competition and cooperation in decentralized push and pull assembly systems in this paper we study a decentralized assembly system consisting of a single assembler who buys complementary components from independent suppliers under two contracting schemes push and pull in both schemes the component suppliers are allowed to freely form coalitions or alliances among themselves to better coordinate their pricing or production decisions we show that the sole driver of the inefficiency in a push system which is due to horizontal decentralization of suppliers is the number of alliances that were formed specifically it is shown that in a push system the assembler s profit the total profit of all suppliers and the consumers surplus are all decreasing in the number of coalitions and are thus maximized when the grand coalition is formed we further carry out a stability analysis of coalition structures to verify to what extent suppliers can reduce or eliminate the inefficiency due to their decentralization by forming alliances we show that in a push system with more than two

the choice between market failures and corruption because government intervention transfers resources from one party to another it creates room for corruption as corruption often undermines the purpose of the intervention governments will try to prevent it they may create rents for bureaucrats induce a misallocation of resources and increase the size of the bureaucracy since preventing all corruption is excessively costly second best intervention may involve a certain fraction of bureaucrats accepting bribes when corruption is harder to prevent there may be both more bureaucrats and higher public sector wages also the optimal degree of government intervention may be nonmonotonic in the level of income

delegation and commitment in durable goods monopolies this paper studies a simultaneous move infinite horizon delegation game in which the principal of a durable goods monopoly entrusts pricing decisions to a manager who enjoys consuming her monetary rewards but dislikes production effort the delegation contract allows for continual interference with managerial incentives in each period the principal rewards the manager according to her performance we show that when the cost of delegation is low relative to profits the principal can attain the precommitment price plan in a perfect rational expectations equilibrium the paper analyzes the robustness of this result under alternative specifications of timing and objectives we also provide a numerical characterization of the equilibrium strategies for the case of linear quadratic payoffs

pricing variation within dual distribution chains the different implications of externalities and signaling for high and low quality brands within many of the multioutlet branded chains that dominate the retail and services landscape the organizational form e g company management franchising used to manage an outlet varies from site to site as do the prices charged at those sites i propose that organizational form and prices may be systematically related as a result of brand externalities in particular i develop logic that the relevant form of externality should differ for upper quality tier brands and lower tier brands using panel data on price and organizational form from more than 6 700 branded u s hotels affiliated with 40 dual distribution brands those brands that simultaneously company manage and franchise individual outlets i find that consistent with the brand externality arguments company managed locations have higher prices within high quality chains whereas franchisees price higher in the lower tiers this paper was accepted by bruno cassiman business strategy

dodging the grabbing hand the determinants of unofficial activity in 69 countries across 69 countries higher tax rates are associated with less unofficial activity as a percent of gdp but corruption is associated with more unofficial activity entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption dodging the grabbing hand in this way reduces tax revenues as a percent of both official and total gdp as a result corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates 2000 elsevier science s a all rights reserved

corruption a review as is increasingly recognised in academic literature and by international organisations corruption acts as a major deterrent to growth and development the aim of this survey is to organise and summarise existing theoretical and empirical work on corruption with a view to identifying opportunities for further research the paper begins with a brief overview of key definitions of corruption and then turns to a review of the factors that favour or deter the growth of corruption together with a brief look at related models this is followed by an examination of the consequences of corruption for society and the consideration of measures that might help to reduce corruption the paper ends with suggestions for future research and includes summaries of data sources and key variables for use in this research

an empirical analysis of territorial encroachment within franchised and company owned branded chains franchisees within large branded chains loudly complain of a form of channel conflict known as encroachment or impact encroachment occurs when franchisors add new units of their brand proximately to their franchisees existing units franchisees claim that their revenues have substantially decreased as a result of encroaching same brand entry the topic of encroachment has not only dominated franchisee association agendas and trade journal headlines but has also become a hot topic for politicians and policymakers yet until now evidence of encroachment has been strictly anecdotal this paper provides the first systematic evidence of encroachment using revenue data from the texas lodging industry in the 1990s i find that when franchisors approve new same brand units in the vicinity of incumbent units these new units cannibalize the incumbents revenues in contrast to the result for franchisors the addition of a new unit by company owned brands in the vicinity of same brand units is associated with an increase in the incumbents revenues this contrast suggests that encroaching behavior is caused by incentives that result from the governance form of franchising and is not simply an outcome that accompanies all expansion this finding informs theory on governance forms and exclusive territories implications for practitioners and policy are also discussed

does competition kill corruption corrupt agents officials or gangsters exact money from firms corruption affects the number of firms in a free entry equilibrium the degree of deep competition in the economy increases with lower overhead costs relative to profits and with a tendency toward similar cost structures increases in competition may not lower corruption the model explains why a rational corrupt agent may extinguish the source of his bribe income by causing a firm to exit assessing the welfare effect of corruption is complicated by the fact that exit caused by corruption does not necessarily reduce social welfare

