multiple equilibria and deterrence in airline markets we use data from the us airline industry to estimate a model of entry deterrence we model the interaction among airlines as a repeated static game where we allow for a very general form of heterogeneity we consider a menu of three alternative games that describe the strategic interaction among airlines simultaneous and sequential move games and a sequential move game with deterrence investments following bernheim 1984 deterrence investments include all investment that raises barriers to entry and for which the incumbent must incur some investment costs we show that the profits that incumbents can make in the sequential game both with and without deterrence investments are larger than those that they can make if the game is played simultaneously thus we find that on average it is profitable for all firms to deter new entrants with the exception of united airlines remarkably united airlines was under bankruptcy protection during the period of analysis suggesting that its deterrence investments were not credible overall we find that the data is explained better by a model where firms make deterrence investments thus we cannot reject the hypothesis that incumbents deter entrants in the airline industry

not all rivals look alike estimating an equilibrium model of the release date timing game a very serious game of strategy is at work a cross between chess and chicken which studio distribution chiefs play year round but with increasing intensity during the summer and holiday release period new york times december 6 1999 hubris hubris if you only think about your own business you think i ve got a good story department i ve got a good marketing department we re going to go out and do this and you don t think that everybody else is thinking the same way in a given weekend in a year you ll have five movies open and there s certainly not enough people to go around joe roth chairman of walt disney studios answering a question about the large number of major movies opening within days of each other los angeles times december 31 1996 i introduction the number of americans who go to the movies varies dramatically over the course of the year and sometimes more than doubles within a period of two weeks at the same time the first week accounts for almost 40 of the box office revenues of the average movie the combination of these two facts makes the timing of launching a new movie a major focus of attention for distributors of movies with virtually no subsequent price competition the movie s release date is one of the main short run vehicles by which studios compete with each other in this paper i develop and estimate a model of discrete games which allows me to analyze this release date timing game most empirical industry studies focus on price and quantity competition taking other product characteristics as given in many industries however prices play a very small role and competition is channeled through other product attributes the entertainment industry is a prime example competition among movies television programs or broadway shows is on nonmonetary product attributes such as content advertising and time therefore understanding competition in such industries requires a model that endogenizes some of these product attributes especially those that can be changed in the short run this paper provides a framework in which release decisions can be endogenized and nonprice competition can be analyzed the absence of price competition is useful because it allows the focus of the analysis to be on the timing dimension without relying on assumptions about the nature of the postrelease price competition 1 together with the frequent timing decisions associated with different movies this makes the motion picture industry quite attractive for empirical analysis of the timing game this industry however is not the only example in which timing decisions play a central role similar timing considerations are also important in the release decisions of books compact disks and other new products as well as in the scheduling decisions of major events television programs flight schedules and promotional sales 2 when taking on a new project distributors of movies typically plan for a friday release which falls within a relatively short window of time carefully chosen to match the type of the movie this makes the choice of the release date a very discrete one the exact friday within the season is generally determined by a strategic timing game played among distributors before each release season distributors scramble to release their movies on big holiday weekends when demand is high when doing so each distributor tries to release on the attractive holiday weekend and at the same time to deter competitors from doing the same the extent to which distributors are successful in doing so largely depends on the quality of the movies at their disposal and on the way they can compete with movies released by other studios thus modeling this timing game must account for the asymmetries among movies and for the variation in these asymmetries across release seasons specifically i develop and estimate a sequential move game with private information i assume that the observed release date decisions are the equilibrium outcome of such a game

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

rising inequality as a cause of the present crisis the article argues that the economic imbalances that caused the present crisis should be thought of as the outcome of the interaction of the effects of financial deregulation with the macroeconomic effects of rising inequality in this sense rising inequality should be regarded as a root cause of the present crisis i identify four channels by which it has contributed to the crisis first rising inequality creates a downwards pressure on aggregate demand since poorer income groups have high marginal propensities to consume second international financial deregulation has allowed countries to run larger current account deficits and for longer time periods thus in reaction to potentially stagnant demand two growth models have emerged a debt led model and an export led model third in the debt led growth models higher inequality has led to higher household debt as working class families have tried to keep up with social consumption norms despite stagnating or falling real wages fourth rising inequality has increased the propensity to speculate as richer households tend to hold riskier financial assets than other groups the rise of hedge funds and of subprime derivatives in particular has been linked to rise of the super rich

