corrective taxes under oligopoly with inter firm externalities pollution externalities between polluters should be taken into account in the design of corrective taxes when the externalities are substantial and or the number of polluters is large the effluent levies on these firms do not necessarily result in a deadweight loss consequently the second best tax exceeds the marginal social cost of pollution a more general rule is that the tax rate should be greater than the marginal social cost of pollution if and only if a marginal increase in the tax rate results in opposite effects on the changes of equilibrium emission level and output

self enforcing collusion in large dynamic markets abstract the folk theorem in game theory implies that any outcome that is better for all players than some single period nash outcome can be achieved through noncooperative equilibrium in repeated games with discounting whether the folk theorem holds for a repeated cournot oligopoly as the number of firms n increases without bound is investigated it is shown that the folk theorem holds in the limit iff demand increases at the same rate as the number of firms and the cournot price sequence is bounded strictly above by the supremum of marginal cost for large n

pigouvian taxes under imperfect competition if consumption depends on emissions the paper considers environmental regulation of a consumption good and an externality which influence demand and costs in a nonseparable way under monopoly two instruments are always required for first best the pigouvian tax is more complicated than anticipated

semicollusion in the norwegian cement market abstract a model of semicollusion where firms collude on prices and compete on capacities is tailor made to the characteristics of the norwegian cement market and tested on this particular market for the period 1927 1982 the results indicate that the rapid increase in capacity and thereby in exports in the period 1956 1967 the late phase of the price cartel best can be explained by the market sharing agreement each firm overinvested in capacity to receive a large quota in the domestic market

environmental policy under oligopoly with endogenous market structure emission taxes under both fixed number oligopoly and endogenous market structure which are the most relevant market structures for policy issues are examined in the latter case and contrary to what is expected under imperfect competition the optimal tax could exceed marginal external damages which implies that externalities generated by oligopolistic firms could be optimally controlled by overinternalizing environmental damages under endogenous market structure a scheme consisting of a license fee and a second best underinternalizing emission tax can increase social welfare as compared to the use of a single emission tax exceeding marginal damages copyright 1995 by the editors of the scandinavian journal of economics

price setting supergames with capacity constraints this paper examines the role of industry capacity in enforcing collusion in the context of repeated games for a fixed capacity per firm it is shown that changes in the number of firms have a non monotone effect on the best enforceable cartel price this is due to the fact that while an additional firm lowers the share that each of the other firms enjoys at the collusive price it also increases the losses to each firm should the cartel fail

an empirical test of the effect of excess capacity in price setting capacity constrained supergames abstract in a multi period game industry excess capacity may act to deter firms from cheating on a non cooperative oligopoly price a model is developed that translates the deterrrent influence of excess capacity into predictions about the relationship between excess capacity and oligopoly price cost margins the model is tested with time series data from the u s aluminum industry results are consistent with those predicted by the model

determinants of the incidence and scale of seed capital investments by venture capital firms employing both behavioral decision making and agency theories our study seeks to identify those factors that influence a venture capital vc firm s decision to undertake seed capital investments and subsequently the scale of such activity using data on the investments made by 2949 vc funds raised worldwide between 1962 and 2002 we find investor age timing of investment and fund location to be of importance in addition the size of the fund and the existing number of portfolio firms exert opposite influences on the level of seed capital activity of the vc firm these results suggest that seed activity is a valuable source of market intelligence for leading vc firms seeking proactively to identify and invest in novel technologies

pollution control through price incentives the role of rent seeking costs in monopoly markets abstract we consider the effect of rent seeking costs on the design of an efficient pollution tax earlier work has concluded that a pollution tax levied on an otherwise unregulated monopoly should always be less than the pigouvian rate this study demonstrates that if rent seeking costs are present the appropriate discharge tax for a monopoly firm can equal or exceed the marginal damage from its pollution calculations reveal that under a wide range of conditions the ideal corrective tax for a monopoly firm is very close to the fully internalizing pigouvian tax

the size distribution of innovating firms in the uk 1945 1983 a survey of 4 378 significant innovations shows that firms with fewer than 1 000 employees commercialized a much larger share than is indicated by their share of r and d expenditures innovations per employee have been consistently above average in firms with more than 10 000 employees and have become so in firms with fewer than 1 000 intersectoral variation in the size distribution of innovating firms can be explained as a function of r and d based technological opportunities and of technological ease of entry by user firms with principal activities outside the sector copyright 1987 by blackwell publishing ltd

pricing strategies in supergames with capacity constraints some evidence from the u s portland cement industry abstract theory demonstrates that demand variations can have nonmonotonic effects on pricing in supergames with capacity constraints furthermore this nonmonotonic relationship can be a function of capacity utilization rates time series data from 25 regional cement markets are used to examine this results empirically no statistically significant relationship is found between demand variations pricing and excess capacity

finance for smes a u k perspective this paper provide an overview of recent trends in the financing of smaller businesses in the u k it refers in particular to the findings of a major recent programme of work in this area funded by the economic and social research council in which the author participated this programme included the first national survey to address these issues since the bolton report of 1971 as well as a range of projects covering the finance of ethnic businesses and hi tech firms as well as the market for informal venture capital on the basis of this work and of the results of more recent follow up surveyors it is concluded that the evidence for general equity or debt gaps in the u k is weak if anything sme funding was too easy in the boom of the late 1980s it is argued that consideration could be given to the promotion through seedcorn funding of sme co operative or mutual guarantee schemes to reduce information asymmetry in u k credit markets