choosing a licensee from heterogeneous rivals we examine a rm that can license its production technology to a rival when rms are heterogeneous in production costs we show that a complete technology transfer from one rm to another always increases joint pro t under weakly concave demand when at least three rms remain in the industry a jointly pro table transfer may reduce social welfare although a jointly pro table transfer from the most e cient rm always increases welfare we also consider two auction games under complete information a standard rst price auction and a menu auction by bernheim and whinston 1986 with natural re nement of equilibria we show that the resulting licensees are ordered by degree of e ciency menu auction simple auction and joint pro t maximizing licensees in weakly descending order

the sources of divergent practices in china s nuclear power sector abstract unlike markets that were early developers of reactors which are dominated by single technologies china s nuclear power sector adopts and imports multiple technologies even after the chinese government introduced a policy to develop a standardized unified and technologically advanced nuclear power sector in the early 2000s different technologies continue to be imported this study uses an institutional lens to explore the decoupling of policy intentions and implementation the three phases of nuclear technology imports that occurred between the 1980s and 2010 are examined and compared data are collected from multiple sources including the diary of a major decision maker news articles project websites a regulation database domestic journal articles and interviews with industry experts using interactive content analysis this study identifies the multiple policy principles and goals of different domains that led to different import arrangements and interpretations of the available foreign technology new arrangements do not replace but overlap the existing ones that are perpetuated by the actors who benefit from them the results show that the multiplicity of china s nuclear power sector coupled with the government s late attempts at standardization contributes to diversified policy implementation they provide important policy implications for the sustainable development of the sector

divisionalization and franchising incentives with integral competing units abstract existing game theoretic models of divisionalization and franchising treat each firm s number of competing units as a continuous variable we account for the integer constraint on divisions and show that the continuous case reasonably approximates the equilibria of the discrete game

cournot oligopoly and the theory of supermodular games abstract we reconsider the cournot oligopoly problem in light of the theory of supermodular games invoking the recent ordinal version of this theory proposed by milgrom and shannon we generalize novshek s existence result derive the associated uniqueness result give an extension of a classical existence result under symmetry and provide conditions making a cournot oligopoly into a log supermodular game with the natural order on the action sets we also provide extensive and precise insight as to why decreasing best responses are widely regarded as being typical for the cournot model with production costs several illustrative examples are provided journal of economic literatureclassification numbers c72 l10 l13

the economist s approach to the problem of corruption summary this paper will first distinguish between the non economist s approach to corruption largely on the basis of public morals and norms and the economist s approach in terms of incentives and organization i then discuss why otherwise similar countries may end up with different equilibrium levels of corruption why such equilibria tend to persist and why corruption in some countries seems to be more damaging to the economy than in others i then try to derive some policy lessons 2005 elsevier ltd all rights reserved

product bundling and incentives for mergers and strategic alliances this paper analyzes firms choice between a merger and a strategic alliance in bundling their product with other complementary product we consider a framework in which firms can improve profits only from product bundling while mixed bundling is not profitable pure bundling is because pure bundling reduces consumers choices and thus softens competition among firms firms benefit the most from this reduced competit ion if they form an alliance firms do not gain as much from a merger because internalizing the complementarity between the two products a merged firm is inclined to pursue aggressive pricing to gain market share yet firms may be motivated to choose a merger over an alliance because of foreclosure possibility as foreclosure is not possible under strategic alliance however in response unmerged rivals can use a strategic alliance to avert foreclosure hence the possibility of counter bundling via strategic alliance by rivals reduces the incentives for merger in equilibrium

international aspects of merger policy a survey this paper surveys the literature on merger policy in open economies we first adopt a reduced form approach to derive general insights on the scope for conflict between national antitrust authorities and on the gains from international merger policy coordination taking trade costs as given we use standard oligopoly models to derive conditions on market structure under which underenforcement or overenforcement of national merger policies can arise we then study the interactions between merger policy and trade policy and find that trade liberalization often leads to stricter national merger policies we conclude by discussing empirical evidence on conflict between antitrust authorities

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

a directional theory of issue voting from stokes s 1963 early critique on it has been clear to empirical researchers that the traditional spatial theory of elections is seriously flawed yet fully a quarter century later that theory remains the dominant paradigm for understanding mass elite linkage in politics we present an alternative spatial theory of elections that we argue has greater empirical verisimilitude based on the ideas of symbolic politics the directional theory assumes that most people have a diffuse preference for a certain direction of policy making and that people vary in the intensity with which they hold those preferences we test the two competing theories at the individual level with national election study data and find the directional theory more strongly supported than the traditional spatial theory we then develop the implications of the directional theory for candidate behavior and assess the predictions in light of evidence from the u s congress

