Cournot, Bertrand, and game theory: A further note

This note synthesizes the discussion on the role of Cournot and Bertrand in the analysis of duopoly by drawing on the history of the debate. We conclude that while Bertrand presented a critique of the mathematical economics of Cournot and stimulated the analysis of strategic choice in game theory, he did not present a duopoly model with price as a strategic variable, as opposed to Cournot's model with quantity. In fact, Cournot has both types of models. We show that Irving Fisher contributed to the myth about Bertrand's duopoly theory.     

Growth limitation and political power : Bruno Fritsch,Ballinger Publishing Company,Cambridge, Mass.

Standardization in modeling is understood here as a strategic process to improve the transfer of models and modeling know-how, to diminish the gap between model builders and model users, and to make the art of modeling an honorable science on a consolidated basis. Within the wide spectrum of standardization efforts, this paper reflects on a general approach for an improvement of model transfer, based on technical concepts for the next generation of software tools. These tools will be developed for large-scale modeling activities. Three formal software concepts to meet these needs are discussed: modularization, software interfaces, and integrated modeling systems. Although modularization is understood here as a concept characterizing the transferable good (the models), the other two concepts refer to output (or input) characteristics of the modeling tools and to their performance requirements. Some remarks on implementation of technical standards are added.     

Rational functions: an alternative approach to asset pricing

This paper shows that asset prices are linear polynomials of various underlying explanatory factors and asset returns being ratios of these polynomials, are rational functions that do not add linearly when averaging. Hence, average returns should be modeled based on stock prices. However, continuous returns may be treated as approximately linear across time and modeled directly. Our new Rational Function (RF) models, empirically outperform the traditional asset pricing models like the Capital Asset Pricing Model (CAPM) and the Fama–French three and five-factor models for both average and continuous returns. Moreover, the RF theory also provides a model to estimate the asset volumes. The average change in asset volumes together with average returns provide the estimates for average change in market values of assets. Thus, the RF model approach can be used to select assets that provide either highest returns for profit maximization or highest change in market values for wealth maximization for given levels of risk.     

The intellectual structure of the strategic management field: an author co-citation analysis

This paper complements a recent study by Ramos-Rodriguez and Ruiz-Navarro (2004) that investigated the intellectual structure of the strategic management field through co-citation analysis. By using authors as the units of analysis and incorporating all the citations that are included in the Science Citation Index and the Social Science Citation Index, we trace the evolution of the intellectual structure of the strategic management field during the period 1980–2000. Using a variety of data analytic techniques such as multidimensional scaling, factor analysis, and Pathfinder analysis, we (1) delineate the subfields that constitute the intellectual structure of strategic management; (2) determine the relationships between the subfields; (3) identify authors who play a pivotal role in bridging two or more conceptual domains of research; and (4) graphically map the intellectual structure in two-dimensional space in order to visualize spatial distances between intellectual themes. The analysis provides insights about the influence of individual authors as well as changes in their influence over time. Copyright © 2007 John Wiley & Sons, Ltd.     

On the Measurement of Changes in Product Quality in Marginal Intra-Industry Trade

There is a long established thread of the international trade literature concerned with the measurement of intra-industry trade (IIT). Two distinct strands of the literature have developed: First, measures of marginal IIT that are concerned with the adjustment implications of volume-based changes in IIT; second, measures of vertical and horizontal IIT that are concerned with quality-based differences in IIT. This paper marries the two literatures to provide a new perspective on the smooth adjustment hypothesis debate and suggests the use of the marginal product quality index, a new measure of changes in quality in matched trade changes that complements dynamic measures of volume-based IIT. JEL no.  F19     

LIFETIMES OF MACHINERY AND EQUIPMENT: EVIDENCE FROM DUTCH MANUFACTURING

This paper estimates service lifetimes for capital assets in Dutch manufacturing industries, using information on asset retirement patterns. A Weibull distribution function is estimated using a non-linear regression technique to derive service lifetimes for three selected asset types: transport equipment, machinery and computers. For this purpose, benchmark capital stock surveys for different two-digit industries are linked to annual discard surveys. On average the estimated lifetimes are 6, 9 and 26 years for transport equipment, computers and machinery, respectively. However, these estimates vary across industries. A comparison of our estimates with Canadian, U.S. and Japanese estimates shows notable differences in the lifetimes of all the asset types, with machinery showing the largest difference.     

