The price normalization problem in imperfect competition and the objective of the firm

Summary. General equilibrium models of oligopolistic competition give rise to relative prices only without determining the price level. It is well known that the choice of a numéraire or, more generally, of a normalization rule converting relative prices into absolute prices entails drastic consequences for the resulting set of Nash equilibria when firms are assumed to maximize profits. This is due to the fact that changing the price normalization amounts to altering the objective functions of the firms. Clearly, the objective of a firm must not be based on price normalization rules void of any economic content. In this paper we propose a definition of the objective of a firm, called maximization of shareholders' real wealth, which takes shareholders' demand explicitly into account. This objective depends on relative prices only. Real wealth maxima are shown to exist under certain conditions. Moreover, we consider an oligopolistic market and prove the existence of a Nash equilibrium in which each firm maximizes the real wealth of its shareholders. Received: July 10, 1997; revised version: July 27, 1998     

Continuous mean demand functions derived from non-convex preferences

In this paper we show that for a large subset of utility functions in the space of all C¹ utility functions and for all prices the mean demand of those consumers whose taste is represented by a given utility function in that subset is uniquely determined. This implies that for a large set of economies mean demand is a continuous function. Our analysis uses derivatives of first and of higher order. The result is essentially a consequence of the multijet transversality theorem.     

The economic effects of agricultural policy in West Germany

Zusammenfassung Die ?konomischen Wirkungen der Agrarpolitik in Westdeutschland. - In diesem Aufsatz wird ein Modell des allgemeinen Gleichgewichts benutzt, um die Wirkungen der Agrarprotektion auf die gesamte Volkswirtschaft abzusch?tzen bzw. zu ermitteln, wie sich eine Liberalisierung auswirkt. Dabei werden die nationalen, aber auch die von der EG gew?hrten Subventionen berücksichtigt. Es wird simuliert, da? alle an Auflagen gebundenen Subventionen und der implizite Zoll auf Agrareinfuhren in H?he von 54 vH abgeschafft werden. Die Ergebnisse zeigen, da? nach einer Liberalisierung die gesamte Besch?ftigung um rund 4 vH und das Einkommen um etwa 3 vH zunehmen würden. Die Importe landwirtschaftlicher Erzeugnisse würden ebenso steigen wie die Exporte von Sektoren wie der Elektroindustrie und des Maschinenbaus, bei deren Produkten die Bundesrepublik einen komparativen Vorteil hat. Der Agrarprotektionismus verursacht also viel h?here Kosten als nur die, die sich im ?ffentlichen Haushalt und in den Preissteigerungen für die Verbraucher zeigen.

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Résumé Les effets économiques de la politique agricole en Allemagne de l’Ouest. - Dans cet article les auteurs appliquent un modèle de l’équilibre générale pour évaluer les conséquences de la protection agricole ou d’une libéralisation. Les subventions sur le niveau national et international sont considérées. Les auteurs simulent une élimination de toutes les subventions liées à un but spécifique et du tarif implicite sur les importations agricoles de 54 pourcent. Les résultats démontrent qu’après une libéralisation l’emploi agrégé accro?traient à peu près par 4 pourcent et le revenu par 3 pourcent. Les importations agricoles accroissent aussi bien que les exportations des secteurs - comme par example de la construction des machines électriques et mécaniques - où l’Allemagne de l’Ouest possède un avantage comparatif. La protection agricole implique des co?ts beaucoup plus hauts que ceux qui sont reflétés dans le budget publique et dans les augmentations des prix au consommateur.

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Resumen Los efectos económicos de la política agraria en Alemania Occidental. - En este trabajo se utiliza un modelo aplicado de equilibrio general para investigar las consecuencias de la protección al sector agrario y de una liberalizatión sobre toda la economía. Se toman en cuenta subsidios tanto a nivel nacional cómo a nivel de la Comunidad. Se simula la eliminación de todos los subsidios condicionales y del arancel implícito sobre las importaciones agrarias del 54%. Los resultados muestran que bajo una liberalizatión el empleo agregado incrementaría en un 4 % y el ingreso en un 3 %. Las importaciones de productos agrarios aumentarían, como también las exportaciones de sectores como ingeniería eléctrica y mecánica, en los cuales Alemania goza de ventajas comparativas. Se concluye que la protección al sector agrario genera más costos que aquellos que se reflejan en el presupuesto nacional y en incrementos de los precios al consumidor.

