Monopoly supply

Summary and Conclusions In the preceding sections, it is shown that a supply curve in the ordinary sense does exist and can be derived, which corresponds to a specified family of demand curves described by changes in a single parameter of demand. If the demand curve hasn parameters, an equal number of supply curves can be derived, one corresponding to each family of demand curves generated by variation in one of the parameters, holding the remainingn–1 constant. Since the demand curve family facing the perfectly competitive firm has the formP =a, there is only one supply curve in this case. Further, that supply curve does not involve demand parameters since the sole demand parameter,a, is eliminated in its derivation. In general, this is not the case and the marginal cost schedule will be insufficient to describe the supply relation for imperfectly competitive firms.In the teaching of graduate and undergraduate microeconomics, students often become confused by conflicting discussion suggesting that monopoly nopoly supply is meaningless, irrelevant, or a point. If there is only one demand curve, the equilibrium price-quantity supply will be one point regardless of whether monopoly or perfectly competitive firms are being considered. The broader definition of supply advocated here offers the pedagogic advantage of stressing the fundamental uniformity of the supply concept in the theory of the firm. With shifting demand, there is a meaningful supply relation in both the competitive and monopoly case.As indicated in Section III, this generalized definition of supply has strong implications for empirical work, showing that it is tractable to estimate monopoly supply relations as well as marginal cost curves in the monopoly case and thus opening the door to useful new empirical work.     

Demand and Supply Curves: Rotations versus Shifts

Virtually all principles and intermediate texts draw demand and supply curves as parallel shifts when a non-price variable changes its value, which implicitly assumes that the demand (or supply) relation is linear. But economists commonly speak of “the” income elasticity, as if it were constant (and not varying continuously as is the case with the linear specification). If the income elasticity is constant, then the demand curve must rotate when income changes.     

Firm and industry elasticities of substitution: The two factor case

Summary For the industry composed of single output, two factor firms, industry elasticity of demand for one of the factors with respect to the price of the other is negative or positive as the elasticity of demand for industry output is greater or less thanindustry elasticity of substitution between the factors. Using isoclines, vectors, isoquants, and isoscales, it is shown that, where firm isoquants are non-homothetic, industry elasticity of substitution for constantindustry output allows for adjustment of the level of firm output, and thus exceeds firm elasticity of substitution for constantfirm output.He wishes to thank two anonymous referees for helpful suggestions.     

International Business Alliance under Asymmetric Information: Technology vis‐à‐vis Information Advantage

We study the relationship between a multinational corporation (MNC) and a domestic firm under demand uncertainty. The MNC possesses a superior production technology, but the domestic firm is better at predicting market demand. We examine the MNC's preference for, and the ownership structure of, an international alliance (IA) and find, inter alia, that binding borrowing constraints have serious implications for the results. Interestingly, a firm's preference for and profits in IA do not necessarily increase as its advantage in market information or production technology increases. We also consider a dynamic setting with technology spillover and show that whether technology spillover hinders or facilitates IA once again depends on the nature of the credit market.     

Elasticities of derived demand under different objectives of the firm

Conclusions We have reconciled and generalized earlier comparisons of input demand elasticities under different objective functions of the firm. In general little can be said of the relative magnitudes of the elasticities under different objectives, since different goals usually imply different levels of production and input demand. With some simplifying assumptions about the technology we can conclude that a profit-constrained, utility-maximizing firm tends to have higher input demand elasticities than a profit-maximizing firm facing the same cost and demand functions. This tendency is reinforced by a high profit requirement, decreasing returns to scale and slowly falling demand elasticity for the output. The results may help to explain differences in the stability of employment between industries,. Scherer [1980, pp. 365–67] reports that some studies have found an inverse relation between market concentration and stability of employment, which is contrary to the expected result. One may argue that in concentrated industries the firms are likely to have organizational slack or to face an inelastic product demand curve. Hence demand for factors of production should be less elastic than in more competitive industries. We have shown, however, that deviations from profit maximization may lead to higher input demand elasticities. Since non-profit-maximizing goals are likely to be more common in concentrated industries, the observed instability of employment may be partly due to the high elasticity of derived demand. Although the type of alternative goals studied in this paper may not be realistic in practice, the analysis shows nevertheless that goals of the firm may be one factor in explaining differences in the stability of employment.     

