upward pricing pressure in two sided markets measuring upward pricing pressure upp has recently been proposed by farrell and shapiro 2010 as an alternative screening device for horizontal mergers we extend the concept of upp to two sided markets examples of such markets are the newspaper market where the demand for advertising is related to the number of readers and the market for online search where advertising demand depends on the number of users the formulae we derive depend on four sets of diversion ratios that can either be estimated using market level demand data or elicited in surveys in an application we show that it is important to take the two sidedness of the market into account when evaluating upp

fiscal federalism and interstate risk sharing empirical evidence from germany abstract using an approach developed by asdrubali et al quarterly journal of economics 111 1996 1081 the paper estimates the extent of smoothing of state specific income shocks to west german states from 1970 to 1997 by federal fiscal institutions the results show that despite the existence of substantial interregional transfer mechanisms the share of shocks to state income absorbed by fiscal flows is roughly at the same level as in the us

ownership consolidation and product characteristics a study of the us daily newspaper market this paper develops a structural model of newspaper markets to analyze the effects of ownership consolidation taking into account not only firms price adjustments but also the adjustments in newspaper characteristics a new dataset on newspaper prices and characteristics is used to estimate the model the paper then simulates the effect of a merger in the minneapolis newspaper market and studies how welfare effects of mergers vary with market characteristics it finds that ignoring adjustments of product characteristics causes substantial differences in estimated effects of mergers jel g32 l13 l82 m37 do mergers affect product characteristics standard merger analyses typically study price effects only and ignore changes in product characteristics this paper endogenizes both it is likely that firms would adjust the features of their products after a merger ignoring this aspect of firm decisions in a merger analysis can lead to a bias in estimated welfare effects specifically i study how ownership consolidation affects product characteristics and welfare in the us daily newspaper market the newspaper market provides an ideal environment for analyzing the effect of mergers on product features for both econometric and economic reasons first of all individual newspapers often circulate in local markets there is substantial variation in demographics and ownership structure across these markets this variation is crucial for this study secondly the characteristics of newspapers are obviously important for welfare for example after an ownership consolidation do newspaper publishers improve or diminish the content quality do they enlarge or shrink the local news ratio do they increase or decrease content variety to address these questions i set up a structural model of the us daily newspaper

a unified presentation of competition analysis in two sided markets the goal of this paper is to present quantitative tools to manage competition policy analysis in two sided platforms based on a common framework for transaction and non transaction platforms we explore tools for relevant market definition critical loss analysis and a small but significant non transitory increase in price ssnip test unilateral effects indicators upward pricing pressure upp and gross upward pricing pressure index guppi and tests for exclusionary practices we review dispersed results in the literature and fill the gaps where appropriate we highlight the required changes from the usual one sided market framework and tools while discussions of antitrust tools can be found in specialized forums devoted to advances in competition policy analysis we organize the material in an integrated framework

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

regional income redistribution and risk sharing how does italy compare in europe abstract this paper investigates income redistribution and risk sharing and the underlying public policy in italy a country marked by stark regional economic contrasts unlike previous works this study also assesses the roles of public consumption investment and welfare assistance in kind the findings suggest that italy s fiscal system provides redistribution at 25 35 and risk sharing at 10 15 of gdp with public consumption playing a large role compared with results in the literature for other countries there appears to be less redistribution and risk sharing through italy s welfare and tax systems because of their different structures

channels of interstate risk sharing united states 1963 1990 we develop a framework for quantifying the amount of risk sharing among states in the united states and construct data that allow us to decompose the cross sectional variance in gross state product into several components which we refer to as levels of smoothing we find that 39 percent of shocks to gross state product are smoothed by capital markets 13 percent are smoothed by the federal government and 23 percent are smoothed by credit markets the remaining 25 percent are not smoothed we also decompose the federal government smoothing into subcategories taxes transfers and grants to states

