Monopolistic competition,aggregation of competitive information,and the amount of product differentiation

Consider an industry with a large number of homogeneous firms. Each firm's profits are a function of its own strategy and the strategies the other firms select. Suppose other firms' strategies enter into each firm's profit function only through one or more statistics. For example, average price in the market may parameterize every firm's profit function. We prove that, as a general rule, the industry's firms will in equilibrium follow at most M + 1 distinct strategies, where M is the number of statistics by which competitors' strategies affect each firm's profits.     

Determinants of capacity utilization by firms in less developed countries

The factors which influenced the capacity utilization decision of two hundred firms in the light manufacturing sector in Thailand during the period 1962–1974 were analyzed. The profit-maximizing capacity utilization rate for each firm was calculated using the projected balance sheets and income statements the firms prepared at the time of their initial investment. This ‘optimal’ rate was roughly twice the rates chosen by the firms. The extent of nonoptimal capacity underutilization of a firm was a function of the nationality of the firm's owner, entry date, number of firms in the industry, projected profits, and the manager's perceived risk of multishift operations.     

Do cost efficiency gap and foreign competitors matter concerning optimal privatization policy at the free entry market?

In this paper, we demonstrate that in contrast to the case with exogenous number of foreign private firms, partial privatization is always the best policy for the public firm in long-run equilibrium, which casts doubt on the robust result in Matsumura and Kanda (J Econ 84(1):27–48, 2005) who argued that welfare-maximizing behavior by the public firm is always optimal in mixed markets. Critical cost gap determines that long-run degree of privatization is larger than the short-run one. In particular, regarding the scenario wherein one public firm competes with domestic private firms and foreign private firms, equilibrium price is lower than marginal cost of public firm instead of being equivalent to marginal cost of the public firm, and that public firm’s outputs, profit, and social welfare is the smallest in the concerned mixed oligopoly models.     

The effects of cash flow and size on the investment decisions of ICT firms: A dynamic approach

This paper examines one of the fastest growing industries in our world today, the ICT industry. We assess the sensitivity of a firm’s investment to a set of financial determinants, by developing a flexible adjustment dynamic model. In particular, we examine the degree to which a firm’s liquidity influences firm investment and whether firm size and firm specialization have any additional implications. Moreover, the effect of the dot-com burst is also considered. For a panel of ICT and non-ICT US companies listed on the NASDAQ stock exchange, the results reveal the following: (1) all firms are sensitive to the availability of internal funds; (2) investment intensity decreases with firm size; (3) and leverage negatively affects investment for ICT firms.     

The incentive effects of plan targets and priorities in a disaggregated model

Most models of the Soviet firm assume that it produces just one output. These models are unsuited for studying the effects of taut planning on the product mix. The objective of the firm's manager in the present two-product model is to obtain a bonus that is conditional upon the fulfillment of stochastic final targets affected by priorities as well as by the initial target. The main result is that an increase in tautness, i.e., an increase in the targets, has an expansion and a substitution effect. While the former will usually increase output in the desired direction, the latter will deflect it away from the desired mix.     

Financial and economic determinants of firm default

This paper investigates the relevance of financial and economic variables as determinants of firm default. Our analysis covers a large sample of medium-sized limited liability firms. Since default might lead, through bankruptcy or radical restructuring, to firm’s exit, our work also relates to previous contributions on industrial demography. Using non parametric tests we assess to what extent defaulting firms differ from the non-defaulting group. Bootstrap probit regressions confirm that economic variables, in addition to standard financial indicators, play both a long and short term effect. Our findings are robust with respect to the inclusion of Distance to Default and risk ratings among the regressors.     

