follower payoffs in symmetric duopoly games this paper compares the leader and follower payoff in a duopoly game as they arise in sequential play with the nash payoff in simultaneous play if the game is symmetric has a unique symmetric nash equilibrium and players payoffs are monotonic in the opponent s choice along their own best reply function then the follower payoff is either higher than the leader payoff or even lower than in the simultaneous game this gap for the possible follower payoff had not been observed in earlier duopoly models of endogenous timing

tariff preferences wto negotiations and the ldcs the case of the everything but arms initiative by assessing the impact of the recently adopted everything but arms eba initiative of the eu on the least developed countries ldcs and by showing how further multilateral trade liberalisations erode the eba preferences and impact the ldcs this paper attempts to uncover the ldcs difficult positions in the wto trade negotiations due to its limited product coverage and previous preferences granted by the eu welfare impacts of the eba on the ldcs are shown to be small and the bulk of these gains are associated with the sensitive products that are subject to gradual liberalisations moreover these small gains are likely to disappear if the eu conducts trade policy reforms in fulfilling its wto obligations resulting in an actually worse off situation for the ldcs extending the analysis to a multilateral trade liberalisation scenario reinforces the above results that the ldcs may well lose due to preference erosion and higher world market prices it concludes that other development assistance measures from developed countries should be made available to the ldcs to ease their dependency on trade preferences and to foster their supply capacities the ldcs themselves should attempt to integrate the duty and quota free market access status contained in the eba into a binding wto agreement to secure a stable trading environment but more importantly in order to solve the difficulties at the root these countries should actively engage in reforming their own trade policies

some aspects of trade between australia and pacific island countries australia and pacific island countries pics have maintained an ongoing trade and economic relationship for several years the determinants of trade between australia and pics are examined using a gravity model by utilising time series cross country data for the period 1981 to 2005 the empirical findings indicate that imports by pic from australia are significantly determined by pics population and their per capita gdp the results also suggest that pics exports are significantly determined by pics and australia s population pics infrastructure telecommunications and the distance to australia consistent with the findings of other studies using the gravity model distance is found to be a friction to pics exports to australia while this study identifies factors influencing pics trade with australia a more substantial issue for the governments and trade policy makers in pics is to look into the generally disappointing long term trade performance from a policy perspective pics would need to seriously look at increasing their export potential

income generating effects of biofuel policies a meta analysis of the cge literature abstract while the production of biofuels has expanded in recent years findings in the literature on its impact on economic growth and development remain contradictory this paper presents a meta analysis of computable general equilibrium cge studies published between 2006 and 2017 on the effect of biofuel production on economic development worldwide using 30 cge studies we found that biofuel supportive policies generated significant impacts on gdp and household incomes cge studies included in our database reported an average 0 25 percentage point increase in gdp and a 0 49 percentage point increase in household incomes we also found that results were driven by several key features of the cge studies included in our database we investigated features such as biofuel type geographic area and characteristics of the cge models employed we found that biofuel expansion has heterogeneous effects in developed versus emerging countries simulations on longer time periods and in multi country studies led to results that indicate higher impacts of biofuel expansion on gdp growth and household incomes moreover simulations with an increase in agricultural productivity indicate positive welfare impact gains unlike simulations with land expansion lastly we found that biodiesel development leads to higher welfare impact gains than that of bioethanol

german dominance in the ems evidence from interest rates abstract the paper presents an empirical analysis of german dominance and asymmetries in the ems based on a dynamic system of equations explaining national money market interest rates the hypothesis of strict german dominance of the ems is rejected however there are some noticeable asymmetries in the ems germany is a relatively strong player and has been the least dependent country in the early phase of the system since 1983 german independence has diminished in contrast france throughout and italy in the early phase of the ems have been relatively weak players in the system

dominant interest and inflation differentials within the ems a comment abstract in a recent article in this review koedijk and kool 1992 k k have argued that the ems has not functioned as a dm zone they use a modified version of the principal components analysis to show that deviating movements in inflation and interest rates have always existed and still exist between germany and the netherlands on the one hand and belgium france and italy on the other they conclude that germany has in practice not dominated the ems bloc and that the participating countries have enjoyed some freedom in setting their monetary policy in this comment we challenge their conclusion we use cluster analysis to show that the ems has gradually evolved into a dm zone we also disagree with another conclusion of k k that the united kingdom in practice always belonged to the dm group indeed we show that this is only true for a few years

