Product standards, trade disputes, and protectionism

Abstract.  Disputes over national product standards are a major source of tension in international trade negotiations. The usual pattern is that exporters challenge new product standards as a 'disguised barrier to trade.' The paper develops a two‐country political agency model of standard setting. It is shown that there exists a political equilibrium in which the importing country on average applies a more stringent standard than the exporting country. This difference can be due either to a too lax standard in the exporting country or a too stringent standard in the importing country. JEL classification: F18, F13, D72     

Market potential dynamics in innovation diffusion: Modelling the synergy between two driving forces

The presence of a slowdown in new product life cycles has recently received notable attention from many innovation diffusion scholars, who have tried to explain and model it on a dual-market hypothesis (early market-main market). In this paper we propose an alternative explanation for the slowdown pattern, a dual-effect hypothesis, based on a recent co-evolutionary model, where diffusion results from the synergy between two driving forces: communication and adoption. An analysis of the synergistic interaction between communication and adoption, based on the likelihood ratio order or on a weak stochastic order, can inform us of which of the two had a driving role in early diffusion. We test the model on the sales data of two pharmaceutical drugs presenting a slowdown in their life cycle and observe that this is identified almost perfectly by the model in both cases. Contrary to the general expectation, according to which communication should precede adoption, our findings show that adoptions may be the main driver in early life cycle; this may be related to the drug's specific nature.     

Multigeneration diffusion model for economic assessment of new technology

In the era of 21st century, development of emerging information technology is the essence of the advancement. This kind of new technology, however, often requires a great deal of amount of initial investment for both procedures of R&D and commercialization. As cost invested in developing the specified technology is increasing, investors are paying more attention to cost to benefit analysis (CBA). One of the basic elements of CBA for new technological development is the diffusion pattern of demand of such technology. Typically, it would be hard to presume the diffusion pattern of demand when the new product or the technology is under development. In this case, a simulation study is necessary. Many studies of technology evaluation have adopted a single generation model to simulate the diffusion pattern of demand. This approach, however, considers the diffusion of the new technology itself, not taking into account newer generation, which can replace the one just invented. In the real market situation, one must consider the competition and substitution phenomena between old and new technologies. In this paper, we show how multigeneration technology diffusion model can be applied for more accurate CBA for information technology. Additionally, Monte Carlo simulation is performed to find influential factors on the CBA of a cybernetic building system (CBS).     

A visual scanning of potential disruptive signals for technology roadmapping: investigating keyword cluster,intensity, and relationship in futuristic data

Technology roadmapping of today’s era is necessarily based on comprehensive scanning of various signals with the disruptive potential in future paths of market, product, and technology. Previous attempts of data-driven technology roadmaps have mainly focused on data from such sources as patents and literatures. However, as these sources catalogue posteriori trends of evolution, roadmaps based on these data cannot be counted on to predict disruptions. In this regard, futuristic data in technology foresight websites may provide a better source. The objective of this research, in response, is to develop a support system for technology roadmapping that uses futuristic data. To this end, we suggest keyword-based visual scanning approach involving three keyword maps, used in succession: keyword cluster map, keyword intensity map, and keyword relationship map. Particularly, keyword intensity map is designed using weak signal theory which can help identify the visibility, diffusion, and interpretation of signals.     

Product life‐cycle,knowledge capital,and comparative advantage

This paper empirically investigates the effect of product life‐cycle on trade patterns. We measure the product life‐cycle length with patent citation data at the industry level. Using bilateral trade data from 2002 to 2006, we find that countries with more knowledge capital endowment export more in industries with shorter product life‐cycles. We show that this pattern is largely driven by the risk of imitation. The pattern is reversed when imitation is limited by stronger intellectual property rights.     

Business cycles in a balance-of-payments constrained growth framework

The main goal of this work is to analyze the potential implications of the balance-of-payments constraint theory for business cycles. Although this theory is oriented towards long-run growth, it implicitly predicts the existence of cycles in any open economy. As we try to show, according to this theory, business cycles are generated by two factors: capital flows and trade shocks. Yet the standard model can overestimate cycles due to its specification of trade equations. In the paper we first develop the implications of the balance-of-payments constraint theory with regard to business cycles, then build an augmented model that can correct the potential over-estimation of cycles: Finally we use that model to analyze the sources of business cycles in Portugal and Spain and to show that the standard model does indeed overestimate cycles, at least in these two cases.     

International trade, flexible manufacturing, and outsourcing

Abstract .  This study analyzes the impact of opening up markets on the diffusion of flexible manufacturing in a general equilibrium framework. With flexible manufacturing, suppliers can service a range of downstream industries and do not have to be concerned about being held up. Instead, the vertical structure is determined by the trade-off between economies of scale in flexible manufacturing and product specificity of in-house production. The analysis derives a number of testable predictions with regard to firm size and productivity measures and shows that globalization can lead to a consolidation in upstream markets, lower real wages, and reduce welfare.     

