prices and the winner s curse we usually assume that increases in supply allocation by rationing and exclusion of potential buyers reduce prices but all these activities raise the expected price in an important set of cases when common value assets are sold furthermore when we make the assumptions needed to rule out these anomalies for symmetric buyers small asymmetries among the buyers necessarily cause the anomalies to reappear our results help explain rationing in initial public offerings and outcomes of spectrum auctions we illustrate our results in the wallet game and in another new game we introduce the maximum game

a budget holdback policy for multi item procurement processes this paper is concerned with the development of an optimal budget holdback policy for a multi item procurement process an annual budget is made available for the purchase and resupply of n items the issue is to determine how much of the budget to commit initially and how much to hold back for spot purchases later in the year an analytic solution to the problem is developed for the single item case and compared to the unconstrained newsboy solution in the multi item case we develop stochastic linear programming with resource models under two views of the organization s procurement process the first view is that the overall budget is allocated to the individual item managers and spot purchase monies earmarked for one item cannot be used for another the computational and data requirements for solution of this model are reasonable the second view is that spot buy monies are pooled and allocated to individual items on an as needed basis the linear programming model of this procurement process is mu

decarbonization under green growth strategies the case of south korea the win win opportunities connected to green growth are appealing to academics and policy makers alike but empirical evaluations about the effectiveness of green growth policies are still scattered taking south korea as case study which set up a highly ambitious green growth program in 2009 our research casts light on the extent to which the korean green growth strategy has been effective in decarbonizing the economy our methodology combines decomposition analysis and econometrics with a review of energy and climate policies including related structural changes on the short term 2008 2012 most of the drivers displayed an enhancing effect on co2 emissions from fuel combustion with gdp per capita being the strongest driver from a historical perspective 1971 2012 findings reveal that important drivers such as energy and co2 intensity even worsened their effects during the first years under the green growth strategy regression statistics revealed that gdp per capita was in fact the driver with the most explanatory power for co2 emissions followed by energy intensity the korean policy mix of modest government support to low carbon energy technologies and a lack of complementary pricing policies did not deliver the targeted emissions reduction at least in the short term despite recent policy developments i e the introduction of a renewable portfolio standard in 2012 and an emissions trading system in 2015 several key policy challenges for decarbonization remain less

an analysis of preemptive behavior in the titanium dioxide industry abstract much of the recent theoretical work on oligopoly theory focuses on preemptive capital expansion this paper continues this work by testing whether dupont s behavior in the titanium dioxide industry was consistent with the capital commitment model between 1972 and 1977 this is different from previous empirical papers analyzing preemptive capital expansion because it focuses on strategic behavior in a specific industry and because the hypothesis tests in this paper are based on a formal model of firms optimizing behavior the results lend support to the conclusion that dupont committed capital to preempt the smallest five firms in the industry between 1972 and 1977

entry deterrence in stackelberg perfect equilibria this paper examines entry deterrence in a duopoly where the postentry game is stackelberg it is argued that in reality firms can use a broader range of precommitments than is allowed for in the literature this paper permits such precommitments and analyzes the perfect equilibria it also allows for the fact that there may be fixed costs associated not only with entry but with beginning production several interesting possibilities are explained including the existence of excess capacity and the holding of inventories even in the absence of any uncertainty copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

some examples of dynamic cournot duopoly with inventory this article analyzes a two period game where firms can produce inventory in the first period for sale in the second period we assume that revenues and costs are time invariant and that the firms are symmetric we focus on the nature and the existence of the subgame perfect equilibrium of this model we use examples to show that the nash value functions defined on the joint inventory vector are likely to be ill behaved in particular they need not be concave nor even continuous in the firm s own inventory as a result asymmetric equilibrium is possible when average production costs are falling single firm operation can occur in equilibrium nonexistence is also a distinct possibility

climate change mitigation with technology spillovers we explore the implications of an increase in clean technology spillovers between developed and developing countries we build a game of abatements in which players are linked with technology spillovers determined by an initial choice of absorptive capacities by developing countries we show that within a non cooperative framework the response of clean technology investments in developed countries to an increase in cross country technology spillovers is ambiguous if the marginal benefits of these additional abatements are not sufficiently high developed countries have a strategic incentive to decrease investments such a strategic response jeopardizes the initial effects of an increase in technology spillovers on climate change mitigation and decreases the incentives for developing countries to enhance their absorptive capacities

the effect of exit on entry deterrence strategies abstract recent analyses of entry deterrence strategies have required an incumbent s post entry output or pricing strategy to be profit maximizing however most papers have continued to assume that either an incumbent can commit not to exit after entry or that exit is never optimal when there are avoidable fixed costs of operating in any period however exit can be the optimal strategy in this situation entry deterrence strategies operate very differently than when exit is never optimal in fact the possibility of exit can make some previously effective strategies completely ineffective while improving the effectiveness of others

excess capacity as a barrier to entry an empirical appraisal this paper examines excess capacity barriers to entry and investment dynamics in a sample of thirty eight chemical product industries logit and log linear models of investment behavior are estimated and specific case examples are considered the results show that incumbents rarely built excess capacity pre emptively in an effort to deter entry in general entrants and incumbents exhibited similar investment behavior

multi item quick response system with budget constraint quick response mechanisms based on effective use of up to date demand information help retailers to reduce their inventory management costs we formulate a single period inventory model for multiple products with dependent multivariate normal demand distributions and a given overall procurement budget after placing orders based on an initial demand forecast new market information is gathered and demand forecast is updated using this more accurate second forecast the retailer decides the total stocking level for the selling season the second order is based on an improved demand forecast but it also involves a higher unit supply cost to determine the optimal ordering policy we use a computational procedure that entails solving capacitated multi item newsboy problems embedded within a dynamic programming model various numerical examples illustrate the effects of demand variability and financial constraint on the optimal policy it is found that existence of a budget constraint may lead to an increase in the initial order size it is also observed that as the budget available decreases the products with more predictable demand make up a larger share of the procurement expenditure

