asymmetric regulation of identical polluters in oligopoly models studies of optimal second best environmental regulation of identical polluting agents have invariably ignored potentially welfare improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset yet cost asymmetry between oligopoly firms may well give rise to private as well as social gains a trade off is demonstrated for the regulator between private costs savings and additional social costs when asymmetric treatment is allowed asymmetry is indeed optimal for a range of plausible parameter values further it is demonstrated that for a broad class of abatement cost functions there is scope for increasing welfare while keeping both total output and total emission constant some motivating policy issues are discussed in light of the results including international harmonization and global carbon dioxide reduction

why interest rates react to money announcements an explanation from the foreign exchange market abstract when the fed announces a money supply greater than had been expected interest rates rise why one explanation is that the market raises its estimate of the future rates of money growth and inflation and bids up nominal interest rates we offer contrary evidence on such days the dollar appreciates not depreciates an alternative explanation is that the market perceives the change in the money stock as a transitory fluctuation that the fed will reverse in the future the anticipated future tightening raises today s real interest rate causes a capital inflow and appreciates the dollar the result in fact observed

unequal treatment of identical agents in cournot equilibrium oligopoly models where prior actions by firms affect subsequent marginal costs have been useful in illuminating policy debates in areas such as antitrust regulation environmental protection and international competition we discuss properties of such models when a cournot equilibrium occurs at the second stage aggregate production costs strictly decline with no change in gross revenue or gross consumer surplus if the prior actions strictly increase the variance of marginal costs without changing the marginal cost sum therefore unless the cost of inducing second stage asymmetry more than offsets this reduction in production costs the private and social optima are asymmetric

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

us money announcements and covered interest parity the case of japan abstract this paper examines the effects of us money announcements on dollar and yen denominated securities in their respective onshore markets the effects are consdered over several periods corresponding to possible us and japanese policy regimes the consistency of the responses is further examined by testing whether the responses of dollar denominated securities yen denominated securities the spot yen dollar exchange rate and the forward yen dollar exchange rate violate covered interest parity given the results of previous studies the evidence suggests that restrictions on capital mobility in japan have not allowed complete international integration of japanese financial markets

bread and peace voting in u s presidential elections a simple bread and peace model shows that aggregate votes forpresident in postwar elections were determined entirely byweighted average growth of real disposable personal income percapita during the incumbent party s term and the cumulativenumbers of american military personnel killed in action as aresult of u s intervention in the korean and vietnamese civilwars the model is subjected to robustness tests against twenty two variations in functional form inspired by the extensiveliterature on presidential voting not one of these variationsadds value to the bread and peace model or significantly perturbsits coefficients

price effects inefficient environmental policy and windfall profits we examine conditions under which a new or tighter restriction on emissions from a competitive polluting industry creates price effects in adjacent markets price effects may arise when a quantity restriction on emissions causes output to fall and therefore output price to rise they may also arise when the required reduction in output causes the price of a polluting input to fall we model emissions as a fixed proportion of output limiting the possibilities for input substitutions the possibility of price effects exists whenever the set of regulated firms is large relative to its input or output markets a possibility that is expressly ruled out in montgomery s j econ theory 5 395 418 1972 paper two potential implications of price effects are explored one is an efficiency concern a welfare maximizing regulator who neglects price effects will require more than the optimal level of abatement the other is a distributional concern an emissions restriction might create windfall profits for the polluting industry

equilibrium pollution taxes in a two industry open economy abstract this paper involves strategic implications of environmental policy in case of two international oligopolies when countries take part in an international environmental agreement and have agreed on national target levels for a global pollutant this set up permits an analysis of the design of optimal emission taxes across domestic producers by differentiating taxes between industries with different abatement cost demand and number of domestic firms governments are in a position to raise national net foreign rents it is argued that a single national emission trading programme encompassing all domestic producers cannot provide the equivalent strategic policy design

do macro economic news announcements affect the volatility of foreign exchange rates some evidence from australia this paper investigates the role of australian macro economic announcement news on five major australian dollar aud exchange rates specifically the daily changes of the exchange rates are modelled to ascertain the existence and the nature of the news effects in the conditional mean and variance of the changes it is found that a higher than expected current account deficit and unemployment rate announcements depreciated the aud and an unexpectedly higher gdp growth announcement appreciated it current account deficit cpi and unemployment news announcements significantly raised the conditional volatility of the changes of the aud on the days of their announcements except for the bp aud for the cpi news and there is some evidence of retail sales news reducing it in general the evidence is consistent with a view that a release of new information creates uncertainty in the markets due to a lack of consensus on the effects of the particular news announcement and the necessary course of action in add

optimal asymmetric strategies in research joint ventures abstract this paper identifies an overlooked implication of models of research joint ventures initiated by d aspremont and jacquemin 1988 even though the aggregate r d cost of identical firms in a research joint venture would be lowest if they invested equally to reduce subsequent production costs nonetheless members may often enlarge their overall joint profit by making unequal investments such a strategy raises costs in the investment stage but may create more than offsetting benefits in the production stage since industry profits are larger there when the firms are of unequal size when the consideration leading to asymmetry prevails we find that in contrast to previous work a research joint venture can raise welfare even when there are no spillovers