     

Bedingungen einer neuen ökologischen Industriepolitik

Wirtschaftsdienst - Zur Erreichung der globalen Klimaziele ist eine drastische Emissionsminderung in allen Sektoren wie Energiewirtschaft, Gebäude, Verkehr und Landwirtschaft notwendig. Zudem...     

Drèze equilibria and welfare maxima

We present an example of a production economy with incomplete markets, von Neumann–Morgenstern utility functions, and a unique Drèze equilibrium in order to illustrate and explain the following phenomenon. There exists a transfer scheme such that every shareholder’s utility after transfers and share adjustments increases the more the firm deviates from the Drèze equilibrium. However, shareholders’ welfare decreases the further the firm departs from the Drèze equilibrium. Shareholders’ welfare is defined as the sum of their utilities where every utility function is normalized such that the marginal utility of today’s consumption equals 1 at the Drèze equilibrium.     

Managing Customer Relationships in the Social Media Era: Introducing the Social CRM House

CRM has traditionally referred to a company managing relationships with customers. The rise of social media, which has connected and empowered customers, challenges this fundamental raison d'etre. This paper examines how CRM needs to adapt to the rise of social media. The convergence of social media and CRM creates pitfalls and opportunities, which are explored. We organize this discussion around the new “social CRM house,” and discuss how social media engagement affects the house's core areas (i.e., acquisition, retention, and termination) and supporting business areas (i.e., people, IT, performance evaluation, metrics and overall marketing strategy). Pitfalls discussed include the organization's lack of control over message diffusion, big and unstructured data sets, privacy, data security, the shortage of qualified manpower, measuring the ROI of social media marketing initiatives, strategies for managing employees, integrating customer touch points, and content marketing.     

Are incomplete markets able to achieve minimal efficiency?

Summary. We consider economies with incomplete markets, one good per state, two periods, t = 0,1, private ownership of initial endowments, a single firm, and no assets other than shares in this firm. In Dierker, Dierker, Grodal (2002), we give an example of such an economy in which all market equilibria are constrained inefficient. In this paper, we weaken the concept of constrained efficiency by taking away the planners right to determine consumers investments. An allocation is called minimally constrained efficient if a planner, who can only determine the production plan and the distribution of consumption at t = 0, cannot find a Pareto improvement. We present an example with arbitrarily small income effects in which no market equilibrium is minimally constrained efficient.Received: 26 November 2002, Revised: 28 May 2003, JEL Classification Numbers: D2, D52, D61, G1.We are grateful to an anonymous referee for very valuable comments. E. and H. Dierker would like to thank the Institute of Economics, University of Copenhagen, for its hospitality and its financial support.     

Equilibria and core of large economies

In this paper we apply results on regular economies to study equilibria and core in a non-differentiable framework. We show that the distributions of agents' characteristics of regular economies form a dense subset of all distributions of agents' characteristics. Therefore ‘most’ economies have equilibria which are contained in finitely many ?-balls. And the core of ‘most’ sufficiently large economies is contained in finitely many ?-balls centered at equilibrium allocations of these economies.     

The Handelsblatt Rankings 2.0: Research Rankings for the Economics Profession in Austria,Germany, and Switzerland

The distinguishing feature of all Handelsblatt rankings published over the last ten years is that they could draw on premium quality bibliometric data. We present here the new method used by KOF and DICE to compile the 2017 Handelsblatt Rankings of university departments and individual economists. As in previous years, the rankings are based on quality weighted journal publications. We show that the benchmark results are robust to various changes in the employed method, in particular to changes in the convexity of the journal quality weighting scheme. In conclusion, we show how the collected data can be used to provide customized evaluations of entire academic careers of individual economists.