claims are made in public or in private as some of the above examples suggest public messages may be more credible than private messages addressed to either audience one possibility is that the presence of one audience can discipline the sender s relationship with the other we call this one sided

how do different drivers of r d investment in foreign locations affect domestic firm performance an analysis based on swiss panel micro data the aim of this article is to investigate the differences between specific motives of rd 2817 companies shows first that factors related to firm specific knowledge oriented advantages are more important for explaining the likelihood of foreign r d activities than factors reflecting disadvantages related to home location second knowledge oriented motives of foreign r d positively influence the innovation performance of domestic firms whereas market and resource oriented strategies have a positive impact on labor productivity copyright 2011 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

on the sources and significance of interindustry differences in technological opportunities abstract the set of technological opportunities in a given industry is one of the fundamental determinants of technical advance in that line of business we examine the concept of technological opportunity and discuss three categories of sources of those opportunities advances in scientific understanding and technique technological advances originating in other industries and in other private and governmental institutions and feedbacks from an industry s own technological advances data from the yale survey on industrial research and development are used to measure the strength of various sources of technological opportunity and to discern interindustry differences in the importance of these sources we find that interindustry differences in the strength and sources of technological opportunities contribute importantly to explanations of cross industry variation in r d intensity and technological advance

transnational firms and the changing organisation of innovative activities it is suggested that a transition is taking place towards new modes of organising transnational corporations innovative activities first different units of multinational firms including foreign based subsidiaries are increasingly involved in the generation use and transmission of knowledge secondly multinationals are developing external networks of relationships with local counterparts through which foreign affiliates gain access to external knowledge sources and application abilities as a result of this evolutionary process multinationals organisation is subject to both centripetal and centrifugal forces considerable efforts are then necessary to innovate coordination procedures and mechanisms in order to enhance the generation circulation and use of knowledge a number of empirical works are reviewed providing some evidence of the evolutionary process discussed in the paper 1 transnational companies as networks of innovators economists have long viewed innovation as being primarily generated by firms in their home countries classic contributions in the economics of multinational corporations have consolidated this view referring mainly to the us based multinationals vernon 1966 kindleberger 1969 and stopford and wells 1972 theorised a quasi colonial relationship between the parent company and foreign subsidiaries wherein the latter are in charge of replicating the former s activities abroad with strategic decisions including r d and innovation strategies being rigidly centralised particularly vernon emphasised that coordinating international innovative activities would be too costly owing to the difficulties of collecting and controlling relevant information across national borders host countries and foreign subsidiaries would then play a role almost exclusively in the adoption and diffusion of centrally created technology this view was supported mainly by us economists and based on us evidence from the early post world war ii period but it was very influential for the development of studies on the economics of transnational companies tncs and the internationalisation of

an approximate solution to rent seeking contests with private information abstract we propose an approximate solution to rent seeking contests in which participants have heterogeneous and private valuations the procedure only requires common knowledge about the mean of the distribution of valuations we obtain a closed form expression for an agent s level of investment and subject it to comparative statics analysis we then assess the performance of the model and find that the proposed solution provides a remarkably effective approximation of the optimal solution for a wide range of parameter specifications

critical infrastructure protection using secrecy a discrete simultaneous game abstract in this research critical infrastructure protection against intentional attacks is modeled as a discrete simultaneous game between the protector and the attacker to model the situation that both players keep the information of their resource allocation secret we prove that keeping the information regarding protection strategies secret can obtain a better effect of critical infrastructure protection than truthfully disclosing it solving a game theoretic problem even in the case of two players has been known to be intractable to deal with this complexity after proving that pure strategy nash equilibrium solutions do not exist for the proposed simultaneous game a new approach is proposed to identify its mixed strategy nash equilibrium solution

global technology development by colocating r d and manufacturing the case of swedish manufacturing mnes in this study we analyze the role of colocation between research and development r d and manufacturing for global technology development by multinational enterprises mnes the extant literature suggests that the main strategic role of colocated r d units is to locally adapt existing products and processes however data from 146 foreign r d units of sweden s 17 largest manufacturing mnes in 2013 show that they instead mainly develop new technology not only for the local and regional markets but to a large extent for the global market a likely explanation is that colocation positively contributes to joint problem solving and transfer of tacit knowledge between production and r d personnel all of which is necessary in new product development especially in industries characterized by complex products and systems and rapid technological change a theoretical implication is that depending on industry characteristics internal cross functional linkages between r d and manufacturing can be more critical than external supply and demand side factors when it comes to influence where r d units are located globally

