The Influence of a Neighbouring Market on Product Qualities and Prices

This paper analyses a model of vertical product differentiation in which there is a primary market with two firms and a secondary market with no firms. Consumers in the secondary market incur a cost when purchasing the product from the primary market. The firms sequentially choose product quality and then simultaneously choose prices. Firm 1 always chooses the maximum quality, while firm 2's quality and the prices depend on the cost. Also, the cost determines which firm(s), if either, serves the secondary market. It is shown that the firms and the consumers of each market prefer different levels of costs.     

Centralized versus decentralized taxation of mobile polluting firms

We consider a world in which a mobile polluting firm must locate in one of two regions. The regions differ in two dimensions: their marginal cost of pollution and the production cost of the firm. It is shown that under incomplete information on regional marginal costs of pollution, fiscal competition may lead to the sub-optimal location of the firm. We also show that under incomplete information, a sub-optimal location is less likely under centralized than under decentralized taxation.     

Efficiency wages and union-firm bargaining with private information

We consider efficiency wage effects in a union-firm bargaining model with private information. We show that an increase in the efficiency wage effects does not necessarily increase the wage level at equilibrium, even when the wage bargaining with private information is close to one with complete information. However, if it is commonly known that the firm is stronger than the union and the demand is sufficiently elastic, then an increase in the efficiency wage effects increases for sure the wage at equilibrium.JEL Classification: J41, J50, J52We thank Juan Dolado and two anonymous referees for valuable comments. Vincent Vannetelbosch is Chercheur Qualifié at the Fonds National de la Recherche Scientifique. The research of Ana Mauleon has been made possible by a fellowship of the Fonds Européen du Développement Economique Régional (FEDER). Financial support from the Belgian French Communitys program Action de Recherches Concertée 99/04-235 (IRES, Université catholique de Louvain) is gratefully acknowledged.     

Externalities, monopoly and the objective function of the firm

This paper provides a theory of general equilibrium with externalities and/or monopoly. We assume that the firm’s decisions are based on the preferences of shareholders and/or other stakeholders. Under these assumptions a firm will produce fewer negative externalities than the comparable profit maximising firm. In the absence of externalities, equilibrium with a monopoly will be Pareto efficient if the firm can price discriminate. The equilibrium can be implemented by a two-part tariffWe would like to thank John Fender, Herakles Polemarchakis, Les Reinhorn, John Roberts, John Roemer, Colin Rowat, Erkan Yalcin two anonymous referees and participants in seminars at the Universities of Birmingham, Durham, Heidelberg, Mannheim and Queens, the Public Economic Theory conference at the University of Warwick, July 2000, and the EEA congress, Lausanne 2001 for comments and suggestions     

Taxation of firms with unknown mobility

We analyze optimal business tax policy when some firms are able to escape taxation by moving abroad. In contrast to the existing literature, we assume that the true number of mobile firms is ex ante unknown. While the government may learn from the firms' location responses to past tax rate changes, firms may anticipate this and adjust their choices accordingly. We find that incomplete information on mobility substantially affects the properties and the implications of equilibrium policy choices. First, the government may find it optimal to set a tax rate that triggers partial firm migration but full revelation of the true number of mobile firms. Second, we show that, if the firms' outside option is attractive (i.e., relocation cost and foreign tax rates are low), expected tax rates and expected firm migration are higher if the degree of mobility is unknown. Third, there is a positive value of learning, i.e., commitment on future tax rates cannot increase the government's expected revenue. However, if the government can commit to a rule‐based learning mechanism, i.e., credibly tie its future tax policy to present policy outcomes, it may obtain a Pareto improvement.     

Public Sector Rationing and Private Sector Selection

We study the interaction between nonprice public rationing and prices in the private market. Under a limited budget, the public supplier uses a rationing policy. A private firm may supply the good to those consumers who are rationed by the public system. Consumers have different amounts of wealth, and costs of providing the good to them vary. We consider two regimes. First, the public supplier observes consumers’ wealth information; second, the public supplier observes both wealth and cost information. The public supplier chooses a rationing policy, and, simultaneously, the private firm, observing only cost but not wealth information, chooses a pricing policy. In the first regime, there is a continuum of equilibria. The Pareto dominant equilibrium is a means‐test equilibrium: poor consumers are supplied while rich consumers are rationed. Prices in the private market increase with the budget. In the second regime, there is a unique equilibrium. This exhibits a cost‐effectiveness rationing rule; consumers are supplied if and only if their cost–benefit ratios are low. Prices in the private market do not change with the budget. Equilibrium consumer utility is higher in the cost‐effectiveness equilibrium than the means‐test equilibrium.     

