cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

political instability corruption and policy formation the case of environmental policy abstract this paper develops a theory of environmental policy formation taking into consideration the degree of corruptibility and political turbulence the predictions that emerge are that the interaction between the two variables is important political instability has a negative effect on the stringency of environmental regulations if the level of corruption is low but a positive effect when the degree of corruption is high corruption reduces the stringency of environmental regulations but the effect disappears as political instability increases the empirical findings are fully consistent with the predictions of the model

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

determinants and welfare of the environmental regulatory stringency before and after regulatory capture abstract the enforcement of environmental regulation relies on the willingness and capacity of the regulator the willingness could be disabled by regulatory capture which is widespread and that how many public resources should be invested in environmental regulation is always debatable we develop a 3 stage game to analyze the nonlinear effects and mechanism of regulatory capture and regulatory capacity on environmental regulatory welfare our model suggests that the importance of the regional economy to government the firm size and the customer s disutility on pollution emissions will influence the possibility of regulatory capture furthermore the dynamic research suggests that when the regulatory capture is controlled with the improvement of governmental regulatory capacity the regulator s and customer s welfare continues to grow until the capacity achieves a threshold beyond the threshold the regulatory capacity will be redundant

on the role of input and output spillovers when r d projects are risky abstract this paper analyzes the impact of input and output spillovers on the expected effective cost reductions in a two stage model of r d where all r d projects are risky it is shown that relative to the deterministic case output spillovers tend to reduce expected cost reductions whereas input spillovers tend to increase investment in r d and hence expected cost reductions in particular the relations between cost reductions in the presence of input and output spillovers known from deterministic models may be reversed under certain parameter constellations

public support for technical advance the role of firm size this article develops a model that shows how firm size that most important firm level correlate of r d moderates the impact of demand and supply side government policies that support r d the most robust result is that government support to product r d will elicit less of a response the greater is average firm size within the industry this result suggests for example that government support to upstream research in the life sciences will stimulate less downstream industrial investment in the development of new drugs to the extent that the firms in the downstream industry are larger the model also predicts that where entry is less encumbered we can expect demand side subsidies to elicit greater product r d within an industry thus to the degree that for example barriers to entering the solar panel manufacturing industry are lower we should expect r d on solar panel development to rise more in response to tax credits for their purchase

endogenous efficiency gains from mergers this article analyzes endogenous efficiency gains from mergers it considers oligopolistic homogeneous good markets and duopolistic and triopolistic markets under product differentiation pd quantity and price competition in a two stage game firms invest in cost reducing innovation with and without mergers and then compete in output prices it is found that in homogeneous good markets all possible mergers generate efficiency gains and that these are most significant when r d spillovers are very low or very high efficiency gains increase with the number of insiders and generally decrease with the number of outsiders with pd in most cases the merger generates efficiency gains when spillovers and or pd are sufficiently high with pd efficiency gains increase with spillovers but may increase or decrease with the level of pd the implications of the results for the relationship between competition and innovation outputs and for merger policy are discussed

concubinage or marriage informal and formal cooperations for innovation based on a sample of german inno innovating firms that contains information on formal and informal innovation cooperation between customers and suppliers we state that firms perceive informal cooperation as being more important than formal cooperation modes we then investigate the determinants of firms decisions to engage into the respective cooperation modes in line with previous empirical work we do not find much empirical evidence for the relevance of incoming spillovers in addition our results suggest that this finding holds as well for informal cooperations a firms ability to protect its proprietary innovations however seems to be a key determinant of formal as well as informal cooperations furthermore absorptive capacity and the organizational structure of in house r d play an important role another relevant driver of vertical cooperations are the innovation dynamics at the he industry level firms who operate an r d department and firms who are involved in costly r d projects tend to cooperate formally rather than informally

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

endogenous r d symmetry in linear duopoly with one way spillovers a duopoly model of cost reducing r d cournot competition is extended to study the endogenous timing of r d strategic investment under the assumption that r d spillovers only flow from the r d leader to the follower sequential and simultaneous play at the r d stage are compared in order to assess the role of technological externalities in stimulating or attenuating endogenous firm asymmetry the only timing structure of the r d stage sustainable as subgame perfect nash equilibrium involves simultaneous play and zero spillovers

access price regulation investment and entry in telecommunications abstract we consider a model with a vertically integrated monopolist network provider who faces rival operators in the retail market we examine the network operator s incentives for infrastructure investment we find that investments are below the social optimum even when there is no regulation and access price regulation further reduces investment incentives we show that the underinvestment problem may have negative effects on the viability of competition access price regulation does not necessarily reduce the likelihood of foreclosure and in the presence of regulation rivals are most likely to be foreclosed when they would bring highest benefits to consumers