decoupling economic growth from carbon dioxide emissions in china a sectoral factor decomposition analysis china is facing the dilemma of how to coordinate economic development and carbon dioxide co2 emissions reduction this paper investigates the decoupling effect of economic growth from co2 emissions in china during the period 1992 2012 using the logarithmic mean divisia index lmdi method we decompose the driving forces of the decoupling of economic growth from co2 emissions in china s five major economic sectors into several factors and measure the contribution of each factor to the decoupling of china s overall economy from co2 emissions the results show that china performed the weak decoupling of economic growth from co2 emissions during 1992 2012 and so did all its five major sectors such a state did not occur smoothly and presented five different stages energy intensity and economic activity level were the most important factors affecting the decoupling in china energy intensity decreased in all sectors indicating a large acceleration for the sectoral decoupling states this finding is applicable to process carbon intensity in industrial sector and energy emission factor in agricultural industrial construction and service sectors in terms of sectoral effects on the decoupling in china industrial sector played a dominant role while construction sector had the most marginal influence the economic activity level and economic share of industrial sector exerted the most negative effects on the decoupling the energy intensity of industrial sector played a key role in promoting the national decoupling state while the energy emission factor of agricultural sector contributed the least

cartels profits and excess capacity a model of a collusive duopoly in which each firm has limited capacity is studied the negotiated output quotas depend on the bargaining power of the firms which derives from the damage the firms can do by cutting prices for fixed capacities the unit profit of the small firm is at least as large as that of the large firm and the relative position of the small firm is better when demand is low when the capacities can be chosen once and for all there is excess capacity in equilibrium so long as the cost of capacity is not too high copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

inefficiency of subgame optimal entry regulation the literature on excess entry shows that the free entry equilibrium number of firms may be greater than is socially optimal and proposes government entry regulation as a remedy this article tries to show that such a policy recommendation is misleading a two period three person entry game model which explicitly includes second best government shows that entry regulation aimed at preventing excess entry actually induces the incumbent to behave strategically against the government and makes the final outcome socially suboptimal compared to cases in which there is no government intervention entry regulation is subgame optimal however it is globally suboptimal

sunk costs entry deterrence and financial constraints this paper studies how sunk costs affect a financially constrained incumbent s ability to deter entry into its market sunk costs make it less attractive to the incumbent to accommodate entry by liquidating assets in place and exiting the market this may render entry by a prospective rival unprofitable and thereby facilitate entry deterrence however sunk costs also make it harder for the incumbent to pledge valuable collateral to outside investors to make up for the poor collateral value the incumbent will have to give stronger liquidation rights to its lenders consequently a larger fraction of the incumbent s assets will be liquidated in the event of a liquidity default this potentially creates room for profitable entry the overall effect of sunk costs on the incumbent s ability to deter entry into its market is thus ambiguous

is china s economic growth decoupled from carbon emissions abstract a comprehensive understanding of the interdependence between china s economy and carbon emissions can better serve china s transition towards a low carbon economy and can also provide reference for other developing countries the purpose of this paper was to investigate the dependence of china s economy on co2 emissions i the tapio decoupling model was applied to quantify the decoupling elasticity between china s economy and co2 emissions ii the structure decomposition technique was utilized to quantity the contribution of china s economic structure to the decoupling elasticity iii the combined decomposition model which combined cobb douglas c d production function with logarithmic mean divisia index lmdi technique and was solved the residual problem was employed to identify more driving factors labor input investment carbon coefficient energy structure energy intensity economic structure and technology state affecting the decoupling elasticity the main results were as follows i the decoupling elasticity showed a downward trend during the whole period and the decoupling state was characterized by two types expansive negative decoupling 2002 2005 and weak decoupling 2000 2002 and 2005 2014 ii the industry sector played the most negative effect on the decoupling process expect 2013 2014 from the cumulative effect the contribution of six sectors to promote decoupling effect was ranked as follows construction agriculture trade other transport industry iii the most critical factor driving the increased co2 emissions was the investment effect accounting for 145 34 of the cumulative total co2 emissions while the energy intensity effect contributed to a cumulative reduction in co2 emissions of 1443 72 mt finally some policy recommendations were offered to achieve the decoupling of china s economic growth and carbon emissions

the effects of electricity reforms on productivity and efficiency of china s fossil fired power plants an empirical analysis abstract this paper investigates the effects of electricity reforms on productivity and efficiency of china s generation plants based on the third industrial census data and the first economic census data partial factor productivity pfp analysis indicates that the productivity improvements in labor and capital inputs associated with the reforms are approximately 26 and 45 respectively the effect of the reforms on fuel expense is weakly significant but there is evidence of significant productivity improvement in fuel usage further total factor productivity tfp analysis shows that the efficiency gain from the reforms is still significant when the substitution effect of labor and capital inputs are considered though the magnitude is much lower than that of the pfp analysis the effect of the reforms on technical efficiency becomes weakly significant when fuel expense is further included in tfp analysis but a significant positive effect is expected if fuel input is measured in physical quantity

contestable markets under uncertainty in this article we present a model of a market which is ex post contestable we show that in a market characterized by uncertainty a firm will face a tradeoff between efficiency and flexibility and generally will make some precommitments to take advantage of ex ante technologies we show that in the face of potential entry the incumbent will increase his precommitments and in so doing will affect the probability of entry the degree of market contestability is therefore endogenously determined by the choice of precommitments the extent to which precommitments will be used to affect entry probabilities is shown to depend on the efficiency of ex ante production adjustment costs and the degree of uncertainty in particular we show that the market becomes more contestable as the relative efficiency of ex post production increases and as market conditions become more uncertain