multidivisional firms internal competition and the merger paradox traditional modelling of mergers has the merged firms insiders cooperate and maximize joint profits this approach has several unappealing results in quantity setting games for example mergers typically are not profitable for insiders but are profitable for non merging firms outsiders we take a different approach and allow for a parent company that can play each insider off one another in quantity setting games with our approach mergers are profitable for insiders unprofitable for outsiders socially beneficial and involve in a non monopolizing merger a small number of firms finally we find that the optimal strategy depends on whether firms compete in quantity or prices jel classification l000 entreprises multi divisionnelles concurrence interne et le paradoxe des fusions les modelisations conventionnelles des fusions suggerent que les entreprises fusionnees parties prenantes cooperent et maximisent leurs profits conjoints cette approche engendre plusieurs resultats contre intuitifs dans des jeux de concurrence par les quantites i e les fusions en general ne sont pas profitables pour les parties prenantes mais sont profitables pour des entreprises qui ne sont pas fusionnees les autres les auteurs adoptent une approche differente qui permet a l entreprise mere de jouer les parties prenantes l une contre l autre dans ce genre de jeu avec l approche adoptee les fusions sont profitables pour les parties prenantes non profitables pour les autres socialement benefiques et impliquent un petit nombre d entreprises dans une fusion qui ne cree pas un monopole finalement on trouve que la strategie optimale depend fondamentalement du fait que les entreprises se concurrencent par les prix ou par les quantites

divisionalization with spatial differentiation abstract this paper assumes that firms can create independent divisions which compete in a market where the product is spatially differentiated our first result is that if the number of firms is exogenous and higher than some critical level then the symmetric subgame perfect equilibrium converges to perfect competition when the cost of divisionalization converges to zero comparisons between the equilibrium level of divisionalization and the socially efficient are also obtained in this context on the other hand if we assume free entry and a fixed cost per firm then the subgame perfect equilibrium implies in some cases a natural oligopoly or monopoly

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

market structure and organizational form this paper studies the determinants of a firm s organizational form in the context of an imperfectly competitive industry there are two kinds of organizational forms the multi divisional form m form and the unitary form u form an m form firm suffers from ignorance of demand externalities among different products and double marginalization is eliminated in contrast in a u form firm demand externalities are taken into consideration and double marginalization exists a firm s optimal choice of organizational form depends on the market structure

competition and outsourcing with scale economies scale economies are commonplace in operations yet because of analytical challenges relatively little is known about how firms should compete in their presence this paper presents a model of competition between two firms that face scale economies i e each firm s cost per unit of demand is decreasing in demand a general framework is used which incorporates competition between two service providers with price and time sensitive demand a queuing game and competition between two retailers with fixed ordering costs and pricesensitive consumers an economic order quantity game reasonably general conditions are provided under which there exists at most one equilibrium with both firms participating in the market we demonstrate in the context of the queuing game that the lower cost firm in equilibrium may have a higher market share and a higher price an enviable situation we also allow each firm to outsource their production process to a supplier even if the supplier s technology is no better than the firms technology and the supplier is required to establish dedicated capacity so the supplier s scale can be no greater than either firm s scale we show that the firms strictly prefer to outsource we conclude that scale economies provide a strong motivation for outsourcing that has not previously been identified in the literature

cost manipulation games in oligopoly with costs of manipulating we analyze a class of two stage games where rival firms incur real resource costs in manipulating their marginal costs so as to influence the outcome of the game they want to play in stage two marginal costs may be manipulated by various means such as redistribution of productive assets choice of location or creation of an internal input market a general formulation of the game is provided and several applications are analyzed we show that the optimal allocation of resources within an oligopoly can be asymmetric even for ex ante symmetric firms this is an additional explanation of heterogeneity in oligopoly

the limits of monopolization through acquisition we address the question of whether competitive acquisition of firms by their rivals can result in complete or partial monopolization of a homogeneous product industry this question is modeled in terms of two distinct three stage noncoopera tive games analysis of subgame perfect pure strategy nash equilibria of these games discloses that under simplifying assumptions monopolization of an industry through acquisition is limited to industries with relatively few firms partial monopolization is either limited in scope or can be completely eliminated by prohibiting any owner from acquiring over 50 percent of the firms in the industry

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

the sources of valence judgments the role of policy distance and the structure of the left right spectrum although the concept of valence figures in many studies of voting behavior very few have investigated its sources in this article we address this deficiency by assessing the extent to which individual valence assessments are affected by the left right policy distance between parties and respondents as well as by their locations relative to the center of the left right spectrum using data from the comparative study of electoral systems we find very widespread support for both hypotheses correcting for differential item functioning dif reveals that although respondents tend to over estimate the distance to opposite side parties these misperceptions do not account for our findings indeed with dif corrected most surveys reveal tendencies not only for opposite side parties to be given lower valence scores in general but also for policy distance to be counted more heavily against them the article concludes with a discussion of possible sources of this bilateral structuring of valence assessments

competence and ideology we develop a dynamic repeated election model in which citizen candidates are distinguished by both their ideology and valence voters observe an incumbent s valence and policy choices but only know the challenger s party our model provides a rich set of novel results in contrast to existing predictions from static models we prove that dynamic considerations make higher valence incumbents more likely to compromise and win re election even though they compromise to more extreme policies consequently we find that the correlation between valence and extremist policies rises with office holder seniority this result may help explain previous empirical findings despite this result we establish that the whole electorate gains from improvements in the distribution of valences in contrast fixing average valence the greater dispersion in valence associated with a high valence political elite always benefits the median voter but can harm a majority of voters when voters are sufficiently risk averse we then consider interest groups igs or activists who search for candidates with better skills we derive a complete theoretical explanation for the intuitive conjectures that policies are more extreme when igs and activists have more extreme ideologies and that such extremism reduces the welfare of all voters

