an n person pure bargaining game abstract we propose an n person pure bargaining game which generalizes rubinstein s two person bargaining game and show that there exists a unique perfect equilibrium outcome the solution approaches the n person nash solution as defined by chae the n person nash bargaining solution with time preference econ lett 41 1993 21 24 in the time preference framework as the time lapse between bargaining rounds goes to 0 journal of economic literature classification number c78

vertical specialisation and its determinants abstract vertical specialisation vs and outsourcing have gained prominence in international trade recently and could represent an entry point for developing countries into world markets as well as a channel for technology transfer however entry into international supply chains often requires just in time delivery and close to zero fault rates making market entry via vs difficult this paper analyses the importance of infrastructure and quality of institutions for vs for total trade and with a focus on the clothing and electronics sectors it is found that good governance and an open trade policy is strongly related to vs in electronics infrastructure particularly ports is strongly related to vs in the clothing sector

bilateral bargaining with externalities this paper provides an analysis of a non cooperative pairwise bargaining game between agents in a network we establish that there exists an equilibrium that generates a coalitional bargaining division of the reduced surplus that arises as a result of externalities between agents that is we provide a non cooperative justification for a cooperative division of a non cooperative surplus the resulting division is related to the myerson shapley value with properties that are particularly useful and tractable in applications we demonstrate this by examining buyer seller networks and vertical foreclosure

the role of firm size in bilateral bargaining a study of the cable television industry we examine the effect of buyer merger on bilateral negotiations between a supplier and n buyers merger may have bargaining effects in addition to the usual efficiency effects the effect of merger on the buyers bargaining position depends on the curvature of the supplier s gross surplus function merger enhances worsens the buyers bargaining position if the function is concave convex based on a panel of advertising revenue in the cable television industry our estimates indicate that the gross surplus function for suppliers of program services is convex this result suggests that cable operators integrate horizontally to realize efficiency gains rather than to enhance their bargaining position vis a vis program suppliers

the effect of distance and road quality on food collection marketing margins and traders wages evidence from the former zaire abstract food price variation is typical of the food economies of many low income countries the presence or absence of road infrastructure is perceived to be one of the main determinants of this variation this analysis shows that in the case of the former zaire food price dispersion is significant both across products and across regions it is demonstrated that transportation costs explain most of the differences in food prices between producer regions and that road quality is an important factor in the transportation costs however food prices decrease relatively faster than transportation costs increase and traders wages are higher on bad roads

the formation of networks with transfers among players we examine the formation of networks among a set of players whose payoffs depend on the structure of the network when players may bargain by promising or demanding transfer payments when forming links we vary three aspects of the game i whether players can only make transfers to and receive transfers from players to whom they are directly linked or whether they can also subsidize links that they are not directly involved in ii whether or not transfers relating to a given link can be made contingent on the full resulting network or only on the link itself and iii whether or not players can pay other players to refrain from forming links we characterize the networks that are supported under these variations and show how each of the above aspects either accounts for a specific type of externality or deals with the combinatorial nature of network payoffs

china s competitive performance a threat to east asian manufactured exports there is growing concern in southeast and east asia about the competitive threat posed by china s burgeoning exports exacerbated by its accession to the wto the threat is not confined to labourintensive products but spans the whole technological and skill range at the same time china is rapidly raising its imports from the region and it is not clear whether its burgeoning exports will damage its neighbours we examine the dimensions of china s competitive threat in the 1990s benchmarking competitive performance by technology and market and finds that market share losses are so far mainly in low technology products with japan being the most vulnerable market we analyse market share changes and highlight product groups that are directly or indirectly exposed to a competitive threat we examine intra regional trade and find that china and its neighbours are raising high technology exports in tandem the nature of the international production systems involved lead to complementari ty rather than confrontation china is thus acting as an engine of export growth for its neighbours in terms of direct trade however this will change as china moves up the value chain and takes on the activities that have driven east asian export growth

bargaining binding contracts and competitive wages in a model where many workers bargain with one firm and sign binding contracts we show existence of a stationary subgame perfect equilibrium if the production function satisfies decreasing return

hedging price volatility using fast transport abstract purchasing goods from distant locations introduces a significant lag between when a product is shipped and when it arrives these transit lags are trade barriers for firms facing volatile demand who must place orders before knowing the resolution of demand uncertainty we provide a model in which airplanes bring producers and consumers together in time fast transport allows firms to respond quickly to favorable demand realizations and to limit the risk of unprofitably large quantities during low demand periods the model predicts that the likelihood and extent to which firms employ air shipments is increasing in the volatility of demand they face decreasing in the air premium they must pay and increasing in the contemporaneous realization of demand we confirm all three conjectures using detailed us import data fast transport thus provides firms with a real option to smooth demand volatility on international markets and we provide simple calculations of that option value this enables us to identify how the option value relates to goods characteristics and to changes in air transport premia associated with technological and policy change including the introduction of jet engines and liberalization of trade in air services

on governing multilateral transactions with bilateral contracts bilateral contracts while neither negotiated nor enforced in an integrated way are nevertheless often interrelated both economically and strategically owing to production or consumption complementarities and to asymmetric information a set of bilateral contracts forms a mechanism with special properties this mechanism forms a contract equilibrium if there is no joint incentive for a supplier and any individual customer unilaterally to alter the terms of their contract if agents preferences are risk neutral in money income and if their private information is independent then there exists a contract equilibrium that implements efficient transactions if in addition preferences are strictly concave and differentiable in goods and services and technologically feasible sets are suitably convex then this equilibrium is essentially unique