Factor market structure and technology choice in the Colombian brick industry

This paper examines the relationship between factor markets and an industry structure such that capital-intensity is correlated with size, and firms of different sizes coexist in the long run. Empirical evidence shows that wages vary positively with firm size after correcting for education, experience, turnover and firm location. Secondary source evidence suggests that capital access differs across entrepreneurs, according to their positions in Colombian society. These assumptions are combined in a model which can generate the industry structure observed. The alternative hypothesis that capital access improves over a firm's lifetime, so that industry structure represents a growth path, is examined and rejected.     

New venture planning: The role of technological forecasting

A system for the analysis and planning of new ventures is developed which provides a structure for the application of logical, mathematical, and scientific procedures to decision problems which (1) involve a significant portion of an organization's resources, (2) have long term effects on a firm's future success, and (3) are characterized by uncertainty in many of the factors important to the decision. The system is based on a synthesis of various analytical techniques from the fields of technological forecasting, decision analysis, and system dynamics, and provides a general methodology for rank-ordering new venture candidates and determining the resource allocation level required for new venture portfolios designed to achieve long term growth objectives. The role played by technological forecasting in new venture planning and in the selection of engineering projects is discussed.     

Scientific and technical planning in the People's Republic of China

At a time when Western market economies are struggling with ways of directing and stimulating technological innovation, China, with a highly centralized system for the planning and coordination of science and technology, offers an unusual perspective on the feasibility and operations of a large-scale, national organization of scientific and technical resources. This paper describes the mechanics of the science and technology planning process in the Chinese system and then draws conclusions on a variety of pertinent issues, such as: whether or not planning is actually conducted at a macrolevel; what are the useful sources of information for scientific and technical decision making within the system; what are the motivations for doing research in China's planned economy and how do they affect the research that is done; and, in summation, does the Chinese attempt at macroscience and technology planning really work?     

Price competition and market transparency: evidence from a random response technique

Surveys can increase market transparency when information asymmetries are present—but this will only happen when respondents answer questions truthfully. Sometimes, however, it might not be in the respondents’ best interest to provide truthful information on their firm or market. This will be especially true when other firms can exploit any information they provide. Understanding when, and under what conditions, respondents answer questions truthfully is important to researchers studying these markets and to policymakers using firm surveys to identify ways of improving the business environment. Using data from two countries in South Asia, this paper uses a random response technique to identify respondents that do not answer truthfully. We label these respondents as ‘reticent’. We show that respondents become more reticent when their firms face intense price competition. We argue that this is because intense competition gives respondents a greater incentive to misreport information to reduce market transparency.     

Depreciation and interest deductions and the effect of the corporation income tax on investment

In this paper, we examine the effect of the corporation income tax on the investment decision of the firm particularly with respect to the role of interest and depreciation deductions in determining the neutrality of the tax. We demonstrate the need for introducing a constraint on corporate borrowing before a meaningful analysis of the firm's behaviour under certainty is possible. The effect of a given tax and deduction scheme on the firm's investment decision is found to depend on the form of this constraint. We then relate our results to that of earlier authors and indicate some problems with their analyses.     

Why are firms sometimes unwilling to reduce costs?

This paper identifies the environments in which it does not pay for a multiproduct firm to engage in small cost reductions. Specifically, it shows that a multiproduct Bertrand firm’s profits will decrease in response to a small reduction in one product’s marginal cost if and only if the output share of the cost-reducing unit is below a threshold. Because cost reductions by a single-product firm or by a multiproduct Cournot firm always increase the firm’s profits, this result is unique to multiproduct Bertrand firms.     

Consumer discrimination and the firm's demand for black labor

This paper analyzes the firm's demand for labor in markets characterized by racial prejudice on the part of consumers. It is seen that the consumer discrimination concept leads to empirically testable implications regarding employment policies of firms. Moreover, unlike previous models of taste discrimination, it is found that racial discrimination need not be unprofitable; will not result in segregation of workers; and will not yield wage equality between black and white workers.     