divide and conquer multiple leasing in common pool oil fields a theoretic model is developed to analyse strategic leasing behaviours of u s landowners in a non exclusively owned common oil pool oil field development is modelled as a simultaneous move two stage non cooperative game the landowners choose leasing strategies in the first stage independent lease operators choose extraction strategies in the second ownership structure is distinguished from operation structure and their relationship analyzed it is shown that in a non exclusively owned oil field it is individually rational for a landowner to subdivide his landholding and delegate production rights to multiple inde pendent firms although more dispersed production control leads to heavier common pool

when is a break up of gazprom good for russia in the late 1990s several proposals for a structural reform that would bring competition and market prices to the russian gas industry were intensely debated splitting up russian gas monopolist gazprom into several producing companies was a considered option in this paper i examine theoretically and numerically how a split up of gazprom would affect russian national welfare results show that under the current gas market structures in europe and russia the split up of gazprom s monopoly might not be beneficial for russia however analysis in the paper indicates that the market shares that gazprom has in both russian domestic and european gas markets are important in determining whether gazprom s dominance is supported under the national welfare criteria when gazprom has small market share in europe and large market share in russia a break up of gazprom might plausibly result in increase of russian national welfare

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

corruption competition and democracy abstract this paper presents a model of the interaction between corrupt government officials and industrial firms to show that corruption is antithetical to competition it is hypothesized that a government agent that controls access to a formal market has a self interest in demanding a bribe payment that serves to limit the number of firms this corrupt official will also be subject to a detection technology that is a function of the amount of the bribe payment and the number of firms that pay it under quite normal assumptions about the shape of the graph of the detection function multiple equilibria can arise where one equilibrium is characterized by high corruption and low competition and another is characterized by low corruption and high competition some suggestive empirical evidence is presented that supports the main hypothesis that competition and corruption are negatively related

excess entry vertical integration and welfare this article provides a systematic analysis of the welfare effects of vertical integration by a monopolist input supplier into a monopolistically competitive downstream industry we give sufficient conditions on consumer preferences that lead to pareto improving vertical integration and demonstrate a close relationship between assumptions on preference for variety excess entry in monopolistically competitive markets and the welfare effects of vertical integration excess entry in downstream markets tends to give rise to pareto improving vertical integration we extend the analysis to vertical oligopoly and access price regulation

a neoinstitutionalist interpretation of the changes in the russian oil model this paper deals with the current change of the institutional and organizational framework of the russian oil industry regarding this evolution the main characteristic is the increasing involvement of national oil companies in the upstream activities the point is to explain this reorganization by relying on the new institutional economics framework these theoretical works highlight that institutional environment and governance structures complement each other we argue that the current reorganization in an attempt to increase the coherence of the institutional arrangement governing the transaction between the russian state and the private oil companies

are new institutional economics enough promoting photovoltaics in india s agricultural sector solar photovoltaic pv technology can bring emissions free electricity to rural areas without access to the grid currently policymakers are seeking ways to expand markets for off grid pv from solar home systems to productive uses in order to enhance income generation and contribute to social development this paper explores the role of the state in promoting such market growth as a start the state must improve institutions thus echoing popular recommendations based in new institutional economic theory nie that are currently touted by the world bank and other large development agencies yet nie s framework may be insufficient because it fails to offer viable solutions to overcoming political barriers that contribute to technological path dependency a case study in punjab india where an agricultural pv water pumping program showed promising signs of successful market penetration in its first 3 years of operation illustrates how the nie s shortcomings manifest themselves in practice the program was beginning to penetrate market entry for pv pumps via competition between pv providers however the government of india achieved this feat by providing subsidies to wealthy farmers a move that is frowned upon by the nie school based on findings from the case study states should look beyond nie s framework to expand and improve pv markets in productive uses by accounting for political constraints assessing how pv technology can improve development goals and cultivating locally appropriate service delivery models

strategic incentives when supplying to rivals with an application to vertical firm structure abstract we consider a vertically integrated input monopolist supplying to a differentiated downstream rival with linear input pricing at the margin the firm unambiguously wants the rival to expand unlike standard oligopoly with no supply relationship for either cournot or bertrand competition with a two part tariff for the input the same result holds if downstream choices are strategic complements but is reversed for cournot with strategic substitutes we analyze vertical delegation as one mechanism for inducing expansion or contraction by the rival customer

the struggle for safe nuclear expansion in china abstract after a temporary halt following the fukushima nuclear disaster in march 2011 china resumed its fast yet cautious expansion of nuclear energy programme nuclear energy is considered as part of the general strategy to deal with the challenges of energy security and climate change and to advance with state of the art technology in its development this article briefly discusses recent development in and driving forces behind nuclear industry in china and several challenges it has been facing how to adopt adapt standardise and indigenise whose technologies and how to address the shortage of qualified nuclear engineers scientists skilled labour force and qualified regulators more importantly it argues that safe and secure nuclear development requires consistent policies and effective regulations therefore it is crucial to build policy and regulatory capacities based on coordination planning and management of government agencies and the industry