basing point pricing and production concentration basing point pricing is a delivered price system in which the price quoted for delivery of a commodity is the sum of the price quoted at a predetermined basing point plus the cost of transportation from the basing point to the point of delivery whether or not the commodity is actually shipped from the basing point thus a seller who is not located at the base site absorbs freight for shipments toward the base point and charges phantom freight on shipments away from the base point basing point pricing has been widely practiced throughout the world for example testimony of the federal trade commission before the tnec i 94 i p 33 alleged that industries in the united states which then or previously followed basing point pricing included lumber iron and steel pig iron cement lime brick asphalt shingles and roofing window glass white lead metal lath building tile floor tile gypsum plaster bolts nuts and rivets cast iron soil pipe range boilers valves and fittings sewer pipes paper and paper products salt sugar corn derivatives industrial alcohol linseed oil fertilisers chemicals transportation equipment and power cable almost from its inception economists have generally considered basingpoint pricing to reflect a cartel or price leadership arrangement hoover i937 stigler i949 machlup i949 and such practices have been attacked under antitrust statutes for example aetna portland cement co vs ftc i 57 f 2nd 533 i946 triangle conduit cable co vs ftc i68 f 2nd i 75 7th cir i 948 cement institute vs ftc i57 f 2nd 533 i948 nonetheless basing point pricing remains prevalent particularly outside the united states opec has used a gulf based price plus transport costs to determine the delivered prices of crude oil to most places in the world haddock i982 p 290 the pricing of cement in great britain and steel in europe can be characterised as multibase point systems greenhut i987 recent attempts by for example haddock i982 to return to the theme that the basing point system could be competitive and desirable have been challenged by thisse and vives i988 and benson et al i990 on the basis of recent advances in the analysis of pricing policy given then that we assume basing point pricing to be a collusive device adopted by incumbent firms to impose some kind of price discipline on potential entrants the price leadership point referred to above important strategic and locational issues arise in particular a major concern of the early analysis of basing point pricing was the effect such a pricing policy would have on location choice of entrant firms

the impact of provincial marketing boards on price relations and pricing dynamics in the north american slaughter hog market canadian provincial hog marketing boards act as sales agents for hog producers the hypothesis that the introduction of marketing boards in alberta manitoba and saskatchewan between 1969 and 1972 created seller side market power is tested and supported their hog prices rose to levels comparable to ontario where a marketing board had been in place organized sellers can also influence pricing dynamics because of the linked spatial oligopsonistic nature of the hog packing industry cointegration tests and variance decompositions indicate that establishing boards in the surplus producing western provinces made them relatively less isolated from pricing innovations in deficit producing eastern canada

do public banks compete with private banks evidence from concentrated local markets in brazil we measure the competitive effect of public banks in concentrated local markets in brazil using branch location patterns we employ variation in market size number and identity of competitors to determine how the conduct of private banks is affected by the entry of a public bank we find that the market size needed to sustain a private bank branch is 35 larger if a private competitor is present and is not significantly affected by the presence of a public bank these results suggest that the presence of a public bank does not affect conduct of private banks

a retrospective look at the u s productivity growth resurgence it is widely recognized that information technology was critical to the dramatic acceleration of u s labor productivity growth in the mid 1990s this paper traces the evolution of productivity estimates to document how and when this perception emerged early studies concluded that information technology was relatively unimportant only after the massive information technology investment boom of the late 1990s did this investment and underlying productivity increases in the information technology producing sectors come to be identified as important sources of growth although information technology has diminished in significance since the dot com crash of 2000 and observed growth rates have slowed recently we project that private sector productivity growth will average around 2 4 percent per year for the next decade only moderately below the average of the post 1995 period