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

unit roots and granger causality in the ems interest rates the german dominance hypothesis revisited abstract the aim of this paper is twofold first it shows that a sufficient conditions for unit roots found in ar systems to persist in var systems amount to granger non causality in any direction among the variables involved this implies that a necessary condition for the disappearance of one unit root in a var system implies granger causality in at least one direction b for first order models with non explosive variables granger causality is also sufficient for cointegration and c causality and cointegration inference are strongly affected by the omission of an important causing variable second our new analytical framework allows us to formulate and test several new variations of the so called german dominance hypothesis in a unified cointegrating framework which we define as strong semi strong and weak types 1 and 2 german dominance in addition we allow for the possibility that the dominant player may lie outside the ems so that we introduce and test the us dominance hypothesis

dynamics of intra ems interest rate linkages anumber of previous studies have questioned the dominant role of germany within the european monetary system ems these conclusions are often based on empirical findings that the interest rates of ems member countries are not affected by german interest rates even in the long run in this study we demonstrate that intra ems interest rate differentials vis a vis germany exhibit mean reverting behavior characterized by long memory dynamics in a system incorporating six ems countries and one non ems country the u s a estimates from a fractional error correction model suggest the presence of short run intra ems monetary policy interdependencies but validate the german dominance hypothesis in the long run

the pricing of forward contracts for foreign exchange this paper investigates the nature of observed deviations from the unbiased expectations hypothesis in the forward foreign exchange market if these deviations are due to risk premia then the same premia should be observed in nominal bonds denominated in different currencies this condition imposes testable restrictions on the parameters of a multivariate regression model the empirical results are consistent with a world in which time varying risk premia cause the observed deviations from unbiased expectations

stackelberg versus cournot oligopoly equilibrium abstract we compare an m firm cournot model with a hierarchical stackelberg model where m firms choose outputs sequentially the stackelberg equilibrium price is lower so output and total surplus are higher total profits are lower while the first mover in a stackelberg duopoly earns more than a cournot duopolist this is not necessarily true for m 2 we find a surprisingly simple relation which determines whether cournot profit exceeds the stackelberg leader s finally we consider a game with firms choosing whether to reveal their outputs which includes stackelberg and cournot as possible outcomes the equilibrium is stackelberg

endogenous timing in duopoly games stackelberg or cournot equilibria abstract simultaneous versus sequential play is studied in an extended game in a preplay stage players decide whether to select actions in the basic game at the first opportunity or to wait until observing their rivals first period actions in one extended game players first decide when to select actions without committing to actions in the basic game the equilibrium has a simultaneous play subgame unless payoffs in a sequential play subgame pareto dominate those payoffs in another extended game deciding to select at the first turn requires committing to an action both sequential play outcomes are the equilibria only in undominated strategies

commitment robust equilibria and endogenous timing abstract this paper investigates which equilibria of a game are still viable when players have the opportunity to commit themselves to that end we study a model of endogenous timing in which players face the trade off between committing early and moving late it is shown that mixed resp pure equilibria of the original game are subgame perfect resp persistent in the timing game only when no player has an incentive to move first consequently mixed equilibria are viable only if no player has an incentive to move first one needs strong evolutionary solution concepts to draw that conclusion for pure equilibria journal of economic literature classification number c72

being a leader or a follower this paper deals with the analysis of conflicts in duopoly situations in particular with the distribution of roles in the von stackelberg framework which firm will be the leader which firm the follower under what circumstances will firms find a mutually advantageous distribution of roles will they fight for leadership or followship in von stackelberg s analysis of duopoly either firms do not choose their respective roles or they fight for leadership this situation is due to the particular strategy space namely the quantity to produce of an homogeneous good we extend here the strategy space to price quantity pairs we show that if costs are identical or similar then both firms will prefer the role of follower if there is a significant cost differential between the firms then the non cooperative equilibrium can only be of two types either the less efficient firm will act as the leader selling a limited quantity at a low price and the more efficient firm as the follower selling to the residual demand at a higher price or the more efficient firm acting as leader will drive the less efficient firm out of the market by adopting a limit pricing strategy but in so doing that firm makes less profits than if it acts as follower we suggest that it is not unreasonable to expect that firms in a duopoly framework will tend to coordinate on their mutually advantageous role distribution even if they compete in a non cooperative strategic way in terms of both prices and quantities