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

on the conservation of distance in international trade the volume of world trade has grown more than twice as fast as real world income since 1980 surprisingly the effect of distance on trade has increased during this period it could be that countries are trading greater volumes of goods that are highly sensitive to distance an alternative explanation is that distance has become more import for a significant share of goods using highly disaggregated bilateral trade data we find that adjustment in the composition of trade has not influenced the way in which distance affects trade in contrast for about 25 percent of industries distance has become more important this implies that the increased distance sensitivity of trade is a result of a change in relative trade costs that affects many industries as opposed to a shift to more distance sensitive products we also find that homogeneous products are twice as likely to have become more distance sensitive as compared with differentiated goods this is consistent with the hypothesis that falling search costs resulting from improvements in transport and communications are relatively more important for differentiated goods the results offer no evidence of the death of distance rather they suggest that distance related relative trade costs have remained unchanged or shifted in favor of proximate markets

investigating the impacts of time delays on trade abstract time delays due to inefficient customs and administrative procedures have become a leading non tariff barrier ntb that restrict international trade and impair social welfare this paper investigates how time delays affect product quality product price trade flow and social welfare using data on the days it takes to clear customs in 96 countries we explore the impacts of time delays on product quality and price with different levels of perishability we find that longer time delays at the border would significantly decrease highly perishable agricultural products quality and price we also find that for highly perishable agricultural products improved and simplified customs delays would increase trade flows and social welfare of importing countries

the economics of credence goods an experiment on the role of liability verifiability reputation and competition credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies such as under and overtreatment or market breakdown we study in a large experiment with 936 participants the determinants for efficiency in credence goods markets while theory predicts that liability or verifiability yield efficiency we find that liability has a crucial but verifiability at best a minor allowing sellers to build up reputation has little influence as predicted seller competition drives down prices and yields maximal trade but does not lead to higher efficiency as long as liability is violated jel d12 d82

business to business bargaining in two sided markets abstract bargaining regularly takes place on the business to business side of two sided markets however little is known about the consequences of these negotiations in this paper we allow the platform or a policy maker to choose between a standard design offering posted prices to both sides or a design with bargaining offering a posted price to consumers and negotiating with at least some firms we find that the platform pursues negotiations when it has a strong bargaining position and does so by targeting firms with the largest network effects while this behavior may appear exploitive we show that profits and welfare often align across platform designs this alignment stems from how bargaining incentivizes the platform greater platform bargaining power allows the platform to extract more of the network surpluses since it can convert more of the firm surplus into profits and this incentivizes the platform to draw in greater participation generating greater welfare these results suggest that platform and policy maker preferences often align in this setting

bargaining in a network of buyers and sellers abstract we analyze bargaining between buyers and sellers who are connected by an exogenously given network players can make repeated alternating public offers that may be accepted by any of the responders linked to each specific proposer our purpose is to find the conditions of the network which drive the price distribution in equilibrium this paper uses graph theory tools to provide necessary and sufficient conditions regarding the architecture of networks for the subgame perfect equilibrium of the bargaining game to coincide with the walrasian outcome

distance time and specialization lean retailing in general equilibrium transport time increases with distance traveled and time is valuable we show the implications of these facts for global specialization and trade products where timely delivery is important will be produced near the source of final demand where wages will be higher as a result in the model timely delivery is important because it allows retailers to respond to final demand fluctuations without holding costly inventories and timely delivery is possible only from nearby locations using a unique dataset that allows us to measure the retail demand for timely delivery we show that the sources of u s apparel imports have shifted in the way predicted by the model with products for which timeliness matters increasingly imported from nearby countries jel f1 transporting goods and people costs time and money and both transport fees and time in transit generally increase with the distance traveled these facts imply an incentive to economize on distance and the equilibrium effects

nash in nash tariff bargaining abstract we provide an equilibrium analysis of the efficiency properties of simultaneous bilateral tariff negotiations in a three country model of international trade we consider the setting in which discriminatory tariffs are allowed and we utilize the nash in nash solution concept of horn and wolinsky 1988 we allow for a general family of political economic country welfare functions and assess efficiency relative to these welfare functions we establish a sense in which the resulting tariffs are inefficient and too low so that excessive liberalization occurs from the perspective of the three countries

timeliness and agglomeration an important element of the cost of distance is time taken in delivering final and intermediate goods we argue that time costs are qualitatively different from direct monetary costs such as freight charges the difference arises because of uncertainty unsynchronised deliveries can disrupt production and delivery time can force producers to order components before demand and cost uncertainties are resolved using several related models we show that this generates a hitherto unexplored mechanism for clustering if final assembly takes place in two locations and component production has increasing returns to scale then component production will tend to cluster around just one of the assembly plants

bilateral bargaining in networks abstract each connected pair of nodes in a network can jointly produce one unit of surplus a maximum number of linked nodes is selected in every period to bargain bilaterally over the division of the surplus according to the protocol proposed by rubinstein and wollinsky equilibrium in a market with sequential bargaining econometrica 53 1985 1133 1150 all pairs which reach an agreement obtain the discounted payoffs and are removed from the network this bargaining game has a unique subgame perfect equilibrium that induces the dulmage mendelsohn decomposition partition of the bipartite network of the set of nodes in this network