testing models with multiple equilibria by quantile methods this paper proposes a method for testing complementarities between explanatory and dependent variables in a large class of economic models the proposed test is based on the monotone comparative statics mcs property of equilibria our main result is that mcs produces testable implications on the small and large quantiles of the dependent variable despite the presence of multiple equilibria the key features of our approach are that i we work with a nonparametric structural model of a continuous dependent variable in which the unobservable is allowed to be correlated with the explanatory variable in a reasonably general way ii we do not require the structural function to be known or estimable iii we remain fairly agnostic on how an equilibrium is selected we illustrate the usefulness of our result for policy evaluation within berry levinsohn and pakes s 1999 model

an analytic history of delivered price litigation do courts properly distinguish rivalrous from collusive instances the federal judiciary s present cautious approach to delivered pricing is appropriate using court records and recent contributions to the economic literature this article evaluates the antitrust history of those practices delivered pricing can replace mill pricing naturally in some rivalrous settings but under special circumstances could be collusive thus delivered pricing has sometimes been adjudged a sherman act violation but only given other evidence of collusion for a time however the legal system threatened to treat delivered pricing as a per se violation of the clayton and federal trade commission acts that reflected poor economic understanding delivered pricing litigation seems to be a pure statutory phenomena our investigation has unearthed no cases under the common law of restraint of trade 1 since the advent of federal antitrust legislation however plaintiffs have relied on several distinct acts of congress to bring delivered pricing practices before the courts the earliest of those statutes the sherman act of 1890 forbad conspiracies in restraint of trade but courts typically have required explicit evidence before they will find a collusive conspiracy the mere use of a novel and poorly understood delivered pricing technique has not been enough relying on the clayton and federal trade commission acts of 1914 however lawyers formulated various claims that purported to draw an inference of collusion from the mere use of a particular delivered pricing schedule under those arguments no evidence of collusion was to be required several important precedents were set in reliance on such claims that we argue below is a leap of logic inconsistent with present economic understanding because the courts sometimes have accepted such theories but at other times have not the predictability of the law has been eroded to the cost of defendants and ultimately to the cost of consumers i the dawn of delivered pricing as an antitrust problem the history a number of industrial practices that became evident during the decades following the civil war were soon followed by statutory antitrust law which largely supplanted the common law antitrust precedents that had developed over the preceding centuries the speed and distance over which commercial orders could conveniently be placed and deliveries made steadily increased as local and regional transportation and communication networks expanded to form national systems that evolution enabled aggressive entrepreneurs to expand local markets into regional ones regional markets into national ones and national markets into world wide markets 2 in industries where technical scale economies were important the market expansion ultimately led to large scale production centers arising at particularly favorable transport hubs resource nodes or buyer concentrations concomitantly firms at less favorable sites either failed in the face of the stiffening long distance competition or found ways to thread themselves into small niches that had been left poorly served by the large scale production centers in the absence of significant differentiation of the physical product modern economic theory implies that it would be difficult for more than one firm to survive in a single small market away from the advantaged production centers in a predominantly large scale industry 3 so with no local competitors such remote enterprises as did survive would be able to price discriminate among nearby customers in that sense the surviving small remote firms would resemble the norm from an earlier day when markets were more commonly characterized by small dispersed spatial monopolies but the manufacturing costs of firms in the new highly competitive production centers coupled with the transport costs required for them to reach various points in a market determined the delivered prices that were available from the production center

