the solaria syndrome social capital in a growing hyper technological economy we develop a dynamic model to analyze the sources and the evolution of social participation and social capital in a growing economy characterized by exogenous technical progress starting from the assumption that the well being of agents basically depends on material and relational goods we show that the best case scenarios hold when technology and social capital both support just one of the two productions at the expenses of the other however trajectories are possible where technology and social interaction balance one another in fostering the growth of both the social and the private sector of the economy along such tracks technology may play a crucial role in supporting a socially sustainable economic growth

collusion in multiproduct oligopoly games under a finite horizon applying recent results on finitely repeated games to oligopoly theory the author finds that there exists a class of finite horizon output games in which collusion can be achieved as a subgame perfect equilibrium trigger strategies prevent defection from the cooperative outcome by credibly threatening that the defector will be forced to exit the industry for the case of a multiproduct oligopoly it is shown that collusion in one market can be enforced by the threat of punishment in a second market if someone defects even though the two markets are structurally independent the firms make them strategically interdependent through their strategies copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

building up social capital in a changing world this paper models the dynamic process through which a large society may succeed in building up its social capital by establishing a stable and dense pattern of interaction among its members in the model agents interact according to a collection of idyosincratic infinitely repeated prisoner s dilemma played on the existing social network this network not only specifies the playing partners but crucially also determines how relevant strategic information diffuses or new cooperation opportunities are found over time the underlying payoffs randomly change i e display some volatility in response to it agents react by creating new links and removing others this combines into a complex but ergodic dynamic process whose analysis is undertaken in different ways first we rely on its ergodicity to compute numerically its long run regularities second we use mean field approximations to derive analytical results both routes are found in accord and also complementary the long run dynamics of the process sharply depends on environmental volatility displaying the following features a only if volatility is not too high can the society sustain a dense social network and thus attain a large average payoff b the social architecture endogenously responds to increased volatility by becoming more cohesive c network based strategic effects are an essential buffer that preclude the abrupt collapse of the social network in the face of growing volatility these conclusions are largely in tune with the points stressed in the social capital literature

oligopsony power a forgotten dimension of food marketing discussion the three papers offer engaging discussions of oligopsony power at the first handler level in agricultural markets the papers fill an important gap in the literature and thus are important reading for those interested in market power issues in markets for raw agricultural commodities in addition to making the case for increased attention to the potential for oligopsony power at the first handler level each of the papers makes important methodological contributions in offering analytical and empirical approaches for evaluating this oligopsony power although linked by a common theme the three papers differ significantly in their approaches to the market power issue as rogers and sexton note statistics on concentration at least on the sellers side of the market suggest that farm related industries are highly concentrated and that this concentration has increased significantly in recent years for example the four firm concentration ratio cr4 in the steer and heifer slaughter industry has gone from 30 in 1978 to 70 in 1988 purcell 1990a likewise the cr4 for the flour milling industry has gone from 37 in 1980 to over 65 in 1991 brester and goodwin the period 1977 87 was one of four great u s merger movements approximately 400 billion was spend on industrial mergers during this period with food and tobacco firms being the major players connor and geithman these mergers were fueled in part by relaxed restrictions on mergers by federal antitrust agencies after 1980 these statistics lead one to suspect the existence of market power influences in farm related industries however a high degree of concentration in an industry does not confirm the existence of discriminatory market power practices after many years of debate among industrial organization economists the relationship between industry concentration and the exercise of market power remains inconclusive the papers at l ast implicitly take as given the premise that industry concentration implies the existence of collusive market power practices an alternative view presented by demsetz holds that scale economies or other competitive advantages lead to increased concentration in many industries without implying the existence of welfare diminishing market power pricing practices in such cases increased concentration may result in more efficient use of resources of course this alternative view often assumes that entry and exit in an industry are relatively easy and thus that firms in highly concentrated industries are disciplined by the threat of competition evidence of scale economies in the food processing sector has been offered in recent research for example ward found that significant economies of size existed in the