on doctors mechanics and computer specialists the economics of credence goods most of us need the services of an expert when our apartment s heating or our washing machine breaks down or when our car starts to make strange noises and for most of us commissioning an expert to solve the problem causes concern this concern does not disappear even after repair and payment of the bill on the contrary one worries about paying for a service that was not provided or receiving some unnecessary treatment this article studies the economics underlying these worries under which conditions do experts have an incentive to exploit the informational problems associated with markets for diagnosis and treatment what types of fraud exist what are the methods and institutions for dealing with these informational problems under which conditions does the market provide incentives to deter fraudulent behavior and what happens if all or some of those conditions are violated

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

the impact of single windows on trade this paper is the first that quantifies the impact of single windows sws on international trade globally sws function as a single point of entry and exit of the goods traded internationally and are therefore intended to facilitate trade using a structural gravity model for a panel of 176 countries from 1995 to 2017 we apply a log log and a poisson pseudo maximum likelihood estimator ppml with multidimensional fixed effects to evaluate the extent to which export and import flows vary depending on whether or not countries have operational sws the main results from the linearised gravity model suggest that total trade between two countries with functioning sws increases by about 37 of which 23 corresponds to exports and 14 to imports the result from the ppml estimation also indicates a positive and significant effect which is however much smaller in magnitude

global value chains a survey of drivers and measures global value chains gvcs emerged as the paradigm for the international organisation of production for most goods and services production is nowadays vertically fragmented across different countries and this reality gave rise to a significant new strand of research in in ternational trade this article starts by discussing the major driving forces of gvcs in recent decades next it surveys the main measures of gvcs accounting for their different scopes and required datasets the artic le highlights the timing of the contributions to the literature signalling their sequential nature and the trend towards more accurate and data demanding indicators

consumer information in a market for expert services abstract we present a model of credence goods in which the consumers are heterogenous in terms of the valuation they place for getting a serious problem fixed we introduce consumer information into this framework by assuming that prior to visiting an expert some consumers receive an information signal about whether they have a serious or a minor problem we show that when the fraction of consumers with low willingness to pay is sufficiently high the expert does not cheat any low valuation consumer regardless of their information status but cheats the high valuation consumers those high valuation consumers with bad signals are the most frequent victims of cheating whereas those with good signals are the least likely victims when the fraction of consumers with low willingness to pay is below a certain threshold however the unique equilibrium involves no cheating

price discrimination and bargaining empirical evidence from medical devices many important issues in business to business markets involve price discrimination and negotiated prices situations where theoretical predictions are ambiguous this paper uses new panel data on buyer supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market while many phenomena that restrict price discrimination are suggested as ways to decrease hospital costs e g mergers group purchasing organizations and transparency i find that 1 non discriminatory pricing actually works against hospitals because competition is more intense under price discrimination and 2 results depend ultimately on a previously unexplored bargaining effect

credence goods costly diagnosis and subjective evaluation we study contracting between a consumer and an expert the expert can invest in diagnosis to obtain a noisy signal about whether a low cost service is sufficient or whether a high cost treatment is required to solve the consumer s problem this involves moral hazard because diagnosis effort and signals are not observable treatments are contractible but success or failure of the low cost treatment is observed only by the consumer payments can therefore not depend on the objective outcome but only the consumer s report or subjective evaluation a failure of the low cost treatment delays the solution of the consumer s problem by the high cost treatment to a second period we show that the first best solution can always be implemented if the parties discount rate is zero an increase in the discount rate reduces the range of parameter combinations for which the first best can be obtained in an extension we show that the first best is also always implementable if diagnosis and treatment can be separated by contracting with two different agents

making nama work supporting adjustment and development nama liberalisation alone will not be sufficient to achieve the development goals of the doha round the structure of developing countries economies and weaknesses in their infrastructure and institutions mean that adjustment to liberalisation is often costly and export responses slow to make nama work developing countries will need technical and financial support to raise their ability to adapt to greater openness and globalisation pressures and to increase their export capabilities although developing countries should decide how to raise their ability to adjust and to increase exports bilateral donors and multilateral agencies will need to fund nama support programmes the wto however is not the appropriate or competent international agency to provide or disburse such funding it can provide technical advice and offers a negotiating vehicle for industrial countries to signal that the development aims of the doha round are recognised in substantive terms if industrial countries support developing countries nama related adjustment costs in addition to offering nama tariff cuts the chances of a successful doha agreement and genuine pro development outcomes will be boosted significantly

export sensitivity to time delays and the pattern of international trade a growing body of literature in the field of international trade highlights the increasing importance of the time delays associated with transporting goods over long distances and the differing eff

mergers when prices are negotiated evidence from the hospital industry in recent years many hospitals have merged in part to gain bargaining leverage with managed care organizations mcos we investigate the price impact of hospital mergers by formulating and estimating an equilibrium bargaining model between hospital systems and managed care health insurers over prices for inpatient services we estimate the parameters of the model using claims and discharge data from northern virginia in 2006 inova health system proposed to acquire prince william hospital we nd that this merger would have raised prices signicantly and that the remedy of separate bargaining imposed by the ftc in a separate hospital case would have resulted in a larger price increase