do nonprofit and government nursing homes enter unprofitable markets i introduction nursing home care is provided in the united states by for profit private nonprofit and government organizations 1 these three organizational forms may compete directly in the same markets with either differentiated or nondifferentiated output or serve entirely separate markets an understanding of which organizational forms will provide the most effective care in a given set of circumstances requires knowledge of in what ways and to what extent the nature of health care provision varies across organizational forms in the context of a market economy in which profit maximizing firms are the default producers the natural question from a welfare perspective is whether consumer surplus would decline if government and nonprofit providers were replaced with for profit providers this study examines whether nonprofit and government nursing facilities expand access to nursing home care through an examination of patterns of nursing home entry in the rural united states i employ methods due to bresnahan and reiss 1990 to identify markets that are unlikely to be profitable for for profits to enter and then ask whether nonprofits and government nursing homes as a consequence of policies that lower their costs relative to for profits locate in these unprofitable markets equivalently if government and nonprofit nursing homes were to exit isolated markets could one reasonably expect that for profits would enter to replace them any evidence suggesting that they would not supports the argument that government and nonprofit nursing home care providers contribute positively to social welfare by expanding access to care in assessing potential differences in care provided by the different organizational forms the literature has focused largely on access and quality differentials two questions of interest naturally arise when studying access to care first is any care available in the market that is is there a nursing home second if care is available to some in the market is it available to all that is are nursing homes full or do they discriminate at the point of admission on the basis of wealth health status or other observable measures the second question has received more attention in the literature most studies of access to nursing home care for example reschovsky 1996 ettner 1993 and gertler 1992 presume the presence of a facility and ask to what extent prospective residents have access to the facility often focusing on individuals covered by medicaid relatively fewer focus on issues of access in isolated markets yu and bradford 1995 is an exception while this study limits its focus to the first question by analyzing isolated rural markets in the united states the methods used here in principle can be extended to focus on the second question as well in focusing on the question of access this analysis abstracts from potential differences in quality across organizational forms deferring to existing studies on the subject including grabowski and hirth 2003 hirth 1999 chou 2002 holtmann and ullmann 1991 and weisbrod 1988 the question of whether nonprofits enter unprofitable geographic markets has not been previously addressed in the nursing home industry or elsewhere the study closest in spirit to the present one is the analysis of nonprofit and for profit hospital location by norton and staiger 1994 in which the authors conclude that for profits tend to locate in better insured areas that is areas that are more likely to be more profitable than nonprofits do this study differs from norton and staiger in that it explicitly calculates market profitability for markets that for profits have entered and projects it for markets that for profits have not entered this analysis also complements the work of kapur and weisbrod 2000 by assessing whether government nursing homes serve unprofitable markets while their paper addressed the question of whether government nursing homes serve unprofitable patients

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

entry into regulated monopoly markets the development of a competitive fringe in the local telephone industry abstract incumbent firms operating in today s local telephone industry are beginning to face competition from new entrants using the dominant firm competitive fringe framework and a recently constructed panel data set of local telephone markets this paper provides an empirical analysis of the competitive transition underway in the u s local telephone industry of particular interest is the differential impact of economic regulation on the development of fringe competition in flocal telephone markets empirical results reveal that local telephone markets with price cap regulation have witnessed less net fringe entry and subsequently contain smaller competitive fringes during the time period studied these findings imply that the widespread adoption of price cap regulation by state public utility commissions has contributed to the slow development of local telephone competition to reconcile this surprising conclusion a political economy explanation that details how state regulators have benefited from

set identification in models with multiple equilibria we propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies it is shown that in the case of shapley regular normal form games the identified set is characterized by the inclusion of the true data distribution within the core of a choquet capacity which is interpreted as the generalized likelihood of the model in turn this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them in all normal form games the identified set is characterized in terms of the value of a submodular or convex optimization program efficient algorithms are then given and compared to check inclusion of a parameter in this identified set the latter are illustrated with family bargaining games and oligopoly entry games copyright 2011 oxford university press

technical change sectoral dislocation and barriers to labor mobility factors behind the great recession abstract the global financial and economic crisis which began in late 2007 great recession is the worst international crisis since 1929 great depression and still affects many countries this paper attempts to determine if the theory of extended crises presented by delli gatti et al 2012 is consistent with empirical evidence the analysis is carried out using two approaches the first part of the paper is purely descriptive and is dedicated to a comparison between structural differences and different patterns of development in six countries france germany italy spain uk and us using data on the major world economies klems and stan since 1970 we show that the fundamentals behind the extended crisis theory apply to these economies we focus particularly on italy germany and the us among large economies italy is one of the most affected and still not recovering even though the italian financial sector appeared to have been less exposed to the 2008 shock than other countries the crisis in italy could be directly connected to the failure of the italian economy to move to an economic system based on more skill intensive production in particular in the service sector as in the us the us financial sector was extremely exposed to the 2008 sub prime crisis but us economy recovered much faster than in many european countries germany is the leading european economy generally considered in european public debate as the example to be followed in the last part of the paper the analysis is broadened involving more countries in a panel analysis approach different specifications of panel probit logit models are presented in a first attempt to investigate the roles of both structural features and financial shock in explaining the extent of the crisis in different countries