endogenous price leadership and the strategic acquisition of information we model a differentiated bertrand duopoly in which a firm s earlier knowledge of market demand than its competitor results in endogenous price leadership with the information advantaged firm leading in such a setting with second mover advantage we then study the firms incentives to acquire information and analyze an information acquisition game both i neither firm acquiring information and ii one firm acquiring information can arise as subgame perfect equilibrium but both firms acquiring information is never an equilibrium outcome even if information is free information may have a negative value if it causes a change in the timing of price competition

sweetening the transition in eu sugar preferences the case of fiji the european union grants preferential market access for sugar to a group of african caribbean and pacific acp countries sugar exported under these quotas receives between two and three times the world price these trade preferences are intended as a form of aid but they tend to stifle productivity growth in the recipient countries the european union could better assist acp countries by providing direct development assistance in place of sugar subsidies for example by investing the aid transfers into infrastructure or other essential public services this paper tests this proposition for the case of fiji using a computable general equilibrium model it is found that significant gains in economic performance can be achieved by employing such alternative strategies for aid these gains are particularly strong over the medium to long term when the aid funds are diverted to infrastructure development however there are issues of equity to consider since in the case of fiji the rural poor would be the losers if trade preferences were to be removed moreover the degree of benefit in alternative strategies such as infrastructure development will be contingent on the economy s flexibility which in turn depends upon the country s regulatory regime and education performance

interest rate linkages within the european monetary system further analysis j costas karfakis and demetrios m moschos 1990 examine the interest rate linkages within the european monetary system ems concluding that the german interest rate plays a dominate role within the ems the authors reexamine the interest rate linkages within the ems with the addition of the interest rate of the united states their results suggest that both the united states and german interest rates play an important but not dominant role in ems interest rate linkages copyright 1993 by ohio state university press

expected and predicted realignments the ff dm exchange rate during the ems an empirical model of time varying realignment risk in an exchange rate target zone is developed expected rates of devaluation are estimated as the difference between interest rate differentials and estimated expected rates of depreciation within the exchange rate band using french franc deutsche mark data during the european monetary system the behavior of estimated expected rates of depreciation accord well with the theoretical model of bertola svensson 1990 we are also able to predict actial realignments with some success

endogenous stackelberg leadership abstract we consider a linear quantity setting duopoly game and analyze which of the players will commit when both players have the possibility to do so to that end we study a two stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2 we show that committing is more risky for the high cost firm and that consequently risk dominance considerations as in harsanyi and selten 1988 allow the conclusion that only the low cost firm will choose to commit hence the low cost firm will emerge as the endogenous stackelberg leader journal of economic literature classification numbers c72 d43

firms timing of production with heterogeneous consumers i revisit endogenous timing in a quantity setting duopoly game in the basic model i show that given strong heterogeneity in consumers willingness to pay wtp and a moderately small consumer segment with low wtp sequential moving outcomes can appear in equilibrium with the follower enjoying second mover advantage owing to consumer heterogeneity in wtp there is a local property that a firm s aggressive behaviour may lead to a competitor responding more aggressively hence the sequential moves can restrict firms total outputs to avoid a price collapse and result in firms strategic choices that pareto dominate those under the simultaneous move i further generalize my results and show that although firms compete in quantity under some conditions of the demand function features of strategic complements can appear

endogenous price leadership with an essential input abstract the hamilton slutsky endogenous timing methodology is applied to differentiated duopolies where motivated by access pricing literature one firm owns an essential input sold wholesale to the rival both firms then set retail prices for their differentiated goods the scenario and results are different from standard endogenous timing duopolies encompassing three prices one wholesale two retail rather than two with unique timing game equilibrium which always entails retail price leadership by the input owner thus providing a new and powerful rationalisation for stackelberg the results call into question the generic access pricing assumption that simultaneous moves determine retail downstream prices