cross licensing and competition we study bilateral cross licensing agreements between n 2 firms that engage in competition after the licensing phase it is shown that the most collusive cross licensing royalty i e the one that allows the industry to achieve the monopoly profit is sustainable as the outcome of bilaterally efficient agreements in a symmetric setting if the terms of the cross licensing agreements are not observable to third parties the monopoly royalty is the unique symmetric bilaterally efficient royalty however when the terms of the agreements are public the most competitive royalty i e zero can also be bilaterally efficient policy implications regarding the antitrust treatment of cross licensing agreements are derived from these results

the nash program non convex bargaining problems we define and characterize an extension of the nash bargaining solution to non convex bargaining problems and in the spirit of the nash program of implementing cooperative solutions non cooperatively we show that this solution is supported by rubinstein s econometrica 50 1982 97 110 model of bargaining and its corresponding set of stationary subgame perfect equilibria

when do experts cheat and whom do they target a credence good is a product or service whose usefulness or necessity is better known to the seller than to the buyer this information asymmetry often persists even after the credence good is consumed i propose two new theories of expert cheating suggesting that identifiable heterogeneities among customers can cause expert sellers to defraud their customers according to these theories cheating arises as a substitute for price discrimination and experts cheat selectively for instance experts target high valuation and high cost customers finally selective cheating may damage the communication of useful information from customers to experts and result in inferior services

country competition and us overseas assembly to examine the role of international competition in outsourcing production decisions i study the decisions of producers who used the u s overseas assembly program oap to conduct assembly operations in developing countries the evidence which is based on u s oap imports between 1991 to 2000 shows that production costs and corporate tax policies both shaped production decisions while increases in own country costs reduced the size of a developing country s oap shipments increases in competitor costs helped to increase a country s shipments the effects of competitor country cost changes were relatively large as the analysis suggests that a ten percent increase in competing country costs would increase a country s oap outsourcing activities by 5 8 percent while a ten percent increase in competitor country taxes would increase a country s oap exports by 1 6 percent

imports and implementation neglected aspects of trade in the report of the commission for africa i i ntroduction the report of the commission for africa aims to provide a blueprint for what is needed to reverse decades of stagnation and decline in africa and enable the region to achieve sustained economic growth and poverty reduction the core argument is for a big push to improve governance reduce corruption invest in people especially health and education and infrastructure and create a favourable business climate an essential source of resources for the big push will be a doubling of aid flows to africa and the potential exists to absorb and spend these resources effectively trade has two functions in this as elaborated below export led growth and increased imports to absorb foreign exchange while the report is quite clear and often detailed in discussing how resources can be increased and spent and on how to address issues of governance there is very little discussion of the sequencing inherent in the trade context will import demand be increasing at the time aid inflows are greatest and over what timeframe should exports expand the report gives good coverage of trade issues and has many sensible things to say chapter 8 more trade and fairer trade is devoted to trade and other chapters cover related issues in particular section 7 3 on policies for growth including agriculture and infrastructure it has long been recognised that africa as a region has been marginalised in the process of globalisation especially regarding trade for many reasons africa has failed to benefit from the expansion of world trade over the past two decades morrissey and filatotchev 2001 the basic argument of the report is that more needs to be done globally and within african

the nature of outsourcing relationships evidence from oap prices i introduction the dramatic growth in international outsourcing has fueled the expansion of international trade and deepened international integration 1 developments in outsourcing attract public attention due to concern that improvements in information technologies enable companies to relocate production or assembly activities to lower cost overseas locations 2 however while international outsourcing allows firms to take advantage of factor price differences grossman and helpman 2005 demonstrate that country cost differences are not sufficient by themselves to guarantee outsourcing as international outsourcing decisions are based on many factors including the costs of search and customization more generally new research in international trade recognizes information as a key element in the globalization process however informational improvements such as reduced communication costs or increasingly sophisticated bar code transmission and management tools may not affect all producers uniformly as ranch and trindade 2003 show product differentiation in consumption or production when combined with informational uncertainty produces a degree of natural protection for this reason information technology improvements are likely to deliver the greatest increases in global integration for those markets where the matching of differentiated partners is critical to the formation of new international partnerships similarly as noted by antras 2003 and bernard et al 2010 the organization of a firm s global operations depends further on factors including the importance of headquarters investments and the degree of product contractibility 3 a key goal of this paper is to study whether outsourcing decisions are consistent with outsourcing models that feature search and adaptation costs to this end this paper studies u s outsourcing conducted under the auspices of the overseas assembly program or oap the oap program was designed to allow firms to avoid tariffs on u s origin inputs that they utilized in final goods they assembled overseas thus while the oap does not include all u s outsourcing activities it does not capture u s assembly of foreign parts or overseas contract manufacturing that is based on u s designs and specifications oap imports provide insight into a wide swath of u s outsourcing and represented 8 5 of u s import value during the sample period since the oap provides tariff benefits to manufacturers who use u s inputs in their overseas production it is administered by u s customs consequently while the oap provides insights into manufacturing outsourcing decisions it does not provide information on developments in services outsourcing since oap exempts u s inputs from tariffs the program requires participating firms to provide detailed information on the u s and foreign content of their outsourcing imports thus oap data records facilitate the precise measurement of cost shocks and trade frictions at the country product level in particular heterogeneity in input choices both across countries and products can be exploited to identify cost pass through and general price responses for outsourcing imports for example year by year pass through can be estimated by regressing yearly oap price changes at the product country level on product country cost changes plots of the year by year coefficients in figure 1 show that the raw rate of oap pass through ranged from 6 to 23 4 however accurate outsourcing pass through estimation requires a theory based estimation framework that controls for economic factors that also influence price decisions this paper adopts feenstra s 1989 passthrough model which is modified to account for the cost structure and tariff treatment facing outsourcing firms who produced products for import under the oap this framework which is based on a bertrand model of competition in internationally differentiated goods focuses its attention on cost pass through and on the degree to which producers emulate the price changes of their competitors