a note on holding excess capacity to deter entry in a labour managed industry in this paper j zhang s 1993 investigation on whether an established labor managed firm carries capacity that would be left idle if entry did not occur is reconsidered to analyze the use of excess capacity as an entry deterrent the author presents an extended model with a general constant returns to scale production function instead of the leontief production function assumed by zhang it is shown that the result of zhang that the labor managed firm lmf carries excess capacity also holds for the constant returns to scale production function furthermore the author examines the global stability of the labor managed firm postentry nash equilibrium

resource allocation to defensive marketing and manufacturing strategies abstract in this paper we investigate the coordinated use of marketing and manufacturing strategies to formulate a defensive business strategy for an incumbent firm upon market entry while defensive marketing strategies have been researched extensively little has been done on defensive manufacturing strategies and even less on coordinating these two we propose a formulation for the joint formation of a defensive strategy by the marketing and production functions under budget constraint considerations the incumbent firm may allocate its resourcesto advertising and distribution expenditures as well as to manufacturing investments to reduce the unit production cost the incumbent firm has also the option of simply allocating all of its resources purely to advertising and distribution we show that while there exist cases where the optimal reaction to entry involves investments in manufacturing improvements there are also cases where defense is in marketing strategies alone we identify the market conditions that promote such reactions to entry and also provide sensitivity analysis

dynamic analysis of discontinuous best response with innovation abstract starting from the static analysis in eckert et al 2017 we study a cournot duopoly where firms can decide to incur fixed costs in activities that improve their competitiveness i e product development or process innovation innovation costs generate discontinuities in the firms quantity best response functions and in turn a variety of equilibrium configurations including multiple equilibria we provide a dynamic global analysis of the equilibria and show the way in which firms initial expectations regarding the rivals level of output are crucial in defining the configuration of the long run equilibrium

carbon dioxide emissions allocation a review carbon dioxide co2 emissions allocation plays a fundamental role in determining reduction responsibility at economy level or emission permits at firm level past decades have seen the development and applications of various methods for co2 emissions allocation this paper provides a literature review of co2 emissions allocation with emphasis on the evolution of allocation methods used it begins with a summary of the most popular allocation principles and criteria that lay a foundation for the development of allocation methods we then classify the existing allocation methods into four groups namely indicator optimization game theoretic and hybrid approaches the main features and findings of past studies are identified and summarized while the fairness principle prevails in earlier studies the efficiency principle has been found to receive increasing attention recently we also present a comparison of the empirical results based on ten popular indicator methods to show how indicator choice affects the allocation results issues related to selecting appropriate methods in co2 emissions allocation are finally discussed further research may be carried out to strike a balance between fairness and efficiency so that the allocation results become more widely acceptable and economically feasible

is decoupling economic growth from fuel consumption possible in developing countries a comparison of china and india abstract a better understanding the coupling decoupling of economic growth from energy demand in china and india can serve both countries and other developing countries to achieve the goal of gaining higher economic growth with less energy demand to demonstrate the relationship between coupling decoupling economy and energy in china and india better this work has made following contributions i analyzes the decoupling elasticity between economic growth and energy consumption by using the tapio model ii explores the five key effects labor input investment energy structure energy intensity technology level of decoupling elasticity by combining the cobb douglas c d function and log mean divisia index lmdi method and iii evaluates the decoupling efforts by applying decoupling efforts model in china and india between 1990 and 2015 the decoupling elasticity results show china s decoupling elasticity curve is in an inverted u shaped trend and the decoupling elastic value is concentrated between 0 and 0 8 in most years showing a weak decoupling state furthermore the decoupling state is strong decoupling during 2014 2015 indicating china has initially achieved the decoupling of economy and energy consumption while india s decoupling elasticity presents irregular fluctuations indicating that india s decoupling status is not very satisfactory the decomposition results uncover that major effects of decoupling in china and india are similar i e the investment effect is the biggest driver which contributed to a cumulative increasing impact in energy consumption in china and india by 3017 10 million tonnes oil equivalent and 675 18 million tonnes oil equivalent respectively whereas the energy intensity effect is the greatest inhibiting factor which contributed to a cumulative reduction in energy consumption in china and india by 1437 81 million tonnes oil equivalent and 139 21 million tonnes oil equivalent the decoupling efforts results show decoupling effort in china is better than that in india improving energy efficiency is the leading contributor to china s decoupling efforts while advancing technology is the major contributor to india s decoupling effort

entry and managerial incentives abstract this paper presents a two period full information model of entry where owners of incumbent and entrant firms endogenously select the incentive schemes for their managers it is shown that when output decisions are delegated to managers the incumbent s owner chooses to base incentive schemes only partly on profit but if output decisions are reached via nash bargaining between managers the incumbent s owner will base the reward on profit alone the entrant never bases the incentive scheme solely on profit if there is a sufficiently high fixed cost of entry then the incumbent can deter entry by providing management with appropriate incentive schemes