Commodity taxes under uncertainty

This paper considers the relative distorting effect on output of commodity taxes, specific and ad valorem, in a situation where a firm faces revenue uncertainty. It is shown generally that this effect depends both on the precise nature of the firm's revenue uncertainty and on the degree of its risk aversion. More specifically, the distorting effect of each tax is characterised for a selection of objective functions and uncertain environments. These characterisations are compared in order to show the influence of alternative specifications on the relative distorting effect.     

Information in the hiring process: A case study

A variety of theoretical models have been concerned with the extent to which economic agents base their decisions on full information. This paper describes the stages of the hiring process for secretaries in a large conglomerate, the information sources used at each stage, and then estimates the relative importance of each source. Almost all applicants are interviewed when they apply and the interviewer's comments are a significant source of information. But in spite of the firm's use of complex information, it appears that the people hired are not likely to do well than those applicants not hired.     

Forward markets and the multiproduct,multifactor firm under price uncertainty

In this paper a competitive firm producing multiple outputs with multiple inputs is examined. All input and output prices are uncertain, and forward markets exist for all prices. The firm's optimal production and forward market strategies are analyzed.     

A simple test of the theory of the short-run Phillips curve

The theory of the Phillips curve is reexamined taking into account the relationship between workers and firms. Emphasis is given to the firm's role in determining employment and hours over the business cycle. Empirical relations between real wages, employment and unemployment using distributed lag estimation are examined.     

Technological districts localized spillovers and productivity growth. The Italian evidence on technological externalities in the core regions

Technological R&D externalities are the effects on the technological capacity of each firm stemming from the complementary and interrelated activities of R&D activities of other firms that operate both in the same industry and in other industries. R&D technological externalities are specially influential at the regional level. Regional proximity enhances the circulation of information, the opportunities for external learning; the scope for capitalizing on potential complementarities among the variety of firms and the different R&D activities being carried out by each firm, and the opportunity for technological networking. The empirical evidence on core regions in Italy in the 1980s confirms that regional clustering of complementary and interrelated R&D activities facilitated the emergence of technological districts. Firms located within technological districts benefited enormously from the R&D technological externalities spilling out from the complementary and interrelated R&D activities of other firms localized in the same area. Consequently, firms localized within technological districts had fast rates of introduction of technological innovations which, in turn, made it possible for total factor productivity levels to be raised with comparatively low levels of intra-muros R&D expenses.     

When do thick venture capital markets foster innovation? An evolutionary analysis

In this paper, we examine the trade off between different effects of the availability of venture capital on the speed of technological progress in an industry. We consider an evolutionary industry simulation model based on Nelson and Winter (1982), in which R&D efforts of an incumbent firm generate technological know-how embodied in key R&D employees, who might use this know-how to found a spinoff of the incumbent. Venture capital is needed to finance a spinoff, so that the expected profits from founding a spinoff depend on how easily venture capital can be acquired. Accordingly, thick venture capital markets might have two opposing effects. First, incentives of firms to invest in R&D might be reduced and, second, if spinoff formation results in technological spillovers between the parent firm and the spinoffs, the generation of spinoff firms might positively influence the future efficiency of the incumbent’s innovation efforts. We study the manner in which this tradeoff influences the effect of venture capital on innovation expenditures, speed of technological change and evolution of industry concentration in several scenarios with different industry characteristics.     

Size structure,stability and performance of the largest British and EEC firms

This paper indicates that industrial as wel' as aggregate concentration of the largest European firms is increasing. Inside the group itself, the British firms show a marked decline of their size superiority over the EEC firms and a lower survival rate. At performance level, the actual increase in economic concentration does bring inferior results in terms of profit and growth rates along with it. The main consequence of a larger size is to reduce the firm's exposure to risk as expressed by the coefficient of profit variation. Comparing the two groups, the effect of a lower British survival rate is strengthened by the fact that the surviving British firms grow systematically more slowly than the continental firms. On the other hand, the British firms have a higher rate of profit and a lower coefficient of profit variation.