bilateral monopolies and incentives for merger the paper presents a model of duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers it combines a bargaining model with a duopoly model to examine how input pri

non cooperative bargaining and union formation we study a union formation decision problem when workers consist of two groups distinguished by different productivities workers may form either a joint union or two separate unions the whole decision process is modelled as an extensive form bargaining game workers form a joint union when the sizes or productivities of the groups are similar in the first case there is a wage differential which is more less than proportional to the productivity difference if the size of the more productive is smaller larger than that of the less productive in the second case there is no wage differential in this paper we study a union formation decision problem when workers consist of two groups distinguished by different productivities they may form either a joint union or two separate unions depending on the relative size and productivity of the two groups the whole decision process is modelled as an extensive form bargaining game in which the two groups of workers bargain with each other as well as with a firm the labour market is sharply distinguished from the goods market by the widespread practice of collective bargaining usually several groups of workers with different characteristics for example skill level or geographical location are represented as a single unit and or several employers form a single bargaining unit against a giant union this multiplicity of bargaining units creates a complicated bargaining structure and makes the outcome hard to analyse the purpose of this paper is to provide a model which captures this complexity and at the same time clarifies the underlying structure of bargaining power although economists have been aware of the multiplicity problem for a long time it has been received little rigorous theoretical treatment until recently davidson 1985 examined the possible gains that can be obtained by trade unions through joint bargaining in an oligopolistic industry there is a positive externality due to the fact that a higher wage rate in one firm generates a larger demand hence a higher wage in competing firms when a joint union is organized these externalities are internalized to the benefit of workers horn and wolinsky 1985 investigated the equilibrium pattern of unionization in an industry where a firm employs two types of workers they found that workers tend to form a single union when the two types are substitutes in the sense that the incremental contribution of one group to the firm s revenue is decreasing with respect to the size of the other group since workers bargaining power comes from the loss that they can

imports я us retail chains as platforms for developing country imports wal mart toys r us and other large retail chains are often identified with cheap imports we use data from the census of retail trade and the international trade commission over the period 1997 2002 to test whether big chains serve as platforms for imports from ldcs using difference in difference specifications we show that chinese and other ldc imports have increased disproportionately in retail sectors with the sharpest consolidation into chains to quantify the importance of chain growth to import growth we apply a numerical algorithm that generates marginal propensities to import by firm size the largest retail firms propensity to import from china is 17 percentage points higher than that of smaller retailers the corresponding difference in import propensities from ldcs as a whole is 27 points the disproportionate growth of large retailers between 1997 and 2002 explains 5 of the overall growth in consumer goods imports 20 of the growth in consumer goods imports from china and 22 of the growth in consumer goods imports from ldcs

contracting with externalities the paper studies inefficiencies arising in contracting between one principal and n agents when the utility of each agent depends on all agents trades with the principal when the principal commits to a set of publicly observable bilateral contract offers the arising inefficiency is due entirely to the externalities imposed on non signers in contrast when the principal s offers are privately observed the distortion is due to the externalities given agents equilibrium trades comparison of the two externalities determines the relative efficiency of the two contracting regimes in both cases we show that when n is large each agent can be treated as non pivotal provided that appropriate continuity assumptions are satisfied we also study the case in which the principal can condition each agent s trade on other agents messages we characterize the set of such mechanisms in which each agent s participation is voluntary when the principal can commit to any such mechanism she implements the first best outcome while threatening each deviator with the harshest possible punishment however in the presence of noise that goes to zero slower than n goes to infinity in the limit we obtain a generally inefficient outcome in which each agent feels non pivotal

the welfare effects of bundling in multichannel television markets we measure how the bundling of television channels affects short run welfare we estimate an industry model of viewership demand pricing bundling and input market bargaining using data on ratings purchases prices bundles and input costs we conduct simulations of a la carte policies that require distributors to offer individual channels for sale to consumers we estimate that negotiated input costs rise by 103 0 percent under a la carte these higher input costs offset consumer benefits from purchasing individual channels mean consumer and total surplus change by an estimated 5 4 to 0 2 percent and 1 7 to 6 0 percent respectively jel d12 l11 l51 l82 m31