capacity outpl t and sequential entry comment two behavioral assumptions that are often made in the industrial organization literature are that an established firm or group may deter entry either through limit pricing the sylos postulate or by holding excess capacity the excess capacity hypothesis in an interesting recent article in this review 1981 daniel spulber examines these behavioral assumptions to see whether they are consistent with rational behavior by an established firm spulber s analysis is based on a two firm two period game model in which the established firm is given a first in advantage by introducing this dynamic element into the model spulber is able to explicitly address the issue of the optimality of entry deterring behavior spulber finds that the use of limit pricing and or excess capacity to deter entry is rational only under a very limited set of circumstances in particular when the second period outcome is determined by a cournot nash equilibrium he derives the following results 1 the first period output of the established firm is always less than or equal to the first period output produced by a firm not anticipating entry the established firm essentially accommodates entry and limit pricing does not occur 2 the established firm never holds more capital than the amount that would minimize its production costs given its output choices in periods one and two this comment takes issue with spulber s conclusions about the cournot nash case it will be shown that the two results cited above may be reversed when the production technology is characterized by variable proportions this reversal hinges on the particular type of nash equilibrium employed in the analysis of the two period model spulber implicitly uses a nash equilibrium that is not subgame perfect 2 it is shown below that when one requires the nash equilibrium to be subgame perfect both limit pricing and excess capital investment outcomes are possible for the variable proportions technology case the subgame perfection property thus seems to capture an important strategic element in decision making for the established firm in some cases this type of strategic behavior leads to entry barriers that would not exist under innocent profit maximization by the established firm strategic entry barriers are discussed by steven salop 1979 spulber s notation and assumptions about demand and costs are adopted below

competing for market shares does the order of moves matter even when it shouldn t abstract this paper investigates whether the order of moves affects behavior and outcomes even in the absence of material incentives for pre commitment evidence from laboratory experiments with shared rents symmetric players and either a simultaneous or a sequential move order suggests that it is an inherent advantage to move second rather than first the reason is that first movers face strategic uncertainty while second movers have the power to ultimately determine the outcome through their investment choices many first movers acknowledge this power and decrease investments below the standard prediction which is interpreted as an attempt to collude this strategy leads to higher absolute payoffs for the first movers compared to a situation where they do not try to establish collusion however relative payoffs are low since collusive outcomes are typically asymmetric to the advantage of the second mover

loyalty discounts and price cost tests abstract we analyze by means of a formal economic model the use of the discount attribution test to assess the competitive effects of loyalty discounts the discount attribution test is a variant of the price cost test where the discount is attributed only to the share of total demand that is regarded as effectively contestable in the model a dominant firm enjoys a competitive advantage over its rivals and uses market share discounts to boost the demand for its own products in this framework we show that the attribution test is misleading or at best completely uninformative our results cast doubts on the applicability of price cost tests to loyalty discount cases

profit raising entry common wisdom suggests that entry reduces profits of incumbent firms on the contrary we demonstrate that if the incumbents differ in marginal costs and the entrants behave like stackelberg followers then entry may benefit the cost efficient incumbents while hurting the cost inefficient ones and the total outputs of all incumbents may be higher under entry

a stochastic inventory model incorporating intra year purchases and accounting tax incentives it has been observed that firms alter year end inventory policies in response to accounting tax incentives this study proposes a stochastic ordering policy model which quantifies these effects an innovative feature is its use of two decision variables an initial order up to level at the beginning of each year and a desired year end inventory level the ability to place a second order after demand has been assessed allows for an explicit consideration of the effects of tax incentives on order quantity decisions separate formulations are developed for the two most widely used inventory accounting methods lifo and fifo the model provides new implications for choices between lifo and fifo the forms of optimal ordering policies under each and for year end inventory levels a procedure is given for calculating the optimal fifo policy calculating optimal lifo policies is very difficult so myopic approximate policies are given which bound the optimal policy

the incidence of entry in 3 oligopoly models three of the least satisfactory features of oligopoly theory are that the beliefs of firms are frequently arbitrary that the solution concept which reflects these beliefs used is taken as exogenous and that its role in conditioning the results is neglected the first criticism has been resolved to a large extent in the recent consistent conjectures literature bresnahan 1981 perry 1981 ulph 1983 for critical views see laitner 1980 or boyer and moreaux 1983 which characterizes equilibria having the property that firms hold locally correct conjectures about rivals reactions yet however satisfactory they are on the question of arbitrariness consistent conjectures unfortunately run afoul of the exogeneity criticism for it is by no means clear how firms come to possess the information needed to form such beliefs quite clearly the complete answer to the exogeneity question lies in models of information acquisition and evaluation by firms nevertheless it would be unwise to abandon static models wholesale for they can be useful if supplemented by a set of comparative static exercises revealing how variations in the solution concept itself conditions the results this paper advances the case for such a comparative statics with respect to solution concept primarily by discussing a somewhat unusual illustration much recent work has been devoted to entry and its effects on market performance but relatively little is known about how putative entrants are attracted to the market how much entry occurs in particular types of markets how fast it occurs how incumbents anticipate putative entrants and their speed of reaction thus while we have some feel for how variations in solution concept affect the market share or profits of a given set of firms in post entry equilibria e g shubik 1980 ulph and folie 1980 dixit 1980 spulber 1981 we have very little in the way of answers to questions like is there more entry when firms play cournot than when one firm acts as a stackelberg leader vis a vis the rest or does successful entry and even displacement of relatively inefficient incumbents occur more or less rapidly when firms behave as cournot than when industry conduct is described by some other solution concept such questions are natural for example if one is interested in the persistence of market power and its speed if any of decline section ii contains some slightly startling results which emerge from considering what is very much a special case of an entry process while the main interest in the results arises because they underline in a particularly emphatic manner the sort of interesting phenomena that can be revealed by such comparative static exercises i shall in section iii pursue these results as having interest in their own right and speculate on their robustness to various extensions of the model section i commences the whole discussion with some methodological remarks