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

security screening queues with impatient applicants a new model with a case study abstract security screening policies are critical in military contexts airports ports and visa issuance processes in order to minimize risks from terrorists smugglers fugitives and others however such screening procedures also increase congestion and inconvenience for normal applicants which may create a trade off for the authorities balancing between risk and congestion in this paper we develop a game theoretical model to investigate optimal screening policies that acknowledges the trade offs between risk congestion and abandonment behavior of the applicants to calculate the average waiting time in the screening queue with heterogeneous impatient applicants we use a two dimensional markov chain model as a case study we tackle the security screening process of us visa applications by conducting an online survey collected data shows some key aspects of applicant preferences such as abandonment behavior we conduct sensitivity analysis for our model we show that if the authorities take the abandonment behavior of the applicants into account beforehand they may achieve higher utility depending on the characteristics of applicants

the globalisation of technology a new taxonomy book synopsis international management of research and development brings together the most influential contributions to managing organising and coordinating r d and innovation on a global scale in addition to papers on the fundamental principles trends and drivers of international r d it covers strategies and operations of global r d it also provides an introduction to modern concepts such as knowledge networks open innovation and virtual innovation it is a key reference collection for professors researchers and practitioners

revenge or continued attack and defense in defender attacker conflicts abstract existing literature has demonstrated that exacting revenge can have a self deterrence effect and a value of revenge effect the former means that each player will decrease effort when competing for a resource because of fear of a rival s revenge while the latter implies that each player will increase effort in the revenge period moreover the self deterrence effect could outweigh the value of revenge effect implying that revenge could be helpful in stabilizing conflicts a phenomenon known as the paradox of revenge we re examine the two effects and the paradox of revenge in defender attacker conflicts considering a scenario in which a defender and only the defender who was attacked in the first period takes revenge on the attacker in the subsequent period we demonstrate that whether or not these results hold depends on how much the defender values revenge and the difference between the two players efficiencies of effort more interestingly we show that a sufficiently large revenge value for the defender can deter an attack from the attacker in the first place

knowledge seeking and location choice of foreign direct investment in the united states to what extent do firms go abroad to access technology available in other locations this paper examines whether and when state technical capabilities attract foreign investment in manufacturing from 1987 1993 we find that on average state r d intensity does not attract foreign direct investment most investing firms are in lower tech industries and locate in low r d intensity states suggesting little interest in state technical capabilities in contrast we find that firms in research intensive industries are more likely to locate in states with high r d intensity foreign firms in the pharmaceutical industry value state r d intensity the most at a level twice that of firms in the semiconductor industry and four times that of electronics firms interestingly not only firms from technically lagging nations but also some firms from technically leading nations are attracted to r d intensive states this suggests that beyond catching up firms use knowledge seeking investments also to source technical diversity

why are companies offshoring innovation the emerging global race for talent this paper empirically studies determinants of decision by companies to offshore innovation activities it uses survey data from the international offshoring research network project to estimate the impact of managerial intentionality past experience and environmental factors on the probability of offshoring innovation projects the results show that the emerging shortage of highly skilled science and engineering talent in the us and more generally the need to access qualified personnel are important explanatory factors for offshoring innovation decisions moreover contrary to drivers of many other functions labor arbitrage is less important than other forms of cost savings the paper concludes with a discussion of the changing dynamics underlying offshoring of innovation activities suggesting that companies are entering a global race for talent

tenure systems in traditional china i a general equilibrium model of tenure preference classical marginalists at least after john clark provide an unequivocal solution for the conventional factor market where people sell the productive services of their resources to producers the productexhaustion theorem says that if factors are priced according to their marginal products incomes of all resource owners will exactly exhaust the value of total products in the long run competitive equilibrium this holds true regardless of which factor is variable and which is fixed and regardless of which group of resource owners perform as producers who buy productive services of other resources in the market and claim residuals for themselves in an agrarian economy with land and labor as the inputs a land owner may cultivate his land and purchase the labor input from outside paying a wage rate in accordance with labor s marginal product the land owner is then the residual claimant alternatively he may lease out his land and receive a fixed rental rate per unit of area equal to the marginal product of land in this case the tenant is the producer and claims the residual income distribution between the two parties remains the same under each land arrangement wage and rent are therefore identical conceptually the classical marginal analysis has not presented a satisfactory theory of share tenancy which instead of being a seller buyer transaction in a conventional factor market is essentially a partnership arrangement between two persons who own complementary factors hence the term land renting will hereafter denote the fixed rent system exclusively in fact the direct application of marginal analysis to share tenancy has created considerable confusion in early economic literature only recently some general equilibrium models of land tenure systems have been developed for better understanding of the

