welfare aspects of technological adoption with learning abstract this paper considers the welfare implications of adoption of a new technology when this technology is characterized by costs of adaptation and some localized learning effects a two period model is developed to represent the adoption game between firms in a duopolistic framework optimal social patterns of adoption are compared with private patterns emerging as equilibria of the game it is shown that differences between the two patterns are due first to the shape of the demand function of the product sold on the duopolistic market and secondly to strategic interaction effects between the adopting firms

technology adoption government policy and tariffication abstract we integrate trade policy into an open economy model of technology adoption to investigate the impact of alternate trade barriers on the equilibrium diffusion of a cost saving technology it is shown that even when ad valorem tariffs have a neutral impact on technology adoption non tariff barriers such as quotas can be used to affect the speed of technology diffusion in both the home and foreign countries in addition we demonstrate how in an open economy setting tariffication i e the conversion of quotas to ad valorem tariffs can lead to faster technology adoption world wide

information revelation and principal agent contracts in an environment in which effort is private information to the worker agreements between a risk neutral principal and a risk averse agent are likely to be risk sharing and information revealing mechanisms it is shown that principal agent contracts have significant implications for both compensation and employment rules in a simple work sharing model in general such contracts involve incomplete income insurance and involuntary or excessive underemployment this supports the view that models of worker specific information particularly with moral hazard provide a natural explanation of underemployment

technology acquisition with technological progress effects of expectations rivalry and uncertainty abstract we study the effect of expectations regarding technological progress on a firm s technology adoption decision in a duopoly new generation technologies become available one in each period with successive generations representing better and better performance a game theoretic framework is used involving two identical firms competing in the same market over two periods it is shown that expectations retard adoption of the first period technology it is also shown that an asymmetric equilibrium results in higher social welfare and that more investment does not necessarily mean higher levels of welfare uncertainty is shown to have either no effect or a negative effect on the adoption of the current technology when nash equilibrium holds however when subgame perfect equilibrium holds uncertainty has a more complicated effect and numerical examples show that it may even encourage the adoption of the current technology relative to the deterministic equilibrium

british bus deregulation competition and demand coordination abstract our framework formally explains some of the recent curious events surrounding deregulation of the british local bus industry the winner takes all nature of this market induces competitive providers to engage in predatory or preemptive behavior in scheduling and pricing unlike previous works we explicitly model consumers responses to firms schedule announcements we show that the market is unstable if demand is uncoordinated but stable otherwise our results highlight the important role played by demand coordinating mechanisms in local bus markets and our results suggest that pure strategy nash equilibria exist in models a la hotelling 1929 whenever demand is effectively coordinated

product differentiation and entry timing in a continuous time spatial competition model abstract we extend the well known spatial competition model d aspremont gabszewicz thisse 1979 to a continuous time model in which two firms compete in each instance our focus is on the entry timing decisions of firms and their optimal locations we demonstrate that the leader has an incentive to locate closer to the center to delay the follower s entry leading to a non maximum differentiation outcome we also investigate how exogenous parameters affect the leader s location and firms values and in particular numerically show that the profit of the leader changes non monotonically with an increase in the transport cost parameter

shipwrecks and treasure hunters we examine dynamic search as a game in which two rivals explore an island for a hidden prize of known value in every period until its discovery the players decide how much of the unsearched area to comb if a player finds the prize alone he wins it and the game ends players have a per period discount factor and costs proportional to the area they search first as a benchmark for efficiency we solve the one player search problem second in the two player setting we show that typically there is inefficient over search a result akin to the tragedy of the commons however for players with intermediate levels of patience there is the possibility of inefficient under search as players incorporate the expected future payoffs in their current search decisions finally with patient players several counterintuitive results can arise for example players might be better off searching a larger island or looking for a less valuable prize

an experimental and theoretical analysis of price matching refund policies abstract price matching refund policies or offers by firms to match competitor s prices are common in both consumer and industrial marketing much of the previous theoretical work in economics suggests that price matching refunds are associated with higher prices in contrast the trade press postulates that price matching policies are associated with lower prices given these inconsistent views regarding price matching policies the authors experimentally examine how consumers view and interpret such policies and then develop a model that incorporates these consumer interpretations as well as asymmetries across stores in the model the asymmetry across stores is the key to deriving the conditions under which a signaling equilibrium exists in the presence of price matching policies the critical point is that the competition reducing and price discrimination effects which seem to form the basis of most of the previous theoretical literature can be counteracted by the presence of differentiated firms