endogenous timing in strategic environmental policymaking in this paper we endogenize the timing of policymaking in a simple two country model of strategic environmental policy we consider a timing game in which two policymakers non cooperatively decide their preferred sequence of moves before setting emission tax rates we show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages when the damages are insignificant the tax rates are strategic substitutes and the simultaneous move policymaking emerges in equilibrium in contrast when the damages are significant the tax rates are strategic complements and sequential move policymaking emerges we also extend the model by allowing for differences in the vulnerability to environmental damages between countries when the differences are large the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader in the case where multiple equilibrium emerges the risk dominant equilibrium is also that where the less vulnerable country leads

second mover advantage and price leadership in bertrand duopoly we consider the issue of first versus second mover advantage in differentiated product bertrand duopoly with general demand and asymmetric linear costs we generalize existing results for all possible combinations where prices are either strategic substitutes and or complements dispensing with common extraneous and restrictive assumptions we show that a firm with a sufficiently large cost lead over its rival has a first mover advantage for the linear version of the model we invoke a natural endogenous timing scheme coupled with equilibrium selection according to risk dominance the analysis yields as the unique equilibrium outcome sequential play with the low cost firm as leader

identifying and characterising price leadership in british supermarkets price leadership is a concept that lacks precision we propose a deliberately narrow falsifiable definition then develop it illustrate its feasibility and test it using the two leading british supermarket chains we find both firms engaging in leading prices upward over a range of products with the larger being initially more dominant but the smaller increasing leadership activity to take overall leadership over time however more price leadership events are price reductions than price increases consistently led by the smaller firm nevertheless the increases are of larger monetary amounts than the falls so average basket price increases over time

the relationship between interest rate differentials and macroeconomic variables a panel data study for european countries abstract based on panel data regressions the relationship between 12 month interest rate differentials and macroeconomic variables is analyzed for nine european countries relative to germany stationarity properties of the variables are examined by tests developed for panel data models the distribution of the test statistic is not normal and is bootstrapped from the sample at hand all significant regression coefficients are estimated with the predicted sign in particular the inflation differential the real income growth differential relative labor costs and the current account have a strong effect on the interest rate differential hence the results indicate that governments have some scope for influencing the interest rate differential by conducting the appropriate macroeconomic policy these results are considerably more optimistic compared to earlier studies where interest rate differentials are frequently measured at 1 month and 3 months maturity included also is an analysis of whether the erm countries have gained more credibility in exchange rate policy through the exchange rate system

endogenizing leadership in tax competition abstract in this paper we extend the standard approach of horizontal tax competition by endogenizing the timing of decisions made by the competing jurisdictions following the literature on the endogenous timing in duopoly games we consider a pre play stage where jurisdictions commit themselves to move early or late i e to fix their tax rate at a first or second stage we highlight that at least one jurisdiction experiments a second mover advantage we show that the subgame perfect equilibria spes correspond to the two stackelberg situations yielding to a coordination problem in order to solve this issue we consider a quadratic specification of the production function and we use two criteria of selection pareto dominance and risk dominance we emphasize that at the risk dominant equilibrium the less productive or smaller jurisdiction leads and hence loses the second mover advantage if asymmetry among jurisdictions is sufficient pareto dominance reinforces risk dominance in selecting the same spe three results may be deduced from our analysis i the downward pressure on tax rates is less severe than predicted ii the smaller jurisdiction leads iii the big country higher tax rate rule does not always hold

endogenous timing in general rent seeking and conflict models we examine simultaneous versus sequential choice of effort in a two player contest the timing of moves determined in a preplay stage prior to the contest subgame as well as the value of the prize is allowed to be endogenous contrary to endogenous timing models with an exogenously fixed prize the present paper finds the following 1 players may decide to choose their effort simultaneously in the subgame perfect equilibrium spe of the extended game 2 the spe does not need to be unique in particular there is no unique spe with sequential moves if the direct costs of effort are zero 3 symmetry among players does not rule out incentives for precommitment to effort locally away from the cournot nash level 4 finally there may be no correlation between win probability and strategic incentives in our framework a finding most central in the analysis of fixed prize contests