提高农民收入的玉米生产技术选择途径分析

在黄祖辉、刘进宝等人研究的基础上,从理论和实证两个方面分析了玉米技术进步与农民收入之间的负相关关系,采用计量经济模型计算出玉米供给弹性与需求弹性之差约为0.27,充分证明了技术进步对农民收入增长产生了负面影响。在实证分析基础上,对这一现象进行了理论分析,认为玉米为缺乏弹性的农产品,应从减少玉米供给曲线右移幅度和推动玉米需求曲线右移两个方面提出既能够增加玉米产量又能够增加农民收入的措施。     

Market Performance Implications of the Transfer Price Rule

The “transfer price rule” (TPR) defines a vertical price squeeze as an input price, output price combination set by a vertically‐integrated firm monopoly producer of an essential input that would not allow the firm's downstream unit to earn at least a normal rate of return on investment in the “as‐if” case that it had to purchase the input at the price charged independent firms. In its 2009 linkLine decision, the U.S. Supreme Court rejected the TPR for the purpose of enforcing the anti‐monopolization prohibition of Section 2 of the Sherman Act. In contrast, a vertical price squeeze, defined by a TPR‐like standard, is an abuse of a dominant position under Article 102 of the Treaty on the Functioning of the European Union. In this article, we model the impact of the TPR on market performance. We find that the TPR increases consumer surplus and net social welfare if all firms remain active in the downstream market. It sometimes induces the upstream firm to refuse to supply the downstream firm, and in such cases, consumer surplus and net social welfare are reduced. The impact of the TPR on market performance thus depends on whether or not an upstream firm can refuse to supply downstream firms on terms that would offer it at least a normal rate of return on investment.     

扩展的总需求总供给模型——一个阐释我国宏观经济运行的分析框架

本文在附加预期的菲利普斯曲线基础上,通过引入可变的技术进步变量,修正了新古典的总供给曲线,指出除预期的通货膨胀率、产出缺口外,技术进步也是影响总供给曲线的重要变量;同时将总需求曲线扩展到开放经济条件下,从而推导出了“通货膨胀率——产出增长率”系统下的总需求总供给模型。作为对扩展后模型的检验,本文利用该模型阐释了我国宏观经济运行中的“高增长与低通胀并存”现象。     

Exports versus FDI: do firms use FDI as a mechanism to smooth demand volatility?

In this paper, we first develop a simple two-period model of oligopoly to show that, under demand uncertainty, whether a firm chooses to serve foreign markets by exports or via foreign direct investment (FDI) may depend on demand volatility along with other well-known determinants such as size of market demand and trade costs. Although fast transport such as air shipment is an option for exporting firms to smooth volatile demand in foreign markets, market volatility may systematically trigger the firms to undertake FDI. We then use a rich panel of US firms’ sales to 56 countries between 1999 and 2004 to confront this theoretical prediction and show strong evidence in support of the prediction     

Entry in Foreign Markets under Asymmetric Information and Demand Uncertainty

This paper examines the mode of entry of a multinational firm that has less information about the host market stochastic demand than the local firm. The foreign firm can enter the market either through direct investment or exports. Each entry mode entails different costs and has different informational implications. Entry through foreign direct investment (FDI) is favored by greater variability in demand. Interestingly enough, strategic behavior by the incumbent firm, which deviates from its first period monopoly output, might be aimed at increasing the probability of foreign entry through FDI despite having to compete against an equally informed and efficient entrant; this never happens in a symmetric information environment. Such host firm behavior is aimed at reducing the strategic uncertainty derived from the foreign firm's beliefs. Compared with the symmetric information setting, entry via direct investment may occur in more cases.     