divisionalization franchising and divestiture incentives in oligopoly a two stage game is used to model firms strategic incentives to divide production among autonomous competing units through divisionalization franchising or divestiture firms simultaneously choose their number of competing units which then engage in cournot competition while it is costly to form autonomous units each firm does so in equilibrium thus reducing firm profits and increasing social welfare relative to the case where firms cannot form competing units with linear demand and costs duopolists choose the socially optimal number of competing units oligopolies with larger numbers of firms choose too many the case of nonlinear demand is also examined copyright 1996 by american economic association

retail contracting theory and practice we summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers we do this using studies of traditional and business format franchise relationships as well as studies of salesforce integration decisions some of the patterns that we uncover are consistent with a standard incentive cum insurance theory of organization while others are not we brie y review some theoretical extensions that seem promising in terms of reconciling seeming con icts between theory and practice i introduction manufacturers of retail products must decide whether to sell their products to consumers themselves vertical integration or to sell via independent retailers vertical separation when manufacturers do not perform the sales function internally but want exclusive retailers they usually choose some form of franchising 1 many theories attempt to explain the choice of retail organizational form moreover a considerable body of empirical evidence concerning this choice is accumulating we attempt to evaluate this econometric evidence and relate it to the theories to accomplish this task we assess studies of franchising arrangements as well as studies of sales force organization in industrial settings the paper is organized as follows in the next section we highlight a number of regularities that arise in the empirical literature on retail contracting in particular we nd that i risk is positively related to the use of high powered incentives vertical separation ii the importance of the agent s eiort in production is positively related to the use of high powered incentives

the economics of casino taxation in this article a model of the costs of a casino is developed that focuses on the implications for economic welfare of different taxation schemes for casinos the situation being considered is in a country where casinos cater exclusively to foreign tourists the goal of the country is to determine the maximum amount of taxes that can be extracted from the activities of this sector under different systems of taxation when the price of gambling is set by regulation above its competitive level the economic losses created by excessive investment in the sector can be reduced by taxation a turnover tax on the amount gambled can maximize both tax revenue and the economic welfare of the country due to administrative constraints a number of countries rely on the taxation of the casinos fixed assets or a combination of a turnover tax and a tax on fixed costs the model is applied to the situation in north cyprus the annual economic efficiency loss from its poorly designed tax policies on casino gambling is

how many franchises in a market abstract this paper studies how firms use their number of franchises as a strategic tool firms can commit to high output by creating many franchises however signing a single franchise contract with a low wholesale price is an equally effective way to generate output the value of granting many franchises is undercut when firms can sign contracts afterwards so firms place only a single franchise in a market this finding reverses previous results which did not model contracts the same issues arise in international competition policy where countries use anti trust policy to affect their number of exporters and use subsidies to affect the choices of exporters

a theory of misgovernance this paper tries to explain why government bureaucracies are often associated with red tape corruption and lack of incentives the paper identifies two specific ingredients that together can provide an explanation the fact that governments often act precisely in situations where markets fail and the presence of agency problems within the government we show that these problems are exacerbated at low levels of development and in bureaucracies dealing with poor people we also argue that we need to posit the existence of a welfare oriented constituency within the government in order to explain red tape and corruption

endogenous timing with infinitely many firms abstract a model with constant marginal costs is considered where firms choose first a period for production and then the amount to produce when competing in the market according to the resulting timing decisions multiple equilibria arise allowing for infinitely many industry output configurations encompassing one limit output dominant firm and the cournot equilibrium with free entry as extreme cases at each of these equilibria a firm produces a positive amount only if this firm commits to produce at period one both stackelberg and cournot like outcomes are sustainable as equilibria however when the number of leaders is given production at subsequent periods is always prevented and industry output is sometimes larger than the entry preventing level

entry barriers and economic welfare the relationship between economic welfare and the number of firms in a quasi cournot market is examined in the first place we presuppose the existence of a strong first best government that can enforce the marginal cost principle to the firms along with regulating the number of firms it is shown that there exist excessive number of firms at the free entry quasicournot equilibrium vis a vis the first best welfare maximizing number of firms the thrust of this result essentially survives even if we replace a utopian first best government by a secondbest government that leaves the firms to pursue their respective profit maximization freely and engages solely in regulating the number of firms it can be shown that the excess entry prevails again in this second best world recent studies in the theoretical industrial organization literature have uncovered several instances which cast serious doubt on the reasonableness of a widespread belief that increasing competition will increase welfare stiglitz 1981 p 184 it has been shown that there are cases which are not altogether unreasonable where social welfare will be increased by strengthening rather than weakening the protection of incumbent firms from the threat of potential entry this is in sharp contrast with the traditional belief 2 what is not known however is how robust these pathologies in fact are we intend to settle this problem by proving two excess entry theorems in the quasi cournot parametric conjectural variations homogeneous oligopoly model seade 1980a b in the first place we presuppose the existence of a strong first best government that could costlessly enforce the marginal cost pricing principle by firms in an oligopolistic market and regulate entry in pursuit of first best social welfare optimization it is shown that the number of firms at the free entry equilibrium exceeds the first best welfare optimizing number of firms the result has already been noted by von weizsacker 1980a b and others in terms of numerical examples our theorem 1 asserts that this phenomenon always holds true for the family of quasi cournot models at hand an implication of this result is that the existence of entry barriers which protect incumbent firms from potential competitors is not necessarily welfare decreasing in sharp contrast with the traditional belief a problem remains with theorem 1 however in that an omnipotent first best government does not exist in reality and the first best ideal is unrealizable in the actual economy therefore even if the intervention by a first best government with a view to restricting the number of firms within an industry may be welfare improving it does

