Price Versus Quantity in a Duopoly with a Unilateral Effect and with Bargaining over Managerial Contracts

This study examines the endogenous choice of each firm’s strategic contract, that is, a price contract or a quantity contract, in a duopoly in which their demand functions are asymmetric when the content of their managerial contracts is determined through bargaining between the owner and the manager. The degree of asymmetry between their demand functions corresponds to the relation between the goods they produce. In contrast to the case wherein each firm’s delegation parameter is determined through profit maximization, we show that the quantity competition cannot become the equilibrium market structure when the bargaining power of the manager relative to that of the owner is sufficiently low. In particular, when the relation between the two goods is complementary, two asymmetric market structures can be observed in equilibrium. Furthermore, we consider the situation in which the relative bargaining power of the manager to that of the owner within each firm is different between the two firms.     

Can Small Class Policy Close the Gap? An Empirical Analysis of Class Size Effects in Japan

Can smaller classes lead to better educational outcomes and greater equality in achievement? We estimate the causal effects of class size on achievement tests by using discontinuous changes in class size under the Japanese public compulsory education system. We employ a value‐added model that uses achievement tests conducted at two different times during the same school year. Our results show that a reduction in class size has significantly positive effects on Japanese language test scores in the sixth grade, especially at schools in wealthy areas. However, we find no evidence that a universal small class policy closes the achievement gap among schools.     

Impossibility of Nash implementation in two-person economies

In this note, we prove two impossibility results of Nash implementation in two-person economies. First, we will show the non-existence of continuous and balanced mechanisms which implement the Walrasian correspondence. Second, by adding a convexity assumption of mechanisms, we present the impossibility of continuous implementation of Pareto optimal and individually rational allocations in balanced way. Received: 16 April 1996 / Accepted: 25 April 1997     

Book Reviews

This paper reformulates Kalecki's investment models based on 'the principle of increasing risk'. First, it is shown that in his model risk can be interpreted as a conditional probability of bankruptcy of a firm, or the 'hazard rate' in reliability theory. Secondly, a simple static Kaleckian investment model is developed based on this interpretation. In the model, a slightly modified Kaleckian optimality condition for investment holds. It is also shown that, as Kalecki correctly pointed out, the principle of falling marginal efficiency of capital (or investment) is not required to obtain a finite level of investment. Finally, I consider sequential investment in an intertemporal model. In this model, a modified version of the Kaleckian optimality condition determines investment. In addition, as Kalecki emphasized, his increasing risk limits the level of investment even without increasing and convex adjustment costs associated with investment, by which the finite rate of investment is derived in the macroeconomics literature.     

Estimating switching costs involved in changing mobile phone carriers in Japan: Evaluation of lock-in factors related to Japan’s SIM card locks

This paper employs a web-based conjoint-type questionnaire to examine empirically user preference for a hypothetical Subscriber Identity Module (SIM) unlock situation in Japan’s mobile phone market. This paper also analyzes carriers’ other marketing strategies to lock in consumers. The empirical analysis in this study reveals the following: over 80% of survey respondents evaluate a highly compatible platform with the SIM unlocked. Approximately 70% of consumers find that the value of discounts on initial payments exceeds the discounts on one-year monthly payments. In addition, conditions set by continuing agreements for mobile carriers and mobile handsets reduce consumer benefit by 35% at the median in the case of SIM unlocking with compatible platforms.     

Wal‐Mart innovation and productivity: a viewpoint

Abstract Technology effects, business process development, and productivity growth are considered in the context of a single company: Wal‐Mart. The starting point is the 2001 McKinsey Global Institute report, which finds that over 1995–2000, a quarter of U.S. productivity growth is attributable to the retail industry, and almost a sixth of that is attributable to Wal‐Mart. Wal‐Mart is interesting as well because of its rapid growth in Canada. This is now Canada's largest private sector employer. We also consider other evidence relevant to public policy formation concerning Wal‐Mart and conclude with a discussion of options for partially filling important data gaps.     

Returns to scale: concept,estimation and analysis of Japan's turbulent 1964–88 economy

Abstract There is policy interest in factoring productivity growth into technical progress and returns to scale components. Our approach uses exact index number methods to reduce the parameters that must be estimated, and allows us to exploit the cross‐sectional dimension of plant‐level panel data. We show that the same equation can also be used to estimate ‘Harberger’ scale economies and technical progress indicators that require fewer assumptions. Estimates of the elasticity of scale for Japanese establishments in three major industries over 1964–88 are presented. Our study spans the high growth era of the 1960s, two oil shocks, and other exogenous shocks.     

Japanese manufacturing facing post-Fukushima power crisis: a dynamic computable general equilibrium analysis with foreign direct investment

The Great East Japan Earthquake and the subsequent tsunami that hit and severely damaged the Fukushima Daiichi Nuclear Power Station resulted indirectly in the shutdown of most of the nuclear power plants in Japan. To compensate for the lost nuclear power supply, more fossil fuels were used. People became concerned that this could be disadvantageous for domestic manufacturing industries and accelerated their offshoring to Asia, especially China, through foreign direct investment (FDI). We used a world trade computable general equilibrium (CGE) model with endogenous FDI from Japan to China to quantify the impact of the power crisis on the Japanese manufacturing sectors. We found that the power crisis as well as FDI would adversely affect several sectors that use power intensively, but would benefit the transportation equipment (TEQ), electric equipment (EEQ) and machinery sectors, despite the common expectation that these sectors would undergo a so-called ‘hollowing-out.’     

Retaining telecommunication services when universal service is defined by functionality: Japanese consumers' willingness-to-pay

This study uses contingent valuation to measure Japanese customers' willingness-to-pay to maintain combinations of five telecommunication services that are considered substitutes if universal service is defined on the basis of functionality. The analysis revealed the following results. First, consumers are more willing to pay to retain voice communication services than data transmission services. Second, customers accept Internet Protocol telephony as a substitute for plain old telephone service (POTS) as a universal service, and they are willing to pay much more than Japan's current Universal Service Fund charge. Third, even when mobile phone service (MOB) is available, consumers will pay to retain fixed-line voice services. Finally, consumers have an equal desire to keep fiber-to-the-home (FTTH) and fixed-line voice services, but it is less than the demand for MOB. Thus, under the present definition of POTS as a universal service, FTTH could be considered as a basic telecommunication service.