非对称信息下供应链回购策略的研究

为了解决供应链中下游零售商的成本和需求预测信息是私有信息的情况下,上游供应商的回购决策问题,运用委托-代理模型研究了供应商的最优回购策略,得到了供应商的最优决策方案。利用最小承诺驱使零售商传递真实的需求预测信息,并证明零售商总是传递真实的成本信息。在此基础上进行公式的推导,并进行数值分析与模型验证,得出最终结论。     

Monetary policy in an open economy with private debt: Another variation on theIS/LM theme

Summary In this article an amended vesion of the traditionalIS/LM-model for an open economy is developed. TheLM-curve is replace by anFM-curve, which represents equilibrium between the demand for and supply of money and bonds. The banks passively satisfy the wishes of the public as to the composition of its portfolio of money and bonds, creating or destroying money in the process. It turns out that not much is left of the well-orderedIS/LM world.     

生态视角下的内蒙古绒山羊生产规模分析

羊绒业是内蒙古的一大特色产业，同时也是内蒙古少数在国际市场上拥有较大影响力的产业之一。但随着内蒙古羊绒业总产值的增加，厂商数目不断增加，规模不断扩张的同时，其原料——山羊绒的供给问题越来越凸显出来。一方面是对羊绒原料需求的增加派生出山羊养殖的增加，但另一方面却是山羊养殖的增加对生态环境带来严重影响。文章从内蒙古绒山羊生产规模的现状分析入手，研究内蒙古绒山羊生产规模扩大的后果。重点分析了绒山羊养殖的增加对生态环境的影响，并估计出内蒙古草原对山羊的承载能力和羊绒最大产量。为内蒙古绒山羊生产规模的发展提出建议。     

Strategic Intrafirm Innovation Adoption and Diffusion

A theory of oligopolistic innovation adoption is developed in which intrafirm diffusions occur because the marginal cost of adoption is increasing in the rate of adoption. The equilibrium intrafirm diffusion curve is S-shaped or concave, as are empirically observed ones. This diffusion curve is more likely to be S-shaped the more competitive the industry, the larger the marginal cost of adoption or the pre-innovation unit cost of production, or the smaller the demand. The diffusion is longer, and so the extent of adoption at any date is lower the more competitive the industry, the larger the marginal cost of adoption or the pre-innovation unit cost of production, or the smaller the demand. A surprising result is that an increase in the unit cost reduction from the innovation has an ambiguous effect on diffusion. Obviously, a larger cost reduction allows each firm to earn a larger flow profit at every date from the same rate of adoption. However, a more subtle effect is that it also allows the firm to earn the same flow of profit with a slower rate of adoption, and so lower adoption costs. That is, the firms also have an incentive to spread out the diffusion over a longer period of time to save on adoption costs.     

ON THE OPTIMAL QUANTITY OF PUBLIC GOODS AND RELATED ISSUES

This paper seeks to reopen a discussion on what the profession has considered settled and closed, namely the issue of the optimal quantity of a pure public good. We argue that determination of the optimal quantity by the intersection of the collective willingness to pay curve and the supply curve is inappropriate because it exaggerates the aggregate demand for the public good, thus giving rise to misleading supply decisions. The reason lies in the basic properties of pure public goods, in particular that of non‐rival consumption (joint supply). The paper submits that the optimal quantity of a public good is the largest quantity demanded by any single consumer (individually or as a collective). The individual demand curves are required in the analysis only for the purposes of determining the optimal benefit taxes and an equitable cost sharing formula. We show that under such a formula, based on benefit shares, the budget will be balanced, and since the tax burden is smaller than the benefits, less resentment to taxation could be anticipated under this framework.     