Equilibrium locations in a mixed duopoly with sequential entry in real time

We investigate a mixed duopoly model where a public firm and a private firm enter a market sequentially over an infinite time horizon, with and without uncertainty over the follower's entry date. We assume that there is a unit-length linear city and show that, if the public firm moves first, equilibrium location falls inside the second and third quartiles. The later the follower is expected to enter, the closer the two firms are. However, if the private firm acts first, it moves aggressively to locate at the middle point (one-half), forcing the public firm to locate nearer the periphery (one-sixth), to minimize consumers' transportation cost. In addition, social welfare is strictly greater when the public firm moves as the leader.     

信号显示博弈与国际寡头最优进入策略的选择

在信息不完全的国际市场竞争中,寡头企业可以通过观察竞争者不同市场进入策略带来的收益为信号帮助判断其真实的成本类型.文章以FDI和出口贸易作为信号推证了在成本类型不确定条件下混同均衡和分离均衡存在的条件;文章的推论表明如果分离均衡条件满足,双边企业可以获得完全信息条件下的均衡产出,如果混同均衡条件满足,双方则将按照不完全信息博弈规则选择古诺纳什产出.     

Pollution Haven with Technological Externalities Arising from Foreign Direct Investment

This paper presents a two-stage game, in which in the first stage two multinational firms (MNFs) seeking pollution havens choose a location, that is, whether to export to or undertake FDI in the host country, and in the second stage, these two MNFs and a firm in the host country play a Cournot game. The MNFs’ location decisions are influenced by the fixed cost of FDI, the spillover of technologies to a foreign firm, and pollution emission standards in the host and home countries. There exist multiple equilibria in the location pattern because of the technology spillover accompanied by FDI. In addition, the analysis leads to the possibility of an equilibrium based on the Prisoners’ Dilemma. When the host country relaxes emission standards, the MNFs choose FDI, although their profits are higher if both choose to export instead. This provides a rationale for the FDI source country’s intervention to restrict the MNFs’ FDI according to the level of environmental regulation in the host country.     

Bidding for Firms with Unknown Characteristics

When a region successfully attracts a firm by offering subsidies, the firm often commits itself to performance targets in terms of employment. In this paper, we interpret these firm‐specific targets as a consequence of incomplete information. We analyze a model of two regions that compete for a firm, assuming that the firm's productivity is ex ante unknown. We show that performance targets often induce overemployment in high‐productivity firms, and that tax credits are often superior to lump‐sum payments. Moreover, when regions differ in wage rates, the low‐wage region wins the bid and has a higher surplus than under complete information. Finally, we show that, under incomplete information, bidding might not lead to efficient firm location.     

Production and financial policies under asymmetric information

We propose an extension of the standard general equilibrium model with production and incomplete markets to situations in which (i) private investors have limited information on the returns of specific assets, (ii) managers of firms have limited information on the preferences of individual shareholders. The extension is obtained by the assumption that firms are not traded directly but grouped into ‘sectorial’ funds. In our model the financial policy of the firm is not irrelevant. We establish the existence of equilibria and discuss the nature of the inefficiencies introduced by the presence of asymmetric information. We also illustrate the properties of the model in three simple examples. We would like to thank Alberto Bisin, Armando Dominioni, Piero Gottardi, Tito Pietra, Paolo Siconolfi, and an anonymous referee for useful suggestions and comments.     

Location of public and private firms under endogenous timing of choices

This paper studies the choices of locations in a mixed duopoly when production costs are endogenously determined and the public firm maximizes a weighted sum of social surplus and its profits. We find that the locations of the two firms are decided simultaneously when the weight of the public firm’s profits in its objective function is high enough. When this is not the case we find that one firm (not always the public firm but sometimes also the private one) behaves as a leader in the choice of location and location decisions are made sequentially. Moreover, in equilibrium, the production cost of the public firm is never higher than that of the private firm.     

Competition and confidentiality: Signaling quality in a duopoly when there is universal private information

We model non-cooperative signaling by two firms that compete over a continuum of consumers, assuming each consumer has private information about the intensity of her preferences for the firms' respective products and each firm has private information about its own product's quality. We characterize a symmetric separating equilibrium in which each firm's price reveals its respective product quality. We show that the equilibrium prices, the difference between those prices, the associated outputs, and profits are all increasing functions of the ex ante probability of high safety. If horizontal product differentiation is sufficiently great then equilibrium prices and profits are higher under incomplete information about quality than if quality were commonly known. Thus, while signaling imposes a distortionary loss on a monopolist using price to signal quality, duopolists may benefit from the distortion as it can reduce competition. Finally, average quality is lower since signaling quality redistributes demand towards low-quality firms.     