investment and usage of new technologies evidence from a shared atm network when new technologies become available it is not only essential that firms have the correct investment incentives but often also that consumers make the proper usage decisions this paper studies investment and usage in a shared atm network be cause all banks coordinate their atm investment decisions there is no strategic but only a pure cost saving incentive to invest at the same time because retail fees for cash withdrawals are regulated to zero at both branches and atms consumers may not have the proper incentives to substitute their transactions from branches to the available atms we develop an empirical model of coordinated investment and cash withdrawal demand where banks choose the number of atms and consumers decide whether to withdraw cash at atms or branches we find that banks substantially underinvested in the shared atm network and thus provided too little geographic coverage this contrasts with earlier findings of strategic overinvestment in networks with partial incompatibility furthermore we find that consumer usage of the avail able atm network is too low because of the zero retail fees for cash withdrawals at branches a direct promotion of investment through subsidies or other means can improve welfare but the introduction of retail fees on cash withdrawals at branches would be more effective even if this does not encourage investment per se

competition in interrelated markets an empirical study abstract this paper studies competition in small concentrated and interrelated markets our data set consists of price information from 486 driving schools in 235 local markets in sweden which gives a large sample to test hypotheses on how market structure influences competition the results show that the price in a market is lower if prices in nearby markets are low and the distances to them are short as suggested in models of spatial competition moreover we find that prices in closely located markets are interdependent it is also shown that prices are increasing in firm concentration within a market as most theories of oligopoly predict

how store format choices and market structure affect agglomeration economies and competition among chain stores in the us supermarket industry this article studies how store format choices and market concentration affect agglomeration economies and competition among chain stores using data on supermarket chains in arizona georgia and il

the industrial organization of health care markets the u s health care sector is large and growing health care spending in 2011 amounted to 2 7 trillion and 18 percent of gdp approximately half of health care output is allocated via markets in this paper we analyze the industrial organization literature on health care markets focusing on the impact of competition on price quality and treatment decisions for health care providers and health insurers we conclude with a discussion of research opportunities for industrial organization economists including opportunities created by the u s patient protection and affordable care act

the nature of the firm and peculiarities of the corporation i must thank the independent social research foundation for generous funding of the research on which this paper draws

robotization and labour dislocation in the manufacturing sectors of oecd countries a panel var approach robots are the most important innovation which has affected the production process in the last three decades thanks to the latest advances in technology they have been able to perform an ever inc

competition in large markets this paper develops a simple and robust implication of free entry followed by competition without substantial strategic interactions increasing the number of consumers leaves the distributions of producers prices and other choices unchanged in many models featuring non trivial strategic considerations producers prices fall as their numbers increase hence examining the relationship between market size and producers actions provides a nonparametric tool for empirically discriminating between these distinct approaches to competition to illustrate its application i examine observations of restaurants seating capacities exit decisions and prices from 224 u s cities given factor prices and demographic variables increasing a city s size increases restaurants capacities decreases their exit rate and decreases their prices these results suggest that strategic considerations lie at the heart of restaurant pricing and turnover

on the basing point system comment in on the basing point system bruce benson melvin greenhut and george norman 1990 1 properly correct a misunderstanding by jacques thisse and xavier vives 1988 2 concerning my 1982 paper on basing point prices but bgn then take exception with several of the conclusions i had reached or that they thought i had reached although i have insufficient space to deal with all the points they raise i will address the most important ones in 1981 most economists believed that a model of profit maximizing basing point pricing would have to assume collusion my model as bgn seem to agree showed that it need not atomistic competition at one production site accompanied by local monpolies elsewhere may lead to basing point pricing and freight absorption without collusion 3 conversely tv showed that the practice as observed empirically will not arise if all production sites contain noncooperative local monopolies bgn establish yet another important theoretical result noncooperative oligopoly at one site could generate the f o b prices or f o b plus transport that in my model led local monopolies elsewhere to adopt freight absorbing basing point prices the three models would seem to be complements i a paradox

contestable markets an uprising in the theory of industry structure presents a transcript of the presidential address delivered at the 94th meeting of the american economic association on december 29 1981 discussion of developments in the theory of industry structure welfare attributes of contestable markets behavior characteristics of oligopoly equilibrium intertemporal vulnerability to inefficient entry ebsco