identifying uncertainty shocks using world diffusion index in this study a world diffusion index is developed to measure how uncertainty shocks have diffused among 179 economies and caused contractions in the world growth cycles this index is simply defi

stackelberg and marshall this paper advocates a generalized n firm stackelberg model as a plausible testable alternative description of oligopoly a pure strategy equilibrium must exist for this model the main result is that efficiency obtains in the limit as the scale of each firm is shrunk relative to demand this is demonstrated for the case of u shaped average cost and also for that of natural monopoly copyright 1990 by american economic association

leaders followers and equity risk premiums in booms and busts abstract we study an investment problem in which two asymmetric firms face competition and the regime characterizing the economic condition follows a markov switching process we derive the value functions and investment thresholds of the leader and follower the option value of regime uncertainty is found to be quite important for the investment decision of firms we also show the relationship between the equity risk premium and the economic cycle that has not been done in previous studies which proxy economic conditions by the level of demand or other state variables

vertical governance change and product differentiation under decreasing component costs in deciding on whether and when to outsource component production firms should consider the trade off between total production costs and the ability to horizontally differentiate products we study the outsourcing decision in a duopoly under decreasing but uncertain market rates for components given that outsourcing increases the substitutability of the final products we find that there is at least one firm that eventually outsources component production because it cannot differentiate its product enough by in house production to justify the eventually higher costs the follower outsources at a lower market rate or may even remain vertically integrated the follower thus incurs the eventually much higher in house component costs longer while the low substitutability is enjoyed by both firms under endogenous roles firms thus engage in a preemption game to be the first to outsource we also find that firms generally outsource at lower market rates if uncertainty is higher but seek to preempt at remarkably higher market rates if substitutability remains low

how regions react to recessions resilience and the role of economic structure martin r sunley p gardiner b and tyler p how regions react to recessions resilience and the role of economic structure regional studies this paper examines how employment in the major uk regions has reacted to the four major recessions of the last 40 years namely 1974 76 1979 83 1990 93 and 2008 10 the notions of resistance and recoverability are used to examine these reactions the analysis reveals both continuities and significant changes in the regional impact of recession from one economic cycle to the next further while economic structure is found to have exerted some influence on the resistance and recoverability of certain regions in general region specific or competitiveness effects appear to have played an equally if not more significant role

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

complementarities in organizational design and the diffusion of information technologies an empirical analysis we use a specially designed survey on french firms located in haute savoie to provide empirical evidence suggesting that information and communication technologies adoption is not only influenced by the traditional factors of technology diffusion but also by complementarity effects between strategies organization and information technologies the data collected permitted several advances firstly we could study authentic ict while the recent literature has mainly focused on computer capital stocks or automation tools secondly we constructed measures of the determinants put forward by the models of technology diffusion thirdly we studied three kinds of practices organizational and strategic practices technological choices

repeated games with frequent signals we study repeated games with frequent actions and frequent imperfect public signals where the signals are the aggregate of many discrete events such as sales or tasks the high frequency limit of the equilibrium set depends on both the probability law governing the discrete events and on how many events are aggregated into a single signal when the underlying events have a binomial distribution the limit equilibria correspond to the equilibria of the associated continuous time game with diffusion signals but other event processes that aggregate to a diffusion limit can have a different set of limit equilibria thus the continuous time game need not be a good approximation of the high frequency limit whenever the underlying events have three or more possible values

understanding rent dissipation on the use of game theory in industrial organization game theory has had a deep impact on the theory of industrial organization in a similar but less controversial way as the rational expectations revolution in macroeconomics the reason it has been embraced by a majority of researchers in the field is that it imposes some discipline on theoretical thinking it forces economists to clearly specify the strategic variables their timing and the information structure faced by firms as is often the case in economics the researcher learns as much from constructing the model the extensive form as from