a robust test for consumer welfare enhancing mergers among sellers of differentiated products recently developed tools are used to predict the effects of differentiated products mergers but they require the assumption of a particular functional form for industry demand and any assumption is vulnerable to attack this paper demonstrates that marginal cost reductions necessary to restore premerger prices can be calculated without making any assumption about demand and it provides a robust and practical method for determining whether a particular merger enhances consumer welfare copyright 1996 by blackwell publishing ltd

royalty reform and illegal reporting of harvest volumes under alternative penalty schemes we study royalty reform in a timber concessions framework illegal logging in the form of underreporting of harvesting is modeled harvesters can be either risk neutral or risk averse detection of illegal logging by the government is imperfect and costly we focus on the government s policy problem solving first for socially optimal royalty and auditing levels and then examining a revenue neutral reform toward this benchmark we find that higher royalty progression will always decrease actual harvest volume regardless of risk preferences for the harvester but the effect of a reform on reported harvest volume is sensitive to the penalty scheme imposed by the government if the fine is levied on evaded royalty payments then higher royalty progression may increase reported harvest volume but when the fine is levied on undeclared harvest volume the reverse happens higher royalty regression increases actual harvest volume under both penalty schemes but it may decrease reported harvest volume higher regression will increase undeclared harvest volume when the fine is levied on evaded royalty payments

chicken and egg competition among intermediation service providers we analyze a model of imperfect price competition between intermediation service providers we insist on features that are relevant for informational intermediation via the internet the presence of indirect network externalities the possibility of using the nonexclusive services of several intermediaries and the widespread practice of price discrimination based on users identity and on usage efficient market structures emerge in equilibrium as well as some specific form of inefficient structures intermediaries have incentives to propose non exclusive services as this moderates competition and allows them to exert market power we analyze in detail the pricing and business strategies followed by intermediation services providers copyright 2003 by the rand corporation

a note on progression penalty schemes and tax evasion abstract this note deals with the question of whether shifting the tax base towards more progression will stimulate or discourage tax evasion when the tax base is shifted so that either the expected tax revenues of government or the expected utility of taxpayer will remain unchanged the answer turns out to depend sensitively on the nature of penalty schemes if caught in tax evasion if the penalty rate is charged on the undeclared income tax evasion will increase while if the penalty rate is charged on the evaded tax tax evasion will decrease when the tax base is shifted towards progression

fiscal flows and financial markets to what extent do they provide risk sharing within sweden andersson l fiscal flows and financial markets to what extent do they provide risk sharing within sweden regional studies the objective of this paper is to analyse the amount of risk sharing that takes place between regions in sweden it is found that the capital market is the largest source of risk sharing of an exogenous change in gross regional product in sweden still roughly 20 of a change in regional output is smoothed among the regions through the fiscal system there is also some evidence that there are regional differences in the sense that regions located in the south rely more on the capital market as a source of insurance against shocks in output while the tax and transfer systems provide a larger extent of risk sharing for regions located in the north andersson l flux fiscaux et marches financiers dans quelle mesure assurent ils le partage de risques en suede regional studies l objet de cette communication est d analyser l importance du partage de risques entre regions suedoises

uncertain income and redistribution in a federal system abstract this paper considers income redistribution in a federal system where regions experience random shocks federal redistribution serves as insurance against jurisdiction specific shocks but provides a uniform assistance to the poor and cannot suit individual jurisdictions demands for redistribution consequently whether the federal government should redistribute depends on the advantage of pooling the risk and the disadvantage of compromising different preferences for redistribution with mobile individuals federal redistribution loses its advantage because migration ensures the equalization of factor incomes between regions and because even local redistribution serves as insurance however local redistribution creates fiscal externalities and distorts the allocation of labor