On the measurement of product quality in intra-industry trade: An empirical test for China

A relatively recent development in the intra-industry trade (IIT) literature is the measurement of the simultaneous import and export of quality-differentiated products, commonly known as vertical and horizontal IIT. A recent paper from Azhar and Elliott [Azhar, A. K. M. & Elliott, R. J. R. (2006), On the Measurement of Product Quality in Intra-Industry Trade, Review of World Economics, Vol 142 no 3, pp 476–495] analyses various approaches for disentangling vertical and horizontal IIT and suggests a complementary methodology. To investigate the robustness and sensitivity of the existing approaches we examine data on the nature of trade flows between China and its East Asian neighbours and show that in 2002 China tended to export low quality versions of its manufactured goods to Malaysia, Thailand and the Philippines.     

The Role of Capital Flight and Remittances in Current Account Sustainability in Sub‐Saharan Africa

Abstract: The literature on capital flight and remittances is copious, as a plethora of studies in recent years have focused greater attention on the determinants and impact of capital flight and remittances in the development process. These issues are particularly pertinent to Africa in view of its relatively high incidence of capital flight in the presence of foreign exchange constraints, limited foreign capital inflows, external indebtedness and high dependence on overseas development assistance. The principal aim of this paper is to estimate the extent and magnitude of capital flights from Africa and remittance inflows to Africa, and to assess their role in current account sustainability. The paper employs standard methodological approaches to estimating capital flight and remittances for selected African countries and analyses their relationships with current account balance and key economic indicators. The findings from the statistical exercises in the paper yielded a number of important results:

• ? The magnitude of capital flight from Africa has increased considerably in recent years, with widespread fluctuations and volatility.
• ? The volume of remittances into Africa has increased dramatically but steadily.
• ? There is a negative association between balances on current account and capital flight, implying that capital flights tend to worsen current account difficulties.
• ? There is a positive relationship between remittances and current account, suggesting that remittances could play an important role in mitigating current account problems.
• ? The link between remittances and economic growth is positive, albeit insignificantly in the statistical sense, suggesting some evidence of the crucial role of remittances in the economic growth and development process.
• ? External debt and capital flight are positively intertwined, providing support to the so‐called ‘round‐tripping’ or ‘back‐to‐back’ hypothesis

The policy implications of these findings are that in spite of the good progress made by many African countries towards economic and political reforms, more innovative policy thinking and reform deepening must be initiated to create a conducive environment for private sector participation in general and foreign capital (including capital flight reversal) in particular. Similarly, there is a need for incentivising and mainstreaming remittances into national development strategies with the view to promoting the growth‐enhancing effects of remittances. A wide range of policy options and forward thinking analyses were advanced in the paper.     

Strategic investments in Japanese corporations: do foreign portfolio owners foster underinvestment or appropriate investment?

This paper investigates the effect of foreign ownership on strategic investments in Japanese corporations. Foreign owners are typically portfolio investors who frequently buy and sell shares and hold diversified portfolios of small stakes in many firms. Prior research has presented two conflicting perspectives on the role of such investors: (a) their frequent trading leads to pressure for short‐term returns that fosters underinvestment; (b) their active trading fosters appropriate investments. We investigated the relationship between foreign ownership and strategic investments using dynamic panel data analysis of a sample of 146 Japanese manufacturing firms from 1991 to 1997. We found that foreign ownership enhances strategic investments (in R&D and capital intensity) to a greater extent when firms have growth opportunities than when they lack such opportunities. We conclude that foreign ownership fosters appropriate investment. Copyright © 2006 John Wiley & Sons, Ltd.     

Nutrition and national development: Establishing the connection

The three major strands of the nutrition planning literature — the socio-economic consequences of malnutrition, its determinants and characteristics, and the solutions offered to the problem — are examined by the authors and found wanting. There are serious limitations both in analysis of the problems and proposals for action in most work on nutrition policies because macro-level social, institutional, economic and political factors are neglected.