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

symmetric equilibrium strategies in game theoretic real option models with incomplete information this paper considers a real options model with incomplete information in a duopoly setting i show that even in the presence of a first mover advantage there are circumstances in which the preemption region is eroded entirely and the only equilibrium strategy is of simultaneous type both players should exercise together or not at all this outcome arises if the price paid by a player from exercising the option simultaneously with his competitor over exercising alone as a stackelberg leader is low such an outcome has not been previously recognised in the literature the underlying information structure has been applied in a one firm setting to a range of different contexts of late all of which have competitive pressures in practice as such the existence of this equilibrium under certain conditions ought to be recognised

does confidence data help forecast business cycles new evidence from canada abstractthis paper assesses the contribution of confidence or sentiment data for predicting canadian economic slowdowns a probit framework is applied to an indicator of the status of the canad

entry in monopoly market this paper develops new empirical models of market concentration from game theoretic models of entry we construct our models from inequality conditions that describe entrants equilibrium strategies in simultaneous move and sequential move games and use them to study the effects of entry in isolated monopoly markets for new automobiles from estimates of the market size necessary to support one and two dealers we conclude that monopoly dealers do not block the entry of a second dealer we also find that entry does not cause price cost margins to fall by much

foreign ownership and technology adoption evidence from indian firms abstract firms in developing countries rely on foreign technology purchases to improve their technology we use a theoretical framework developed by katz and shapiro to examine the ongoing technology adoption behavior of foreign owned and domestic firms using firm level data on indian firms from 1989 to 1993 we test this theoretical model we find that foreign ownership firm size and market structure are among the variables that impact a firm s probability of adopting new technology we also find that the 1991 liberalization of technology transfer policies in india appears to have had a larger impact on foreign owned firms than domestic firms

detrending and business cycle facts a user s guide this note argues that it is hardly the case that the profession is fully aware that the application of di erent filters to the data leads to di erent outcomes and that we have enough evidence to claim that these di erences are unimportant to evaluate the fit models to the data 1998 elsevier science b v all rights reserved jel classification b41 e32

is zoning a negative sum game zoning is well known as a key instrument of planning regulation which is environmental regulation in its broadest sense zoning in terms of economic theorisation is normally justified by the pigovian welfare economics theses of market failure notably

a new class of sufficient conditions for the first order approach to the principal agent problem abstract the first order approach can be shown to be valid if the agent s expected utility is pseudoconcave in effort we derive new conditions on the agent s utility function which insures that the expected utility is pseudoconcave there is a tradeoff of the stringency of the distribution function exhibited by the rogerson mirrlees conditions the mlrc and the cdfc for stringency of the utility function the new conditions are independent of the mlrc and or the cdfc and hence we cannot indicate which are more general

business cycle turning points a new coincident index and tests of duration dependence based on a dynamic factor model with regime switching the synthesis of the dynamic factor model of stock and watson 1989 and the regime switching model of hamilton 1989 proposed by diebold and rudebusch 1996 potentially encompasses both features of the business cycle identified by burns and mitchell 1946 1 comovement among economic variables through the cycle and 2 nonlinearity in its evolution however maximum likelihood estimation has required approximation recent advances in multimove gibbs sampling methodology open the way to approximation free inference in such non gaussian nonlinear models this paper estimates the model for u s data and attempts to address three questions are both features of the business cycle empirically relevant might the implied new index of coincident indicators be a useful one in practice do the resulting estimates of regime switches show evidence of duration dependence the answers to all three would appear to be yes

analysis and algorithm for the optimal investment times of new manufacturing technologies in a duopoly abstract on the basis of a dynamic and non cooperative game theoretic model the optimal timings of investments in new manufacturing technologies nmt is analysed under duopolistic competition non identical incumbents with time proportional demand always wait for some delay to invest in nmt the existence of silent timing equilibrium is addressed subsequently we show that cost reducing nmt diffuse over time within a duopoly the investments in strategic nmt however may be distributed through time or in a swarm economic interpretations of initial options and the comparative statics presented in this paper help decision makers develop strategies and make decisions under the situation they face finally a computational algorithm of optimal timings could verify this analysis and facilitate the real applications of game theoretic models

technology adoption under price uncertainty abstract the paper examines the impact of changes in the variance of output prices on the bias and intrafirm diffusion rate of technological change the results indicate that a reduction in the variance of output prices will increase the rate of adoption and the intrafirm diffusion speed of yield increasing technologies the opposite is true for cost reducing technologies

