Infinite-horizon choice functions

We analyze infinite-horizon choice functions within the setting of a simple technology. Efficiency and time consistency are characterized by stationary consumption and inheritance functions, as well as a transversality condition. In addition, we consider the equity axioms Suppes–Sen, Pigou–Dalton, and resource monotonicity. We show that Suppes–Sen and Pigou–Dalton imply that the consumption and inheritance functions are monotone with respect to time—thus justifying sustainability—while resource monotonicity implies that the consumption and inheritance functions are monotone with respect to the resource. Examples illustrate the characterization results.     

Corporate restructuring in Japan: Who monitors the monitor?

Peek and Rosengren [Peek, J., Rosengren, E., 2005. Unnatural selection: Perverse incentives and the misallocation of credit in Japan. American Economic Review 95, 1144–1166] showed that, when the bubble economy era ended, regulatory forbearance and perverse incentives allowed Japanese banks to engage extensively in evergreening. This is the first comprehensive study to empirically analyze the economics of private debt restructurings of financially distressed companies in Japan, where the corporate monitoring mechanism is not market based but large-stakeholder based – typically, banks and affiliated companies. These stakeholders are expected to efficiently resolve potential bankruptcy or collapse with better information resulting from long-term relationships with the distressed firms. Our study, however, finds that private restructurings led by them failed because of delays in implementing fundamental solutions. Forbearance in addressing the needs of distressed firms demonstrates the weakness of such stakeholders in instituting discipline, hence the need for a system to “monitor the monitor”.     

Post-restructuring performance in Japan

Peek and Rosengren (2005) showed that after the end of the bubble economy era in Japan, regulatory forbearance and perverse incentives allowed Japanese banks to engage extensively in “evergreening”. Inoue et al. (2008) also showed that, compared to out-of-court settlements in the United States, agreements on out-of-court restructuring are attained more easily in Japan. However, widespread forbearance by banks and affiliated companies in addressing the needs of distressed firms indicated a serious weakness of banks and affiliated companies in instituting discipline. This is the first empirical study to examine the performance of Japanese firms that experienced out-of-court restructuring in Japan from January 1990, when the bubble economy burst, to March 2005, when the Koizumi Cabinet declared the bad debt problems of major firms to be resolved. Our results show that important biases permitted deeply unprofitable firms to survive in Japan. This finding is similar to research by Hotchkiss (1995), who analyzed post-restructuring performance in the United States. We also find that out-of-court restructurings of troubled firms in Japan were less effective in improving profitability than restructurings under Chapter 11 in the United States. However, we find that restructurings associated with new capital injections and new outside management are more likely to lead to genuine improvement in financial performance.     

How Do Ordinary Japanese Reach Consensus in Group Decision Making?: Identifying and Analyzing “Naïve Negotiation”

The purpose of this study is to investigate ways in which ordinary Japanese people negotiate in a multi-party meeting. We initially gave such a way of negotiation the tentative name of “naïve negotiation”. The analysis of the conversational data reveals three structural features of naïve negotiation: (1) at the utterance level, the participants tend to claim their opinions without providing any overt grounds, (2) at the local consensus-building level, they tend to jump to conclusions without the full examination of proposed hypotheses, (3) at the final consensus-making level, there tends to be disjunctions between discussion units. Although these features are not necessarily seen as irrational or illogical, a naïve-negotiation style can still be a trouble-source in achieving successful consensus-making. This leads us to emphasize the necessity of developing a support system for the discussants.     

Voluntary Export Restraints and Economic Welfare

In this paper, we explore welfare implications of a voluntary export restraint (VER) agreement within a simple model of duopoly with product differentiation and conjectural variations. We assume that the foreign exporter does not sell its product in its own market and that the imposition of a VER makes the domestic firm into a Stackelberg leader. Under these assumptions, it is shown that a VER introduced at the free-trade equilibrium level of export is welfare-improving for the importing country if and only if the foreign exporter is forced to comply with the restraint involuntarily . In other words, it is impossible to benefit home country and foreign country simultaneously by a VER agreement within the class of models we are envisaging. This result holds irrespective of whether firms compete in terms of quantities or prices.     

Applying Matching Strategies in Climate Change Negotiations

This paper aims to apply game theory matching mechanisms to international climate change negotiations using numerical analysis in order to overcome the free-riding problem without a central authority. The analysis found that the mechanisms can increase the reduction by 2.5 times compared to the case without the mechanisms. It also demonstrates that coupling it with an emission trading scheme could reduce total abatement costs, and improve countries’ payoffs substantially. Matching mechanisms could be tabled in international climate change negotiations based on the conditional pledges which are currently proposed by the European Union and a few other countries.