diversification multi market contact and profitability this paper analyses the relationships between diversification multi market contact and industry profitability it focuses on the link between diversification and multi market contact to show that when diversification establishes or increases the extent to which firms meet in more than one market the effect of such multi market contact is to increase the possibility that collusion emerges as an evolutionary stable strategy as a result multi market contact may increase the potential for tacit collusion and so lead to higher profitability the effects of diversification and multi market contact on the price cost margin and the rate of return to capital are estimated using a specially constructed new database for uk manufacturing industry in 1979 this database provides information on the diversification and multi market contact of 418 firms across 134 manufacturing industries thus linking firm and industry level data the results show a clear positive effect of multi market contact on industry profitability

market delineation and demand structure this paper addresses the relationship between the cointegration approach to market delineation and the more traditional approach of analyzing the demand structure among different products in terms of degree of substitutability cointegration tests for market delineation and estimation of a dynamic system of demand equations are undertaken utilizing the same data set the data set consists of three high quality seafood products in the european union the results are encouraging as the results from the two approaches are not only compatible but are also complementary in the sense that they provide more information together than they do separately

measuring globalization of international trade theory and evidence summary measuring globalization requires a standard of perfect international integration as a benchmark that a single world space would reach under conditions of geographic neutrality in international trade we define this standard and present indicators for openness connectedness and integration for each specific economy and for the world economy we apply our indicators to data on trade flows for 59 countries for the 1967 2004 period results show that trade integration is higher than what traditional openness indicators suggest several economies find high levels of integration but the low degree of openness in some large economies jeopardizes the progress of globalization

competitive advantage and collusive optima cost differences may often be important in real oligopolies if side payments are impossible the standard cartel objective total industry profits lacks plausibility when costs differ this essay considers plausible alternatives four different technologies for effecting collusion which are essentially identical when costs are equal define sets of possible profits axiomatic bargaining models are used to select unconstrained optima from among these possibilities simple functional forms are employed low cost firms with large shares in cournot equilibrium may have little to gain from collusion if collusion is effective low cost firms will have relatively low estimated conjectural variations

the role of the exchange rate in monetary policy rules for a country that chooses not to permanently fix its exchange rate through a currency board or a common currency or some kind of dollarization the only alternative monetary policy that can work well in the long run is one based on the trinity of i a flexible exchange rate ii an inflation target and iii a monetary policy rule while not often put into this threepart format the desirability of such a monetary policy in an open economy is in my view the clear implication of three corresponding strands of recent monetary research i research on fixed exchange rates regimes including the influential 1995 article the mirage of fixed exchange rates by maurice obstfeld and kenneth rogoff and the many analyses of the breakdown of fixed exchange rate regimes in the late 1990 s ii research on the practical success with inflation targeting by ben bernanke et al 1999 and iii research on the benefits of simple monetary policy rules see e g taylor 1999a this clear policy implication however does not end the debate about how exchange rates should be taken into account in formulating monetary policy even if one excludes capital controls and sterilized exchange market intervention from consideration because they are not effective or attractive ways to de link exchangerate movements from the domestic interest rate a crucial question remains how should the instruments of monetary policy the interest rate or a monetary aggregate react to the exchange rate should policymakers avoid any reaction and focus instead on domestic indicators such as inflation and real gdp or is the rule of thumb that a substantial appreciation of the real exchange rate furnishes a prima facie case for relaxing monetary policy as characterized by obstfeld and rogoff 1995 p 93 a better monetary policy rule or perhaps policymakers should heed the obstfeld rogoff warning that substantial departures from ppp purchasing power parity in the short run and even over decades make such a policy reaction to the exchange rate undesirable more generally if one accepts the trinity concept of monetary policy in an open economy then what is the role of the exchange rate in the monetarypolicy rule

balance of payments crises under inflation targeting abstract this paper analyzes a small open economy model under inflation targeting it shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously the speed at which the regime collapses and the extent of reserve losses are increasing in the central bank s explicit or implicit commitment to intervene in the foreign exchange market attacks are therefore ranked from most to least severe as follows exchange rate targeting cpi inflation targeting domestic nontradables inflation targeting and money targeting under inflation targeting the size of the attack is increasing in the tradables consumption share