international risk sharing and european monetary unification abstract we explore income and consumption smoothing patterns among european community ec countries and among oecd countries during the period 1966 90 we find that for oecd as well as for ec countries about 40 percent of shocks to gdp are smoothed at the one year frequency with about half the smoothing achieved through national government budget deficits and half by corporate saving at the three year differencing frequency only 25 percent of shocks to gdp are smoothed mainly via government lending and borrowing in the absence of alternative income and consumption smoothing mechanisms the restrictions on budget deficits imposed by the maastricht treaty should be relaxed to allow governments to run large temporary deficits in response to output shocks

competition between networks a study of the market for yellow pages this paper estimates the importance of network effects in the market for yellow pages i estimate three simultaneous equations consumer demand for usage of a directory advertiser demand for advertising and a publisher s first order condition derived from profit maximizing behaviour estimation shows that advertisers value consumer usage and that consumers value advertising implying a network effect i find that internalizing network effects would significantly increase surplus as an application i consider whether the market benefits from monopoly which takes advantage of network effects or oligopoly which reduces market power i find that a more competitive market is preferable copyright 2004 wiley blackwell

fiscal flows in the united states and canada lessons for monetary union in europe regional flows of federal taxes and transfers within the united states and canada are used to analyze long term fiscal flows the redistributive element and short term responses to regional business cycles the stabilization element in the united states long run flows amount to 22 cents in the dollar while the stabilization effect is 31 cents in the dollar in canada the redistributive effect is larger 39 cents and the stabilization effect smaller 17 cents federal flows appears to depend on the institutional structure of the country concerned however in both countries the redistributive element is considerably larger than the amounts involved in the ec structural funds program as for stabilization national fiscal policies in the ec appear to have been as effective as federal governments in the united states and canada in cushioning shocks to incomes

federal fiscal constitutions risk sharing and redistribution the paper studies the political and economic determinants of regional public transfers specifically it focuses on how such transfers are shaped by alternative fiscal constitutions where a constitution is an allocation of fiscal instruments across different levels of governments plus a procedure for the collective choice of these instruments realistic restrictions on fiscal instruments introduce a tradeoff between risk sharing and redistribution different constitutions produce very different results in particular a federal social insurance scheme chosen by voting provides overinsurance whereas an intergovernmental transfer scheme chosen by bargaining provides underinsurance

regional non adjustment and fiscal policy asymmetric shocks regional non adjustment and fiscal policy how will countries handle idiosyncratic macroeconomic shocks under the single currency since the regional adjustment patterns currently prevailing within european currency unions are likely to prevail at the national level under the single currency looking at the ways in which european countries react to internally asymmetric shocks today provides a good preview for the answer to that question in this paper we compare the usa with germany italy and the uk and with canada which is closer to europe than the usa in its labour market and fiscal institutions europe s and to some extent canada s model of regional response differs from that of the usa changes in regional real exchange rates are small in all countries outside of the usa however there is more reliance on interregional transfer payments less on labour migration and the pace of regional adjustment appears to be slower if emu aims at the same degree of economic and social cohesion that its constituent nations enjoy today this suggests that its members may find it hard to resist the eventual extension of existing eu mechanisms of income redistribution a transfer union we propose an alternative strategy based on a relaxed stability pact further strictures against central eu borrowing labour market and fiscal reform and the issuance by individual member states of debt indexed to nominal gdp maurice obstfeld and giovanni peri

cooperation among competitors some economics of payment card associations we analyze platforms in two sided markets with network externalities using the specific context of a payment card association we study the cooperative determination of the interchange fee by member banks the interchange fee is the access charge paid by the merchants banks the acquirers to cardholders banks the issuers we develop a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card after drawing the welfare implications of a cooperative determination of the interchange fee we describe in detail the factors affecting merchant resistance compare cooperative and for profit business models and make a first cut in the analysis of system competition