entry collusion and capacity constraints it is arguably true that no single topic has held more of a fascination for students of industrial organization than the issue of entry deterrence this issue has been analyzed from many perspectives including the role of advertising and imperfect information in deterring entry 1 14 18 19 incentives confronting a monopoly seller of durable goods 3 4 incentives in the context of sequential entry 2 9 dynamic aspects of entry deterrence 10 13 and the role of excess capacity in deterring entry 22 23 dixit 5 6 discussed the incentives for an incumbent firm to deter entry in the presence of sunk costs in his models a firm must sink some capital prior to entering the industry and this sunk cost creates an entry barrier any potential entrant must pay the sunk costs prior to entering and the incumbent can deter entry by reducing the stream of profits sufficiently so that the entrant s post entry profit flow cannot cover its sunk cost ware 24 adapted dixit s work by allowing for a three stage game following the incumbent s decision the entrant decides upon entry in stage two paying the sunk costs at that time in stage three if entry occurred the firms play a quantity choosing game formby and smith 7 argue that rather than deterring entry the incumbent firm often has an incentive to allow entry and then collude with the entrant in this context the post entry cartel is asymmetric with the incumbent producing the larger amount and realizing the higher profits

concurrent renting and selling in a durable goods monopoly under threat of entry this article analyzes the choice of contract sales or rental of a durable goods monopolist facing a threat of future entry although in the absence of such a threat a monopolist would prefer to rent his entire output we show that the threat of entry alters that preference there is an optimal preentry contract mix involving both rental and sales if both firms behave as cournot duopolists after entry the optimal choice of preentry contracts enables the erstwhile monopolist to gain the same profits as he would if he behaved as a von stackelberg leader

fifty shades of green revisiting decoupling by economic sectors and air pollutants abstract using a consistent dataset for eighteen eu countries six economic sectors and six pollution indicators we analyze decoupling of production based emissions from gdp growth from 1995 to 2008 computing decoupling factors as defined by the oecd 2002 we find that in almost all sectors and by almost all pollutants the median eu country had at least some decoupling however considerable heterogeneity in its magnitude can be observed across countries sectors and pollutants for most pollutants and sectors median decoupling performance improved from 2001 2008 compared to 1995 2001 while between country disparities increased simultaneously in a second step we investigate country level changes in decoupling states between the two sub periods based on tapio 2005 we find high diversity across countries and over time to explain these differences across countries and sectors we assess the impact of environmental policy stringency and find tentative evidence that stricter policy encourages decoupling however the effects are small and imprecise differ by economic sector and pollutant and take several years to materialize

excess capacity as a barrier to entry in the us titanium industry abstract the purpose of this paper is to construct and empirically test a model designed to determine the impact if any of expected excess capacity on the probability of entry the analysis is conducted within the context of a single oligopoly specifically the us titanium metal industry using time series data an empirical model is developed and estimated in order to determine expected values of the components of excess capacity capacity and production by disentangling the components of excess capacity and estimating them separately it is possible to separate any incumbent actions that may preempt entry from the effects of underlying cycles in demand and production these predicted values are utilized in a logit model generating results which indicate that expected levels of capacity expansion appear to diminish the probability of firm entry into the titanium industry

analysis of electricity consumption in china 1990 2016 using index decomposition and decoupling approach abstract electricity consumption accounts for a significant portion of final energy consumption in countries worldwide and has a close relationship with economic growth this paper explores the factors influencing electricity consumption in china during 1990 2016 using index decomposition analysis and analyses the decoupling status between economic growth and electricity consumption in addition to the influencing factors these analyses are conducted at both national and sectoral levels the results reveal that 1 the economic activity effect was the main driving force increasing total electricity consumption in china while the energy intensity effect hindered it 2 both diversity and aggregation existed at the sector level the power generation chemicals and non ferrous sectors were the top three contributors to increased electricity consumption 3 the change of electricity consumption caused by gdp growth in china showed three decoupling states during 1990 2016 expansive negative decoupling expansive coupling and weak decoupling in particular the energy intensity effect stimulated the occurrence of decoupling 4 industrial sectors played a significant role in decoupling in china while service sectoral electricity consumption showed expansive coupling with its sectoral gdp in recent years

a theory of market structure with sequential entry this article sets out a theory of market structure with sequential entry we characterize the perfect nash equilibrium to the entry game in several propositions first equilibria never involve excess capacity second a sufficient statistic for the entry of any firm is that its profits are positive when computed myopically i e with no further entry third the equilibrium number of firms is the smallest number that can deter entry fourth aggregate output in equilibrium is no smaller than the limit output we calculate some explicit solutions to the model and examine comparative static properties

postentry investment and market structure in the chemical processing industries this article analyzes the investment response of incumbents to new entry in 39 chemical product industries the behavior of incumbents in highly concentrated industries differed from that of incumbents in low concentration industries in concentrated industries incumbents increased their rate of investment following entry but reduced investment to accommodate capacity expansions made by other incumbents this asymmetric response did not arise in less concentrated industries significant excess capacity existed in concentrated industries following entry but there is little evidence that incumbents built such capacity as a deterrent before entry thus the results support mobility deterrence theories rather than the conventional excess capacity deterrence argument

strategic investment and the co existence of labour managed and profit maximising firms the authors examine firm profitability in mixed duopoly equilibrium with one labor managed lm firm and one profit maximizing pm firm and with strategic investment conventional wisdom suggests that firms deviating from profit maximization will suffer forced exit in the long run the authors reverse this conclusion in mixed lm pm duopoly with strategic investment no equilibrium can have both firms making zero profits and pm profitability implies lm profitability but not the converse adverse parameter shifts would cause the pm firm to exit first empirical evidence is consistent with this prediction of robust market survivability of lm firms