bargaining in stationary networks we study an infinite horizon game in which pairs of players con nected in a network are randomly matched to bargain players who reach agreement are replaced by new players at the same positions in the network we show that all equilibria are payoff equivalent the payoffs and the set of agreement links converge as players become patient several new concepts mutually estranged sets partners and shortage ratios provide insights into the relative strengths of the positions in the network we develop a procedure to deter mine the limit equilibrium payoffs for all players characterizations of equitable and nondiscriminatory networks are also obtained jel c78 d85 competitive equilibrium theory assumes large and anonymous markets in which every buyer can trade with every seller underlying these assumptions are standard goods and services that may be traded at low transaction costs by agents who are not in specific relationships with one another however in many markets goods and services are heterogeneous e g cars apartments or need to be tailored to particular needs e g manufacturing inputs technical support furthermore trad ing opportunities may depend on transportation costs social relationships infor mation advertising trust technological compatibility joint business opportunities free trade agreements etc in such cases it is natural to model the market using a network where only pairs of connected agents may engage in exchange new theories are needed to explore the influence of the network structure on market outcomes many questions arise how does an agent s position in the net work determine his bargaining power and the local prices he faces who trades with whom and on what terms when are prices uniform in the network one possible conjecture is that an agent s bargaining power is determined by his relative number of connections in the network however this simple theory is implausible consider the network of four sellers located at the top nodes and nine buyers located at the bottom nodes depicted in figure 1 assume that each seller supplies one unit of a homogeneous indivisible good each buyer demands one unit of the good and all buyers have identical values for the good the buyer located in the middle has the largest number of links in the network as he is connected to each

domestic road infrastructure and international trade evidence from turkey poor domestic transportation infrastructure in developing countries is often cited as an important impediment for accessing international markets yet evidence on how transportation infrastructure improvements affect the volume and composition of exports is scarce drawing on the large scale public investment in expressways undertaken in turkey during the 2000s this paper contributes to our understanding of how internal trade costs affect regional exports and specialization two results emerge first we estimate that this road infrastructure project accounts for 15 percent of the export increase from interior regions generating a 10 year discounted stream of additional export revenues that amount to between 9 and 14 percent of the value of the investment second while the exports of all industries within a given region increase in response to improvements in connectivity to the international gateways of the country the magnitude of this increase is larger the more time sensitive an industry is accordingly we also observe an increase in the regional employment and revenue shares of such industries our results support the hypothesis that internal trade costs can be a determinant of international specialization and comparative advantage

experts vs discounters consumer free riding and experts withholding advice in markets for credence goods this paper studies the incentives for credence goods experts to invest effort in diagnosis if effort is both costly and unobservable and if they face competition by discounters who are not able to perform a diagnosis the unobservability of diagnosis effort and the credence characteristic of the good induce experts to choose incentive compatible tariff structures this makes them vulnerable to competition by discounters we explore the conditions under which honestly diagnosing experts survive competition by discounters we identify situations in which experts misdiagnose consumers in order to prevent them from free riding on experts advice and we discuss policy options to solve the free riding consumers cheating experts problem

price effects of preferential market access caribbean basin initiative and the apparel sector preferential trade arrangements should be evaluated by analyzing their effect on prices rather than the total value of trade as emphasized in the theoretical literature but rarely implemented empirically the authors analyze the impact of the unilateral preferences granted by the u s caribbean basin initiative cbi on the prices received by eligible apparel exporters they use fixed effects generalized least squares gls estimation to isolate the effects of various other factors such as quality exchange rates and transactions costs and identify the effects of tariff preferences the authors find that cbi exporters only capture around two thirds of their preference margin despite the fairly competitive nature of the apparel market this translates into a 9 percent increase in the relative prices they receive but these numbers vary across countries and years countries specializing in higher value items capture more of the preference margin while implementation of the north american free trade agreement has a negative effect the authors analyze the effect of multi fibre agreement mfa quotas imposed on third countries such as china and find that the benefits of cbi preferences will be significantly reduced once the quotas are fully removed in 2005

endogenous scope of firm union bargaining with vertical pay comparisons abstract there is strong evidence that employees motivation and incentives in the workplace are affected by vertical pay comparisons in a stylized cournot duopoly model with firm specific unions that institutionalize workers vertical fairness concerns we show that universal wage employment w e bargaining may arise as the equilibrium scope of bargaining institution we thus propose that intra firm vertical fairness concerns may resolve the mismatch between recent findings in the empirical literature on labor market institutions and the predictions of traditional models that universal w e bargaining will never arise in equilibrium the scope of bargaining puzzle we derive a number of testable hypotheses that address the recent shift towards more decentralized bargaining institutions the decline in unions bargaining power and the prevalence of w e bargaining

vertical integration in the presence of upstream competition we analyse vertical integration when there is upstream competition and compare outcomes to the case where upstream assets are owned by a single agent i e upstream monopoly in so doing we make two contributions to the modelling of strategic vertical integration first we base industry structure namely the ownership of assets firmly within the property rights approach to firm boundaries second we model the potential multilateral negotiations using a fully specified non cooperative bargaining model designed to easily compare outcomes achieved under upstream competition and monopoly given this we demonstrate that vertical integration can alter the joint payoffs of integrating parties in ex post bargaining however this bargaining effect is stronger for firms integrating under upstream competition than upstream monopoly we also consider the potential for integration to internalise competitive externalities in manner that cannot be achieved under non integration we demonstrate that ex post monopolization is more likely to occur when there is an upstream monopoly than when there is upstream competition our general conclusion is that the simple intuition that the presence of upstream competition can mitigate and reduce the incentives for socially undesirable vertical integration is misplaced and depending upon the strength of downstream competition i e product differentiation the opposite could easily be the case journal of economic literature classification number l42

