Multi‐Market Competition,R&D,and Welfare in Oligopoly

We investigate a multi‐market Cournot model with strategic process research and development (R&D) investments wherein a multi‐market firm meets new competitors that enter one of the markets. We show that entry can enhance the total R&D expenditures of the multi‐market firm. Moreover, the incumbent's profit nonmonotonically changes as the number of entrants increases. Depending on the fixed entry costs and R&D technologies, both insufficient and excess entry can appear. Our results imply that diversification of their products can be a useful strategy for firms.     

Marginal Distance: Does Export Experience Reduce Firm Trade Costs?

Are the costs of exporting to a market reduced if a firm has experience of exporting to a neighbouring market? If so, does this effect operate through reducing entry barriers or by increasing sales once the firm is operating in the market? This paper examines linkages between current export destinations and entry, sales and exit for new markets. We find that measures of exporting experience in geographically nearby markets increase the probability of entry into a market and reduce the probability of exit. However, these same measures have very limited effect on the firm’s export sales in the market. The effect of related experience on sales tends to be negative for recently entered firms. We interpret this result in the context of the Melitz heterogeneous-firm model of trade by showing that lower fixed costs reduce the entry threshold, but this lower threshold has the effect of allowing lower-sales marginal firms to be present in the market.     

The Paris financial market in the nineteenth century: complementarities and competition in microstructures1

This article sets out to explain why the Paris Bourse was highly successful in the nineteenth century in spite of the supposedly inefficient monopoly of the official market, the Parquet. The literature argues that the official monopoly was sidelined by a free, innovative market known as the Coulisse, but it fails to explain how the Coulisse emerged despite the monopoly and how the two markets persisted alongside each other during the entire century. We provide a detailed history of how these two markets emerged and interacted. The Parquet increasingly developed as a high‐end market, providing security, transparency, and effective settlement‐delivery to unsophisticated investors trading on the spot market. The Coulisse provided liquidity, immediacy, and opacity to professional investors trading mostly forward. In line with recent theoretical developments, we argue that the juxtaposition of heterogeneous organizations had important virtues for market participants, since it allowed the exchanges to specialize in different investors and services and made the exchanges complementary to each other. We demonstrate our claim by looking at both the formal rules and the actual functioning of the Parquet, drawing on its archives which we have recently classified.     

Note on uncertainty and socially excessive entry

It is well known that under general conditions entry into imperfectly competitive markets is usually excessive. This note explores the effects of uncertainty on this result. Specifically, a firm that incurs entry costs might fail to successfully enter a market. In this environment, it is found that the previous conditions might not hold when there is uncertainty. That is, with uncertainty entry might be socially insufficient (instead of excessive) by more than one firm.     

State‐Owned Enterprises,Competition, and Disclosure

We develop a mixed‐duopoly model in which a private firm competes against a state‐owned enterprise (SOE) who cares about social welfare and is privately informed about market demand. When the SOE's social concerns are sufficiently important and when the market competitiveness is sufficiently low, the SOE commits to fully disclose its private information. Otherwise, the SOE commits to withhold its private information. When the disclosure equilibrium prevails, the private firm can be more profitable competing against an SOE than against another private firm. In this mixed‐duopoly setting, the equilibrium social welfare is maximized when the SOE puts a positive weight on both social welfare and its own profit. Our analysis has further implications for both mandatory disclosure and market entry.     

Spatial Monopoly with Product Differentiation

Most theoretical work on the behavior of spatial monopoly focuses on the single-product case, while, in reality, a firm usually produces (or sells) many differentiated products. In this paper, 1 introduce a new model of spatial monopoly with a multiple-product firm where the firm chooses both the measure of product varieties and the price of each variety to maximize its profit. I also examine the monopolist's optimal decision and its economic effects on the spatial economy with a fixed and variable market fringe, respectively. For a class of preferences to product differentiation, I find that both the quantities produced and the consumer surpluses vary across three different spatial pricing policies. This finding is in contrast to the literature on a single-product spatial monopoly where those results are invariant across different pricing policies.     