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

little innovation many jobs an econometric analysis of the italian labour productivity crisis during the past twenty years italy has realized changes in labour legislation leading to a decentralization of wage bargaining and increased flexibility in labour relations both these factors have helped to curb wage growth and to enhance employment growth but have also led to a crisis in italian labour productivity growth our estimates among 3 000 firms show that firms with high shares of flexible workers a high labour turnover and lower costs of labour relative to capital experienced significantly lower rates of labour productivity growth our findings raise doubts about the mainstream call for flexibilisation of european labour markets we argue hat the italian shift towards a low productive and labour intensive growth path is problematic gainst the background of an ageing population

entry industry growth and the microdynamics of industry supply entry is widely discussed but rarely subjected to empirical study this study develops a competitive theory of entry with primary focus on the relationship between entry and industry growth the main ingredients are adjustment costs to firms already in the industry and the distribution of fixed entry cost to potential entrants the theory suggests sufficient conditions under which the entry rate is an increasing convex function of the industry growth rate a regression model correcting for severe heteroscedasticity is applied to data from swedish manufacturing industries the results are consistent with the theoretical prediction for growth and other key variables expected to influence entry significantly

fetters of gold and paper we describe in this essay why the gold standard and the euro are extreme forms of fixed exchange rates and how these policies had their most potent effects in the worst peaceful economic periods in modern times while we are lucky to have avoided another catastrophe like the great depression in 2008 9 mainly by virtue of policy makers aggressive use of monetary and fiscal stimuli the world economy is still experiencing many difficulties as in the great depression this second round of problems stems from the prevalence of fixed exchange rates fixed exchange rates facilitate business and communication in good times but intensify problems when times are bad

the number of firms and production capacity in relation to market size many oligopoly theories predict a positive correlation between market size and the equilibrium number of firms and some also imply that competition is more intense in larger markets we test these predictions on a sample of driving schools in 250 swedish regional markets by estimating the relation between the number of firms production capacity and market size the number of firms increases less than proportionally with market size market size per capacity unit is smaller in large markets since firms produce a fairly homogenous good we argue that this is evidence that profits per capita is decreasing in market size

reply on comment to small firms and the merger mania research on performance differences between small and large firms is booming it emerges relatively separated from the mainstream industrial organization literature inspired by levy s comment on an earlier paper we try to bridge the gap between the two areas especially we screen non cooperative game theoretical models for predictions on performance differences most of them forecast higher profits for larger firms but there exist also some models which predict the opposite for very specific circumstances

market size fixed costs and horizontal concentration abstract a cournot oligopoly model is used to relate horizontal concentration to market size and fixed costs assuming that higher fixed costs yield a lower level of marginal costs a vertically and horizontally growing market size is shown to cause horizontal concentration to decline if there is free entry in an empirical test focusing on changes in total production the number of suppliers and the variance of market shares in 291 lines of business in west germany over the period 1978 1993 we find evidence for the existence of entry barriers

local financial development and growth using a unique sample of net domestic product data for districts in india i investigate the connection between banking sector development human capital and economic growth at the sub national level using disaggregate data avoids many of the omitted variable problems that plague cross country studies of the finance growth connection and facilitates an instrumentation strategy the findings show that the growth of many districts in india is financially constrained due to lack of banking sector development and that the relationship between finance and growth may be non linear for the districts in the sample moving from the 75th percentile of credit net domestic product to the 25th percentile implies an average loss of 4 percent in growth over the 1990s this indicates that the gains from increased banking sector outreach may be large the analysis shows that human capital deepening can reduce the effect of the financial constraint and help decouple growth from financial development in a district at the 25th literacy percentile the implied growth loss due to a constrained banking sector is twice as large as in a district at the 75th literacy percentile thus higher levels of human capital may activate alternative growth and production channels that are less finance intensive