dynamic games with hidden actions and hidden states abstract we consider a class of dynamic games in which each player s actions are unobservable to the other players and each player s actions can influence a state variable that is unobservable to the other players we develop an algorithm that solves for the subset of sequential equilibria in which equilibrium strategies depend on private information only through the privately observed state journal of economic literature classification numbers c63 c73

foreign direct investment in industrial research in the pharmaceutical and electronics industries results from a survey of multinational firms abstract this paper examines motives location characteristics inter temporal characteristics and modes of entry for foreign direct investment fdi in research and development r d the paper is based on a detailed empirical survey of laboratory sites established by 32 large multinational companies domiciled in 5 countries findings indicate that fdi in r d has risen considerably over the last 40 years and that firms invest in r d sites abroad in order to augment their knowledge base or in order to exploit it the former motive leads to establishment of facilities primarily close to universities while the latter type leads to establishment of facilities close to existing manufacturing facilities and markets the paper also finds that greenfield investments are the dominant mode of entry and that firms establish multiple r d sites in their home countries before investing in such sites abroad

interdependent behavior in foreign direct investment the multi level effects of prior entry and prior exit on foreign market entry this paper examines the interdependent foreign market entry decisions of multinational corporations mncs based on the argument that legitimacy and competition are two important forces in foreign market entry decisions we hypothesize that an mnc s market entry decisions are influenced by its own prior entry and prior exit decisions and those of other mncs we examine this general proposition at four levels of analysis the host country global industry an industry that spans host countries local industry an industry that is separately defined within each host country and parent firm level our analysis of a panel data of over 4000 market entry decisions that were made by japanese mncs shows that an mnc s market entry decision has a stronger inverted u shaped relationship with the prior entry and exit decisions of other mncs at the local industry level than the prior entry and exit decisions of other mncs at the host country and global industry levels we also find that both the prior entry and prior exit decisions of an mnc have a marginal influence on its own subsequent market entry decisions at the parent firm level

securing access to lower cost talent globally the dynamics of active embedding and field structuration manning s sydow j and windeler a securing access to lower cost talent globally the dynamics of active embedding and field structuration regional studies this article examines how multinational corporations shape institutional conditions in emerging economies to secure access to high skilled yet lower cost science and engineering talent two in depth case studies of engineering offshoring projects of german automotive suppliers in romania and china illustrate how multinational corporations engage in active embedding by aligning local institutional conditions with global offshoring strategies and operational needs multinational corporations thereby contribute to the structuration of field relations and practices of sourcing knowledge intensive work from globally dispersed locations the findings stress the importance of institutional processes across geographic boundaries that regulate and are shaped by multinational corporation activities manning s sydow j and windeler a

the globalization of r d results of a survey of foreign affiliated r d laboratories in the usa abstract this paper examines the globalization of innovation and the phenomenon of foreign direct investment fdi in research and development to do so it draws from a survey of foreign affiliated r d laboratories in the united states while the literature on foreign direct investment has emphasized the role of markets in driving off shore investments the main conclusion of this research is that the globalization of innovation is driven in large measure by technology factors of particular importance is the objective of firms to secure access to scientific and technical human capital

the returns to foreign r d extant research on research and development r d internationalization has not examined how effective foreign r d investments are in generating positive returns for the investing firms in particular in comparison and conjunction with the effects of domestic r d investments we examine the effectiveness of international knowledge sourcing through foreign r d in an empirical analysis of the productivity effects of foreign and domestic r d investments in a large panel of firms based in the netherlands we argue that foreign and domestic r d will exhibit complementarity in their effects on productivity but that the roles of domestic and foreign r d depend on the relative position of the home country with respect to the global technology frontier and the related relative opportunities for knowledge sourcing abroad we estimate a dynamic panel data model derived from a knowledge stock augmented production function framework allowing for productivity convergence and declining returns to r d we confirm that for firms active in industries in which the home country is behind the global technology frontier foreign r d provides positive returns and has a complementary relationship with domestic r d for industries at the global technology frontier in contrast domestic r d is the primary source of productivity growth