an experimental analysis of dynamic incentives to share knowledge knowledge sharing arrangements are an important part of the innovation process as they help firms acquire technological capabilities shorten development time and spread risk and cost a question central to the study of knowledge sharing arrangements is the impact of competition on cooperation while cooperation has the benefit of avoiding duplication it may have an adverse effect on the competitive advantage of a leading firm hence firms face a difficult challenge during the innovation process while deciding which components of it if any to carry out in collaboration with other firms this paper reports the results of controlled laboratory experiments which identify how the decision to form research joint ventures changes with both relative progress during the r d process and the intensity of product market competition the design is based on a modified version of erkal and minehart optimal sharing strategies in dynamic games of research and development research paper 1038 university of melbourne department of economics 2008 the results indicate that if expected profits are such that the lagging firms always stay in the race cooperation unravels as firms move forward in the discovery process and as monopoly profits become more attractive these results are generally consistent with the theoretical predictions jel c91 l24 o30 d81

the effects of environmental regulation and technical progress on co2 kuznets curve an evidence from china based on environmental kuznets curve theory a panel data model which takes environmental regulation and technical progress as its moderating factors was developed to analyse the institutional and technical factors that affect the path of low carbon economic development the results indicated that there was a co2 emission kuznets curve seen in china environmental regulation had a significant moderating effect on the curve and the inflection of co2 emissions could come substantially earlier under stricter environmental regulation meanwhile the impact of technical progress on the low carbon economic development path had a longer hysteresis effect but restrained co2 emission during its increasing stage and accelerated its downward trend during the decreasing stage which was conducive to emission reduction strict environmental regulation could force the high carbon emitting industries to transfer from the eastern regions to the central or the western regions of china which would make the co2 kuznets curve higher in its increasing stage and lower in its decreasing stage than that under looser regulation furthermore energy efficiency energy structure and industrial structure exerted a significant direct impact on co2 emissions we should consider the above factors as essential in the quest for low carbon economic development

racing to the bottom or to the top decentralization revenue pressures and governance reform in china summary china s decentralization has been praised for promoting inter jurisdictional competition that incentivizes local officials to promote economic development the downside of decentralization is that it enables these same local authorities to slow or block implementation of centrally mandated governance reforms especially when these may negatively affect local development goals we suggest that china s fiscal system and promotion system have created mismatched incentives that encourage cash strapped local authorities to disregard central governance reforms specifically we show that cities with weaker revenue bases were slower to implement new centrally mandated environmental transparency regulations additional evidence points to a bifurcation in development strategies in fiscally strong cities increased foreign investment leads to greater compliance in fiscally weak cities foreign investment is associated with decreased disclosure suggesting they aim to promote local development by becoming pollution havens similarly high levels of pollution induce fiscally strong cities to increase pollution disclosures while the opposite holds in fiscally weak cities these findings imply that mismatched decentralization policies can undermine other important governance reforms even ones that might be expected to be complementary to decentralizing initiatives

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

farsighted r d networks we analyze the formation of bilateral r d collaborations in an oligopoly when each firm benefits from the research done by other firms it is connected to in contrast to myopic stability farsighted stability leads to r d networks consisting of two minimally connected components with the largest one comprising three quarters of firms

dynamic r d with spillovers competition vs cooperation abstract we investigate dynamic r d for process innovation in a cournot duopoly where firms may either undertake independent ventures or form a cartel for cost reducing r d investments by comparing the profit and welfare performances of the two settings in steady state we show that private and social incentives towards r d cooperation coincide for all admissible levels of the technological spillovers characterising innovative activity we also evaluate the whole history of the dynamic system along the transition to the steady state showing that the conflict between private and social incentives does not necessarily emerge

cooperative and noncooperative r d in an oligopoly with spillovers this paper examines the positive and normative effects of cooperative r d whereby member firms commit themselves to the joint profit maximizing level of r d in a precompetitive stage but remain fierce competitors in the product market vis a vis noncooperative r d socially first best r d and socially second best r d in the presence of sufficiently large r d spillovers neither noncooperative nor cooperative equilibria achieve even second best r d levels in the absence of spillover effects however while the cooperative r d level remains socially insufficient the noncooperative level may overshoot first and second best levels of r d copyright 1992 by american economic association

regional decentralization and fiscal incentives federalism chinese style abstract aligning the interests of local governments with market development is an important issue for developing and transition economies using a panel data set from china we investigate the relationship between provincial government s fiscal incentives and provincial market development we report three empirical findings first we find that during the period of fiscal contracting system the discrepancy between ex ante contracts and ex post implementation was relatively small suggesting that the fiscal contracts were credible second we find a much higher correlation about four times between the provincial government s budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform third we find that stronger ex ante fiscal incentives measured by the contractual marginal retention rate of the provincial government in its budgetary revenue are associated with faster development of the non state sector as well as more reforms in the state sector in the provincial economy this holds even when we control for the conventional measure of fiscal decentralization finally we compare federalism chinese style to federalism russian style

separation of regulators against collusive behavior we show that the separation of powers in regulation may act as a commitment against the threat of regulatory capture splitting regulatory tasks and monitoring technologies among several nonbenevolent regulators may reduce their discretion in engaging in socially wasteful activities when regulators make collusive offers that are accepted by the agent whatever his characteristics competition between regulators relaxes collusion proofness constraints and improves social welfare this result is robust to different specifications of the agent s preferences and to the timing of the game as long as one insists on safe side contracting offers we also discuss how separation affects both allocative efficiency and the distribution of rents in the economy