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

the struggle for safe nuclear expansion in china abstract after a temporary halt following the fukushima nuclear disaster in march 2011 china resumed its fast yet cautious expansion of nuclear energy programme nuclear energy is considered as part of the general strategy to deal with the challenges of energy security and climate change and to advance with state of the art technology in its development this article briefly discusses recent development in and driving forces behind nuclear industry in china and several challenges it has been facing how to adopt adapt standardise and indigenise whose technologies and how to address the shortage of qualified nuclear engineers scientists skilled labour force and qualified regulators more importantly it argues that safe and secure nuclear development requires consistent policies and effective regulations therefore it is crucial to build policy and regulatory capacities based on coordination planning and management of government agencies and the industry

judo economics reconsidered capacity limitation entry and collusion abstract the capacity investment by a new firm into an established market is explored in a repeated price game if the entrant expects collusion to prevail upon entry it may not practice judo economics but instead choose to install enough capacity to serve the entire market this occurs when collusion involves optimal punishment paths if instead collusion is based upon the static nash equilibrium punishment and the incumbent has excess capacity and the entrant is at a cost disadvantage the entrant will strategically limit its capacity so as to restrain the incumbent s price response to entry

holding excess capacity to deter entry in a labour managed industry this paper considers the dixit model of entry deterrence and adapts it to the case in which firms are maximizing surplus per worker rather than profits the properties of this model are analogous but not identical to those of the dixit model of particular interest is the possibility that the best response functi ons may be positively sloped even though demand satisfies that a firm s marginal revenue is decreasing in rival firms output this possibil ity implies the existence of perfect equilibria in which the incumbent holds excess capacity which is not possible in the dixit model give n the above condition

the role of multiple potential entrants sequential entry in noncooperative entry deterrence a number of authors have recently considered whether the free rider problem is exhibited in models characterized by multiple potential entrants sequential entry bernheim 1984 and eaton and ware 1987 find that the free rider problem is not an important factor while mclean and riordan 1989 find that it is in this article i identify a general property whose presence is important for whether a model of noncooperative entry deterrence exhibits a free rider problem and in this way help clarify why the above mentioned authors reach these diverse conclusions the article also demonstrates that quite plausible changes in the specifications of both bernheim and eaton and ware lead to incumbent firms underinvesting in entry deterrence

the cost function given imperfectly flexible capital abstract the properties of the firm s cost function are examined when investment is irreversible and there are costs of capital adjustment the effects of the firm s initial capital stock on total marginal and average costs are analysed

strategic competition among the few some recent developments in the economics of industry the title of this article is intended as a signal of two things first we are concerned with industries where several but not many firms are actually or potentially in competition with each other thus our topic is competition among the few 1 or oligopoly rather than the polar extremes of textbook perfect competition and pure monopoly secondly we are interested in the strategic nature of competition between firms where the meaning of strategic can be explained as follows if the essence of a game of strategy is the dependence of each person s proper choice of action on what he expects the other to do it may be useful to define a strategic move as follows a strategic move is one that influences the other person s choice in a manner favourable to one s self by affecting the other person s expectations of how one s self will behave schelling 1960 p 150

strategic entry deterrence recent developments in the economics of industry this paper reviews the recent developments in the economics of industry with respect to strategic entry deterrence starting from bain s 1956 classical analysis a simple two stage game between an incumbent firm and a potential entrant is used to present the general structure of the entry deterrence problem commitments credible threat and sub game perfection are illustrated in this context the various strategic variables that an incumbent firm can use to bar entry are discussed the issue of whether a group of incumbents can noncooperatively deter entry is taken up and some empirical evidence is reviewed copyright 1989 by blackwell publishers ltd

bigger cakes with fewer ingredients a comparison of material use of the world economy the amount of materials used worldwide in production and consumption increased by 56 from 1995 to 2008 using an index decomposition analysis based on the logarithmic mean divisia index we investigate the drivers of material use both on a global and a country scale we exploit a panel dataset of 40 countries accounting for 75 of worldwide material extraction and 88 of gdp from 1995 to 2008 the results show that economic growth and structural change towards material intensive countries explain most of the growth in global material use slight gains in material efficiency and falling importance of material intensive sectors have decelerating effects the country level analysis reveals substantial heterogeneity some nations exhibit stable or falling material use while it increases notably in most countries improving material efficiency is able to dampen growth of material use in important industrializing nations like china or india

strategic learning and entry equilibrium abstract this paper describes the nature of equilibrium for a dynamic game between a monopolist and an entrant who adopts a learning strategy for cost reduction the learning process is characterized as a continuous time poisson process where each success reduces a part of the entrant s cost difference with the incumbent the entrant chooses a stream of expenditure after every success to control the instant probability of the next success the techniques of semi markov decision processes are used to characterize equilibrium learning decisions at every stage distribution of entry times and the effects of subsidies technical progress etc on pre entry and post entry learning strategies

scale economies and existence of sustainable monopoly prices abstract the size of the firm relative to market demand is crucial to a determination of whether there exist sustainable monopoly prices in the one product case the size of the firm is its minimum efficient scale in the multiproduct case size is defined by a set of outputs at which cost complementarities are present the analysis shows that when the size of the firm is sufficiently large there exist anonymously equitable aumann shapley prices further at these prices natural monopoly is sustainable against rival entry the aumann shapley price are also shown to be quantity sustainable in the sense of brock and scheinkman

sunk capacity costs long run fixed costs and entry deterrence under complete and incomplete information this article considers a three stage extensive form game where capacity once installed is sunk but where fixed costs are not sunk we show that there may be multiple perfect equilibria of the complete information game when the entrant is incompletely informed about the incumbent s cost the entrant may use the incumbent s capacity choice as a signal of the incumbent s cost we present an example where the incumbent prefers a noninformative capacity signal since this has the effect of reducing the scale of entry we present a second example where the entrant is incompletely informed because the incumbent makes a choice over production technologies that is unobservable to the entrant

how does the implementation of the policy of electricity substitution influence green economic growth in china abstract to promote the level of electrification reduce environmental pollution and achieve the goal of clean energy usage and green economic growth in china the national development and reform commission and other eight departments jointly issued and implemented the policy of electricity substitution in 2016 electricity substitution aims to replace traditional fossil fuels such as coal and fuel oil with clean electric energy in different fields e g industry transportation and construction and deal with the pollutants at power generation however we still need to find out the exact impact of the policy of electricity substitution on energy saving and emission reduction in this paper we estimate the economically feasible increment of electricity demand according to different classifications in electricity substitution technology furthermore based on the input output model we discuss the relative influence of the policy of lectricity substitution the main conclusions are first the policy of electricity substitution alone is not adequate to reduce the dependence on fossil energy and environmental pollution under china s current power generation structure we should also increase the use of renewable energy second the power sector plays a leading role in stimulating economic output and the increasing electricity consumption due to the policy of electricity substitution can boost the green development of china s economy