structural change in advanced nations a new set of stylised facts we provide new evidence on patterns of structural change in advanced economies reconsidering the stylised facts put forward by kaldor 1963 kuznets 1971 and maddison 1980 since 1980 the services sector has overwhelmingly predominated in the economic activity of the european union japan and the us but there is substantial heterogeneity among services personal finance and business services have low productivity growth and increasing shares in employment and gdp by contrast shares of distribution services are constant and productivity growth is rapid we find that the labour share in value added is declining while the use of ict capital and skilled labour is increasing in all sectors and regions

cross country causes and consequences of the crisis an update abstract we update rose and spiegel forthcoming rose and spiegel 2010 and search for simple quantitative models of macroeconomic and financial indicators of the great recession of 2008 09 we use a cross country approach and examine a number of potential causes that have been found to be successful indicators of crisis intensity by other scholars we check a number of different indicators of crisis intensity and a variety of different country samples while countries with higher income and looser credit market regulation seemed to suffer worse crises we find few clear reliable indicators in the pre crisis data of the incidence of the great recession countries with current account surpluses seemed better insulated from slowdowns

on the basing point system reply david d haddock s 1990 contention is really that the jacques f thisse and xavier vives 1988 and the bruce l benson melvin l greenhut and george norman 1990 papers do not provide a collusive model that yields base point pricing bpp he apparently believes his paper 1982 established competitive bpp and suggests in 1990 that the collusive model and hard empirical work alone remain however no collusive model is required since it has already been well demonstrated in the literature on plant location and spatial price theory that firms at feasible distance locations from a production center would accept bpp only because they fear that to do otherwise would subject them to retaliatory actions by the larger more powerful firms at the production center moreover the paper by thisse vives 1988 henceforth tv and benson greenhut norman 1990 henceforth bgn indicated sufficiently that other systems would arise than haddock s competitive bpp especially since the restrictive conditions necessary for the latter militate against its use haddock in fact appears to accept these conditions in his references to arthur r burns proposals 1936 of nearbase point pricing nbpp hard empirical analysis would indeed be in order in determining the extent of nbpp not competitive bpp this paper responds to the above noted issues in three main sections section i briefly provides some historical data on the collusive uses of bpp for any future researcher who seeks empirically to uncover a

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

financial crisis and global imbalances its labour market origins and the aftermath the objective of this paper is to articulate how the 2007 09 economic crisis is rooted in the uneven income distribution and inequality caused by the current finance led model of growth the process of financialisation that took place in the 1980s in the usa and then in the european union was coupled with labour flexibility wage moderation and soaring profits the flexibility agenda of the labour market and the end of wage increases along with the contraction of indirect wages i e public social expenditure diminished workers purchasing power this was partly compensated with increased borrowing opportunities and the boom of credit consumption all of which helped workers to maintain unstable consumption capacity however in the long term unstable consumption patterns derived from precarious job creation job instability and poor wages have weakened aggregate demand hence labour market issues such as flexibility uneven income distribution poor wages and the financial crisis are two sides of the same coin both have a direct impact on the economic crisis and the current global imbalances copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

bank panics government guarantees and the long run size of the financial sector evidence from free banking america governments attempt to increase the confidence of financial market participants by making implicit or explicit guarantees of uncertain credibility confidence in these guarantees presumably alters the size of the financial sector but observing the long run consequences of failed guarantees is difficult we look to america s free banking era and compare the consequences of a broken guarantee during the indiana centered panic of 1854 to the panic of 1857 in which guarantees were honored our estimates of a model of endogenous market structure indicate substantial negative long run consequences to financial depth when panics cast doubt upon a government s ability to honor its guarantees

a dynamic model of entry and exit in a growing industry the potential demand in a new industry evolves over time demand is initially low but advertising by the industry s early entrants can speed up demand growth however there is intrinsic uncertainty of the demand level in each period and uncertainty of the demand evolution path which can be affected by the underlying economic environment we construct a dynamic model that features the stochastically and endogenously expanding demand of a new industry and we investigate the optimal entry and exit behavior of firms as the industry evolves we find that firms incentive to enter early depends critically on the cost that early entrants have to pay in developing the market when the cost is high and the benefit spills over to potential entrants firms have an incentive to wait and the probability of entry can increase with the number of incumbents under certain circumstances firms entry strategy is also influenced by the transition of economic states firms are more likely to enter under a state that shows the prospect of demand taking off soon we also find that in the early stage of an industry higher demand uncertainty can induce faster entry