on indirect tax evasion abstract this paper examines some aspects of the decision to evade indirect taxes in the context of a monopolistic firm in particular the degree of interdependence between the tax shifting and the tax evasion decisions is analyzed both in the case of a fixed and of a variable probability of being detected it is shown that in the first case the shifting and evasion decisions are separable while in the second case this is no longer true in this latter case a rule according to which the probability decreases with larger declarations can be said to be an efficient one the conditions for a firm s becoming a completely submerged one are derived and finally direct and indirect tax evasion are compared it is shown that for decreasing risk aversion an indirect tax is evaded as a percentage less than a profit tax of equal yield

risk sharing within the united states what do financial markets and fiscal federalism accomplish we measure income uncertainty at the level of u s states and the extent to which it has been reduced through risksharing using a method recently developed by athanasoulis and van wincoop 2000 risk is measured as the standard deviation of state specific income growth uncertainty measured by using the error term of a regression of income growth on variables in the information set risk sharing is measured by the extent to which this standard deviation has been reduced through financial markets and federal fiscal policy the advantage of this measure over the existing risk sharing literature is that the interpretation does not depend on many auxiliary assumptions our findings on the extent of risk sharing are insensitive to the only assumption we need to make the variables that are in the information set we find that the standard deviation of state specific income growth uncertainty is reduced by less than half through financial markets and federal fiscal policy we show that the extent of risk sha

subnational fiscal balance interregional redistribution and risk sharing in italy abstractthis paper provides new estimates of redistribution and risk sharing across regional territories accomplished by the italian public sector for the first time subnational governments fisc

regional risk sharing provided by the fiscal system empirical evidence from sweden andersson l 2004 regional risk sharing provided by the fiscal system empirical evidence from sweden reg studies38 269 280 the objective of this paper is to analyse risk sharing among municipalities in sweden in terms of how the central government smooths personal income via the tax and transfer systems using panel data for the period 1983 2001 we find that the national tax and transfer systems mitigate an adverse shock to income of 1 krona so that the disposable income falls by 90 ore on average however there are differences across regions where the effect on disposable income varies between 78 and 93 ore in the krona a sensitivity analysis of the stability of the estimates over time suggests that the adjustment of the rules of the transfer system in 1991 associated with the tax reform the same year may have influenced the importance of national transfers as a means of absorbing risk while the evidence of a structural break due to the tax reform itself is less conclusive andersson l 2

inter regional insurance this paper considers the problem facing a central government which can insure regional governments by use of intergovernmental grants against region specific and privately observed shocks either to income or demand for or cost of the public good notable results are i depending on the source of the shock the grant may induce over or undersupply of the public good relative to the samuelson rule ii with public good spillovers between regions there is two way distortion of public good supply that is qualitatively different distortions relative to the samuelson rule for different values of the shock iii the solution to the central government s problem may depend qualitatively on whether regional taxation is lump sum or distortionary 1999 elsevier science s a all rights reserved

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

two sided network effects a theory of information product design how can firms profitably give away free products this paper provides a novel answer and articulates trade offs in a space of information product design we introduce a formal model of two sided network externalities based in textbook economics a mix of katz and shapiro network effects price discrimination and product differentiation externality based complements however exploit a different mechanism than either tying or lock in even as they help to explain many recent strategies such as those of firms selling operating systems internet browsers games music and video the model presented here argues for three simple but useful results first even in the absence of competition a firm can rationally invest in a product it intends to give away into perpetuity second we identify distinct markets for content providers and end consumers and show that either can be a candidate for a free good third product coupling across markets can increase consumer welfare even as it increases firm profits the model also generates testable hypotheses on the size and direction of network effects while offering insights to regulators seeking to apply antitrust law to network markets

is canada an optimal currency area an inflation targeting perspective we propose a method based on the currency union model of gali and monacelli 2008 to determine whether a region within an existing currency area belongs in the currency union the method involves assessing the predictability of regional inflation rates at medium term horizons we apply the method to the canadian provinces and find that for all but alberta there is little evidence of costs in terms of inflation arising from national monetary policy for alberta the evidence suggests that they are not as well served by the inflation targeting framework and that a more flexible policy environment might improve inflation outcomes