project selection commitment and competition we examine project selection decisions of firms constrained in the number of projects they can handle at once a new project opportunity arises every period taking on a project requires a commitment of uncertain duration preventing the firm from selecting another project in subsequent periods until the commitment ends in our dynamic game when two firms are free of commitment they move sequentially in random order symmetric pure strategy markov perfect equilibria always exist in equilibrium the first mover strategically rejects some projects that are then selected by the second mover even when the value of the project is the same for both firms a monopolist rejects more projects and adopts ones of higher average quality compared to the duopolist duopolists select too few projects compared to their jointly optimal behavior we extend the model to allow for externalities asymmetry and n 2n 2 firms

capital as a commitment strategic investment to deter mobility abstract this paper analyzes how an early entrant in a market can exploit its head start by strategic investment the analysis is based on spence s paper investment strategy and growth in a new market bell j econ 10 1979 1 19 we frist study the investment game in the no discounting case which embodies the key features of mobility deterrence we establish the existence of a set of perfect equilibria and suggest that one particular equilibrium is most reasonable this equilibrium also valid with discounting involves the follower firm being forever deterred from investing to its steady state reaction curve in contrast to spence s proposed solution

innovation timing games a general framework with applications abstract we offer a new algorithm for analyzing innovation timing games its main advantage over the traditional approach is that it applies to problems that had previously been intractable we use the algorithm to examine two classical innovation problems we find that the competition takes the form of a waiting game with a second mover advantage either for any level of r d costs process innovation or for high r d costs product innovation moreover both models predict that the second mover advantage is monotonically increasing in the costs of r d

irreversible investment and r d spillovers in a dynamic duopoly investments in new production processes usually involve a significant amount of rd an increase in uncertainty delaying the equilibrium calls for higher subsidization rates third numerical simulations show that the spillover reduces the difference between the leader s and the follower s maximum value functions accordingly our model can help generate realistic market betas

to grab for the market or to bide one s time a dynamic model of entry we consider a simultaneous move dynamic entry game the fixed cost of entry is private information entering earlier increases the likelihood of being the monopolist but also increases the likelihood of coordination failure and simultaneous entry we consider general continuous distributions for the fixed cost and we characterize the unique symmetric sequential equilibrium in pure strategies comparative statics results are derived as the time between rounds approaches zero all of the action occurs during an arbitrarily small amount of time for the bertrand model we extend the analysis to allow for n firms

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

trends and cycles in macroeconomic time series two structural time series models for annual observations are constructed in terms of trend cycle and irregular components the models are then estimated via the kalman filter using data on five u s macroeconomic time series the results provide some interesting insights into the dynamic structure of the series particularly with respect to cyclical behavior at the same time they illustrate the development of a model selection strategy for structural time series models

dissecting the cycle a methodological investigation following burns and mitchell we define the cycle as a pattern in the level of aggregate economic activity an algorithm to locate turning points is developed as is a new measure of pro cyclicality a link between turning points and the moments of the series is established thereby providing the statistical foundation that burns and mitchell s work lacked using these tools we are able to dissect cycles in terms of the contributions made by trend growth volatility serial correlation and non linear effects we dissect several models and find little evidence that certain non linear effects are important to the nature of business cycles

evaluation of firm s loss due to incomplete information in real investment decision abstract we investigate the effect of incomplete information in a model where a start up with a unique idea and technology pioneers a new market but will eventually be expelled from the market by a large firm s subsequent entry we evaluate the start up s loss due to incomplete information about the large firm s behavior we clarify conditions under which the start up needs more information about the large firm the proposed method of evaluating the loss due to incomplete information could also be applied to other real options models involving incomplete information

on vertical relations and the timing of technology adoption we study the timing of new technology adoption in markets with input outsourcing and thus with vertical relations we find that technology adoption can take place earlier when firms engage in input outsourcing than when they produce the input in house hence the presence of vertical relations can accelerate the adoption of a new technology we also find that particular features of a vertically related market such as the distribution of bargaining power and the contract type through which trading is conducted can crucially affect the speed of technology adoption

being identical behaving differently a theorem on technological diffusion abstract adoption of a new technique is analysed in the framework of an infinitely repeated symmetric bertrand duopoly it is shown that asymmetric subgame perfect equilibria i e equilibrium diffusion exist

