why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

the structure of production technical change and productivity in a port the primary focus of this paper is the modelling and estimation of the structure of production technical change and total factor productivity tfp growth in a port special attention is given to the specification of technical change which is measured as the percent of containerization our findings indicate that technical change has been labour saving and capital using tfp has been growing from 1966 1983 at an annual average rate of 0 11 the main contribution to tfp growth has been containerization on the average 85 of the growth in tfp has been due to containerization and 15 of the growth has been due to economies of scale and output growth

social networks and new product choice to successfully market new products in a social network it is essential to identify influential individuals whose product recommendations influence the consumption choices of their peers in this study we use spatial econometric methods to determine how individuals revise their preferences for product attributes when exposed to product recommendations from peers and how different individuals who vary in their degree of network connectedness exert influence on the product choices of others we find evidence that consumers look to others for guidance from peers in their preference for subjective taste specific parameters but tend not to respond to peer price choices our spatial methods allow us to empirically determine the influence exerted by individual members on the consumption choices of other members of the social network we find that connected members of the social network are not always the most influential in revising the consumption choices of others our estimates reveal that network proximity explains only 8 8 of influence

liberalization quality and welfare removing the italian ver on japanese car exports the empirical evidence that evaluates ex post the effects of trade policy confirms the presumption well known in theory that quantitative barriers to trade have an impact on the average quality of exports yet in evaluating ex ante the effects of trade policy reform very few studies take into account the role of the induced change in quality the paper evaluates the effects of liberalization in the italian car market through a calibrated model where the choice of the quality of exports is made endogenous simulating the removal of the ver on japanese exports there are substantial gains from liberalization when only quantity effects are considered results change dramatically if quality effects are taken into account the downgrading in japanese exports entails a strong reduction in consumers gains

estimating demand for spatially differentiated firms with unobserved quantities and limited price data extending the circular city model i derive a pricing equation that identifies key structural parameters from one firm s data simulations indicate demand shifters and rotators can be distinguished cost parameters are imprecise and the likeliest specification error biases estimates toward zero

estimating markups and market conduct with multidimensional product attributes we demonstrate how to estimate a model of oligopoly pricing when products are multi dimensionally differentiated we provide an empirical counterpart to recent theoretical work on product differentiation using specifications informed by economic theory we estimate price cost margins for products differentiated in many dimensions

an empirical analysis of scale and scope economies and technical change in an irish multiproduct banking firm abstract in contrast to most empirical investigations of the efficiency of multiproduct financial institutions which either estimate scale and scope economies with a given state of technology or only analyse technical change in the presence of overall scale economies this study estimates overall scale economies product specific scale economies and scope economies in the presence of both neutral and non neutral technical change also in contrast to most other empirical studies in this area standard errors are computed for all relevant statistics the findings indicate diseconomies of scope overall diseconomies of scale product specific economies are decreasing for investments and increasing for loans in addition to substantial neutral technical change biased technical change is labour and capital saving and deposits using in character