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

domestic and international financial market responses to federal deficit announcements abstract this study examines the response of domestic and international financial variables to announced changes in federal deficit projections over the 1981 1994 period as observed in earlier studies rates on us treasury securities responded positively to announced increases in federal deficit projections new evidence shows that deficit effects are transmitted internationally with foreign long term interest rates also increasing in response to announced increases in us deficit projections the exchange value of the dollar tends to be positively related to announced changes in deficit projections but that result appears to be related to the degree of insulation of foreign financial markets from us financial markets finally the price of gold responded positively to announced changes in deficit projections taken together the results suggest that higher projected deficits raise real interest rates in part because of an increase in an inflation risk premium

the 1992 1994 and 1996 elections a comment and a forecast a model of the two way relationship between elections and the economy previously estimated on historical data for 1916 1988 is applied to the united states elections of 1992 1994 and 1996 the 1992 result was a surprise to the model since the economy had performed reasonably well that election year the midterm elections of 1994 were accurately forecast the republicans took control of congress not because of unusual circumstances but because of a normal midterm cycle president clinton s chances in 1996 look dim given the current modest growth rate and an electoral bias favoring republican presidential candidates but an alternative model keyed more to the voters choosing clinton to balance the republican congress gives him a reasonable chance of reelection

a model of the political economy of the united states we develop and test a model of joint determination of economic growth and national election results in the united states the formal model which combines developments in the rational choice analysis of the behavior of economic agents and voters leads to a system of equations in which the dependent variables are the growth rate and the vote shares in presidential and congressional elections our estimates support the theoretical claims that growth responds to unanticipated policy shifts and that voters use both on year and midterm elections to balance the two parties on the other hand we find no support for rational retrospective voting we do reconfirm in a fully simultaneous framework the naive retrospective voting literature s finding that the economy has a strong effect on presidential voting we find congressional elections unaffected by the economy except as transmitted by presidential coattails

money supply announcements interest rates and foreign exchange abstract this paper presents a test of the joint hypothesis that money supply announcements affect the real interest rate and that changes in the real interest rate affect the exchange rate in the short run the test results are consistent with the joint hypothesis for example it is found that announcement of an unexpected jump in the money supply is accompanied by an increase in interest rates and an appreciation of the dollar if the rise in interest rates was entirely due to higher inflationary expectations the dollar should not appreciate

the policy anticipation hypothesis and the expected inflation hypothesis some new evidence using index linked bonds abstract using price index linked and conventional bonds issued by the uk government estimates of expected inflation and the expected real interest rate are derived these estimates are employed to investigate the relationship between components of the nominal interest rate and surprise monetary change the empirical results support the expected inflation hypothesis rather than the policy anticipation hypothesis

two remarks on cournot equilibria abstract we describe two simple results in the theory of cournot equilibria the first has to do with the effect of taxation in a cournot industry and the second describes under what conditions a cournot equilibrium will implicity maximize an objective function these results are probably known but are not well known and they seem useful enough to be worth spelling out

economic performance and political outcomes an analysis of the turkish parliamentary and local election results between 1950 and 2004 the results of twenty five turkish elections for parliament and local administrations between 1950 and 2004 are studied turkish voters are found to take government s economic performance into account but not look back beyond one year furthermore they are found to hold the major incumbent party responsible for both growth and inflation but minor incumbent parties only for inflation also they appear to vote strategically especially in local and parliamentary by elections to diffuse power finally all parties exhibit a steady depreciation in their political capital while in office these conclusions are essentially in conformity with the literature on other countries

the effect of relative monetary surprises on spot exchange rates this paper examines the hypothetical relationship between us and canadian monetary surprises and the behaviour of us canadian spot exchange rates past studies have found that positive us monetary surprises were correlated with an appreciating us dollar in foreign exchange markets in this paper it is argued that monetary surprises in the us must be measured relative to foreign monetary innovation rather than in the conventional absolute sense when examining their impact on exchange markets rational investors consider expected returns and risk differentials in the us and local markets jointly in determining whether to be net buyers or sellers of us dollars the monetary actions of both the fed and the central bank operating in the local foreign economy will be considered in the foreign exchange market because of the close synchronization between the weekly money supply announcements in canada and the us it is possible to examine whether the relative or absolute us monetary surprise is more signifi

the political economy of pollution taxes in a small open economy abstract this paper develops a positive theory explaining pollution tax policy outcomes in a small open economy the equilibrium tax rate depends on lobby group membership the relative importance of lobbying activities and the tax elasticity of pollution the equilibrium properties are investigated the model is extended to incorporate pollution abatement and a pollution abatement subsidy we show that total pollution may be increasing in the pollution abatement subsidy rate this effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium

effects of us interest rates and news on the daily interest rates of a highly indebted emerging economy evidence from turkey it has been widely demonstrated that asset prices react sensitively to macroeconomic news releases both in the industrialized countries and emerging markets however there are contradicting results on the effects of changes in interest rates of industrialized countries on asset prices of emerging markets in heavily indebted economies in addition to these factors political news and announcements from international institutions that may increase or decrease concerns about debt sustainability can affect asset prices as well this potential notwithstanding there has been relatively limited empirical work on the effects of such variables the objective of this study is to quantify the impact of all of these factors on interest rates of a highly indebted emerging economy using daily post crisis data of the turkish economy we show that both good and bad political news international monetary fund announcements and european union related news significantly affected secondary market government securities yi

bilateral exchange rates and risk premia abstract the paper develops a theoretical model of the risk premium in a bilateral exchange rate representative agents in both countries are assumed to hold open positions in foreign exchange together with risky assets denominated in their own currencies also past surpluses in the current account of the balance of payments lead to net foreign asset positions which may partially be covered in the forward markets our two period mean variance model for optimizing investors is combined with standard assumption about the behavior of real exchange rates to give a reduced form equation for the discrepancies between spot rates and lagged forward rates the model is tested for the dollar dm dollar sterling and dollar yen exchange rates using monthly data for the period 1976 86 the null hypothesis of no risk premium is rejected for each of the currencies reported

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

when are nash equilibria independent of the distribution of agents characteristics author s bergstrom ted varian hal r abstract we present examples of nash equilibria that do not vary with the distribution of a parameter across agents and then offer a general theorem that characterizes this independence