hedging price risk with options and futures for the competitive firm with production flexibility when some input decisions can be made after price is realized separation between production and hedging decisions still holds only under limited circumstances under the assumption of a restricted profit function that is quadratic in price the optimal futures hedge of a risk averse firm equals expected output and a short straddle position is desirable assuming that futures and options prices are unbiased in this case the use of options not only raises expected utility by reducing income risk but also affects the firm s input decisions in general copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on additive spillovers and returns to scale in r d abstract this paper explores economically meaningful forms of cost functions for process research and development in the presence of imperfect appropriability of inventive output we propose as a central criterion to be satisfied by the knowledge production process that a given r d investment should always produce more cost reduction if devoted to one lab rather than two independent labs operated under natural spillovers with input spillovers this postulate is broadly satisfied however with output spillovers this is generally not the case for r d technologies having decreasing returns to scale we identify economically plausible restrictions on the size of spillovers and on the properties of the r d cost function so as to bring about compatibility with the above postulate some empirical evidence in support of both the criterion and of its theoretical implications is discussed

research note channel structure with knowledge spillovers we study two main questions in this paper 1 how do spillovers of knowledge created by manufacturers investments in process innovation affect channel structure and effort investment incentives 2 what are the interactions between organizational incentives to form joint ventures and strategic alliances with competitors and coordinate decisions vertically with downstream channel members we focus on situations where spillovers are involuntary firms innovative activities are nonoverlapping and firms benefit directly from the results of competitors innovations under these conditions we find that spillovers in process knowledge increase the likelihood of observing decentralized channel structures surprisingly decentralized manufacturers invest more in process innovation than perfectly coordinated manufacturers do when spillovers are large moreover in industries where large spillovers exist horizontal cooperation among manufacturers induces higher levels of process innovation investments than channel coordination does from a public policy perspective however the desirability of such cooperative arrangements among competitors depends on channel structure joint ventures among decentralized manufacturers are more likely to meet the regulators criteria of raising effort investments than cooperation among integrated manufacturers would be investment incentives are best provided when firms share their process knowledge and are buffered from subsequent price competition by independent retailers

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

noncooperative versus cooperative r d with endogenous spillover rates this paper deals with a general version of a two stage model of r d and product market competition we provide a thorough generalization of previous results on the comparative performance of noncooperative and cooperative r d dispensing in particular with ex post firm symmetry and linear demand assumptions we also characterize the structure of profit maximizing r d cartels where firms competing in a product market jointly decide r d expenditure as well as internal spillover levels we establish the firms would essentially always prefer extremal spillovers and within the context of a standard specification derive conditions for the optimality of minimal spillover

cooperative and noncooperative r d in duopoly with spillovers comment claude d aspremont and alexis jacquemin 1988 employ a simple yet elegant symmetric duopoly model of r d and spillovers to compare several equilibrium concepts these concepts include 1 the two stage noncooperative solution 2 the two stage mixed game 3 the two stage fully cooperative solution 2 and 4 the social planner s optimum 3 for each of the cases stated above they computed the equilibrium levels of output q q1 q2 and r d xl x2 x and the required second order conditions they report i for large spillovers i e b 0 5 x x x and q q q q and ii for small spillovers i e 3 x 2x x and q q q q where x denotes a firm s r d level q denotes total industry output denotes the social optimum denotes the fully cooperative model the noncooperative two stage case and the mixed game 3 is the spillover parameter here we show that comparing the pure cooperative and the pure noncooperative solutions as defined by d aspremont and jacquemin is only meaningful when the noncooperative solution is stable that is when spillovers are not too small we find that for very small spillovers in our example this occurs when 3 0 17 the d aspremont jacquemin observation holds because the noncooperative model is unstable the importance of this result rests on the fact that even though the output reaction functions cross correctly when 3 0 17 the r d reaction functions do not when 0 17 0 41 stability obtains but r d levels are higher in the noncooperative case than the fully cooperative one for large spillovers the d aspremont jacquemin result is confirmed moreover we find that the introduction of spillovers in the case of the noncooperative model tends to promote stability in the case of the cooperative model however as the level of spillovers is increased an equilibrium ceases to exist

firm size government capacity and regional environmental regulation theoretical analysis and empirical evidence from china abstract the size and number of firms in a region represent key characteristics of that regional economic ecosystem but few studies have linked such characteristics with the stringency of local environmental regulation in this study we discuss the effects of local firm scale on environmental regulation and its mechanism and the optimal strategic choices theoretically and empirically for environmental regulation in regions with different firm scale we find that when government capacity is insufficient regional environmental regulation will be relatively more stringent when dealing with fewer but larger firms because of the government scale effect when government capacity is sufficient firm size has no influence on environmental regulation our results are robust and offer insights for government decision makers to improve local environmental regulation efficiency