the relevance of private information in mechanism design abstract recent results in mechanism design show that as long as agents have correlated private information and are sufficiently risk neutral it is possible to design mechanisms that leave agents with arbitrarily small information rents we show that these full rent extraction results hinge on the implicit assumption that the agents beliefs uniquely determine their preferences we present an example of the voluntary provision of a public good in which this assumption is relaxed and consequently even in highly correlated environments if agents beliefs do not uniquely determine their preferences then the extraction of the agents entire information rents is impossible

price discrimination in competitive markets we present models in which price discrimination in the context of a two part price can occur in some competitive markets purchases take place in groups which choose which firms to patronize while firms are perfectly competitive with respect to groups they have some market power over individual consumers who are constrained by their groups choices we find that firms will charge an entry fee that is below marginal cost and the second part of the price is marked up above marginal cost the markup not only is positive but increases with the quality of the product

motivating wealth constrained actors we examine how owners of productive resources e g public enterprises or financial capital optimally allocate their resources among wealth constrained operators of unknown ability optimal allocations exhibit 1 shared enterprise profit the resource owner always shares the operator s profit 2 dispersed enterprise ownership resources are widely distributed among operators of varying ability 3 limited benefits of competition the owner may not benefit from increased competition for the resource and sometimes 4 diluted incentives for the most capable more capable operators receive smaller shares of the returns they generate implications for privatizations and venture capital arrangements are explored

minimal and maximal product differentiation in hotelling s duopoly abstract hotelling s 1929 model of duopolistic competition is re examined a family of utility functions is used which has as a special case hotelling s original utility function in a two stage location price game it is shown that an equilibrium exists when the curvature of the utility functions in the space of characteristics is sufficiently high the subgame perfect equilibrium never exhibits minimum product differentiation on the other hand not all equilibria are at maximal product differentiation

geographical amplitude in the international generation of technology present situation and business determinants abstract building on a rich dataset with information on 65 000 firms and 465 000 european patent applications from 1978 to 2000 this paper addresses the geographical amplitude of international technology generation first we show that the number of countries hosting international technological activities is increasing the usa and some developing nations benefit from this internationalisation conversely although europe as a whole still plays a leading role in the encouragement of foreign technological activities some european countries such as germany and the uk appear to be losing their technological appeal second we verify that multinational corporations mncs have increased the geographical amplitude of their technological activities in fact the mean number of countries in which mncs internationalised technology generation has doubled during the 23 years we have analyzed third we address the business characteristics that explain this phenomenon a negative binomial regression suggests that internationalisation is higher in mncs showing a greater technological diversification a higher volume of technological activity a wider presence in international markets and more experience in the international generation of technology finally american corporations and regardless of the home country those firms whose main technological fields are in chemistry pharmaceuticals or electronics present the highest geographical dispersion of their international technological activities

optimal allocation of resources in airport security profiling vs screening this model examines the role of intelligence gathering and screening in providing airport security we analyze this problem using a game between the government and a terrorist by investing in intelligence gathering the government can improve the precision of its information in contrast screening can be used to search a passenger and thereby deter terrorist attacks we determine the optimal allocation of resources between these two strategies wherein we model the role of intelligence using the concept of supermodular precision one striking result is that under certain circumstances an increase in the investment in intelligence can induce a more devious terrorist to attack with a higher probability we also find that when there is a cost reducing innovation in the screening technology then the optimal investment in intelligence gathering can go either way however such an innovation unambiguously improves social welfare another interesting implication is that a developed economy would value intelligence inputs more than a developing economy we also examine the efficacy of a program such as precheck that allows some select passengers expedited screening in exchange for voluntarily revealing information about themselves our analysis shows that such a program can be used to cushion the adverse effect of budgetary shortages finally we also examine the role of enhanced punishment on the optimal level of intelligence we find that the result can go both ways if the initial level of punishment is high then any further enhancement reduces the optimal level of intelligence gathering however this result is reversed if the initial level of punishment is low

hiding in plain sight using signals to detect terrorists this paper studies the interaction between a governmental security agency as the transportation security agency or the immigration and naturalization service and a terrorist organization like al qaeda the governmental agency wants to stop the terrorists but first must infer whether a visa applicant or an airline passenger is a terrorist on the basis of some observable signal the terrorist organization s objective is to get past security to commit murder and mayhem we derive the equilibrium strategy for this signaling model and evaluate specific anti terrorist policies as the creation of the new homeland security agency and increased airport security screening