competition and structure in serial supply chains with deterministic demand supply chains often consist of several tiers with different numbers of firms competing at each tier a major determinant of the structure of supply chains is the cost structure associated with the underlying manufacturing process in this paper we examine the impact of fixed and variable costs on the structure and competitiveness of supply chains with a serial structure and price sensitive linear deterministic demand the entry stage is modeled as a simultaneous game where the players take the outcomes of the subsequent post entry cournot competition into account in making their entry decisions we derive expressions for prices and production quantities as functions of the number of entrants at each tier of a multitier chain we characterize viability and stability of supply chain structures and show using lattice arguments that there is always an equilibrium structure in pure strategies in the entry game finally we examine the effects of vertical integration in the two tier case altogether the paper provides a framework for comparing a variety of supply chain structures and for studying how they are affected by cost structures and by the number of entrants throughout the chain

on the strategic choice of spatial price policy the strategic incentives with respect to the choice of price policy in spatial competition are analyzed in a duopoly model price discrimination emerges as the unique equilibriu m outcome in games with either simultaneous choice of policy and pric e or sequential choice where firms may commit first to uniform mill p ricing before the actual market stage nevertheless profits may be h igher with uniform pricing the authors models are applied to analyz e some common business practices that arise in geographical pricing like the basing point system and in the pricing of varieties or opti ons from a base product in a product differentiation context copyright 1988 by american economic association

prices capacity and the entry decision a conditional logit analysis an understanding of what potential entrants consider in reaching an entry decision is important in assessing the validity of some rather fundamental hypotheses concerning the behavior of firms faced with an entry threat the reason is that such hypotheses are based on implicit assumptions concerning what influences the decisions of potential entrants if for example established firms deter entry by adjusting their prices as suggested by the limit pricing hypothesis then it must be true that prices in fact influence potential entrants 1 similarly if firms build capacity to deter entry as suggested recently by spence 8 then it must be true that observed capacity in fact influences the entry decision hence an examination of whether these considerations are important to potential entrants can be interpreted as a test of a necessary though not sufficient condition for the existence of these types of behavior on the part of established firms despite the significance of this question as a foundation upon which a number of important hypotheses concerning firm behavior rest few studies have attempted to estimate the relationship between the relevant market characteristics and the behavior of identifiable potential entrants the reasons for this are not hard to isolate price data of the type required is not generally available for most industries leaving untested the frequently debated relationship between pre entry market price and the entry decision also in the interindustry context in which empirical resesarch is usually conducted it is virtually impossible to account systematically for the differing levels of knowledge and experience among potential entrants and such differences may significantly influence the relative attractiveness of markets for entry thus any attempt to estimate the relationship between market characteristics and the entry decisions of individual potential entrants in the interindustry context will founder on the inability to account for the influence of knowledge and experience on the attractiveness of the potential entrant s choices this paper circumvents these problems by examining the relationship between market

mobility constraints productivity trends and extended crises abstract in this paper we propose an interpretation of the current global financial crisis which emphasizes sectoral dislocation following localized technical change in the presence of barriers to labor mobility this tale is reminiscent of a similar tale concerning the great depression in the 30s technical change was localized in agriculture where income fell because rising productivity could not be offset by a shrinking labor force due to the costs of moving out of agriculture for unemployed workers inelastic demand for agricultural output meant that as output increased income declined as individual incomes fell below the level necessary to finance the transition to manufacturing excess labor became trapped in agriculture reducing wages and exacerbating the rise in output shrinking incomes in agriculture reverberated on the other sectors mainly manufacturing causing a large depression nowadays it is manufacturing that plays the role of epicenter of technical change falling incomes in manufacturing yield a lack of demand for goods produced in the rest of the economy namely the service sector this may be the deep rooted cause of the long lasting slump and the painfully slow recovery