equilibrium and optimal size of a research joint venture in an oligopoly with spillovers this paper analyzes a simple oligopoly model with information spillovers firms spend on r d to affect their costs of production the main finding is that depending on the magnitude of the spillover the market may not provide enough incentives for the optimum degree of cooperation to take place it is shown that the equilibrium size of a research joint venture is usually less than the optimum size which requires all firms to participate in the research joint venture the policy implications of this result are that there should be encouragement for firms competing in high technology industries to form industry wide cooperative agreements copyright 1995 by blackwell publishing ltd

modelling imperfectly appropriable r d via spillovers abstract we provide an extensive comparison of the well known r d models of d aspremont jacquemin and kamien muller zang exposing full or partial conflict in key conclusions and policy prescriptions using a mix of formal and or intuitive criteria we argue that the first model is of questionable validity for large spillover values the latter being characterized by jointly increasing returns to scale in the r d process an argument leading to equivalence between the two r d processes but not to agreement on some key conclusions is exposited in conclusion the models emerge as fundamentally different although a unilateral shift in the cost function of the first leads to agreement in all equilibrium outcomes

r d induced industry polarization and shake outs abstract we consider the standard two stage game of r d and cournot competition with ex ante identical firms but depart from the literature in assuming that r d is characterized by mildly instead of strongly decreasing returns to scale we establish that only extreme r d levels are possible at equilibrium and that for a broad range of parameters equilibria are asymmetric in r d levels possibly leading one firm to endogenously exit this provides a simple link between returns to scale in r d and industry polarization including shake outs a novelty is that exit may be triggered by positive opportunities in a strategic setting given the original nature of our r d equilibrium a complete welfare analysis is conducted including a possible role for r d subsidies

why do firms engage in environmental management an empirical study in china abstract there are increasing pressures being put on firms from a number of different sources such as governmental regulation community participation and market demand to engage firms in environmental initiatives these factors play different roles at various development periods government regulation was the major pressure initially however community participation and market demand have become more and more important thus a better understanding of the determinant factors that play a role in engaging firms to take environmental management initiatives may help policy makers develop more effective environmental policies using data collected from 89 firms in wujin county of jiangsu province china this paper developed an index system to evaluate the corporate environmental management performance furthermore we used econometric methodology to identify the main factors that probably shape corporate environmental management performance including both external pressures and firm characteristics the results showed that pressures from supply chain customers and communities played positive roles in engaging firms to improve environmental management performance however the pressure from the regulatory system did not implicate positive effect on environmental management performance when basic compliance is not an issue in the region anymore the results also showed that firms with larger scale will be more active in engaging in environmental management initiatives finally our results suggest that a regulation s stimulation may be reduced as long as firms have complied with requirements of local environmental standards and other environmental laws b policy makers should pay more attention to market and information instruments c more financial and technical support should be provided to encourage small and medium sized enterprises smes to improve environmental performance

firm heterogeneity imitation and the incentives for cost reducing r d effort i develop and test a model of strategic r d investments where innovating and non innovating firms compete on the basis of their ability to reduce costs and imitate rivals i find that a larger proportion of non innovating rivals stimulates cost reducing investments and attenuates the disincentive effect of imitation by innovators on firm level r d key model properties are verified by estimating the first order condition for the optimal choice of r d using the 1994 carnegie mellon survey of u s industrial r d results also suggest that r d and size are simultaneously determined with r d being proportional to size as predicted by the theoretical model

analysis of the benefits and challenges of implementing environmental regulatory programmes for mining tanzania case study abstract all mining activities in tanzania are regulated according to the mining act 1998 and associated regulations the enactment of the 1998 mining legislation and thus the repeal of the 1979 act was a result of the overall restructuring of the country s economy in order to encourage the private sector to take a leading role in economic development the government identified priority segments of the economy which included the mining sector with the mining sector identified as one of the priority sectors it was thought imperative to put in place a transparent and competitive legal and regulatory framework an effective and conducive fiscal regime and an environmental framework a new mining act which incorporated the mining legal and regulatory fiscal and environmental frameworks was enacted in august 1998 the act was then equipped with the regulations which provide clear guidance for administration and enforcement since the enactment of tanzania s new mining legislation the mineral sector has been the fastest growing sector of the economy which has posed numerous managerial challenges this paper discusses the benefits of the current environmental legislation and the challenges facing the government in meeting the demands of a rapidly expanding mining sector the paper examines the institutional set up its capacity to execute tasks financial technical working facilities etc the roles played by related institutions in managing the mining sector and the interaction between mining and other sectors of the economy

analysis of existing building energy saving policies in japan and china building sector accounts for a large percentage of the total national energy consumption in most of the countries thus it is critical to formulate and implement appropriate energy saving policies in the building sector this paper focuses on energy saving policies in the building sector by conducting a comparative study between japan and china the exiting building energy saving bes policies actual effectiveness of policy implementation and obstacles to the effective policy implementation are compared in sequence related policies are categorized into four groups control and regulatory instruments economic market based instruments fiscal instruments and information and voluntary actions policy effect analysis identifies that bes policies have promoted building energy saving in both japan and china obstacles comparison reveals that japan and china shared many obstacles including high transaction costs and lack of applicable methodology compared with japan china is suffering more obstacles such as inefficient enforcement insufficient levels of information and awareness and immature financial regulation system based on the previous findings common suggestions for overcoming these obstacles of bes policies in japan and china are presented such as the accurate methods of baseline identification and emission accountings innovative incentives and more capacity building activities distinct suggestions for japan and china are also added by considering their own situations so that both countries can further improve their bes policies