offshoring of r d looking abroad to improve innovation performance the offshoring of knowledge services has become a phenomenon of increasing importance for firms but many of its implications are yet to be discussed thoroughly this paper analyzes whether r d offshoring contributes to enhancing firms innovation capabilities specifically the study distinguishes between two governance models of offshoring captive offshoring and offshore outsourcing and two types of innovation outcomes product and process innovations we suggest that r d offshoring has different impacts depending on the innovation results and governance models considered the study empirically tests these relationships using the spanish technological innovation panel this survey contains information on a large sample of firms from diverse sectors for the period 2004 2007 the empirical findings allow us confirm our hypotheses and highlight the strategic importance of r d offshoring the empirical evidence reveals a positive relation between offshoring and innovation performance with a greater effect on product than on process innovations the results for different governance models show that captive offshoring has a greater effect on innovation outcomes than offshore outsourcing these findings lead us to conclude that firms that look overseas can benefit from location specific and specialization advantages to improve innovation performance

location versus home country advantages in r d activities some further results on multinationals locational strategies abstract in this paper we study the question of the determinants of the foreign location of technological activities of multinational firms mnfs do they locate their knowledge activities as a consequence of their home country advantages or according to host country strengths we have defined four types of strategy learning according to revealed technological advantages our results based on the 345 mnfs with the greatest patenting activity in europe globally confirm the main findings of patel and vega research policy 28 2 3 1999 145 155 in a great majority of cases nearly 70 mnfs locate their activities abroad in technological areas or fields where they are strong at home strategies 2 and 3 moreover strategy 3 which corresponds with dynamic learning outclasses strategy 2 which corresponds with myopic learning and becomes increasingly important over time the strategy of japanese firms is very different from european and us mnfs in europe japanese firms seek out locations that have complementary strengths to their own strategy 2 in terms of policy implications it can be noted that the national system of innovation in particular the system of academic research should strengthen the technological advantages of local firms and enable them to successfully locate a part of their r d activities abroad

using privileged information to manipulate markets insiders gurus and credibility access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted announcements the fact that privileged information is noisy interferes with the public s attempts to learn whether such announcements are honest it allows opportunistic individuals to manipulate prices repeatedly without ever being fully found out this leads us to extend sobel s 1985 model of strategic communication to the case of noisy private signals our results show that when truthfulness is not easily verifiable restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices

what determines the location choice of r d activities by multinational firms abstract we analyse 446 location decisions of r d activities by multinational firms incorporated in the european union over 1999 2006 our results suggest that on average the location probability of a representative r d foreign affiliate increased with agglomeration economies from foreign r d activities human capital proximity to centres of research excellence and the research and innovation capacity of the region further our evidence suggests that in comparison to european multinational firms the effects of patents intensity and proximity to centres of research excellence were stronger in the case of north american multinational firms while government r d expenditure intensity increased the probability of location of r d activities by european multinational firms in the region it did not have a significant effect on the probability of location of r d activities by north american multinational firms

wealth constraint and contractual arrangements we examine how a project owner optimally selects a project operator and motivates him to deliver an unobservable effort when potential operators are wealth con strained we show that when potential operators abilities are common knowledge an operator s share of realized profit can be increasing invariant or decreasing in his ability depending on the nature of production technology however when potential operators are privately informed about both their abilities and their effort supply a bunching contract arises in equilibrium for a general class of production technology in the case of bunching all potential operators are selected equally often and awarded an equal share of realized profit the finding provides an explanation for the relative uniformity of contract terms in many practical settings jel classification d440 d820 li40

how firms innovate through r d internationalization an s curve hypothesis abstract this article examines the effects of r d internationalization and organizational slack on innovation performance we suggest that there is an s shaped relationship between r d internationalization and innovation performance innovation performance increases in the decentralization stage decreases in the transition stage and increases again in the recentralization stage in addition organizational slack is hypothesized to have a negative moderating effect on the s shaped relationship longitudinal data on 210 taiwanese firms in the information technology sector during a 10 year period is collected to test the hypotheses the findings support our prediction managerial implications and future research directions are discussed