the role of exchange rate in inflation targeting the case of turkey the role of the exchange rates in emerging market economies that have adopted inflation targeting it is a critical and contentious issue in the relevant literature this article investigates whet

social capital and entrepreneurial activity a pseudo panel approach abstract this paper uses a pseudo panel approach at an age based cohort level to investigate the extent to which social capital accounts for differences in entrepreneurial activities the findings suggest that trust measured by trust either in strangers or in public institutions facilitates entrepreneurship we also find that parents emphasis on individual achievement relative to interpersonal relations in raising their child is positively associated with entrepreneurship evidence suggests that both social norms and networks influence entrepreneurship these results do not change when we use social capital measured at the national level

trade costs and multimarket collusion contrary to conventional wisdom this article argues that trade liberalization may facilitate collusion and reduce welfare with the help of a duopoly model in which firms interact repeatedly in multiple markets we first show that if trade costs i e tariffs transport costs and discount factors are not too high efficient cartel agreements necessitate the cross hauling of goods as that entails lower deviation incentives in this setting we then demonstrate that reciprocal trade liberalization always raises total output when trade costs are within a range whose lower bound exceeds a threshold level but may reduce total output and thus be pro collusive when trade costs are below that threshold level

inflation targeting as a monetary policy rule the purpose of the paper is to survey and discuss in ation targeting in the context of monetary policy rules the paper provides a general conceptual discussion of monetary policy rules attempts to clarify the essential characteristics of in ation targeting compares in ation targeting to other monetary policy rules and draws some conclusions for the monetary policy of the european system of central banks jel classi cation e42 e52

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

ethnic ties in trade relationships and the impact on economic performance the case of small scale producers in the handloom sector in ethiopia abstract this article analyses the importance of ethnic ties in trade relationships of small scale producers in the handloom sector in ethiopia using both a non parametric and a parametric statistical method it is shown how various socio economic characteristics of producers lead to ethnic ties with traders it is also shown that ethnic ties affect the performance of producers negatively apparently the positive effect of ethnic ties through the reduction of transaction costs arising from market imperfections does not outweigh the negative effects of closed social networks

from tradition to modernity economic growth in a small world this paper introduces the small world model watts and strogatz nature 1998 into the theory of economic growth and investigates how increasing economic inte gration aects rm size and eciency norm enforcement and aggregate economic perfor mance when economic integration is low and local connectivity is high informal norms control entrepreneurial behavior and more integration mainly improves search for ecient investment opportunities at a higher level of economic integration neighborhood enforce ment deteriorates and formal institutions are needed to keep entrepreneurs in check a gradual take o to perpetual growth is explained by a feedback eect

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

implicit asymmetric exchange rate peg under inflation targeting regimes the case of turkey especially after the 2000s many developing countries let exchange rates float and began implementing inflation targeting regimes based on mainly manipulation of expectations and aggregate demand however most developing countries implementing inflation targeting regimes experienced considerable appreciation trends in their currencies might have exchange rates been utilized as implicit tools even under inflation targeting regimes in developing countries to answer this question and investigate the determinants of inflation under an inflation targeting regime as a case study this paper analyzes the turkish experience with the inflation targeting regime between 2002 and 2008 there are two main findings of this paper first the evidence from a vector autoregressive var model suggests that the main determinants of inflation in turkey during this period are supply side factors such as international commodity prices and the variation in exchange rate rather than demand side factors since the turkish lira tl was considerably over appreciated during this period it is apparent that the turkish central bank benefited from the appreciation of the tl in its fight against inflation during this period second our findings suggest that the appreciation of the tl is related to the deliberate asymmetric policy stance of the bank with respect to the exchange rate both the econometric analysis from a var model and descriptive statistics indicate that appreciation of the turkish lira was tolerated during the period under investigation whereas depreciation was responded aggressively by the bank we call this policy stance under the inflation targeting regimes as implicit asymmetric exchange rate peg the turkish experience indicates that as opposed to rhetoric of central banks in developing countries inflation targeting developing countries may have an asymeyric stance toward exchange rates and favour appreciation of their currencies to hit their inflation targets in this sense it seems to contribute to the ignorance of dangers regarding to over appreciation of currencies in developing countries