transparency and regional integration in the asia pacific we show in this paper that increasing the transparency of the trading environment can be an important complement to traditional liberalisation of tariff and non tariff barriers our definition of transparency is grounded in a transaction cost analysis we focus on two dimensions of transparency predictability reducing the cost of uncertainty and simplification reducing information costs using the asia pacific economic cooperation apec member economies as a case study we construct indices of importer and exporter transparency for the region from a wide range of sources our results from a gravity model suggest that improving trade related transparency in apec could hold significant benefits by raising intra apec trade by approximately us 148 billion or 7 5 per cent of baseline trade in the region action to improve transparency measures examined could be undertaken in many forms including within the current apec framework or future talks on a free trade area in the asia pacific

risk aversion wealth and background risk we use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay for a risky security we relate this measure to consumer s endowments and attributes and to measures of background risk and liquidity constraints we find that risk aversion is a decreasing function of the endowment thus rejecting cara preferences we estimate the elasticity of risk aversion to consumption at about 0 7 below the unitary value predicted by crra utility we also find that households attributes are of little help in predicting their degree of risk aversion which is characterized by massive unexplained heterogeneity we show that the consumer s environment affects risk aversion individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute risk aversion consistent with recent theories of attitudes toward risk in the presence of uninsurable risks jel d1 d8

multiunit bargaining in oligopolistic industries a model of wage determination in unionized oligopolistic industries is developed and used to compare the outcome of collective bargaining under two different bargaining structures one in which the workers of each firm are represented by separate and independent unions local bargaining and one in which a national union represents all workers in the industry in both cases the bargaining problem has a unique outcome with industrywide bargaining resulting in higher wages in addition industrywide unions are inherently stable in that there are no incentives for independent unions to attempt to cheat on the collusive agreement

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

airplanes and comparative advantage abstract airplanes are a fast but expensive means of shipping goods a fact which has implications for comparative advantage the paper develops a ricardian model with a continuum of goods which vary by weight and hence transport cost comparative advantage depends on relative air and surface transport costs across countries and goods as well as stochastic productivity a key testable implication is that the u s should import heavier goods from nearby countries and lighter goods from faraway counties this implication is tested using detailed data on u s imports from 1990 to 2003 looking across goods the u s imports nearby exporters have lower market share in goods that the rest of the world ships by air looking across exporters for individual goods distance from the us is associated with much higher import unit values these effects are large which establish that the model identifies an important influence on specialization and trade

credence goods experts and risk aversion abstract the existing literature on credence goods and expert services has overlooked the importance of risk aversion in this paper we extend a standard expert model of credence goods with verifiable service quality by considering risk averse consumers our results show that the presence of risk aversion reduces the expert s incentive to invest in diagnosis and may thus lead to consumers mistreatment

communication in vertical markets experimental evidence abstract an upstream monopolist supplying competing downstream firms may fail to monopolize the market because it is unable to commit not to behave opportunistically we build on previous experimental studies of this well known commitment problem by introducing communication allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the cournot level observed in the absence of communication halfway toward the monopoly level allowing all firms to chat together openly results in complete monopolization downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them a simple structural model of nash in nash bargaining fits the pattern of shifting surpluses well using third party coders unsupervised text mining among other approaches we uncover features of the rich chat data that are correlated with market outcomes we conclude with a discussion of the antitrust implications of open communication in vertical markets

transportation costs and international trade in the second era of globalization while the precise causes of postwar trade growth are not well understood declines in transport costs top the lists of usual suspects however there is remarkably little systematic evidence documenting the decline this paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time series pattern of shipping costs the ad valorem impact of ocean shipping costs is not much lower today than in the 1950s with technological advances largely trumped by adverse cost shocks in contrast air shipping costs have dropped an order of magnitude and airborne trade has grown rapidly as a result as a result international trade has also experienced a significant rise in speed

vertical relationships between manufacturers and retailers inference with limited data in this paper different models of vertical relationships between manufacturers and retailers in the supermarket industry are compared demand estimates are used to compute price cost margins for retailers and manufacturers under different supply models when wholesale prices are not observed the purpose is to identify the set of margins compatible with the margins obtained from estimates of cost and to select the model most consistent with the data among non nested competing models the models considered are 1 a simple linear pricing model 2 a vertically integrated model and 3 a variety of alternative strategic supply scenarios that allow for collusion non linear pricing and strategic behaviour with respect to private label products using data on yogurt sold in several stores in a large urban area of the u s the results imply that wholesale prices are close to marginal cost and that retailers have pricing power in the vertical chain this is consistent with non linear pricing by the manufacturers or high bargaining power of the retailers

negative externalities may cause delay in negotiation we study the strategic equilibria of a negotiation game where potential buyers are affected by identity dependent negative externalities the unique equilibrium of long finitely repeated generic games can either display delay where a transaction can take place only in several stages before the deadline or in spite of the random element in the game a well defined buyer exists that obtains the object with probability close to one