Combining conjoint analysis,scenario analysis,the Delphi method,and the innovation diffusion model to analyze the development of innovative products in Taiwan's TV market

In science and technology industries, innovative products are launched rapidly, making the lifecycle of new products ever shorter. Thus, it is important that companies understand consumers' needs and consider expert opinion when analyzing the development of a new technology. However, no studies have combined these two perspectives with regard to the development of a new product. Therefore, this research combined conjoint analysis, scenario analysis, and the Delphi method with the innovative diffusion model to analyze the development of Taiwan's TV market over the next 10 years. The results show that the outlook for demand for light-emitting diode (LED) TVs in Taiwan is very optimistic; sales of LED TVs will surpass sales of liquid crystal display TVs in 2015 in the optimistic scenario and in 2017 in the most likely scenario.     

Product diffusion and pricing with market frictions

Summary. We study pricing and product diffusion in a dynamic general equilibrium framework with product market frictions. Ongoing R&D activity leads, with an endogenously determined probability, to continual improvements in product quality. We characterize the steady-state equilibrium with endogenous product diffusion in which a number of different goods co-exist on the quality ladder. We show that the severity of the economy's market frictions is a crucial determinant of the pricing structure, the product diffusion pattern, the level of R&D investment, the rate of endogenous growth, the length of Schumpeterian product cycles and the possibility of multiple growth paths. Eliminating market frictions leads to a degenerate product ladder of precisely one step, containing only the most recent product, as in the monopolistic competition literature. Received: August 16, 1999; revised version: March 6, 2001     

Technology product evolution and the diffusion of new product features

The evolution of technology products can be analysed on multiple levels. Product categories go through continuous evolution determined by the cumulative changes in the features of new product models. This is manifested in the diffusion of new product features and in the increasingly vague boundaries between different product generations. This article develops an approach for planning and forecasting technology product evolution and the diffusion of new product features. This is achieved by isolating the phenomena underlying the evolution process, and formulating the process at the product category, product feature, and product model levels. The approach is derived from these formulations combining the primarily demand-driven product category diffusion and product unit replacement behaviour, and the more supply-driven product feature dissemination. The approach enables meaningful sensitivity analysis including the analysis of discontinuities. The developed approach is applied to characterise the evolution of an example product category of mobile handsets and to forecast the diffusion of mobile handset features using extensive longitudinal and cross-sectional data collected from Finland. In consequence, the process of technology product evolution and the phenomenon of product feature dissemination are suggested as extensions to research on product category diffusion and replacement.     

基于Agent的小世界网络中集中式与分散式创新扩散仿真分析

在小世界网络中,采用节点具有记忆功能的创新扩散模型进行仿真实验,考察了两种不同的创新扩散方式——集中式扩散和分散式扩散在小世界网络中创新扩散效果的优劣。实验结果表明,在小世界网络中采用分散式扩散要比采用集中式扩散的效果好,具体体现在扩散的时间短、范围广,而且在创新抵触型网络中能更有效地进行扩散。同时更进一步发现,通过增加节点的"创新感知"能有效地改进节点在网络中的扩散效果,大大减少节点在扩散前期所花费的时间,使节点避免出现"Lock-in"现象。     

The cost of capital,asset prices,and the effects of monetary policy

The primary objective of this paper is to study the interaction between monetary policy, asset prices, and the cost of capital. In particular, we explore this issue in a setting where individuals face idiosyncratic risk. Incomplete information also provides a transactions role for money so that monetary policy can be studied. In contrast to standard monetary growth models which focus on the transmission of monetary policy to the demand for capital goods, we incorporate a separate capital goods sector so that the supply response to monetary policy is taken into account. Consequently, in contrast to the standard monetary growth model, monetary policy plays an important role in investment activity through the relative price of capital goods. Moreover, different sources of productivity can affect the degree of risk sharing. Although the optimal money growth rate falls in response to an increase in productivity in either sector of the economy, monetary policy should react more aggressively to the level of productivity in the capital sector.     

Job protection,housing market regulation,and the youth

Young Europeans experience high unemployment rates, job instability, and late emancipation. Meanwhile, they do not support reforms weakening protection on long‐term contracts. In this paper, we suggest a possible rationale for such reform distaste. When the rental market is strongly regulated, landlords screen applicants with regard to their ability to pay the rent. Protecting regular jobs offers a second‐best technology to sort workers, thereby increasing the rental market size. We provide a model where nonemployed workers demand protected jobs despite unemployment and the share of short‐term jobs increases, whereas the individual risk of dismissal is unaffected. Our theory can be extended to alternative risks and markets involving correlated risks and commitment under imperfect information.     

Investigation of the effect of secondary market on the diffusion of innovation

In the high-tech product market, the number of hungry adopters, a new type of early adopters who buy new products and sell them soon in the on- or off-line secondary market to seek for the other new products, has been increasing due to the short product life cycle of high-tech products and the low transaction cost on the Internet. This new phenomenon means that it is inappropriate to consider customers only in the primary market as total adopters in innovation diffusion modeling, since purchasers in the secondary market also have a word-of-mouth effect on the remaining non-adopters. To explain this new phenomenon, we modify the basic Bass diffusion model by incorporating the effect of the secondary market and conduct an empirical analysis. As a result, we conclude that the basic Bass model is likely to overestimate sales volume and tends to forecast lagged peak time when there is an effect from the secondary market. This means that applying a diffusion model to high-tech products without considering the secondary market effect would provide an inaccurate market forecast.     

