Reserve Prices without Commitment

When potential bidders in an auction have to incur a cost to prepare their bids and thus to learn their valuations, imposing a reserve price and announcing that in case no bid is submitted there will be another auction without a reserve price is both revenue and welfare improving. Reserve prices that induce less than maximum entry in the first auction may be optimal. Also, entry fees are not necessarily better instruments than reserve prices.Journal of Economic LiteratureClassification Number: D44.     

Education Policies and Taxation without Commitment

We study the implications of limited commitment on education and tax policies set by benevolent governments. Consistent with real‐world practices, a government can decide to subsidize different levels of education at different rates. A lack of commitment, however, affects the optimal structure of education subsidies. The direction of the effect depends on how labor taxes are designed. With linear labor tax rates and a transfer for redistribution, subsidies become more progressive. By contrast, if the government is only constrained by informational asymmetries when designing taxes, subsidies become more regressive.     

Commitment to Rules on Investment: The Developing Countries' Stake

This study examines foreign direct investment into developing countries, and the stake those countries have in liberalizing or restricting these long-term investments. Of particular interest is the stake the developing countries might have in committing to codes or multilateral agreements on investments. Clear advantages to commitment are identified, involving attracting investments that would not occur otherwise. But disadvantages are also identified, involving the possible loss of rents to host countries that might have been captured in the absence of binding codes.     

Regulatory Choices and Commitment: Challenges for Electricity Market Regulation in Kosovo

Since 1990 the Cuban economy has faced a crisis comparable with those in Eastern Europe. However, since 1995 approximately, the Cuban reform has been showing significant results in terms of economic recovery and financial adjustment. As is the case with the Chinese reform, the stabilising, privatising and liberalising measures taken in Cuba point to a reform strategy essentially different from that followed in Eastern Europe. This article shows two relevant aspects of the Cuban case: first, the Cuban reform is a transition process toward the market although forced by external circumstances and still at an early developmental stage; second, the Cuban transition is in line with the evolutionary conception of a transition.     

Managing Foreign Direct Investment: Commitment, Deterrence, And Diversion

The paper models the multinational choice between foreign direct investment in and exporting to a domestic market as an equilibrium outcome of strategic play between domestic and foreign firms. Two cases are considered, one in which the domestic firm can precommit to output levels (as, for example, through investment in a distribution network), and one in which such precommitment is not possible. The domestic firm's strategy in the case of precommitment includes aggressive efforts to deter or divert foreign investment and results in fewer observed equilibria with foreign investment than would otherwise occur. Tariffs designed to switch the foreign decision from exporting to direct investment may lead instead to monopolization of the market by the domestic firm.     

Market Liberalization,Regulatory Uncertainty,and Firm Investment

This paper analyzes the effects of regulatory uncertainty regarding labor costs on investment in a liberalized market. We distinguish between the external investment margin (market entry) and the internal investment margin (technology), and establish that regulatory uncertainty affects these margins differently, encouraging market entry, but discouraging technological investment. As a consequence, the impact of regulatory uncertainty on competition in liberalized markets is a combination of these two countervailing forces.     

代理人有限承诺下的规制合约设计--以环境规制为例

在非对称信息下,委托人该如何设计契约,使代理人按照其意愿行事,在既定的信息结构下实现资源配置的"次优",是委托代理理论所要解决的首要问题.本文在一个环境规制的框架下,分析了作为委托人的政府该如何对作为代理人的污染企业进行最有效的规制.针对逆向选择和代理人有限承诺并存的情形,本文给出了规制契约的形式,并对不同信息结构下所求得的解进行福利比较.     

Non Utility Power,Alternative Regulatory Regimes and Stranded Investment

The electric industry is experiencing increasing competition in generation encouraged by non utility generators and regulatory agencies. An electric utilitys problem of satisfying stochastic demand with either power purchased from non utility generators or with its own generators is examined. The utility is subject to either rate-of-return regulation, profit sharing or price caps. The level of profit at which sharing is triggered is shown to be endogenous to the utilitys problem. The paper demonstrates how the form of regulation affects purchases of non utility power and measures of stranded investment. Simulations highlight the tradeoff between allocative efficiency and recovery of stranded investment.     

International R&D Rivalry and Industrial Strategy without Government Commitment

We examine optimal industrial and trade policies in a series of dynamic oligopoly games in which a home and a foreign firm compete in R&D and output. Alternative assumptions about the timing of moves and the ability of agents to commit intertemporally are considered. We show that the home export subsidy, R&D subsidy and welfarc are higher when government commitment is credible than in the dynamically consistent equilibrium without commitment. Commitment thus yields welfare gains (though they are small) but so does unanticipated reneging, whereas reneging which is anticipated by firms yields the lowest welfare of all.     

Status-Seeking, Catching-Up, and Comparative Statics in a Dynamic Heckscher–Ohlin Model

This paper examines a two‐country dynamic general equilibrium model with status‐seeking agents. We show that the introduction of status‐seeking behavior brings about new properties in equilibrium dynamics. While there exists a continuum of steady states in the standard dynamic models, the present framework demonstrates that, under some conditions, there uniquely exists an incompletely specialized steady state, which is locally saddle‐point stable. Therefore, catching‐up and overtaking phenomena seen in economic development can be explained, and comparative statics analysis also is made possible. Our comparative statics analysis illustrates, for example, that trade pattern is determined in the Heckscher–Ohlin manner; the patient country acts just like a capital abundant one to export the capital‐intensive good. Furthermore, as distinct from the existing literature, the present study shows that the existence of an incompletely specialized steady state can be ensured even if the two countries conduct different policies.     