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

overcoming incentive constraints by linking decisions consider a bayesian collective decision problem in which the preferences of agents are private information we provide a general demonstration that the utility costs associated with incentive constraints become negligible when the decision problem is linked with a large number of independent copies of itself this is established by defining a mechanism in which agents must budget their representations of preferences so that the frequency of preferences across problems mirrors the underlying distribution of preferences and then arguing that agents incentives are to satisfy their budget by being as truthful as possible we also show that all equilibria of the linking mechanisms converge to the target utility levels the mechanisms do not require transferable utility or interpersonal comparisons of utility and are immune to manipulations by coalitions

clustering cooperation and search in social networks the paper discusses the important role of clustering in the evolution of social networks as it affects not only the incentives of players to cooperate but also their ability to search for fresh opportunities depending on the volatility of the environment and the social convention in place we show that network clustering endogenously adapts to achieve and maintain to the extent possible a state of high social connectivity in the long run jel c71 d83 d85

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

behind the market stage where real societies exist part i the role of public and private order institutions this two part article is an attempt to clarify the social conditions upon which the viability and efficiency of the market system rest it strives to show that the embeddedness thesis that is an explanation based upon the existence of long run personal ties involving the use of reputation mechanisms among transactors cannot fully elucidate the question as to how the problem of trust is solved in market societies as explained in part i there are difficulties of both theoretical and empirical historical kinds and these explain why the market order needs to be sustained by private and public order institutions in part ii the role of generalised morality in backing or supplementing such institutions is discussed in the light of game theory and particular emphasis is put on the ability of moral norms to sustain honest behaviour by generating the right kind of preferences and establishing trust the vexed problem of the dynamics of norm emergence and erosion is then addressed with a view to showing

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

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

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

commitment in utility regulation a model of reputation and policy applications abstract this paper builds a dynamic model of utility regulation where a government cannot commit to a time inconsistent policy of not expropriating investment by allowing the government s type to change over time i explore how reputation concerns may generate partial commitment restricting attention to equilibria that are strongly renegotiation proof i show that there is a unique perfect bayesian equilibrium this contains episodes of investment and good behaviour followed by periods of expropriation and non investment i then apply the model to consider how the power of the incentive scheme and decentralization may influence the properties of this equilibrium in the case of the power of incentives the model suggests that price caps may worsen commitment in developing countries but not in developed ones similarly the model suggests that decentralisation is likely to have a significant effect on commitment but that this effect will depend on the general ability of the government to commit overall we conclude that the effect of such policies on commitment will be different across countries depending on the institutional environment

on interdependent supergames multimarket contact concavity and collusion abstract following bernheim and whinston 1990 this paper addresses the effects of multimarket contact on firms ability to collude real world imperfections tend to make firms objective function strictly concave and market supergames interdependent firms payoffs in each market depend on how they are doing in others then multimarket contact always facilitates collusion it may even make collusion sustainable in all markets when otherwise it would not be sustainable in any the effects of conglomeration are discussed multigame contact is shown to facilitate cooperation in supergames other than oligopolies as long as agents objective function is submodular in material payoffs journal of economic literature classification numbers c72 d43 l13 l21