A study on the relationship between technology diffusion and new product diffusion

This study investigates the relationship between “technology diffusion” and “new product diffusion”. We define “technology diffusion” as a knowledge spillover process, which is represented by patent citation, and “new product diffusion” as the spread of a new product that has been developed by the application of patented technology. To investigate the relationship between the two types of diffusion, we use patent citation data of code division multiple access (CDMA) technology and market sales data of mobile phones in South Korea for the analysis. The results show that the diffusion of technology through patent citation could be successfully explained by empirical analysis, for which the Bass diffusion model was used. Moreover, we can find out if technology diffusion can be the leading indicator of a new product's diffusion before its launching; in other words, before the commercialization of the patent.     

A choice-based multi-product diffusion model incorporating replacement demand

This study proposes an integrated forecasting model that incorporates both first purchase diffusion and replacement component of sales in predicting multi-product diffusion patterns. The model consists of a two-stage procedure that customers undertake during purchase occasions according to a diffusion process or replacement process, and at each occasion, they make purchase incidence decisions and product choices according to a choice model. By incorporating various exogenous factors in the choice model, the model can identify the impact of each factor on customers' purchase incidence decisions and choice decisions among various product sub-categories. This approach enables us to understand the overall process of customers' purchasing behavior and to separate total sales amount into sales to three consumer segments: first-time buyers, customers who repurchase the same product category and customers who change their previous product category. We applied the proposed model in the forecasting multi-product framework; forecasting sub-category level automobile sales and brand level mobile terminal sales in the South Korean market. The results of the empirical studies showed that incorporating the replacement components into the multi-product diffusion framework is useful not only in understanding the demand interaction among automobile categories and among mobile handset brands, but also in producing more accurate long-term sales forecasts compared to previous multi-product diffusion models.     

Forecasting future demand for large-screen television sets using conjoint analysis with diffusion model

The methodological framework proposed in this paper addresses two limitations of the basic Bass diffusion model: that it does not reflect competition among products nor does it forecast demand for products that do not exist in the marketplace. The model consists of four steps. First, to investigate consumer preferences for product attributes, we use conjoint analysis to estimate the utility function of consumers. Next we estimate the dynamic price function of each competing product to reflect technological changes and the evolving market environment. Then we derive dynamic utility function by combining the static utility function and the price function. Finally, we forecast the sales of each product using estimated market share and sales data for each period, which are derived from the dynamic utility function and from the Bass diffusion model, respectively.We apply this model to South Korea's market for large-screen televisions. The results show that (1) consumers are sensitive to picture resolution and cost and (2) in the near future, should the market see the introduction of liquid crystal display (LCD) TVs with screens larger than 50 inches, the high resolution and steep price drop of LCD will lead LCD TVs to capture a larger market share than TVs with other display types. Finally, our results show that TVs with 40-inch screens are preferred over TVs with larger screens.     

BIGGER IS BETTER: MARKET SIZE,DEMAND ELASTICITY,AND INNOVATION*

This article proposes a novel mechanism whereby larger markets increase competition and facilitate process innovation. Larger markets, in the sense of more people or more open trade, support a larger variety of goods, resulting in a more crowded product space. This raises the price elasticity of demand and lowers markups. Firms, therefore, become larger to break even. This facilitates process innovation, as larger firms can amortize R&D costs over more goods. We demonstrate this mechanism in a standard model of process and product innovation. In doing so, we question some important results in the new trade and endogenous growth literatures.     

State-uncertainty preferences and the risk premium in the exchange rate market

This paper shows that state-uncertainty preferences help to explain the observed exchange rate risk premium. In the framework of Lucas (1982) economy, state-uncertainty preferences amount to assuming that a given level of consumption will yield a higher level of utility the lower is the level of uncertainty perceived by consumers. Under these preferences we can distinguish between two factors driving the exchange rate risk premium: “macroeconomic risk” and “the risk associated with variation in the private agents' perception on the level of uncertainty”. Empirical evidence from three main European economies in the transition period to the euro provides empirical support for the model. The model is more successful in accounting for the observed currency risk premium than models with more standard preferences, and the general perception of risk by private agents is shown to be a more important determinant of risk premium than macroeconomic uncertainty.     

Interest Groups, Trade Liberalization, and Environmental Standards

In considering a country that imposes a minimum standard on an imported polluting good, which generates negative consumption externalities, we construct a common-agency model, in which a domestic environmental group and a foreign industrial lobby can influence the formation of the minimum standard by providing political contributions to the government. This paper investigates the effects of trade liberalization on the political equilibrium environmental standard, the pattern of trade, environmental disutility, and social welfare. We find that trade liberalization tightens the minimum standard, decreases imports of the polluting good, and reduces environmental disutilities. The importing country’s social welfare, however, does not necessarily increase with trade liberalization. The weaker the environmental group’s lobbying efficiency, or the stronger the foreign firm’s lobbying efficiency, the more likely it is that trade liberalization will enhance the importing country’s welfare.