The Role of Regulatory Focus and Information in Investment Choice: Some Evidence Using Visual Cues to Frame Regulatory Focus

This study examines the role of regulatory focus and additional information on risk preferences in investment choice using an experimental approach. The findings reveal that situational regulatory focus plays an important role in influencing investment choice. In particular, a congruent promotion-focused image and related message increases risk-taking behavior in terms of choice for stocks rather than fixed deposits, whereas the reverse is true for a congruent prevention-focused image and related message. However, this relationship depends on the amount of information available during the decision-making process, and regulatory focus has a stronger impact on investment choice under the condition without additional financial information.     

演化经济学中的技术赶超理论:研究进展与启示

通过对技术赶超理论的研究文献进行回顾,分析了演化经济学中技术赶超理论的逻辑、经济史和创新政策等,总结了演化经济学中技术赶超理论的基本观点和政策启示。研究结论如下:第一,发展中国家的技术赶超并不是一个单调线性过程,成熟的技术轨道上并不存在赶超机会,只有在"机会窗口"时期率先进入新兴技术轨道才有赶超的可能性;第二,成功的赶超依赖于新兴产业的技术创新和制度的"创造性破坏";第三,发展中国家的创新政策不仅要能应对市场、公共机构和商业环境改变的挑战,而且要能改善国家创新系统的机能并增强赶超机遇的能力。     

Vertical Innovation and Catching-Up: Implications of EU Integration for CEECs-5

We analyze the role of vertical innovation in trade patterns for developing economies trading with technologically advanced countries. A model is presented where the international diffusion of knowledge, promoted by economic integration, is the source of a technological catching up and leads to a convergence in the quality of traded goods, with a positive effect on exports. We then turn our attention on the evolution of trade between the Central and Eastern European countries (CEECs-5) and their European Union partner countries, assessing whether economic integration has increase the quality of the goods produced. For the period 1995–2005, we find evidence of the increasing role of intra-industry trade and vertical differentiation and a process of specialization in higher quality products, especially in the medium- and high-skill sectors.

Investment without regulatory commitment: The case of elastic demand

This paper analyzes a regulation game with asymmetric information and lack of commitment. It expands Besanko and Spulber's (1989) framework to the case of elastic demands using a generalized Nash solution. It is found that the most important property of the equilibrium with inelastic demand is not carried over to the elastic demand case, i.e., incomplete information worsens underinvestment, contrasting to Besanko and Spulber's result.     

Investment without democracy: Ruling-party institutionalization and credible commitment in autocracies

What explains private investment in autocracies, where institutions that discourage expropriation in democracies are absent? We argue that institutionalized ruling parties allow autocrats to make credible commitments to investors. Such parties promote investment by solving collective-action problems among a designated group, who invest with the expectation that the autocrat will not attempt their expropriation. We derive conditions under which autocrats want to create such parties, and we predict that private investment and governance will be stronger in their presence. We illustrate the model by examining the institutionalization of the Chinese Communist Party.     

Commitment and self-control

The literature on self-control problems has typically concentrated on immediate temptations. This paper studies a Gul and Pesendorfer [Temptation and self-control, Econometrica 69 (2001) 1403-1435; Self-control and the theory of consumption, Econometrica 72 (2004) 119-158] style model in which decision-makers are affected by temptations that lie in the future. While temptation is commonly understood to give rise to a demand for commitment, it is shown that ‘temptation by future consumption’ can induce its absence. The model also exhibits procrastination, provides an alternative to projection bias as an explanation for some experimental results, and can simultaneously account for myopic and hyperopic behavior. The evidence on preference reversals supports temptation by future consumption, and suggests that it may not be restricted to short time horizons.     

Starting Small and Commitment

I study a model of a long-term partnership with two-sided incomplete information. The partners jointly determine the stakes of their relationship and individually decide whether to cooperate with or betray each other over time. I characterize the extremal—interim incentive efficient—equilibria. In these equilibria, the partners generally “start small,” and the level of interaction grows over time. The types of players separate quickly. Further, cooperation between “good” types is viable regardless of how pessimistic the players are about each other initially. The quick nature of separation in an extremal equilibrium contrasts with the outcome selected by a strong renegotiation criterion (as studied in Watson (1999, J. Econ. Theory85, 52–90). Journal of Economic Literature Classification Numbers: C72, C73, D74.     

Commitment to regulatory bureaucracy

A model is considered in which ‘regulatory bureaucracy’ is in the best interest of consumers as well as the regulated firm. Making it more costly for the regulator to discern the firm's true costs can help motivate the firm to act in the interest of consumers. But this is only true if the regulator cannot make binding precommitments concerning the use of his policy instruments. Endowed with the ability to precommit, prices below marginal cost, investment in excess of efficient levels, and the absence of regulatory bureaucracy will characterize the optimal regulatory policy.     

Bargaining with Imperfect Commitment

We study the effect of imperfect commitment in noncooperative two-person bargaining games. By establishing the reputation for being stubborn, a player sometimes commits to her initial demand, becoming unable to change her demands or to accept an inferior offer from her opponent. When the probability of being stubborn is small, the set of equilibria is shown to be small and agreement may be reached immediately despite the possibility of stubbornness. A player has greater bargaining power when she is more patient and/or is more likely to be stubborn. Journal of Economic Literature Classification Number: C78.