stackelberg versus cournot equilibrium we reconsider stackelberg s classical critique of the cournot duopoly in the framework of endogenous timing for two player games for quantity duopoly we provide different sets of minimal conditions directly on the demand and cost functions yielding respectively the simultaneous and the two sequential modes of play while our findings essentially confirm the predominance of the former they also indicate that the latter is natural under some robust but restrictive conditions no extraneous assumptions such as concavity existence or uniqueness of equilibria are needed and the analysis makes crucial use of the basic results from the theory of supermodular games classification numbers b21 c72 d43 l13 c 1999 academic press

endogenous sequencing of firm decisions abstract when firms are symmetrically informed a stackelberg leader prefers to be leader rather than a cournot duopolist however when the leader has superior information about demand the leader may earn lower ex ante profits than it would earn if it was choosing quantities simultaneously with the follower in this paper i give the firm with superior information the option of delaying its quantity decision until the decision period of the less informed firm so that decisions are made simultaneously surprisingly in the unique stable outcome the informed firm moves first regardless of its private information journal of economic literature classification numbers c72 c73 d82 l10

von stackelberg and cournot duopoly choosing roles under what circumstances will firms agree on the choice of roles of leader and follower in the von stackelberg duopoly model a key determinant is the slope of the firms reaction function in either price or quantity space the duopolists will disagree over the choice of roles if they have downward sloping reaction functions each will prefer to be the leader they will also disagree if they have upward sloping reaction functions and similar profit functions each will prefer that the other be the leader preferences between von stackelberg and cournot outcomes are also considered

pricing strategies who leads and who follows in the air and rail passenger markets in italy abstractin this paper we aim at empirically uncovering the existence of price leadership in the passenger transport market whose oligopolistic structure facilitates the strategic interaction amon

asymmetry in capacity and the adoption of all units discounts abstract in many abuse of dominance antitrust cases the dominant firm adopts pricing schemes involving all units discounts whereas its smaller competitors often use simple linear pricing we provide a game theoretic justification for the observed asymmetry in pricing practices by studying a model in which a firm with full capacity faces a capacity constrained rival the asymmetry in capacity between the firms which gives rise to the captive market allows the dominant firm to take advantage of the quantity commitment through all units discounts while the capacity constrained rival is induced to offer simple linear pricing

when should a manufacturer set its direct price and wholesale price in dual channel supply chains abstract applying an observable delay game framework developed in noncooperative game theory we investigate the timing problem concerning when a manufacturer managing dual channel supply chains consisting of a retail channel and a direct channel should post its wholesale price and direct price conventionally operational research models describing dual channel supply chains examine price competition where the retailer and the manufacturer simultaneously determine the retail and direct prices respectively in contrast to this conventional setting our model demonstrates that such simultaneous price competition never arises if the manufacturer and retailer can choose not only the level of the price but also the timing of pricing if the manufacturer sets the direct price after setting the wholesale price to the retailer the retailer accelerates the timing of retail pricing prior to the direct price setting by the manufacturer our findings suggest that the manufacturer should post the direct price before or upon but not after setting the wholesale price for the retailer this upfront posting of the direct price not only constitutes the subgame perfect nash equilibrium of the noncooperative game between channel members but also maximizes the profits for a manufacturer employing multichannel sales strategies

asymmetric information acquisition and behavior in role choice models an endogenously generated signaling game the authors employ a static homogeneous good duopoly model wherein firms can choose to produce in one of two periods the model allows agents to acquire information and then traces the impact of the information pattern on subsequent production behavior asymmetric information acquisition leads to a unique production role choice pattern the informed uninformed firm chooses to assume the leader s follower s role moreover if information is costly the typical equilibrium involves only one firm acquiring information thus identical firms with identical opportunities choose to become asymmetrically informed and produce sequentially this is the unique refined equilibrium outcome copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