internal decision making rules and collusion we study the impact of internal decision making structures on the stability of collusive agreements to this end we use a three firm spatial competition model where two firms belong to the same holding company the holding company can decide to set prices itself or to delegate this decision to its local units it is shown that when transportation costs are high collusion is more stable under delegation furthermore collusion with maximum prices is more profitable if price setting is delegated to the local units profitability is reversed for low discount factors

corruption and socially optimal entry abstract the paper investigates the effects of corruption in the entry certifying process on market structure and social welfare for a cournot industry with linear demand and costs to gain entry a firm must pay a bribe maximizing official a fixed percentage of anticipated profit in addition to the usual set up cost this would lead to a monopoly but only in markets without pre existing or shadow economy firms a benevolent social planner may preempt the harmful effects of corruption by either manipulating the number of pre existing firms in the market or by setting up two independent corrupt licensing authorities a socially optimal number of firms in the market may be reached by choosing the right number of pre existing firms or by having exactly two licensing authorities these mechanisms may be seen as restoring second best efficiency in settings characterized by two major sources of distortion imperfect competition and corruption we also show in an extension that the basic insights carry over in a qualitative sense to a model with quadratic costs and first best entry regulation

competitive procurement with corruption we study competitive procurement administered by a corrupt agent who is willing to manipulate his evaluation of contract proposals in exchange for bribes with complete information and no corruption the efficient firm will win the contract for sure if the agent is corrupt and has large manipulation power however bribery makes it costly for the efficient firm to secure a sure win so in equilibrium the efficient firm loses the contract with positive probability the optimal scoring rule for the buyer deemphasizes quality relative to price and does not fully handicap and may even favor the efficient firm

international fish wars the strategic roles for fleet licensing and effort subsidies abstract this article examines the problem of noncooperative international fishing by analyzing the strategic rent shifting roles for such well known national management policies as fleet licensing and effort subsidies it is shown that the noncooperative equilibrium in each policy takes the form of a prisoner s dilemma with dissipated rents in the fishery it is also shown that strategic effort subsidies can only lead to incomplete rent dissipation but strategic fleet licensing can lead to complete rent dissipation the models developed in this article may help to provide an explanation for the persistence of large and excessively subsidized national fleets that exploit depleted international fish stocks

licensing the market for technology abstract in technology based industries incumbent firms often license their technology to potential competitors such a strategy is difficult to explain within traditional models of licensing this paper extends the literature on licensing by relaxing the assumption of a monopolist technology holder competition in the market for technology induces licensing of innovations and incumbent firms may find it privately profitable to license although their joint profits may well be higher in the absence of any licensing a strong testable implication of our model is that the number of licenses per patent holder decreases with the degree of product differentiation

market foreclosure and vertical merger a case study of the vertical merger between turner broadcasting and time warner abstract we employ an event study methodology the event being the vertical merger between time warner and turner broadcasting distribution and programming respectively in the cable television industry we assess the effects of the merger on final prices subscriptions and carriage and marketing decisions of time warner the analysis finds several interesting facts first foreclosure in time warner markets following the merger is observed for the rival channels that are not integrated with any cable distributors second the turner broadcasting channels that increased market shares because of this merger appeared to be foreclosed by time warner prior to the merger the preference for own channels by time warner persisted despite a lower quality of channel bundles in its markets efficiency gains from the merger were not passed on to consumers

multidivisional firms internal competition and comparative advantage baye et al meet neary abstract we present a tractable general equilibrium model to capture the effects of divisionalization on trade in oligopolistic industries divisionalization reduces the incentives for diversification in production the extensive margins of trade expand as a result of divisionalization facilitating specialization toward the direction of comparative advantage with exports rising in the case of domestic divisionalization and imports rising in the case of foreign divisionalization this effect of internal competition on specialization is magnified when competition between divisions is staggered the factor market effects of divisionalization domestic and or foreign strengthen the expansionary effects on the extensive margins of trade

institutional arrangements in the emerging biodiesel industry case studies from minas gerais brazil connecting small family farmers to the emerging biodiesel industry requires careful design of the institutional arrangements between the producers of oil crops and the processing companies according to institutional economics theory the design of effective and efficient arrangements depends on production and transaction characteristics the institutional environment and the organizational environment supporting the transaction between producers and the industry this paper presents a comparative study on two cases in the feedstock for biodiesel industry in the state of minas gerais brazil the two case studies represent the production and transaction system of soybeans glycine max l merrill and castor beans ricinus communis l important elements of effective and efficient institutional arrangements are farmer collective action availability of technical and financial support and farmer experience with particular crops