cooperation spillovers and price competition in experimental markets i introduction both competition and cooperation are important for the successful functioning of many economic systems for example firms compete in markets but they also cooperate with one another through arrangements such as research joint ventures lobbying cooperative marketing agreements and strategic alliances in this paper we use experiments to examine how competitive interactions affect agents propensity to cooperate we are interested in studying spillovers that may involve cooperation in one domain such as a research joint venture and competition in another such as in a market 1 cooperation could weaken competition perhaps promoting collusion or market competition could reduce incentives for non market cooperation these behavioral spillovers could go in either direction they are distinct from another type of spillover through knowledge externalities that occur in research and development r d when the innovator cannot fully appropriate the gains to innovation leading potentially to a socially inefficient level of research debondt 1996 2 as discussed below behavioral spillovers have been shown in experiments to increase cooperation in otherwise competitive environments for example through establishing cooperative precedents a large body of theoretical research has focused on firms cooperating in research joint ventures and how this impacts competition in output markets for example cooper and ross 2009 examine the mechanism by which agreements to cooperate in one market can have negative effects on competition in other markets even in situations when these markets are not linked via costs or demand cabral 2000 shows that product market prices are affected by r d agreements between firms caloghirou ioannides and vonortas 2003 lambertini poddar and sasaki 2003 and poyago theotoky 2007 also discuss the impact of forming research joint ventures on product markets and cartel formation 3 empirical work using field data has provided creative indirect evidence on the collusive potential of research joint ventures by exploiting natural policy experiments although the extent of this evidence is limited goeree and helland 2010 for example show that research joint ventures facilitate collusion because they became less popular following an enforcement policy change leniency that made collusion less attractive policy experiments such as these are often required since systematic collusion often goes undetected by authorities duso roller and seldeslachts 2010 also examine the link between research joint ventures and collusion using data from the u s national cooperation research act that granted certain research joint ventures milder antitrust scrutiny they find that horizontal research joint ventures lead to more collusion than vertical joint ventures our work provides complementary and more direct evidence since in the laboratory we can observe the level and sustainability of tacit and explicit collusion and can therefore circumvent the measurement and endogeneity issues that are often prevalent in field data the specific research goals of this study are the following first we wish to examine if agents take advantage of available gains from cooperation in the presence of payoff uncertainties that arise from stochastic innovation success second we are interested in learning if a behavioral spillover of cooperation can lead to collusion in markets or whether competition in markets reduces non market cooperation these notions of cooperation concern contributions to joint r d projects or collusion in price setting and are defined independently of any communication opportunities therefore our third goal is to determine how this interaction between cooperation and competition is affected by the introduction of non market communication opportunities finally we will measure the externalities from r d cooperation to non innovators in the market

cooperative r d under uncertainty with free entry abstract this paper analyzes the effects of cooperative r d arrangements in a model with stochastic r d and output spillovers our main innovation is to allow for free entry in both the r d race and product market moreover in contrast with the literature we assume that cooperative r d arrangements do not have to include all the firms in the industry we show that sharing of research outcomes is a necessary condition for the profitability of cooperative r d arrangements with free entry the profitability of rjv cartels depends on their size subsidies may be desirable in cases of larger rjvs since they are the ones which are less likely to be profitable

rollover hedging and missing long term futures markets sequential rollover of annual futures positions provides farmers or others with a means of long term hedging consequently the absence of multiyear futures markets may not be a serious problem however year to year basis risk exists which can render rollovers ineffective in hedging evidence on soybean corn and cotton futures suggests that rollovers would be effective at locking in an initial price for a three to six year period but would be ineffective in routine hedging over a series of successive three to six year periods

on the dynamic efficiency of bertrand and cournot equilibria abstract this paper compares bertrand and cournot equilibria in a differentiated duopoly with r d research and development competition it shows that cournot competition induces more r d effort than bertrand competition however the price is lower and output is larger in bertrand than in cournot competition furthermore the bertrand equilibrium is more efficient than the cournot equilibrium if either r d productivity is low or spillovers are weak or products are very different if r d productivity is high spillovers are strong and goods are close substitutes then the bertrand equilibrium islessefficient than the cournot equilibrium journal of economic literatureclassification number l13

comparing cournot and bertrand equilibria in a differentiated duopoly with product r d abstract this paper compares bertrand and cournot equilibria in a differentiated duopoly with substitute goods and product r d i find that r d expenditure prices and firms net profits are always higher under quantity competition than under price competition furthermore output consumer surplus and total welfare are higher in the bertrand equilibrium than in the cournot equilibrium if either r d spillovers are weak or products are sufficiently differentiated if r d spillovers are strong and products are not too differentiated then output consumer surplus and total welfare are lower in the bertrand case than in the cournot case thus a key finding of the paper is that there are circumstances where quantity competition can be more beneficial than price competition both for consumers and for firms