investment uncertainty and pre emption this paper examines irreversible investment in a project with uncertain returns when there is an advantage to being the first to invest and externalities to investing when others also do so we show that the possibility of pre emption can have significant qualitative and quantitative effects on the relationship between uncertainty and investment in a single agent real options model the trigger threshold for investment increases without bound as uncertainty grows in contrast the investment trigger of a leader faced with pre emption is bounded above as uncertainty increases in fact we show that under certain parameter values greater uncertainty can lead the leader to invest earlier these findings reinforce the importance of extending real options analysis to include strategic interactions between players applications to industry situations are also discussed

how institutional and organizational characteristics explain the growth of contingent work in china china s traditional model of long term employment has been undermined by an increased reliance on nonrenewable fixed term and temporary agency employment contracts in this study the author draws

are linear models really unuseful to describe business cycle data we use first differenced logged quarterly series for the gdp of 29 countries and the euro area to assess the need to use nonlinear models to describe business cycle dynamic behaviour our approach is model estimation free based on testing only we aim to maximize power to detect non linearities and simultaneously we purport avoiding the pitfalls of data mining the evidence we find does not support some descriptions because the presence of significant non linearities is observed for 2 3 of the countries only linear models cannot be simply dismissed as they are frequently useful contrarily to common knowledge nonlinear business cycle variation does not seem to be an universal undisputable and clearly dominant stylized fact this finding is particularly surprising for the u s case some support for nonlinear dynamics for some further countries is obtained indirectly through unit root tests but this is marginal to our study based on indirectmethods only and can hardly be invoked to support nonlinearity in classical business cycles

sequential correlated equilibria in stopping games in many situations such as trade in stock exchanges agents have many opportunities to act within a short interval of time the agents in such situations can often coordinate their actions in advance but coordination during the game consumes too much time an equilibrium in such situations has to be sequential in order to handle mistakes made by players in this paper we present a new solution concept for infinite horizon dynamic games which is appropriate for such situations a sequential normal form correlated approximate equilibrium under additional assumptions we show that every such game admits this kind of equilibrium

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

caveat preemptor coordination failure and success in a duopoly investment game abstract we build on mason and weeds 2010 model of duopoly investment under uncertainty by allowing high initial values of the profit shock as in huisman and kort 1999 persistent first mover advantage increases the likelihood of immediate simultaneous investment in contrast with previous models where these have been interpreted as mistakes such simultaneous investment outcomes can be optimal for the industry clustering of investments is thus both more likely and more likely to be a desirable outcome

continuous time games of timing abstract we address the question of existence of equilibrium in general timing games with complete information under weak assumptions any two player timing game has a markov subgame perfect e equilibrium for each e 0 this result is tight for some classes of games symmetric games games with cumulative payoffs stronger existence results are established

multinational plant location as a game of timing we study the problem of when firms should switch from exporting to producing at an onshore plant which will cater to a local market the model incorporates factors such as rivalry differences between costs of domestic and offshore production differences in consumer preferences for offshore and domestically produced goods and the capital costs associated with switching to domestic production we find equilibrium timing patterns where there is a leader and a follower diffusion equilibria to be most typical furthermore we find that a firm with lower switching costs has a competitive advantage in the determination of which firm will lead it is found in the duopoly model that market growth and production and transportation unit costs have a relatively greater impact on the timing of the switch than do changes in demand elasticities or changes in the fixed costs of switching with more firms and increased competition however the effect of changes in fixed costs become relatively greater

purchasing sleeping patents to curtail budget padding abstract this paper provides an explanation for sleeping patents based not on their ability to deter external competitors but rather on their ability to discipline actions of the firm s employees by acquiring a patent upfront a firm is able to issue a credible threat that it will switch technologies if a manager s cost budget for the existing technology is too high this threat reduces the manager s propensity to pad budgets

uncertainty networks and real options abstract two pervasive features of industries experiencing rapid technological progress are uncertainty with regard to the technological feasibility and marketabilility of an innovation and networks the dense web of research alliances and joint ventures linking firms to each other this paper connects the two disparate phenomena using the notion of real options it visualizes firms as nodes and the links connecting them as call options that give each pair of interlinked firms the right but not the obligation to sink additional resources into a project at some future date conditional on favorable technical market information the formation of networks is endogenous as firms establish links with others by appraising their value using option pricing methods our model explains the following why networks are particularly ubiquitous in industries that are subject to high uncertainty why networks often display an interconnected hubs and spokes architecture why small or peripheral spoke firms often sink resources into relatively higher risk higher return investment projects and those too with only large or hub firms and why so many research alliances are continuously formed and dissolved our paper also outlines the conditions under which ex ante symmetric firms end up ex post forming complex asymmetric networks