royalty systems government revenues and forest condition an application from malaysia royalty structure has been linked to deforestation through non sustainable harvesting and high grading yet royalties are an important rent generation mechanism for governments in this paper a dynamic model of government policy choice is used to compare different royalty systems with respect to government revenue generation and high grading empirical analyses of the various royalty systems is then undertaken for forest concessions in malaysia one unique aspect of our study is an examination of how different royalty systems impact harvesting of highand low valued timber species government rent capture and concessionaire profits the results should help with future royalty design

fiscal devolution and dependency public spending devolution in practice is widely seen as more appropriate for addressing varied political aspirations within state boundaries than is tax devolution a drawback is that devolved public spending may be subject to irresistible upward pressure as illustrated by formula drift of the united kingdom devolved administrations by crowding out the private sector such public spending can exacerbate the problem it was originally intended to alleviate when taxpayers do not value increases in government output at least as highly as the private goods and services they must forgo to finance them then the public sector is too large this article estimates a three sector hecksher ohlin model of the economy with the greatest relative rise of the public spending ratio in the united kingdom wales simulation of the model shows a net gain in employment from a 1 cut in income tax matched by a corresponding reduction in government spending this result is consistent with the current level of intergovernme

risk sharing and industrial specialization regional and international evidence the authors provide empirical evidence that risk sharing enhances specialization in production to the best of their knowledge this well established and important theoretical proposition has not been tested before the empirical procedure is summarized as follows first the authors construct a measure of specialization in production and calculate an index of specialization for each of the european community ec and non ec oecd countries u s states canadian provinces japanese prefectures latin american countries and regions of italy spain and the united kingdom then they estimate the degree of capital market integration a measure of risk sharing within each of these groups of regions the ec countries the non ec oecd countries the united states canada japan italy spain and the united kingdom and rely on another author s estimate for latin america finally they perform a regression of the specialization index on the degree of risk sharing controlling for relevant economic variables they find a positive and significant relation between the degree of specialization of individual members of a group of countries provinces states or prefectures and the amount of risk that is shared within the group the authors perform regressions using variables such as shareholder rights and the size of the financial sector relative to gdp as instruments for the amount of inter regional risk sharing these regressions confirm that risk sharing facilitated by a favorable legal environment and a developed financial system is a direct causal determinant of industrial specialization this abstract was borrowed from another version of this item

regional redistribution and stabilization by the center in canada france the uk and the us abstract this paper re examines earlier estimates of regional redistribution and stabilization through the central government budget in the us and produces new estimates of this redistribution and stabilization in the us canada france and the uk the new estimates rest on panel data econometrics and an adherence to certain accounting principles that have occasionally been violated in the past as a result of the accounting the peak estimates for the us and canada in the earlier literature are never attained regional stabilization of personal income through the central government budget emerges as close to 20 in the us france and the uk but only 10 to 14 in canada in case of gross product instead of personal income accounting regional stabilization is closer to 10 in the us as regards france and the uk the use of panel data econometrics proves essential

establishing a central bank issues in europe and lessons from the us list of figures list of tables preface list of conference participants 1 introduction part i the design of a central bank 2 designing a central bank for europe a cautionary tale from the early years of the federal reserve system 3 the european central bank reshaping monetary politics in europe 4 the ecb a bank or a monetary policy rule part ii transition from national central banks to a european central bank 5 hard erm hard ecu and european monetary union 6 voting

sufficient decisions in multi sided and multiproduct markets we show that in many models where firms make multiple decisions analysis can be made more tractable by re formulating the model into one in which each firm makes a single choice which we call a sufficient decision the transformation allows application of standard techniques in these settings including pass through for tax incidence and upward pricing pressure for merger analysis the transformation works because the assumption of profit maximization links the firms decisions together examples include models of monopoly and oligopoly in two sided markets where a natural sufficient decision may be the number of transactions that the firm facilitates and multiproduct markets