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

incentives information and organizational form we model an organization as a hierarchy of managers erected on top of a technology here consisting of a collection of plants in our framework the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him we argue that different organizational forms give rise to different information about managers performance and therefore differ according to how effective incentives can be in encouraging a good performance in particular we show that under certain assumptions the m form multi divisional form is likely to provide better incentives than the u form unitary form because it promotes yardstick competition i e relative performance evaluation more effectively we conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for chinese data

multimarket contact competition and pricing in banking abstract in this paper we assess the impact of multimarket contact of banks on their market power by means of a simultaneous equation model in which the divergence of price from marginal cost is a function of multimarket linkages the model is estimated using aggregate data from the italian regions for the years 1997 2009 our results show that multimarket contact is positively and significantly correlated to the market power index and is also connected to both home and non home market concentration the evidence is robust to changes in model specification and multimarket contact measures and supports the idea that firms which have a greater amount of contact are more likely to collude

industry institutions social capital and firm participation in industrial development industry institutions and trade associations represent the collective interests of an industry s constituent firms and play a prominent role in industrial development yet the strength and efficacy of industry institutions to promote these collective interests depends upon the active support and participation of member firms this is essentially a collective action problem by aligning olson s 1971 logics of collective action framework with nahapiet and ghoshal s 1998 dimensions of social capital this article uses survey data from 381 firms from across five uk manufacturing sectors to explore the factors that affect the propensity for firms to participate in industry institution led initiatives the results suggest the propensity of firms participating in collective activities rises where shared interests emerge although the over riding factor is the extent to which firms perceive their own ability to influence and shape the direction of such activities the logic of influence

on the formation of interaction networks in social coordination games there are many situations where two interacting individuals can benefit from coordinating their actions we examine the endogenous choice of partners in such social coordination games and the implications for resulting play we model the interaction pattern as a network where individuals periodically have the discretion to add or sever links to other players with such endogenous interaction patterns we see multiple stochastically stable states of play including some that involve play of equilibria in the coordination game that are neither efficient nor risk dominant thus the endogenous network structure not only has implications for the interaction pattern that emerges but it also has a significant impact on the play in the coordination game relative to what would arise if the same interaction network were exogenous

price discrimination or uniform pricing which colludes more abstract conventional wisdom attributes different economic outcomes of uniform pricing and price discrimination to the heterogeneity in market conditions or market participants such as differences in demand elasticity or production costs we offer a new explanation for the observed differences that relates to behavioral aspects rather than demand or supply side effects in particular in a symmetric bertrand duopoly laboratory experiment for which theory predicts no differences between the two pricing regimes we find that tacit price collusion is systematically higher under price discrimination than under uniform pricing

adjustment costs and the sequencing of trade liberalisation a common feature of trade agreements between countries is that the integration of markets proceeds in stages this paper examin es conceptually the role played by adjustment costs in determining the best way to structure an agreement between two countries when there are multiple sectors to be liberalised adjustment costs to liberalisatio n of industries might influence the timing of liberalisatio n with the analysis bearing similarity to why tariff reductions tend to be phased in over time when two industries have no spillover eff ects trade agreements with sequential liberalisation will be less costly to sustain however if the liberalisation of one in dustry influences permanently the flow of benefits from liberalising the other industry simultaneous liberalisation may be easier to sustain

collusion at the extensive margin abstract we augment the multi market collusion model of bernheim and whinston 1990 by allowing for firm entry into and exit from individual markets we show that this gives rise to a new mechanism by which a cartel can sustain a collusive agreement collusion at the extensive margin whereby firms collude by avoiding entry into each other s markets or territories we characterise parameter values that sustain this type of collusion and identify the assumptions where this collusion is more likely to hold than its intensive margin counterpart specifically it is demonstrated that where duopoly competition is fierce collusion at the extensive margin is always sustainable finally we provide a theoretic foundation for the use of a proportional response enforcement mechanism

social capital inclusive networks and economic performance abstract empirical studies show that the relationship between social capital and economic performance is ambiguous the paper points to the potential trade off between the sustainability of self enforcement and the magnitude of gains from trade in social networks as an explanation based on an infinitely repeated multi player prisoners dilemma it is shown how self enforcement of cooperation within a network is influenced by its inclusiveness its communication capacity and the complexity of the exchange setting the paper shows that inclusive social capital can combine both low enforcement costs and high gains from trade even in a complex exchange setting