time series decomposition and measurement of business cycles trends and growth cycles abstract a study of business cycles does not require trend estimation and elimination but a study of growth cycles does major cyclical slowdowns and speedups deserve to be analyzed but the needed time series decomposition presents difficult problems mainly because trends and cycles influence each other we compare cyclical movements in levels deviations from trend and smoothed growth rates for both the quarterly real gdp and the monthly u s coincident index using the phase average trend pat then we compare alternative trend estimates deterministic and stochastic linear and nonlinear and the corresponding series of deviations from these trends we discuss how the resulting estimates differ for u s growth cycles in the post world war ii period the results of pat show great similarity to the results obtained with the hodrick prescott local linear trend band pass filtering methods

have business cycles changed over the last two decades an empirical investigation abstract we document the properties of business cycles of 71 countries 23 industrial countries and 48 emerging market economies or emes from 1970q1 to 2012q4 using the harding and pagan dating algorithm first recessions are deeper steeper and costlier among emes especially in east asia and latin america second recoveries are swifter and stronger among emes partly due to stronger rebound effects third recessions became less costly during the globalization period 1985 2007 for industrial countries and emes thus reflecting institutional changes made during the great moderation fourth the dynamic behavior of macroeconomic indicators around peaks in real gdp is more volatile in downturns associated with crisis compared to other downturns fifth peaks in financial cycles credit and asset prices tend to precede peaks in real output cycles finally although both industrial and emerging markets have experienced deep recessions during the recent global financial crisis the emerging markets have recovered faster

let s take a break trends and cycles in us real gdp abstract trend cycle decompositions for us real gdp such as the unobserved components models the beveridge nelson decomposition the hodrick prescott filter and others yield very different cycles which bear little resemblance to the nber chronology ascribes much movements to the trend leaving little to the cycle and some imply a negative correlation between the noise to the cycle and the trend we argue that these features are artifacts created by the neglect of a change in the slope of the trend function once this is accounted for all methods yield the same cycle with a trend that is non stochastic except for a few periods around 1973 the cycle is more important in magnitude than previously reported and it accords well with the nber chronology our results are corroborated using an alternative trend cycle decomposition based on a generalized unobserved components models with errors having a mixture of normals distribution for both the slope of the trend function and the cyclical component

second mover advantages in the strategic adoption of new technology under uncertainty abstract this paper introduces technological uncertainty into a timing game of new technology adoption it is shown that the timing neither necessarily involves first mover advantages in precommitment equilibria reinganum review of economic studies xlviii 1981 395 405 nor rent equalization due to the threat of preemption fudenberg and tirole review of economic studies lii 1985 383 401 rather there may be second mover advantages because of informational spillovers furthermore the model predicts that the equilibrium payoffs will typically be discontinuous and non monotonic in the probability that the new technology is profitable a welfare analysis reveals several market failures and suggests that policy intervention should adequately depend on the nature of uncertainty and the rate of technological progress

sequential signals of recession and recovery this paper describes a sequential procedure for identifying the beginning and ending dates of business cycle recessions as promptly and accurately as practicable its origin lies in a study in progress for the economic development administration eda u s department of commerce which deals with the problem of designing and testing an efficient trigger formula for public works expenditures with the aid of a system of cyclical indicators however the proposed approach can be applied much more broadly to any temporary countercyclical policy program on the national level federal policy programs of job creation through public works or public service employment have been repeatedly called countercyclical without in fact being so most such programs came into effect much too late to counter the cyclical early and confirming signals of business cycle peaks and troughs are produced sequentially on a current basis by a system of monitoring smoothed rates of change in the composite indexes of leading and coincident indicators evidence is offered that the system would have identified each of the peaks and troughs of u s business cycles since 1949 without undue delays and false alarms countercyclical policies activated and deactivated by such signals would have desirable timing properties