a noncooperative theory of coalitional bargaining the authors explore a sequential offers model of n person coalitional bargaining with transferable utility and with time discounting their focus is on the efficiency properties of stationary equilibria of strictly superadditive games when the discount factor delta is sufficiently large it is shown that delay and the formation of inefficient subcoalitions can occur in equilibrium the latter for some or all orders of proposer however efficient stationary equilibrium payoffs converge to a point in the core as delta approaches one strict convexity is a sufficient condition for there to exist an efficient stationary equilibrium payoff vector for sufficiently high delta

credence goods monopolists abstract with a credence good consumers never discover how much of the good they actually need therefore the seller acts as the expert determining the customers requirements this information asymmetry creates strong incentives for the seller to cheat on services we analyze whether the market mechanism may induce non fraudulent seller behavior we consider four scenarios differing in the amount of information consumers have at hand to infer the seller s incentives to be honest in three constellations the profit maximizing credence goods monopolist provides honest services only in one scenario there is no trade

nash in nash bargaining a microfoundation for applied work a nash equilibrium in nash bargains has become the workhorse bargaining model in applied analyses of bilateral oligopoly this paper proposes a non cooperative foundation for nash in nash bargaining that extends the rubinstein 1982 model to multiple upstream and downstream rms assuming there exists gains from trade for each rm pair we prove that there exists an equilibrium with immediate agreement and negotiated prices that correspond to rubinstein prices if and only if the marginal contribution of a set of agreements is weakly greater than the sum of the agreements marginal contributions we provide stronger conditions under which equilibrium prices are unique

identifying spatial efficiency equity tradeoffs in territorial development policies evidence from uganda abstractwe contribute to the debate on the spatial allocation of infrastructure investments by examining where these investments generate the highest economic return spatial efficiency and identifying trade offs when infrastructure coverage is made more equitable across regions spatial equity we estimate models of firm location choice in uganda drawing on insights from the new economic geography literature the main findings show that manufacturing firms gain from being in areas that offer a diverse mix of economic activities public infrastructure investments in other locations are likely to attract fewer private investors and will pose a spatial efficiency equity trade off

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

logistic infrastructure and the international location of fragmented production abstract casual evidence suggests that multinational companies increasingly look for places with adequate transport and logistic infrastructure to locate affiliates that participate in cross border production sharing yet there are no systematic empirical analyses examining how logistic infrastructure interacts with the location decisions made by multinationals most studies on the determinants of fdi address the issue of transportation logistics by examining the impact of distance on the relevant outcome but distance does not capture by itself the quality of the logistic systems in place we overcome this shortcoming in the literature by embedding indicators of infrastructure into an empirical framework that examines whether countries with adequate logistic systems attract more vertical fdi and particularly in industries that are more dependent on logistic services we find that logistic infrastructure positively impacts vertical fdi in addition to the impact typically found on distance a change from the first quartile to the third quartile of the distribution of logistic infrastructure is associated with an average increase in the number of vertically integrated subsidiaries equivalent to 29

spatial linkages and export processing location in china this paper provides empirical evidence that spatial linkages matter for the localisation of global value chain activities relying on processing trade data for chinese provinces during the period 1997 2008 we investigate whether a chinese province s proximity to international suppliers and international buyers within an industry chain affects its attractiveness as an export processing location we find that the upstream and downstream spatial linkages both have a strong and independent explanatory power we also explore what factors explain the influence of these spatial linkages

a life s work on trade and development this paper reflects on the career contributions of professor chris milner to the literature on international trade and economic development as such it not only provides an overview of a life s work but also sets the context for the nine papers which follow all of these were specially written for this special issue of the world economy and all relate to different areas that professor milner worked in

bilateral control with vertical contracts when a manufacturer contracts secretly with competing retailers he is subject to opportunism and linear or non linear tariffs may not allow the manufacturer to maintain monopoly prices to analyse the effects of rpm o brien shaffer 1992 use a concept of contract equilibrium which concentrates on pairwise deviations thereby questioning the robustness of the analysis this paper emphasises the distinction between the contract equilibrium and standard non cooperative concepts we advocate for some caution in the use of the former concept as if overlooks an inexistence problem we then confirm the intuition that rpm can help solve the manufacturer s commitment problem this confirms that o brien shaffer s insight is robust and validates the courts reluctance against rpm

declining protection in developing countries fact or fiction this paper explores whether and to what extent evident trade reform falling average tariffs and rising exports in recent decades overstate the extent to which protectionism has declined in developing countries especially low income developing countries it identifies remaining significant protection especially of final manufactured goods this being associated with the presence of peak tariffs escalating tariff structures by stage of production and replacement of old forms of non tariff protection with new instruments of non tariff protection it also identifies significant protection arising from high international trade costs induced by inefficiencies in transportation ports and customs and from the growth of exports to preference receiving export markets

policy and non policy barriers to trade and implicit taxation of exports in uganda uganda has made significant progress in reducing policy induced anti export bias in its trade policy in the 1990s taxes on exports have been abolished and import protection has been reduced considerably such trade barriers are only a component of thee transaction costs associated with trade poor infrastructure notably by increasing transport costs and institutional inefficiencies can significantly increase trade costs the effective protection of imports and implicit tax on exports due to transport costs is calculated and compared to effective protection due to trade policy barriers for uganda the results reveal that transport costs are often very high in many cases representing a greater cost tax to exporters than trade policy