the drivers of foreign direct investment into research and development an empirical investigation this paper examines the determinants of foreign direct investment fdi in research and development laboratories by 32 multinational enterprises in the pharmaceutical and electronics industries the paper applies a dichotomous set of motives for fdi results from an econometric analysis of 136 laboratory investments show that relative market size and relative strength of a country s science base determine whether fdi in research and development is carried out in order to exploit existing firm specific advantages or in order to build up new firm specific advantages this holds true in similar form for japanese european and u s firms and across the two industries

identifying technology transfer in foreign direct investment influence of industry conditions and investing firm motives firms have different motives for investing abroad most notably to exercise existing capabilities but also to build new capabilities by accessing knowledge located abroad recognizing this heterogeneity helps determine whether foreign investments transfer technology to their host industries using host industries initial level of competition to differentiate when each of these dichotomous motives is more likely i examine change in productivity resulting from inward fdi in us manufacturing industries for 1987 through 1991 while controlling for change in industry competition i find that relatively uncompetitive industries experience productivity growth while competitive industries experience productivity stagnation from fdi this differential outcome is consistent with heterogeneous investment motives

large firms in the production of the world s technology an important case of non globalisation us patenting by 686 of the world s largest manufacturing firms shows that their share of the world s production of technology is less than their share of r d activities and varies greatly amongst sectors in most cases the technological activities of these large firms are concentrated in their home country the characteristics of which influence the volume and trends in their technological activities much more strongly then the international component of these activities at the same time these large firms are major elements in the volume and the pattern of sectoral specializations in their home countries technological activities

the wrong kind of transparency in a model of career concerns for experts when is a principal hurt from observing more information about her agent this paper introduces a distinction between information on the consequence of the agent s action and information directly on the agent s action when the latter kind of information is available the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori this conformist behavior hurts the principal in two ways the decision made by the agent is less likely to be the right one discipline and ex post it is more difficult to evaluate the agent s ability sorting the paper identifies a necessary and sufficient condition on the agent signal structure under which the principal bene ts from committing not to observe the agent s action the paper also shows the existence of strategic complementarities between information on action and information on consequence the results on the distinction between action and consequence are then used to interpret existing disclosure policies in delegated portfolio management in particular they are consistent with hitherto puzzling evidence that mutual funds systematically overperform pension funds

firm and country level trade offs and contingencies in the evaluation of foreign investment the semiconductor industry 1994 2002 this paper examines the joint impact of firm and country level factors on the international plant location decisions of semiconductor firms from 1994 2002 we find that these factors interact to influence the location decisions of firms investing abroad in a given host country firms with more advanced technological capabilities are more likely to make investments in countries with greater technological sophistication but not in politically hazardous countries where they face greater expropriation hazards firms with less advanced technology are more willing to accept a trade off between country level political hazards and technological sophistication firms also trade off own versus other firm experience as sources of critical knowledge regarding the foreign investment environment

allocation of cost savings in a three level supply chain with demand information sharing a cooperative game approach we analyze the problem of allocating cost savings from sharing demand information in a three level supply chain with a manufacturer a distributor and a retailer to find a unique allocation scheme we use concepts from cooperative game theory first we analytically compute the expected cost incurred by the manufacturer and then use simulation to obtain expected costs for the distributor and the retailer we construct a three person cooperative game in characteristic function form and derive necessary conditions for the stability of each of five possible coalitions to divide the cost savings between two members or among three supply chain members we use various allocation schemes we present numerical analyses to investigate the impacts of the demand autocorrelation coefficient and the unit holding and shortage costs on the allocation scheme

new forms of organisation and r d internationalisation among the world s 100 largest food and beverages multinationals this paper explores the strategic internationalisation of research and development r d activities of the world s 100 largest food and beverages f b multinationals mnes in 1996 and 2000 with a sample of nearly 8000 affiliates for each period we develop a global innovation strategy gis structure where we analyse the r d internationalisation process of f b mnes we argue that in a fully developed gis model the sourcing of creative inputs does not come exclusively from a central r d laboratory but other overseas r d laboratories or technological affiliates can also undertake genuine knowledge creation activity from capitalising on the scientific heterogeneity fostered in individual host countries as well as distinctive demand conditions our results indicate the increasing importance of overseas technological affiliates in the application of a gis in the leading f b mnes which determine the degree of their technological internationalisation two variants of technological affiliates reflect two broad knowledge related activities i e adaptation and genuine forms of knowledge creation