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

developing real option game models by mixing concepts from both game theoretic analysis and real options theory an investment decision in a competitive market can be seen as a game between firms as firms implicitly take into account other firms reactions to their own investment actions we review two decades of real option game models suggesting which critical problems have been solved by considering game theory and which significant problems have not been yet adequately addressed we provide some insights on the plausible empirical applications or shortfalls in applications to date and suggest some promising avenues for future research

persistence of technological leadership emerging technologies and incremental innovation in a model of competitive innovation i derive theoretical conditions for an entrant to displace the incumbent firm by innovating in an undeveloped substitute emerging technology the main result presents conditions on profitability and innovation speed that yield a markov perfect equilibrium in which the entrant pursues the emerging technology while the incumbent chooses to persist with the established technology and collect short run profits notably this result does not require the entrant s superiority to the incumbent for innovation finally when the model is calibrated to hard drive industry data its predictions are consistent with the observed outcomes

dynamic patent licensing abstract this paper shows one way a fixed fee can dominate an auction if no one knows whether the innovation will succeed or not when it appears and if its life exceeds the life of the patent then selling one licence by fixed fee maximizes inventor profit for some probabilities of success the reason is a nonlicensee is better off when a rival buys a license because this reveals the nature of the innovation if it succeeds the nonlicensee can adopt in the future after the patent has expired this expected future gain can outweigh the expected loss during the life of the patent

entry into the electricity market uncertainty competition and mothballing options the present paper analyzes the entry strategies into the electricity market of two firms that have power plants under price uncertainty and competition we consider the symmetric and asymmetric two firms which have either a thermal power plant or a nuclear power plant the differences between the thermal power plant and the nuclear power plant such as the cost structure and operational flexibility are modeled the threshold values of market entry are calculated for each firm with either the thermal power plant or the nuclear power plant as the leader or the follower we show the dependence of cost structures on entry thresholds of the leader and the follower into the electricity market for various market and cost conditions the diagrams of the leader are also shown

entry deterrence by timing rather than overinvestment in a strategic real options framework this paper examines a dynamic incumbent entrant framework with stochastic evolution of the inverse demand in which both the optimal timing of the investments and the capacity choices are explicitly considered we find that the incumbent invests earlier than the entrant and that entry deterrence is achieved through timing rather than through overinvestment this is because the incumbent invests earlier and in a smaller amount compared to a scenario without potential entry if on the other hand the size of the investment is exogenously given the investment order changes and the entrant invests before the incumbent does

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

trends and random walks in macroeconomic time series a re examination in their 1982 article c r nelson and c i plosser provided evidence supporting the existence of an autoregressive unit root in a variety of macroeconomic time series the author reexamines their evidence using small sample distributions for various unit root test statistics these distributions are calculated from specific null and alternative models including median unbiased models that correct for ols coefficient bias estimated from the data contrary to earlier assertions the null and alternative models of many macroeconomic series provide very different characterizations of persistence but cannot be distinguished with unit root tests copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

timing of technology adoption and product market competition abstract this paper examines how product market competition affects firms timing of adopting a new technology as well as whether the market provides sufficient adoption incentives it demonstrates that adoption dates differ not only among symmetric firms but also among markets with different market features more specifically technology adoption can occur earlier in a market with cournot competition than in a market with bertrand competition it can also occur earlier in a market in which goods are not too close substitutes therefore this paper shows that competition toughness does not always reinforce adoption incentives when goods are sufficiently differentiated adoption occurs later than is socially optimal

dynamic competition and intellectual property rights in a model of product development we study innovation timing and socially optimal intellectual property rights iprs when firms facing market uncertainty invest strategically in product development if demand growth and volatility are high attrition occurs and iprs should ensure the cost of imitation attains a lower bound we identify if demand growth and volatility are low then provided that the private imitation incentive is socially excessive iprs should set the cost of imitation high enough to induce preemption and possibly winner take all preemption moreover the welfare achieved with optimal iprs is then greater with endogenous innovation than if firm roles are predetermined illustrating the importance of fostering dynamic competition in extensions we show how firms benefit from open standards takeovers have ambiguous welfare effects and simple licensing schemes are welfare improving