competitive pricing behavior in the auto market a structural analysis in a competitive marketplace the effectiveness of any element of the marketing mix is determined not only by its absolute value but also by its relative value with respect to the competition for example the effectiveness of a price cut in increasing demand is critically related to competitors reaction to the price change managers therefore need to know the nature of competitive interactions among firms in this paper we take a theory driven empirical approach to gain a deeper understanding of the competitive pricing behavior in the u s auto market the ability motivation paradigm posits that a firm needs both the ability and the motivation to succeed in implementing a strategy boulding and staelin 1995 we use arguments from the game theoretic literature to understand firm motivation and abilities in different segments of the auto market we then combine these insights from the game theoretic literature and the ability motivation paradigm to develop hypotheses about competition in different segments of the u s auto market to test our hypotheses of competitive behavior we estimate a structural model that disentangles the competition effect from the demand and cost effects on prices the theory of repeated games predicts that firms with a long run profitability objective will try to sustain cooperative pricing behavior as a stable equilibrium when conditions permit for example markets with high concentration and stable market environments are favorable for sustaining cooperative behavior and therefore provide firms with the ability to cooperate the theory of switching costs suggests that in markets in which a firm s current customers tend to be loyal firms have a motivation to compete very aggressively for new customers recognizing the positive benefits of loyalty from the customer base in the long run as consumer loyalty in the market increases the gains from increasing market share by means of aggressive competitive behavior are more than offset by losses in profit margins firms therefore have the motivation to price cooperatively empirically we find aggressive behavior in the minicom pact and subcompact segments cooperative behavior in the compact and midsize segments and bertrand behavior in the full size segment these findings are consistent with our theory based hypotheses about competition in different segments in estimating a structural model of the auto market we address several methodological issues a particular difficulty is the large number of car models in the u s auto market existing studies have inferred competitive behavior only in markets with two to four products they also use relatively simple functional forms of demand to facilitate easy estimation functional forms of demand however impose structure on cross elasticities between products such structure when inappropriate can bias the estimates of competitive interaction we therefore use the random coefficients logit demand model to allow flexibility in cross elasticities we also use recent advances in new empirical industrial organization neio to extend structural estimation of competitive behavior to markets with a large number of products we use the simulation based estimation approach developed by berry et al 1995 to estimate our model a frequent criticism of the neio approach is that its focus on industry specific studies limits the generalizability of its findings in this study we retain the advantages of neio methods but partially address the issue of generalizability by analyzing competitive behavior in multiple segments within the auto industry to see whether there is a consistent pattern that can be explained by theory theoretical modelers can use our results to judge the appropriateness of their models in predicting competitive outcomes for the markets that they analyze a by product of our analysis is that we also get estimates of demand and cost apart from competitive interactions for the market managers can use these estimates to perform what if analysis they can answer questions about what prices to charge when a new product is introduced or when an existing product s characteristics are changed

voluntary export restraints on automobiles evaluating a trade policy the authors evaluate the voluntary export restraint that was initially placed on exports of automobiles from japan in 1981 they evaluate the impact this policy had on u s consumer welfare firm profits and foregone tariff revenue from its initiation through 1990

spatial multiproduct pricing empirical evidence on intra european duopoly airline markets this paper estimates a model of spatial multiproduct duopoly pricing when the location patterns differ across markets the theoretical model suggests that the neighbouring configuration yields less competitive nash prices than the interlaced configuration i apply this model to data for intra european duopoly airline markets the empirical results support the theoretical model since i find that fares are higher on intra european markets that exhibit neighbouring configurations in the time domain this result suggests that price competition is reduced when each airline operates on a specific segment of the timetable e g the first 12 hours of the day clearly this result has several implications for policy makers and or airport authorities in charge of awarding slots

market power and joint dominance in u k brewing market power and joint dominance are examined in u k brewing i assess unilateral and coordinated effects where the latter is equated with joint dominance and show how one can distinguish between the two econometrically the application makes use of two demand equations the nested logit of mcfadden 1978a and the distance metric of pinkse slade and brett 2002 the two equations yield very different predictions concerning elasticities and markups nevertheless although there is evidence of market power using either demand model that power is due entirely to unilateral effects in other words neither model uncovers evidence of coordinated effects tacit collusion

limited knowledge of demand and oligopoly equilibria abstract in a standard model of oligopoly with differentiated products the existence of an equilibrium at which the first order conditions for profit maximisation are simultaneously satisfied for all firms is proved and this is done without imposing any restrictions on the demand functions this is an equilibrium in the following sense although some firms may not necessarily be maximising their profits nevertheless if each firm s knowledge of demand is limited to the linear approximation of its own demand curve then it will believe that it is indeed maximising its profits

brands in motion how frictions shape multinational production following the 2016 leave vote in the referendum on uk membership in the eu and the election of donald trump trade agreements have entered a period of great instability to predict the impact of possible disruptions to existing arrangements requires counterfactual analysis that takes into account the complex set of factors influencing the production and marketing strategies of multinational corporations we estimate a model of multinational decision making in the car industry this model predicts the production reallocation and consumer surplus consequences of changes in tariffs and non tariff barriers induced by nafta termination brexit trans pacific and trans atlantic integration agreements