transaction costs institutional design and the separation of powers abstract the internal organization of the government can be used as a constraint on the capture of political decision makers in a setting where multiple interest groups try to influence policy outcomes centralization i e the choice of a single agency dealing with all interest groups is costly because it induces a better coordination of their influences the choice of specialized agencies is better because it increases the overall transaction costs of capture making agencies more immune to capture by interest groups more generally we discuss how an institutional design relying on separation of powers among specialized agencies may improve policy outcomes

r d collaboration networks in mixed oligopoly we develop a model of endogenous network formation in order to examine the incentives for r d collaboration in a mixed oligopoly our analysis reveals that the complete network where each firm collaborates with all others is uniquely stable when r d subsidies are not available in addition to the complete network the private partial and the private hub star networks are pareto efficient however the complete network becomes the unique pareto efficient network when r d is subsidized this result is in contrast with earlier contributions in private oligopoly where under strong market rivalry a conflict between stable and efficient networks is likely to occur it also highlights the role of a public firm as policy instrument in aligning individual incentives for collaboration with the objective of efficiency independently of whether r d subsidies are provided by the regulator

dynamic r d with spillovers a comment cellini and lambertini 2009 dynamic r d with spillovers competition vs cooperation j econ dyn control 33 568 582 study a dynamic r d game with spillovers this comment demonstrates that contrary to what is claimed in their paper the game is not state redundant and the open loop nash equilibrium is not subgame perfect

regulatory capture a review this article reviews both the theoretical and empirical literatures on regulatory capture the scope is broad but utility regulation is emphasized i begin by describing the stigler peltzman approach to the economics of regulation i then open the black box of influence and regulatory discretion using a three tier hierarchical agency model under asymmetric information in the spirit of laffont and tirole 1993 i discuss alternative modelling approaches with a view to a richer set of positive predictions including models of common agency revolving doors informational lobbying coercive pressure and influence over committees i discuss empirical work involving capture and regulatory outcomes i also review evidence on the revolving door phenomenon and on the impact that different methods for selecting regulators appear to have on regulatory outcomes the last section contains open questions for future research copyright 2006 oxford university press

government target price intervention in economies with incomplete markets the target price deficiency payment program is among economists favorite examples of costly government intervention in competitive markets dubbed the brannan plan after president truman s secretary of agriculture this program pays producers any positive difference between a given target price and the prevailing market price for their output in a world of certainty and perfect competition such an intervention benefits producers hurts consumers as taxpayers and causes a net harberger triangle welfare loss these implications are not only standard fare in economics lecture halls they have become conventional wisdom in contemporary policy discussions for example the 1986 economic report of the president states income support programs by inhibiting the efficient operation of agricultural markets can impose extra costs on consumers and taxpayers that exceed the amount of income transferred to farmers when such losses occur the programs are doing more than redistributing income they are wasting valuable economic resources that could be used to make everyone better off the object of this paper is to show that these conclusions do not extend to a stochastic production economy with incomplete contingent claim markets in the latter setting the distributional and welfare implications of a brannan plan can be reversed producers can be made worse off consumers can be made better off and with nonstochastic compensation all agents can be made better off the conditions under which these outcomes occur include producer risk aversion and low price and income elasticities of demand all well known characteristics of staple food markets in which target price programs are actually employed e g markets for wheat corn and rice like many other equilibrium analyses of resource allocation

case study evidence that direct regulation remains the main driver of industrial pollution avoidance and may benefit operational efficiency abstract environmental regulation is required to reduce industrial pollution to levels that are socially acceptable and economically efficient but there is debate over the most efficient form of such regulation typically a limited range of environmental and economic parameters are accounted for in the econometric studies that inform that debate this paper integrates evidence from two separate studies to assess a broad range of parameters related to the efficiency of industrial environmental regulation questionnaire responses from 25 italian manufacturers of building chemicals and 28 irish pharmaceutical manufacturers provided evidence on the environmental effectiveness and operational impacts of different regulatory instruments combined with extensive emissions data from irish pharmaceutical manufacturers survey results enabled a quantitative estimation of pollution avoidance specifically attributable to direct regulation the monetised social benefit of avoided pollution was found to be equal to direct compliance costs chemical manufacturers in italy and ireland stated that direct regulation is a more important driver of industrial environmental performance than economic or voluntary regulation and their responses indicated that direct compliance costs may be countered somewhat by stimulated operational improvements it was concluded that direct regulation is an effective approach for multi pollutant control in an industrial context and that the efficiency of such regulation may be underestimated in studies that do not consider the full range of pollutants and operational effects

inter firm complementarities in r d a re examination of the relative performance of joint ventures we compare duopoly outcomes between two alternative modes of research and development rd the reverse holds for high spillovers when rjvs yield higher technological improvement they also yield higher industry profit and social welfare