modelling market fundamentals a model of the aluminium market the standard approach to modelling primary commodity markets under rational expectations is to relate the commodity price to the production and consumption surprises i e the innovations on the equations using the world aluminium market we show how this approach can be modified so that both the price and stock can be written in terms of one or more market fundamentals which reflect the supply demand balance on the market this approach allows joint estimation of production consumption stock demand and price equations subject to cross equation restrictions it may be seen as a formalization of the approach adopted by metals industry analysts

the informal venture capital market aspects of scale and market efficiency abstract risk capital is a resource essential to the formation and growth of entrepreneurial ventures in a society that is increasingly dependent upon innovation and entrepreneurship for its economic vitality the performance of the venture capital markets is a matter of fundamental concern to entrepreneurs venture investors and to public officials this article deals with the informal venture capital market the market in which entrepreneurs raise equity type financing from private investors business angels the informal venture capital market is virtually invisible and often misunderstood it is composed of a diverse and diffuse population of individuals of means many of whom have created their own successful ventures there are no directories of individual venture investors and no public records of their investment transactions consequently the informal venture capital market poses many unanswered questions the author discusses two aspects of the informal venture capital market questions of scale and market efficiency the discussion draws upon existing research to extract and synthesize data that provide a reasonable basis for inferences about scale and efficiency private venture investors tend to be self made individuals with substantial business and financial experience and with a net worth of 1 million or more the author estimates that the number of private venture investors in the united states is at least 250 000 of whom about 100 000 are active in any given year by providing seed capital for ventures that subsequently raise funds from professional venture investors or in the public equity markets and equity financing for privately held firms that are growing faster than internal cash flow can support private investors fill gaps in the institutional equity markets the author estimates that private investors manage a portfolio of venture investments aggregating in the neighborhood of 50 billion about twice the capital managed by professional venture investors by participating in smaller transactions private investors finance over five times as many entrepreneurs as professional venture investors 20 000 or more firms per year compared to two or three thousand the typical angel backed venture raises about 250 000 from three or more private investors despite the apparent scale of the informal venture capital market the author cites evidence that the market is relatively inefficient it is a market characterized by limited information about investors and investment opportunities furthermore many entrepreneurs and private investors are unfamiliar with the techniques of successful venture financing the author s scale and efficiency inferences coupled with evidence documenting gaps between private and social returns from innovation prompt questions about public as well as private initiatives to enhance the efficiency of the informal venture capital market the article concludes with a discussion of venture capital network inc vcn an experimental effort to enhance the efficiency of the informal venture capital market vcn s procedures and performance are described followed by a discussion of the lessons learned during the first two years of the experiment

long run competition in the u s aluminum industry abstract a methodology for examining dynamic structure performance relationships in a single industry is proposed and illustrated implications of long run competitive behavior for a simple simultaneous equations model of structure and performance are derived and tested using recently developed methods for the interpretation of economic time series it is concluded that the structure and performance in the u s aluminum industry in the postwar period conform well with the hypothesis that the primary aluminum market was competitive in the long run

the response by the norwegian aluminium industry to changing market structure abstract this paper analyses how changes in market structure have affected the margins measured by the lerner index of norwegian aluminium plants instead of showing the expected negative trend due to increased competition internationally the margins are found to move procyclically around a constant that significantly exceeds zero three explanations for this stability in the levels of the margins are identified a better exploitation of scale economies increased productivity and product specialisation which allows norwegian producer prices to increase more rapidly than the international reference price

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

excess capacity and limit pricing an empirical test entry may be inhibited by expectations that incumbents have lower marginal costs incumbents may be able to use limit pricing or excess capacity to further this expectation we construct an empirical model of oligopoly capacity and pricing decisions and of entrant responses the results support the hypothesis that both lower prices and greater excess capacity inhibit entry they further support limit pricing but provide no evidence that oligopolies deliberately install excess capacity to deter entry the results suggest however that limit pricing firms may exploit the entry inhibiting effects of unintended excess capacity by raising their limit prices

pigouvian taxation in tourism the paper studies the characteristics and the effects of a tax imposed by a local government on the land used to create new tourists accommodations first a dynamic policy game between a monopolist in a tourist area and a local government is considered in each period the former has to decide the size of land undergoing development whereas the latter has to choose the tax to levy on each newly developed area unit linear perfect markov strategies are derived for both the non cooperative and the public monopoly case in equilibrium a public monopoly would develop land more rapidly than a private monopoly furthermore the more the monopolist discounts the future the more the long run use of the natural resource is reduced second the properties of the tax are studied considering an oligopolistic market structure the tax alone does not lead to the socially optimal level of land use however its combined effect with another policy instrument such as a quota induces the optimal level of resource use

the importance of equity finance for r d activity this article analyzes the importance of equity finance for the r d activity of small and medium sized enterprises we use information on almost 6 000 german smes from a company survey using the intensity of banking competition at the district level as an instrument to control for endogeneity we find that a higher equity ratio is conducive to a higher r d intensity owners may only start r d activities if they have the financial resources to sustain them until successful completion we find a larger influence of the equity ratio for young companies equity may be more important for young companies which have to rely on the original equity investment of their owners since they have not yet accumulated retained earnings and can rely less on bank financing