product line rivalry and market segmentation with an application to automobile optional engine pricing this paper addresses the questions whether and when the pricing practices on base products may differ from those of premium products sold with options or add ons various alternative models are considered a monopoly model a model of brand rivalry with full consumer information and a model of rivalry in which consumers are only well informed about base product prices only the brand rivalry model with limited consumer information predicts that premium products have larger percentage markups than base products provided that brand rivalry is sufficiently intense empirical evidence on base and premium product pricing in the automobile market is consistent with the limited information model and inconsistent with the other two models

the differentiation triangle the paper formalizes the observation that submarkets for high quality and low quality variants are markedly different from each other we study a simple model where variants of low quality cannot be horizontally differentiated whereas customers disagree about the value of variants in the high quality range we determine the outcome under price competition in the differentiation triangle with sequential entry when each firm can develop the vertical product line or decide to follow a niche strategy i e to develop only one variant

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

market structure and pricing strategy of china s automobile industry in this study using market level data on quantities prices and automobile characteristics from 1995 to 2001 we conduct a market analysis of the chinese automobile industry under imperfect competition on the demand side we apply a nested multinomial logit model to the national market share data in order to ascertain the demand features of china s automobile market on the supply side we assume bertrand behavior to uncover the markups set by automobile manufacturers our empirical results suggest that some large automobile manufacturers set high markups indicating their strong market power in china s automobile market however their declining markups in the late 1990 s imply a reduction in market control by the major producers

estimating the trans log cost function with insufficient observations abstract if the production technology is non homothetic efficient estimation of the trans log approximation requires joint estimation of the cost and share equations in this note we adopt the method of extraneous estimation to obtain a method of efficient joint estimation when there are insufficient observations on the cost equation

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

supermarket choice and supermarket competition in market equilibrium multi store firms are common in the retailing industry theory suggests that cross elasticities between stores of the same firm enhance market power to evaluate the importance of this effect in the u k supermarket industry we estimate a model of consumer choice and expenditure using three data sources profit margins for each chain a survey of consumer choices and a data set of store characteristics to permit plausible substitution patterns the utility model interacts consumer and store characteristics we measure market power by calculating the effect of merger and demerger on nash equilibrium prices demerger reduces the prices of the largest firms by between 2 and 3 8 depending on local concentration mergers between the largest firms lead to price increases up to 7 4

spatial price competition a semiparametric approach we investigate the nature of price competition among firms that produce differentiated products and compete in markets that are limited in extent we propose an instrumental variables series estimator for the matrix of cross price response coefficients demonstrate that our estimator is consistent and derive its asymptotic distribution our semiparametric approach allows us to discriminate among models of global competition in which all products compete with all others and local competition in which products compete only with their neighbors we apply our semiparametric estimator to data from u s wholesale gasoline markets and find that in this market competition is highly localized

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

product differentiation and oligopoly in international markets the case of the u s automobile industry this paper develops and estimates a model of the u s automobile industry on the demand side a discrete choice model is adopted that is estimated using micro data from the consumer expenditure survey the estimation results are used in conjunction with population weights to derive aggregate demand on the supply side the automobile industry is modelled as an oligopoly with product differentiation equilibrium is characterized by the first order conditions of the profit maximizing firms the estimation results are used in counterfactual simulations to investigate two trade policy issues the effects of the ver and exchange rate pass through

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

localized competition multimarket operation and collusive behavior this paper studies collusive behavior in a repeated oligopoly model with localized competition also reinterpreted as a model of multimarket operation private information about the rivals past actions naturally arises from these product market structures the resulting communication problems imply that firms should not adopt strategies with too severe punishments infinite grim punishments may be too severe for large discount factors the standard stick and carrot punishments from the perfect public information model are always too severe for all discount factors modified stick and carrot punishments can still be used though for a smaller range of discount factors than the standard stick and carrot punishments

the structure of technology in a multioutput branch banking firm we formulate and estimate a multioutput bank s cost function amenable for distinguishing between economies of scale and economies of network density we find significant returns to network density especially for smaller banks diseconomies of scale are found for the larger banks whereas the hypothesis of constant returns to scale could not be rejected for the smaller banks