cooperative r d between vertically related firms with spillovers abstract this paper analyzes the effects of cooperative r d in two vertically related duopolies which are two final good manufacturers and two input suppliers with horizontal and vertical spillovers vertical r d cartels yield a larger social welfare than non cooperative r d and if the horizontal spillover rate between the input suppliers is not sufficiently high than horizontal r d cartels technological improvement is accelerated by forming vertical research joint ventures rjvs whether or not their member firms r d decisions are coordinated vertical rjv cartels yield the largest social welfare when the vertically related firms can coordinate their r d decisions and or share useful knowledge fully

taxes and firm size abstract firm size has been used as a proxy for the firm s political costs and hence managers proclivity to choose income reducing accounting procedures this study provides additional evidence on this topic by examining the association between firm size and effective corporate tax rates the latter are one component of a firm s political costs the roughly fifty largest u s exchange listed firms in particular oil and gas companies and manufacturing firms have significantly higher worldwide tax rates than other firms these higher tax rates are observed primarily after the implementation of the u s 1969 tax reform act and after the opec countries raised their tax rates on u s oil producers the findings which are insensitive to alternative sources of data alternative measures of firm size and alternative measures of effective tax rates are consistent with the use in previous studies of firm size as a proxy for the firm s political costs

sustainable and responsible supply chain governance challenges and opportunities this paper introduces the special volume on sustainable and responsible supply chain governance as globalized supply chains cross multiple regulatory borders the firms involved in these chains come under increasing pressure from consumers ngos and governments to accept responsibility for social and environmental matters beyond their immediate organizational boundaries governance arrangements for global supply chains are therefore increasingly faced with sustainability requirements of production and consumption our primary objectives for this introductory paper are to explore the governance challenges that globalized supply chains and networks face in becoming sustainable and responsible and thence to identify opportunities for promoting sustainable and responsible governance in doing so we draw on 16 articles published in this special volume of the journal of cleaner production as well as upon the broader sustainable supply chain governance literature we argue that the border crossing nature of global supply chains comes with six major challenges or gaps in sustainability governance and that firms and others attempt to address these using a range of tools including eco labels codes of conduct auditing procedures product information systems procurement guidelines and eco branding however these tools are not sufficient by themselves to bridge the geographical informational communication compliance power and legitimacy gaps that challenge sustainable global chains what else is required the articles in this special volume suggest that coalition and institution building on a broader scale is essential through for example the development of inclusive multi stakeholder coalitions flexibility to adapt global governance arrangements to local social and ecological contexts of production and consumption supplementing effective monitoring and enforcement mechanisms with education and other programs to build compliance capacity and integration of reflexive learning to improve governance arrangements over time

r d spillovers and information exchange abstract we show that the spillover of r d can be endogenised in a sense that even without spillovers firms have an incentive to exchange the r d information after the investment costs are sunk

endogenous spillovers and the performance of research joint ventures we present a model of r d with endogenous spillovers and demonstrate that noncooperation can produce maximal spillovers the only other noncooperative outcome is minimal spillovers when noncooperation achieves maximal spillovers so does an rjv whereas minimal noncooperative spillovers imply partial but not necessarily maximal spillovers by an rjv partial rjv spillovers are chosen for anti competitive reasons and an rjv may also close a lab for anti competitive reasons the possibility of anti competitive outcomes is precluded in the existing literature on rjvs which focuses on symmetric outcomes our model predicts when anti competitive behaviour by an rjv arises

cooperative r d and vertical product differentiation abstract a partial equilibrium model with vertical product differentiation coumot competition and quality determined by r d expenses is analysed cooperative agreements on r d entail higher levels of r d quality output and welfare than at the non cooperative equilibrium under well denned conditions on spillover rates this confirms in a new setting a well known outcome of models with cost reducing r d further cooperation in r d allows a larger number of firms to operate in the industry than in the non cooperative case via a reduction in prices a new source of social gains from cooperative research is identified

optimal price policy and the futures markets abstract because of the short term nature of existing commodity futures contracts optimally hedged producers remain subject to intertemporal income uncertainty but price stabilization may be detrimental because it negates the benefits of intertemporal production flexibility multiperiod futures would be preferred to price stabilization although they would not provide perfect hedging opportunities thus leaving scope for government intervention the optimal price policy requires the support price to be positively correlated to the futures price that prevails when production decisions are made

absorptive capacity and connectedness why competing firms also adopt identical r d approaches abstract this paper explores the endogenous determination of r d appropriability through the firms choice of r d approaches whereas identical broad r d approaches connect firms with their r d environment and maximize absorptive capacities the opposite holds for idiosyncratic r d approaches our model shows that competing firms choose identical r d approaches in order to maximize knowledge flows between each other in essence this frees firms from the prisoner s dilemma of aggressive investment in r d our analysis contrasts with kamien and zang s 2000 kamien m zang i 2000 meet me halfway research joint ventures and absorptive capacity international journal of industrial organization 18 995 1012 finding that competing firms chose idiosyncratic r d approaches we demonstrate that their model also yields a nash equilibrium for broad identical r d approaches