regional trade agreements versus global trade liberalisation implications for a small island developing state this study undertakes an empirical investigation of the macroeconomic and sectoral impacts of two forms of regional trade agreements vis a vis global trade liberalisation on a small island country using fiji as a case study in order to capture the feedback effects of such a complex set of policies we employ a dynamic computable general equilibrium model of the fijian economy to investigate i the impact of the pacific island countries trade agreement picta ii the impact of picta the pacific agreement for closer economic relations pacer and the economic partnership agreements epas iii the impact of full tariff liberalisation i e tariff removal only and iv the impact of full trade liberalisation with removal of both tariff and non tariff barriers while picta consistently provides the least benefits across a range of macroeconomic indicators including real output welfare trade volumes and employment full trade liberalisation involving the removal of tariff and non tariff barriers provides the greatest benefits compared to the other scenarios in terms of real output however the latter scenario is outperformed by picta pacer the epas and full tariff liberalisation in terms of welfare effects trade volumes and employment the policy implications hold important lessons for developing countries considering trade liberalisation

simultaneous vs sequential price competition with incomplete information abstract we compare equilibria with sequential and simultaneous moves under homogeneous good bertrand competition when unit costs are private information under an alternative interpretation we examine the consequences of awarding a right of first refusal in a first price procurement auction with endogenous quantity

endogenous price leadership we consider a linear price setting duopoly game with differentiated products and determine endogenously which of the players will lead and which one will follow while the follower role is most attractive for each firm we show that waiting is more risky for the low cost firm so that consequently risk dominance considerations as in harsanyi and selten a general theory of equilibrium selection in games mit press cambridge ma 1988 allow the conclusion that only the high cost firm will choose to wait hence the low cost firm will emerge as the endogenous price leader

endogenous timing with infinitely many firms abstract a model with constant marginal costs is considered where firms choose first a period for production and then the amount to produce when competing in the market according to the resulting timing decisions multiple equilibria arise allowing for infinitely many industry output configurations encompassing one limit output dominant firm and the cournot equilibrium with free entry as extreme cases at each of these equilibria a firm produces a positive amount only if this firm commits to produce at period one both stackelberg and cournot like outcomes are sustainable as equilibria however when the number of leaders is given production at subsequent periods is always prevented and industry output is sometimes larger than the entry preventing level

forward foreign exchange rates expected spot rates and premia a signal extraction approach in this paper we implement a methodology to identify and measure premia in the pricing of forward foreign exchange that involves application of signal extraction techniques from the engineering literature diagnostic tests indicate that these methods are quite successful in capturing the essence of the time series properties of premium terms the estimated premium models indicate that premia show a certain degree of persistence over time and that more than half the variance in the forecast error that results from the use of current forward rates as predictors of future spot rates is accounted for by variation in premium terms the methodology can be applied straightforwardly to the measurement of unobservables in other financial markets there exists a growing body of empirical research on premia in the pricing of forward foreign exchange conditional on the hypothesis that the foreign exchange market is efficient or rational the existence of time varying premia has been documented in the literature by fama 6 hansen and hodrick 10 11 hodrick and srivastava 15 16 hsieh 171 and korajczyk 20 frankel 9 fails to identify such premia and domowitz and hakkio 51 obtain different results for different currencies

cost of delay and endogenous price leadership abstract we study the effects of discounting in a standard endogenous price leadership model we show that there will be occasional changes in the identity of the leader with any cost of delay or discounting however small by analyzing the incentives that induce a firm to take up the leader position we derive positive predictions about which firm will lead most price changes firms with shorter reaction times will be more likely to become the price leader as will firms with lower cost of delay if the firms reaction times are similar

corporate social responsibility or payoff asymmetry a study of an endogenous timing game we revisit an endogenous timing game by introducing corporate social responsibility into firms payoffs previous research investigates an endogenous timing game in a mixed oligopoly wherein one welfare maximizing public firm competes against profit maximizing private firms it shows that the outcome is completely different from that of private oligopoly in contrast to its result we find that this change in payoff does not matter as long as the payoffs are symmetric our result indicates that asymmetry and not welfare concerning objectives yields specific results in the literature on mixed oligopoly

a new look at the classical bertrand duopoly abstract the paper provides necessary and sufficient conditions for the uniqueness of pure strategy nash equilibrium in the standard bertrand duopoly with a homogeneous product the main condition is elementary easy to interpret and nests all known sufficient conditions in the literature