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

the lab and the plant offshore r d and co location with production activities the literature has highlighted that the propensity of mnes to co locate offshore r d labs with their production plants can vary substantially according to firm and industry characteristics in this paper we apply a novel two stage estimation procedure that allows us to tease out this heterogenous behavior and investigate the factors that are associated with a higher propensity to co locate production and r d activities abroad using data on 1483 greenfield international investments in r d activities made by 855 firms in 587 cities worldwide we uncover that the strength of the co location effect is indeed highly heterogenous across firms in particular it is higher among firms with less international experience and geographical dispersion of international activities as well as with a lower share of intangible assets these results are consistent with the idea that co location is a substitute for firms ability to coordinate complex and dispersed organizational structures and that firms relying relatively less on codified knowledge can use co location of offshore r d and production to facilitate knowledge transfer across activities

competition of firms discriminatory pricing and location1 two costlessly mobile firms are to be located in a market region a subset of the plane the firms compete by setting locations and delivered price schedules to study this competitive stiuation an appropriate extensive form game is defined along with an appropri ate noncooperative solution concept existence and general properties of the equilibrium are demonstrated among the results are each firm increases its profit by locating so as to decrease total cost to both firms of serving the market firms will never locate coinciden tally if they have identical production costs and transport cost rates or if these are different and the firms are located in a circular market region having a uniform demand distribution this paper studies competition between two profit maximizing firms in space who are costlessly mobile and may discriminate in price we will allow the firms to set locations and delivered price schedules and we will be concerned with the existence and properties of equilibria in location and price starting with hotelling 9 the spatial competition literature has focused on location on bounded linear markets by two or more firms hotelling assumed identical firms that produced a single good with constant cost of production and considered consumers to be uniformly distributed and to have inelastic demand he also assumed that the consumers pay transport cost and purchase the good from the cheapest source hotelling claimed that a nash equilibrium in locations for the two firm market existed and yielded back to back locations at the center of the market many authors most recently d aspremont gabszewicz and thisse 2 have noted that an equilbrium in prices and location does not exist for hotelling s model however if the firms employ identical exogeneously specified prices hotelling s conclusions hold subsequent work by smithies 14 hartwick and hartwick 7 and eaton 3 claimed to show that a nash equi librium in f o b prices and locations can exist in markets with a uniform distribu tion of consumers each of whom have identical elastic demand functions for the two and three firm problems the work of d aspremont et al casts doubt on these conclusions without the adoption of restrictive conditions our work contrasts with these works and related research which has dealt with linear markets with uniform distributions of customers and with identical firms our work will involve markets that are subsets of the plane having nonuniform distributions of customers our firms will be allowed to be different that is have differences in production and transport costs however the fundamental difference in our approach is that our firms will set discriminatory prices and not price f o b in many ways our work will represent the discriminatory pricing

lying for strategic advantage rational and boundedly rational misrepresentation of intentions starting from hendricks and mcafee s 2000 example of the allies decision to feint at calais and attack at normandy on d day this paper models misrepresentation of intentions to competitors or enemies allowing for the possibility of bounded strategic rationality and rational players responses to it yields a sensible account of lying via costless noiseless messages in many cases the model has generically unique pure strategy sequential equilibria in which rational players exploit boundedly rational players but are not themselves fooled in others the model has generically essentially unique mixed strategy sequential equilibria in which rational players strategies protect all players from exploitation

manufacturer s revenue sharing contract and retail competition this paper investigates a revenue sharing contract for coordinating a supply chain comprising one manufacturer and two competing retailers the manufacturer as a stackelberg leader offers a revenue sharing contract to two competing retailers who face stochastic demand before the selling season under the offered contract terms the competing retailers are to determine the quantities to be ordered from the manufacturer prior to the season and the retail price at which to sell the items during the season the process of pricing and ordering is expected to result in an equilibrium as in the bayesian nash game on the basis of anticipated responses and actions of the retailers the manufacturer designs the revenue sharing contract adopting the classic newsvendor problem model framework and using numerical methods the study finds that the provision of revenue sharing in the contract can obtain better performance than a price only contract however the benefits earned under the revenue sharing contract by different supply chain partners differ because of the impact of demand variability and price sensitivity factors the paper also analyses the impact of demand variability on decisions about optimal retail price order quantity and profit sharing between the manufacturer and the retailers lastly it investigates how the competition between retailers factor influences the decision making of supply chain members in response to uncertain demand and profit variability