development and the interaction of enforcement institutions we examine how formal and informal contract enforcing institutions interact in a competitive market with asymmetric information where consumers do not observe quality before purchase firm level incentives for producing high quality can be achieved with an informal enforcement mechanism reputation the efficacy of which is enhanced by consumers investing in connectedness or with a formal mechanism legal enforcement the effectiveness of which can be reduced by means of bribes we show that formal and informal enforcement mechanisms do not necessarily substitute each other while high levels of judicial efficiency decrease consumers incentives to connect higher consumers connectedness leads to higher levels of judicial efficiency we then look at how the equilibrium institutional mix evolves with the level of development in doing so we show the presence of a new physical channel that can affect institutions i e the frequency of bad productivity shocks that in less developed settings can impact on firms incentives to cheat c 2010 elsevier b v all rights reserved

de targeting advertising an assortment of products to loss averse consumers we consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes using sophisticated tracking technologies an intermediary can make inferences about a consumer s preferred product category and offer advertising firms the possibility to target their ads to match the consumer s taste such targeting reduces overall advertising costs and as a direct effect increases industry profits however as we show in this paper when consumers form reference prices and are loss averse more precise targeting may intensify competition between firms as a result firms may earn higher profits from de targeted advertising i e when the intermediary deliberately informs about some products and their price quotes from outside a consumer s preferred product category

on intrabrand and interbrand competition the strategic role of fees and royalties abstract we examine oligopolistic markets with both intrabrand and interbrand competition we characterize equilibrium contracts involving a royalty or wholesale price and a fee when each upstream firm contracts with multiple downstream firms royalties control competition between own downstream firms at the expense of making them passive against rivals when the number of downstream firms is endogenous each upstream firm chooses to have only one downstream firm this result is in sharp contrast to previous literature where competitors benefit by having a larger number of independent downstream firms under only fixed fee payments we discuss why allowing upstream firms to charge per unit payments in addition to fixed fees dramatically alters their strategic incentives

on the effects of entry in cournot markets in the framework of symmetric cournot oligopoly this paper provides two minimal sets of assumptions on the demand and cost functions that imply respectively that as the number of firms increases the minimal and maximal equilibria lead to i decreasing industry price and increasing or decreasing per firm output and ii increasing industry price and decreasing per firm output in both cases per firm profits are decreasing the analysis relies crucially on lattice theoretic methods and yields general unambiguous and easily interpretable conclusions of a global nature as a byproduct of independent interest new insight into existence of cournot equilibrium is developed

competition and regulation in vertically related markets in an industry where naturally monopolistic and competitive activities are vertically related should the natural monopolist be allowed also to operate in the deregulated competitive sector unlike much of the literature on vertical integration this paper assumes that monopoly pricing behaviour is regulated and therefore the effect of vertical integration on the task of regulation is central to the analysis in the model there is both imperfect information and imperfect competition when vertical integration by the monopolist is allowed the regulator s task is made harder insofar as the monopolist has anticompetitive incentives to raise rivals costs on the other hand integration may lead to there being fewer firms in the deregulated sector and hence less duplication of fixed costs the overall welfare comparison between separation and integration is ambiguous as two simple examples illustrate various extensions to the analysis are also considered one of the central questions in debates on regulatory reform is how to organize industries that contain both naturally monopolistic and potentially competitive activities electricity transmission and distribution are characterized by natural monopoly cost conditions but electricity generation is not in the gas industry pipeline services may be naturally monopolistic but supply to larger customers is not in telecommunications natural monopoly is more a feature of local network operations than of long distance operations and is not present in apparatus manufacture and supply or in the provision of value added services in railways while the infrastructure of track and stations is naturally monopolistic the supply of train services might not be policy developments notably those associated with privatization in britain and deregulation in the united states have sometimes led to radical structural reform in these industries at t for decades a vertically integrated monopolist was required under the 1982 settlement of its long running antitrust case against the u s government to divest itself of its local network operations the central electricity generating board cegb in england and wales was restructured both vertically transmission grid activities were separated from generation and horizontally before privatization in 1990 1991 by contrast british telecom was privatized as a vertically integrated dominant firm bt now faces competition from mercury and others especially in the long distance market but its dominance of local network operations might affect competition there and in other areas such as apparatus supply the local network monopoly would of course have to be regulated in any event but its link via ownership to vertically related and potentially competitive activities poses additional regulatory questions many of the efforts of the regulatory body oftel notably in relation to interconnection between bt s and rivals 1 for a general account of the theory and british experience of regulatory reform in the utility industries