cooperative and noncooperative r d in duopoly with spillovers erratum in our article published in this review volume 78 no 5 december 1988 pp 1133 37 we have shown that in the presence of sufficient spillovers of the r d benefits duopolists cooperating in r d but not in the output spend more on r d than noncooperating firms at both stages and also produce more output closest to the socially optimal level a second symmetric result is that for small spillovers duopolists cooperating neither in r d nor in output spend more on r d and produce more output than cooperative firms however this result has been obscured by an obvious inequality inversion and other typos implying a modification in the conclusions indeed in fn 13 on p 1135 one should have that x x iff

an empirical analysis of the green paradox in china from the perspective of fiscal decentralization abstract while it is generally recognized that the introduction of environmental policy can effectively control carbon emissions the green paradox hypothesis puts forth a new warning about the validity of this policy s implementation this study uses panel data on 29 chinese provinces from 1995 to 2012 to investigate the impact of fiscal decentralization on the functional mechanisms of environmental policy while controlling for the spatial correlations of carbon emission the empirical results indicate that environmental policy alone can achieve the objective of reducing carbon emissions however the chinese style fiscal decentralization makes the environmental policy significantly promote carbon emissions leading to a green paradox moreover we find that the impact of fiscal decentralization on environmental policy varies greatly among different geographical regions and the direct controlled municipalities in addition our study confirms the spatial correlations in china s carbon emissions by using a spatial integration term finally we recommend that emission reduction efforts should be incorporated into the local government s performance evaluation system to improve the institutional environment further differentiated environmental policies and measures should be considered for different provinces to maximize the emission reduction potential

on environmental regulation of oligopoly markets emission versus performance standards by specializing montero s j environ econ manag 44 23 44 2002 model of environmental regulation under cournot competition to an oligopoly with linear demand and quadratic abatement costs we extend his comparison of firms incentives to invest in r d under emission and performance standards by solving for a closed form solution of the underlying two stage game this allows for a full comparison of the two instruments in terms of their resulting propensity for r d and equilibrium industry output in addition we incorporate an equilibrium welfare analysis finally we investigate a three stage game wherein a welfare maximizing regulator sets a socially optimal emission cap under each policy instrument for the latter game while closed form solutions for the subgame perfect equilibrium are not possible we establish numerically that the resulting welfare is always larger under a performance standard

renegotiation design with multiple regulators abstract one striking feature of the internal organization of governments is the existence of multiple regulators this paper explains this organizational choice as coming from the government s limited ability to commit the separation of powers between two regulators is modeled as a stackelberg common agency game with respect to the case of a single regulator the allocative efficiency and the regulated firm s informational rent are both reduced in the unique equilibrium of this game however when regulators have a limited ability to commit this static cost of regulators separation becomes a dynamic benefit separation makes renegotiation harder and improves commitment journal of economic literature classification numbers d82 l51

uncertainty spillovers and cooperative r d abstract this paper extends the literature on cooperative r d in an oligopoly with spillovers the model has three new features it introduces uncertainty focuses on spillover of innovation instead of effort spillover and offers a new definition of the research joint venture rjv the rjv is an arrangement to coordinate r d efforts and also to share the innovation firms form an rjv only if the innovation raises flow industry profit but independently of the speed of spillovers and the degree of uncertainty the model is robust when we allow for licensing the single lab endogenous spillovers and r d effort spillovers

networks of knowledge among unionized firms we develop a model of strategic networks in order to analyze how trade unions will affect the stability of r d networks through which knowledge is transmitted in an oligopolistic industry whenever firms settle wages the partially connected network is likely to emerge in the long run if and only if knowledge spillovers are large enough however when unions settle wages the complete network is the unique stable network in other words the stronger the union bargaining power is the more symmetric stable r d networks will be in terms of network efficiency the partially connected network when firms settle wages does not pareto dominate the complete network when unions settle wages and vice versa

public policy towards r d in oligopolistic industries the importance of determining optimal policy towards r d cannot be exaggerated given the worldwide interest in fostering r d and given the significant differences between european and u s policies towards interfirm cooperation on r d moreover the problem is an inherently difficult one because of the complex nature of the r d process since r d is a component of fixed costs industries where it is important tend to be concentrated hence r d policy must go hand in hand with competition policy at the same time r d is like any form of investment in that it precedes the production stage hence issues of time consistency and strategic commitment inevitably arise in considering the choice of r d policy finally r d by one firm typically leads to spillovers wbich benefit other firms so that r d exhibits many of the character department of economics university college dublin belfield dublin 4 ireiatid for helpful discussions and comments we are grateful to two anonymous referees to pedro bartos steve martin massimo motta and damien neven and to participants at seminars in birmingham st andrew s and warwick at a cepr workshop on r d spillovers in lausanne at erwit 94 in caslel gandolfo eea 95 in prague the 1996 conference on industrial economics at universidad carlos iii de madrid and a meeting of the dublin economics workshop this paper was produced as part of the international economic performance programme of the centre for economic performance london school of economics supported by the u k esrc an earlier version was circulated as cepr discussion paper no 1243 see alexis jacquemin 1988 and stephen martin 1996 istics of a public good albeit one that is mostly privately produced tbe degree to which such spillovers occur and can be internalized is another crucial influence on the desirable pattem of intervention