e business usage across and within firms in the uk profitability externalities and policy using data from the third uk community innovation survey we model the usage of e business across and within firms in the uk in the year 2000 as a single observation upon an integrated process of inter and intra firm diffusion the intra firm dimension is a significant extension to standard analysis the model estimates indicate that the pattern of e business usage reflects the heterogeneity of firms in terms of size other innovative activity and labour force skills generating differences in the payoffs to use as well as market and non market intermediated externalities the policy implications of the findings are discussed c 2008 elsevier b v all rights reserved

firm scale and the endogenous timing of entry a choice between commitment and flexibility abstract this paper presents a model of stochastic oligopoly with demand uncertainty where firms endogenously choose entry timing we examine two extreme types of market structure and show that the equilibrium correspondence that connects them is continous with two identically sized firms there are symmetric cournot type equilibria where the probability of early entry declines with greater uncertainty and for low uncertainty two asymmetric equilibria with one large firm with a continuum of nonatomic firms there is a unique stackelberg equilibrium we conclude that the behavior of a dominant firm with a finite fringe can be approximated by stackelberg equilibrium journal of economic literatureclassification numbers d21 l11

a theory of endogenous commitment commitment is typically modelled by assigning to one of the players the ability to take an initial binding action the weakness of this approach is that the fundamental question of who has the opportunity to commit cannot be addressed as it is assumed this paper presents a framework in which commitment power arises endogenously from the fundamentals of the model we construct a finite dynamic game in which players are given the option to change their minds as often as they wish but pay a switching cost if they do so we show that for games with two players and two actions there is a unique subgame perfect equilibrium with a simple structure this equilibrium is independent of the order and timing of moves and is robust to other protocol specifications moreover despite the perfect information nature of the model and the costly switches strategic delays may arise in equilibrium the flexibility of the model allows us to apply it to various environments in particular we study an entry deterrence situation its equilibrium is intuitive and illustrative of how commitment power is endogenously determined copyright 2008 wiley blackwell

an information diffusion based model of oil futures price abstract inspired by the increasing evidence of financialization speculation in commodity pricing this paper constitutes a first attempt to build an information diffusion based asset pricing framework for the oil futures market with gradual information dissemination slowly decaying uncertainty about the asset s future fundamentals generates persistent conditional volatility and a drift in asset return volatility based proxies for information flows are proposed to examine empirically the asset pricing implications the results confirm a significant intertemporal relationship between return on the price of oil futures information diffusion and volatility components an important implication of our study is that the slow diffusion of information generates predictability in price dynamics a forecasting model is then constructed and tested in relation to our theory it is found that the lagged series of the pricing factors possess significant predicting power for returns

delay and information aggregation in stopping games with private information abstract we consider equilibrium timing decisions in a model with a large number of players and informational externalities the players have private information about a common payoff parameter that determines the optimal time to invest they learn from each other in real time by observing past investment decisions we develop new methods of analysis for such large games and we give a full characterization of symmetric equilibria we show that the equilibrium statistical inferences are based on an exponential learning model although the beliefs converge to truth learning takes place too late ex ante welfare is strictly between that without observational learning and that with full information

real options in strategic investment games between two asymmetric firms abstract this paper examines strategic investment games between two firms that compete for optimal entry in a project that generates uncertain revenue flows under asymmetry on both the sunk cost of investment and revenue flows of the two competing firms we investigate the value of real investment options and strategic interaction of investment decisions compared to earlier models that only allow for asymmetry on sunk cost our model demonstrates a richer set of strategic interactions of entry decisions we provide a complete characterization of pre emptive dominant and simultaneous equilibriums by analyzing the relative value of leader s and follower s optimal investment thresholds in a duopoly market with negative externalities a firm may reduce loss of real options value by selecting appropriate pre emptive entry when one firm has a dominant advantage over its competitor both the dominant firm and dominated firm enter at their respective leader s and follower s optimal thresholds when the pre emptive thresholds of both firms happen to coincide the two firms enter simultaneously under positive externalities firms do not compete to lead

does detrending matter for the determination of the reference cycle and the selection of turning points we examine the sensitivity of turning points classification to detrending and compare the implied cycles to those derived by nber or doc researchers two dating rules are considered turning point dates are broadly insensitive to detrending with one dating rule but not the other and many procedures generate false alarms and miss several common turning points with the latter one amplitude and duration properties are also sensitive detrending and dating rules the hodrick and prescott and a frequency domain filters are best in mimicing nber and doc cycles regardless of the dating rule used