increasing the profits of a subset of firms in oligopoly models with strategic substitutes consider an industry composed of n firms in a symmetric equilibrium designate a subset of s n firms and marginally reduce the strategic variables of the firms in the subset if the remaining firms simultaneously make the best reply to this exogenous displacement under what circumstances will profits of the firms in the designated subset increase we show that in the case of cournot competition among producers of perfect substitutes a marginal contraction is strictly beneficial strictly harmful if and only if the number of firms in the designated subset exceeds the adjusted number of firms outside it by strictly more strictly less than one the adjustment factor is unity when cost and demand functions are linear but more generally depends on the convexity of the cost and demand curves thus a marginal contraction of two firms in a triopoly has no effect on the profits of firms in the subset if cost and demand functions are linear if instead cost is linear but the inverse demand function is strictly concave strictly convex a marginal contraction will strictly decrease strictly increase profits the analysis is extended to the effects of nonmarginal exogenous changes in the outputs of the constrained firms this extension has implications for the relationship of stackelberg sequential move and nash simultaneous move equilibria our analysis has broad application to illustrate we show that it unifies results in the literature on export subsidies horizontal mergers and strikes the paper is organized as follows in section i our comparative static result is derived in section ii we present a wide range of applications in the conclusion and the appendix we generalize our analysis to other situations involving strategic substitutes

divisionalization and strategic managerial incentives in oligopoly under uncertainty abstract this paper argues that divisionalization and incentive contracting are complementary rent shifting tools in the presence of demand uncertainty the role for divisionalization arises if managers know the state of demand prior to making output decisions and if incentive contracts are linear and non state contingent in this context incentive contracts achieve expected stackelberg outcomes but have no impact on the firm s responsiveness to demand shocks divisionalization on the other hand has the strategically beneficial effect of making the firm more responsive to demand shocks

behavioral equilibrium in economies with adverse selection i propose a new solution concept behavioral equilibrium to study environments with players who are naive in the sense that they fail to account for the informational content of other players actions a behavioral equilibrium requires that i players have no incentives to deviate given their beliefs about the consequences of deviating ii these beliefs are consistent with the information obtained from the actual equilibrium play of all players and iii when processing this information naive players fail to account for the correlation between other players actions and their own payouncertainty i apply the framework to certain adverse selection settings and show that contrary to the received literature the adverse selection problem is exacerbated when naive players fail to account for selection more generally the main distinguishing feature of the framework is that in equilibrium beliefs about both fundamentals and strategies are jointly restricted consequently whether a bias may arise or not is determined endogenously in equilibrium jel c72 d82 a large literature presents evidence that psychological and cognitive biases aect people s be havior this evidence raises some questions what are the eects of these biases and can they persist at all in economic settings where people strategically interact with each other and have the opportunity to learn from their experience 1 in this paper i introduce a game theoretic equilibrium framework to study these questions in the context of a particular bias people s failure to take into account the informational content of other people s actions i apply the framework to a class of games that arises naturally in adverse selection settings and then show that the adverse selection

market structure and casino taxation in tourist resorts this article examines the association of tax effects with market structure for casino gaming we show that if market structure is uncompetitive much of casino taxation falls on tourists whose demand is inelastic relative to supply the tax is likely to be efficient under strong external demand if imposed on oligopoly casinos with a monopoly location in a cross border market the likelihood of economically good taxation is greater under oligopoly than under competition but lower than under monopoly casino taxes should be lowered in a more competitive market with weaker external demand our prediction is consistent with the evidence found from casino tourism development in macao with high gambling taxes

divisionalization and entry deterrence this paper assumes that incumbent firms can create new independent divisions more cheaply than potential entrants who must incur the additional overhead costs of new entry the main theoretical result is that such divisionalization ability leads perfectly informed incumbents to preempt all rational entry into their industries in contrast existing models of entry deterrence imply that informed incumbents even those with steadily decreasing average costs will often allow rational entry our result may explain why successful large scale entry by firms with no informational advantage is extremely rare the use of divisions to preempt entry may also explain why large firms in high profit oligopolies often divisionalize allowing their divisions to compete freely despite the negative pecuniary externality that each division imposes on others

the dynamics of corruption with the ratchet effect this paper provides a simple model of corruption dynamics with the ratchet effect as in shleifer and vishny 1993 we consider the sale of government property entry permit by government officials as the prototype of corruption activities in a dynamic version of the shleifer vishny model corrupt officials have ex post the incentive to price discriminate entrepreneurs based on the entry decisions made in an earlier period we show that the inability of government officials to commit to future money demands induces the ratchet effect in that entrepreneurs have incentives to delay entry in order to receive a discount in the permit price later the ex post opportunism erodes the official s extortion power and reduces his revenues from selling permits even though the dynamic setting leaves the corrupt official with less extortion power we cannot rule out the possibility that the official s ability to apply dynamic discrimination decreases the intertemporal aggregate social welfare we also explore the effect of the official s tenure stability on the extent of corruption this allows us to identify circumstances under which the often observed practice of job rotation can help mitigate corruption

on the existence of cournot equilibrium this paper examines the existence of n firm cournot equilibrium in a market for a single homogeneous commodity it proves that if each firm s marginal revenue declines as the aggregate output of other firms increases which is implied by concave inverse demand then a cournot equilibrium exists without assuming that firms have nondecreasing marginal cost or identical technologies also if the marginal revenue condition fails at a potential optimal point there is a set of firms such that no cournot equilibrium exists the paper also contains an example of nonexistence with two nonidentical firms each with constant returns to scale production