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

holding idle capacity to deter entry in this journal dixit i980 carefully analysed the extent to which an established firm facing a prospective entrant might make an investment in capacity beyond that which is optimal for its pre entry output in his model both the established firm and prospective entrants understand that a quantity setting nash equilibrium would be established in any post entry game dixit showed that spence i977 had studied an imperfect equilibrium that is an equilibrium that depended upon a threat that was not credible to obtain his result that firms might hold excess capacity to deter entry in a perfect equilibrium a firm would not wish to install capacity that would be left idle if entry did not occur dixit s conclusion however depends on his assumption that each firm s marginal revenue is always decreasing in the other s output this is quite a restrictive assumption for example it is never satisfied in the relevant range for economists second favourite demand curve constant elasticity demand the basic point is unchanged if the firms anticipate price competition with differentiated products rather thanquantity competition in any post entry game under quite plausible conditions rational firms facing rational potential entrants may install capacity that will certainly be left idle we are thus able to rehabilitate spence s original proposition in a perfect equilibrium setting

capacity output and sequential entry two crucial assumptions frequently made in industrial organization are that an established firm deters entry either by a constant high output the sylos postulate or by high excess capacity the excess capacity hypothesis these assumptions may be an accurate description of the observed conduct of firms in some industries however when the rules of the post entry game are clearly specified the optimal output and investment strategies of an established firm may depart considerably from these behavioral assumptions because of this possible inconsistency with rational behavior any conclusions about the formation of industry based upon either assumption are highly suspect what is more these assumptions avoid the main issue of whether entry deterrence is worthwhile at all this paper presents a dynamic model of entry in which established firms pursue a cournot nash alternatively stackelberg strategy toward a potential entrant the entrant behaves in cournot nash fashion and chooses output on the basis of expected postentry profits at the equilibrium of the post entry game within this framework a constant output entry deterring strategy would involve maintenance of an entry deterring output level before and after entry is threatened an excess capacity entry deterring strategy would involve holding excess capacity at an entry deterring level and increasing output to that level after entry is threatened special conditions are presented under which the sylos postulate or the excess capacity hypothesis will accurately describe optimal entry deterring strategies in addition special conditions are examined under which the established firm maintains a constant output or holds pre entry excess capacity when large scale entry does in fact take place the analysis shows that in general established firm reactions to entry are quite different from these special cases the sylos postulate see joseph bain paolo sylos labini franco modigliani 1958 asserts not only that potential entrants expect established firms to maintain their output constant as entry occurs but that established firms keep output constant at a level that deters entry whether or not it is profitable to do so hailed as a welcome major breakthrough on the oligopoly front modigliani 1958 the sylos postulate underlies many papers in the large theoretical and empirical literature on limit pricing yet the sylos postulate ignores both the strategic interaction between firms and the dynamic aspects of entry 2 unless the established firm s monopoly output exceeds the entrydeterring level the established firm with a general cost function able to choose an entry deterring output level will instead always desire a lower output level before entry for the special case where capacity is an upper bound on output and the established firm is a stackelberg leader in the post entry game

does the european natural gas market pass the competitive benchmark of the theory of storage indirect tests for three major trading points this paper presents the first comparative analysis of the relationship between natural gas storage utilization and price patterns at three major european trading points using two indirect tests developed by fama and french 1987 1988 that are applied in other commodity markets we impose the no arbitrage condition to model the efficiency of the natural gas market the results reveal that while operators of european storage facilities realize seasonal arbitrage profits substantial arbitrage potentials remain we suggest that the indirect approach is well suited to provide market insights for periods with limited data we find that overall market performance differs substantially from the competitive benchmark of the theory of storage

dominant firms and their alleged decline abstract by way of a survey of recent literature on the theory of strategic competition this paper focuses on the question of whether dominant firms decline the traditional argument suggesting decline is found to be based on a rather unsatisfactory modelling of dominance and more acceptable conceptualizations suggest that such privileged positions will persist

dynamic duopoly prices and quantities we study a dynamic model of duopoly in which firms choose both prices and quantities if quantity capacity choices are relatively inflexible firms generally carry excess idle capacity in equilibrium because of this enforcement cost firms are unable to achieve monopoly levels this contrasts with models in which which firms compete in either prices or quantities alone on the other hand if capacities are flexible firms may be able to sustain monopoly behaviour