Multimarket Equilibrium,Trade, and the Law of One Price

This paper describes the setup of two classroom markets, one with a thin supply side and relatively higher prices. A comparison of the equilibrium price tendencies in the two markets helps students discover how to apply supply and demand analysis in this context. The introduction of speculators, who buy in one market and sell in the other, reduces or eliminates the price disparity. Class discussion can be focused on how “nonproductive” speculation can increase surplus measures of efficiency when price is permitted to convey the correct information about opportunity cost. Use: This experiment can be used in classes in the principles of economics, intermediate economics, or international trade to illustrate supply and demand analysis and the effects of inter-market trade. In upper-level classes, optimal bidding can be addressed as well. Time: Reading instructions and completing five trading rounds takes 30 to 40 minutes. Discussion lasts an additional 15 minutes. Materials: One deck of cards for up to 36 students, one copy of the instructions, and eight small blank slips of paper for each student.     

Multinational Learning under Asymmetric Information

The aim of this paper is to analyze the competition between a multinational and the incumbent firm in a foreign market under asymmetric information about demand and unobservable outputs. It is shown that the incumbent firm increases its production in the first period to signal to the multinational that the demand is low. The multinational reduces its output in the foreign market in order to signal-jam. In addition, the multinational increases its production in the other market. However, total production of the multinational is lower. Implications for research and development expenditure by the multinational are examined.     

Exporting versus Direct Investment under Local Sourcing

This paper examines a setting where foreign direct investment (FDI) shifts demand for an intermediate good from the source to the host country. A domestic and a foreign firm choose between exports or FDI, always sourcing the intermediate locally. We show that by increasing the price of the intermediate, outward FDI can act as a cost-raising strategy for a firm and that attracting FDI can raise host country welfare. Two-way FDI is the equilibrium when the countries have similar market sizes. However, such FDI reduces global welfare relative to two-way exporting since it eliminates indirect competition between suppliers. JEL no. F12, F13, F23, L13     

In the crossfire: Multinational companies and consumer boycotts

Multinational firms face challenges as geopolitical tensions are rising when stakeholders may have divergent views on contentious issues. Sharply different attitudes toward the proposed extradition law by the Hong Kong SAR Government in 2019 and related issues were observed among some residents in mainland China and Hong Kong. While firms such as Cathay Pacific Airways expressed support of the government, it was perceived by some of its customers in mainland China that the firm was hostile to them due to the views expressed by some of its staff based in Hong Kong. In this paper, we estimate the impact of such perceived divergent staff political attitudes on consumer demand. Using a triple differences design that controls for changes in market demand and supply conditions, we find that passenger volumes from mainland China were adversely affected for Cathay Pacific, leading to a monthly decrease of approximately 20%, after contentious political views of some of its staff were widely reported in mainland China. However, the negative effects subside within a quarter. Further analysis reveals heterogeneity in consumer responses by regions, with passengers from South East Asia or countries having closer migration or trade ties with mainland China behaving similarly with those from mainland China.     

Instability of Equilibria in Experimental Markets: Upward-Sloping Demands,Externalities, and Fad-Like Incentives

The objective of the paper is to study markets in which the value of the activity to any one person increases with the level with which the activity is undertaken by others. The general interpretation could be fads, mimicking behavior, or some sort of belief formation process in which the beliefs or expectations of agents about some underlying state of nature are influenced by the buying behavior of other agents. The result is to create a market that can be modeled as having an upward-sloping market demand curve. The questions posed are (i) in the fad-like environment, does the classical concept of equilibrium (as an equating of market demand and market supply) accurately predict market behavior; (ii) can both stable and unstable equilibria be observed; and (iii) which of the two classical concepts of stability best describes the conditions under which instability is observed? Under the conditions of a fad-like demand side externality in a market organized by the multiple unit double auction (MUDA), market equilibration occurs at a point where demand equals supply. The disequilibrium behavior follows the dynamics of the Marshallian model of dynamics, as opposed to the Walrasian model. These results confirm and extend the major findings of Plott and George who studied a similar environment with a downward-sloping supply.