The structure of information networks

We develop a strategic model of information acquisition in networks where agents pay for all the pieces of information they acquire, including those through indirect links. The cost of information depends on the distance it traverses in the network. We consider two possibilities in this context: (1) costs increasing with distance, and (2) costs decreasing with distance. The paper also examines situations where it is more expensive to acquire information of higher value. We show that there is almost no divergence between the efficient and Nash equilibrium information architectures. We then study the effect of decay in networks where information through longer paths is cheaper. Finally, we also examine a model with costly link formation that combines both types of cost related assumptionsWe are grateful to Hans Haller, Rob Gilles, Susanne Maria Schmidt, Sumit Joshi, Georg Erber, Beth Allen, Mark Machina, Bob Martin, Johanna Francis, Cheryl Long, Raja Kali, Kaz Miyagiwa, Micheal Kosfeld, Bibhudutta Panda and two anonymous referees for helpful suggestions. The paper has further benefited from the comments of participants at Game Theory and Applications Mumbai 2003, Royal Economic Society Meetings 2003, SED 2004 and GAMES 2004. Sudipta Sarangi acknowledges the hospitality of DIW Berlin where a part of this research was carried out. Rajgopal Kannan acknowledges the support of NSF grants IIS-0329738 and IIS-0312632     

Reproducing the Firm: Routines,Networks, and Identity

Firm survival or reproduction does not occur as a matter of course. Especially under circumstances in which uncertainty and equivocality prevail is firm reproduction potentially problematic. Uncertainty prevails when there is insufficient or inadequate information to assess a situation, equivocality when the information available is multiinterpretable. Firm routines, social networks in a firm, and an organization’s identity can explain how a firm reproduces. We offer suggestions as to which of these will contribute to firm reproduction under what circumstances.     

Spatial Cournot competition in a circular city with more than two dispatches

This paper investigates spatial Cournot competition in a circular city, where the maximal service range of a vehicle is less than half of the perimeter, and a firm needs to initiate more than two dispatches to serve the whole market. We examine a multi‐stage game of location and transportation mode choices, and the subsequent quantity competition between duopoly firms. The findings reveal that non‐maximum dispersion is the unique location equilibrium when duopoly firms deliver products in different transportation modes or when the transportation mode decisions are made endogenously and the fixed cost of a transportation instrument is relatively high.     

Wage and price controls in the equilibrium sequential search model

In this paper, we study the effects of wage and price controls on employment, output, and welfare in a simplified version of the Bénabou (J. Econom. Theory 60 (1993) 140) equilibrium sequential search model with bilateral heterogeneity. We show that a price ceiling increases output but the change in welfare depends on three effects: the reduction in aggregate search costs, the increase in surplus due to increased output, and the transfer of production to the least efficient firm. The model is formally identical to a standard equilibrium search model of the labor market so analogous results hold for the minimum wage.     

Tax Effects in a Model of Product Differentiation: A Note

We investigate how unit (or specific) tax and ad valorem tax affect equilibrium location choice in a model of product differentiation, which includes Hotelling (linear-city) and Vickrey-Salop (circular-city) spatial models as special cases. We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. Two taxes can yield different location patterns under cost heterogeneity among firms.     

基业长青的企业本质: 一种基于广义虚拟经济视角的解释

制度经济学的企业理论在探寻企业的本质时,将企业抽象为市场的对应物,抹杀了现实中不同企业之间存在的差别(异质性),难以理解企业之间的竞争及企业是如何成长.战略管理学则倾向于重视这种差别,并以此为基点从理论上阐释了企业是如何获取并持久保持竞争优势以促进企业成长,但忽视了企业的同质性.本文则从广义虚拟经济二元价值容介态的视角...     

Market crashes,speculation and learning in financial markets

A natural conjecture is that if agents’ beliefs are almost correct then equilibrium prices should be close to rational expectations prices. Sandroni (J Econ Theory 82:1–18, 1998) gives a counterexample in an economy with sunspots and complete markets. We extend Sandroni’s result by showing that the conjecture is generically true for economies with complete markets. We consider a standard General Equilibrium model with large but finite horizon and complete markets. We show that, for almost every such economy, if conditional beliefs eventually become correct along a path of events then equilibrium prices of assets traded along this path converge to rational expectations equilibria in the sup-norm. Moreover, we establish that, generically, there exist along any such path local diffeomorphisms between individual beliefs and equilibrium prices. I would like to thank C. Ewerhart and A. Kirman for their comments, as well as the seminar participants at the University of Minho, the General Equilibrium Workshop 2005 in Zurich, and the 15th Asian General Equilibrium Conference 2007 in Singapore. An anonymous referee also provided very valuable comments.