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

investment in electricity capacity under fuel cost uncertainty dual fuel and a mix of single fuel technologies abstract we study the effect of the price and price volatility of natural gas on investment in electricity capacity in two technology scenarios 1 dual fuel units that use natural gas and diesel and 2 a mix of single fuel plants that use coal or natural gas we develop a two stage capacity and operation model and derive analytical solutions for both scenarios based on the observed log normal distribution of the natural gas price we show that optimal capacity investment increases moderately with natural gas price volatility countering a commonly held view that fuel cost uncertainty tends to discourage capacity investment thus higher volatility of the natural gas price tends to reduce the missing money problem we use texas data to show that higher gas price volatility implies higher profits and consumer surplus in the first scenario even when the per mwh diesel cost is much higher than the expected value of the per mwh gas cost in the second scenario firms invest only in gas capacity unless the per mwh coal cost is significantly below the expected per mwh gas cost thus explaining the popularity of gas generation

the optimal number of firms in the commons a dynamic approach we consider a common property resource sold in imperfectly competitive markets there is a dynamic externality current harvests lower future stocks raising future harvest costs and a static crowding externality increasing industry size raises costs but lowers prices thus it has ambiguous welfare effects the optimal industry size typically changes over time so that a first best outcome cannot be obtained with a fixed number of firms single firm exploitation is optimal only under special circumstances the socially optimal open loop steady state industry size corresponds to the static optimum both generally differ from the closed loop steady state optimum

the political economy of electricity dispatch reform in china the transition to a cleaner and more cost efficient electricity system in china is political economic as well as technological an example is the reform of china s method of dispatching power plants which potentially affects the economic relationships between consumers and producers between grid and generating companies and between central and provincial governments historically coal fired power plants in china all received roughly the same number of operating hours regardless of efficiency or cost in 2007 chinese government agencies began to pilot energy efficient dispatch which requires that generators be dispatched on the basis of thermal efficiency using a case study of guangxi zhuang autonomous region in southern china we evaluated potential energy and cost savings from a change to energy efficient dispatch we found that the savings are at best relatively small because large efficient generators already account for a significant share of total generation moreover as an administrative policy that does not change economic incentives energy efficient dispatch exacerbates imbalances and center provincial tensions in the current system we argue that incentive based dispatch reform is likely to produce better outcomes and that the keys to this reform are empowering an independent regulator with pricing authority and establishing a formal transparent ratemaking process

capacity precommitment as an entry barrier for price setting firms abstract for a bertrand edgeworth framework this paper considers whether investmentin capacity may serve as a barrier to entry when firms are identical except for the first mover precommitment possibilities that the incumbent enjoys subgame perfect nash equilibria are examined for a three stage non cooperative game in which the incumbent sets a capacity level the potential entrant chooses its capacity and then firms set prices using mixed strategies for some parameter values entry is blockaded positive profits for the entrant are precluded for other parameter values the incumbent may increase its capacity to prevent entry and maintain non negative profits

equilibrium selection in a nonlinear duopoly game with adaptive expectations abstract we analyze a nonlinear discrete time cournot duopoly game where players have adaptive expectations the evolution of expected outputs over time is generated by the iteration of a noninvertible two dimensional map the long run behavior is characterized by multistability that is the presence of coexisting stable consistent beliefs which correspond to nash equilibria in the quantity space hence a problem of equilibrium selection arises and the long run outcome strongly depends on the choice of the players initial beliefs we analyze the basins of attraction and their qualitative changes as the model parameters vary we illustrate that the basins might be nonconnected sets and reveal the mechanism which is responsible for this often neglected kind of complexity the analysis of the global bifurcations which cause qualitative changes in the topological structure of the basins is carried out by the method of critical curves

entry for buyout the possibility of buying out an entrant has an important effect on entry deterrence entrants can blackmail the incumbent by threatening to keep prices low and buyout can make entry profitable which otherwise would not be in particular the entry deterrence policy of excess capacity to reduce the post entry price can not only fail but work against the incumbent the presence of multiple oligopolistic incumbents or multiple potential entrants however can discourage entry for buyout the long literature on entry deterrence has always assumed that if entry is made unprofitable no entry will occur but as followers of professional football may have suspected a clearly unprofitable competitor might rationally enter a market in the hopes of selling out to the incumbent i will model such a situation and try to show what conditions facilitate entry for buyout in the simplest entry deterrence model the incumbent successfully maintains monopoly by threatening to expand output and cut price after other firms enter but he succeeds only because potential entrants believe the threat if entrants are rational this strategy fails price warfare hurts the incumbent as well as the entrant so the monopolist would let the entrant have a share of profits after entry potential entrants foreseeing the accommodating response ignore the threat deterred entry is a nash equilibrium but not a perfect nash equilibrium it is nash because the entrant chooses to stay out given the incumbent s strategy of cutting prices after entry and the incumbent does not mind committing himself to cutting prices given that entry never occurs a perfect nash equilibrium is a set of strategies that is a nash equilibrium for every proper subgame if the game is started at any of the nodes of the game tree including those off the equilibrium path the strategies the agents pick to maximize their objective function from that node onwards must be part of the equilibrium strategy for the entire game in the subgame which begins after entry has already occurred the incumbent would not choose to cut prices so cutting prices after entry is not part of a perfect equilibrium in the perfect equilibrium entry occurs and is accommodated

decoupling decomposition and forecasting analysis of china s fossil energy consumption from industrial output abstract industries are a major fossil energy consumer and economic development contributor in china the chinese government is performing the industrial reforms to diminishing the dependence of industrial output on fossil energy consumption to guide the present industrial policy adjustment this study employs the tapio decoupling index a structural decomposition algorithm a hybrid forecasting model and industry related data from 2001 to 2014 to evaluate decompose and forecast the relationship between china s industrial output and fossil energy consumption empirical results show that the decoupling index of fossil energy consumption from the value added by china s industry was less than 0 in 2015 consequently the industrial fossil energy consumption reached its peak at that time and will gradually decrease in the future even though the added value continuously increased the mitigation goals set by the chinese government for industrial fossil energy intensity by 2020 are expected to be achieved ahead of schedule the attainment of these goals will strongly support the realization of china s fossil energy related prospects for 2030 to reduce industrial fossil energy consumption china should develop strategies for non fossil energy electricity generation implement electricity price bidding prevent overheated investments to real estate and infrastructure and eliminate backward capacity and establish market access rules for acetic acid calcium carbide ethyl alcohol and dimethyl ether