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

on stackelberg games in a homogeneous product market abstract in a homogeneous product duopoly with concave demand and strictly convex costs we bring together all the standard results of quantity stackelberg games provide some new results with price stackelberg games and compare the equilibrium configuration of the quantity games with the price games in the price stackelberg game we show there is a unique spne where the leader chooses a lower price than the follower but both get equal payoffs we prove that generally quantity stackelberg games are less competitive than price stackelberg games however we also demonstrate the possibility of a reversal of this result

does the dm dominate the euro market an empirical investigation starting point is the german dominance hypothesis according to which germany has a dominant position within the ems this makes it impossible for other member countries to pursue their own monetary policies using monthly data of three month euro market rates from 1980 to 1988 for the u s germany the u k the netherlands france and italy we test this hypothesis in a multivariate cointegration framework we find that germany has a strong position in europe which is not restricted to the ems concerning long run development one might speak of a dominant position however there are short run relations between european countries which are not linked to relations with germany copyright 1993 by mit press

strategic effects of three part tariffs under oligopoly the distinct element of a three part tariff 3pt compared with linear pricing lp or a two part tariff is its quantity target within which the marginal price is zero this quantity target instrument enriches the firm s strategy set in dictating the competition to a specific level even in the absence of a usual price discrimination motive with general differentiated linear demands the competitive effect of a 3pt in contrast to lp depends on the degree of substitutability between products competition is intensified when two products are more differentiated yet softened when two products are more substitutable

dominant interest and inflation differentials within the ems abstract this paper investigates nominal interest and inflation behavior in the ems between march 1979 and september 1989 using a modified version of principal components analysis neither over the whole period nor after march 1983 has the ems functioned as a dmark zone deviating movements in inflation and interest rates between ems countries still persist most important is the division between germany the netherlands and the united kingdom on the one hand and belgium france and italy on the other differences in deflationary policies between countries inside and outside the ems appear to be the most important determinant of this result

testing for a break in the persistence in yield spreads of emu government bonds this study tests for a break in the persistence of emu government bond yield spreads examining data from france italy and spain and using german interest rates as a kind of benchmark the results reported here provide evidence for breaks between 2006 and 2008 the persistence of the yield spreads against german government bonds has increased signicantly after this period this could be a sign of higher sovereign credit risk and possibly even redenomination risk caused by the debt crisis in the euro area we nd long memory behavior before and after the breakpoints and empirical evidence for positive excess kurtosis and garch eects when persistence

a north american free trade agreement analytical issues and a computational assessment abstractthe following sections are included introductionissues in analyzing the economic impact of the naftathe computational modelcomputational resultsconclusionsstudy questionsreferencessuggested further reading this abstract was borrowed from another version of this item

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

a note on equilibrium leadership in tax competition models this paper reexamines the work of kempf and rota graziosi j pub econ 94 768 776 2010 which shows that leadership by the small region is the risk dominant equilibrium under the endogenous timing game they obtained this result in a model where the asymmetry among regions translates into different gradients of the demand for capital but identical vertical intercepts in this paper we simply reverse the form of asymmetry by considering different vertical intercepts but identical gradients the reason is that market power is typically related to the intercept and not to the slope of the demand function we then show that leadership by the large region becomes the risk dominant equilibrium and can even become pareto superior

the foreign exchange risk premium in a target zone with devaluation risk abstract the foreign exchange risk premium in an exchange rate target zone is derived when the exchange rate is heteroskedastic within the band and there is a separate devaluation risk the risk premium is then the sum of two separate risk premia arising from uncertainty about exchange rate movements within the band and from uncertainty about devaluations both real and nominal risk premia are considered real and nominal risk premia from movements within the band are very small real and nominal risk premia from devaluations are larger but still relatively small proportions of the interest rate differential

stationary time varying risk premia in forward foreign exchange rates abstract there is mounting evidence that forward foreign exchange rates contain time varying risk premia however this evidence is from tests for which statistical inference is based on asymptotic distribution theory furthermore it is uncertain whether risk premia evolve as stationary or nonstationary processes this paper applies two exact small sample pointwise most powerful invariant statistical tests to determine 1 whether forward exchange rates contain time varying risk premia and 2 whether the time varying risk premia are stationary or nonstationary these tests finds strong evidence that forward exchange rates contain stationary time varying risk premia during the recent float evidence from the interwar float is mixed

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14