垄断厂商的过剩生产能力可置信威胁行为分析

本文以完全垄断市场中在位企业阻止对手进入作为研究的基本问题,使用博弈论方法,在假定完全信息条件下,通过允许对手进入的斯塔克尔伯格均衡和阻止对手进入的过剩生产能力可置信威胁策略性行为的比较分析,论证了企业中存在过剩生产能力的一类原因,解释了企业的理性选择使部分的生产能力闲置,是一种特定条件下各利益主体最大化其效用时出现的相对稳定状态。垄断企业通过投资于过剩生产能力,使它对潜在进入者的威胁变得可置信,从而能够阻止进入。本文的研究结果表明,企业选择保持过剩的生产能力是在特定条件下的理性选择,是根据特定的技术和市场条件确定的。     

Productivity Differences and Foreign Market Entry in an Oligopolistic Industry

We show how productivity differences between foreign and indigenous firms affect the choice of the foreign market entry strategy. We identify the conditions necessary for the adoption of a particular strategy depending on the competing firms?? productivity differences as well as each strategy??s cost. In particular, we study tradeoffs between exporting and JV as well as between JV and WOS that were neglected in the firm heterogeneity literature. We find that high productivity differences led the foreign firm to enter host markets via WOS or exporting monopoly, while in the case of smaller productivity differences they entered via different types of JV. The share in joint venture depended positively on the productivity difference and negatively on trade and investment costs.     

THE ECONOMICS OF IMPORT PARITY PRICING: A PEDAGOGICAL NOTE

This paper demonstrates that pricing to import parity is not necessarily prima facie evidence of the exercise of market power. It is shown that in the presence of imports both market structures, perfect competition and monopoly, can price to import parity. If markets can be segmented enabling the firm to discriminate between the export and domestic market it is shown that the imperfectly competitive firm can differentially price. Furthermore, as the number of domestic firms is increased, and if these firms are able to segment the market, the differential between domestic and foreign prices is reduced. The import parity price may or may not be charged in the domestic market. A measure of the exercise of market power is therefore the differential between export parity and the domestic price.     

Corruption Via Media Capture: The Effect of Competition

In this article, we compare a government's optimal choice of whether to engage in corruption by capturing the media outlets through bribery in two alternative media market structures: monopoly versus duopoly. While there is an extra bribe claimant in a media duopoly relative to monopoly, it may also be harder for each firm to individually expose corruption when the rival co‐opts with the government. We find that when the latter effect is stronger than the former, media is captured at lower bribes under duopoly relative to monopoly and in such instances media competition facilitates rather than hindering corruption.     

Stackelberg横向兼并博弈的分析

文章通过增加"蛇吞象"式兼并分析,扩展了Steffen-Kai-Wieland模型,研究结果表明:无论"大鱼吃小鱼","蛇吞象","强强联合",还是"弱者联合"的兼并,四种兼并对参与企业都是有利可图的.但这些兼并都会提高市场集中度,导致消费者福利下降.     

Vintage capital and the diffusion of clean technologies

We develop a general equilibrium vintage capital model with energy‐saving technological progress and an explicit energy sector to study the impact of investment subsidies on equilibrium investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy‐consuming and scrapping is endogenous. Two polar market structures are considered for the energy market: free entry and natural monopoly. First, it is shown that investment subsidies may induce a larger equilibrium investment into cleaner technologies either under free entry or natural monopoly. However, in the latter case, this happens if and only if the average cost is decreasing fast enough. Second, larger diffusion rates do not necessarily mean lower energy consumption at equilibrium, which may explain certain empirical observations.     

Access to Finance,Financial Development and Firm Ability to Export: Experience from Asia–Pacific Countries

With particular reference to Asia–Pacific countries, the present study examines how access to finance and financial development affects firms’ ability to enter export markets. Using firm‐level data from the World Bank Enterprises Survey, we found that access to finance plays a significant role in improving firms’ ability to export. In addition, development of the financial sector fosters export market entry. Among the financial development indicators, reach of the banking sector variable is most prominent. The present study suggests that improvements in access to finance and financial development (increases in the reach of the banking sector) enable firms operating away from capital or major cities to enter export markets easily. The present study supports policy intervention to strengthen access to the financial sector, which would encourage firms to export, and to facilitate export market entry for remotely located firms.     

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.     

Price Discrimination and Efficient Distribution

This paper focuses on third‐degree price discrimination by an upstream firm with some degree of monopoly power. Downstream firms fall into two categories: efficient and inefficient, according to their relative costs of transforming a unit of the upstream good into a unit of final product. Under ordinary static conditions, price discrimination favors the inefficient firms, which have more elastic demands. We consider, however, the possibility that discrimination in the opposite direction can alter the downstream market structure toward greater efficiency. Discriminatory pricing, then, involves charging a higher price to the less efficient firms. Such pricing is shown to be both potentially profitable for the upstream firm and welfare improving as average consumer prices fall.     

跨国公司对东道国企业技术创新的影响

在下游企业顺序进入市场条件下,本文分析了跨国公司对于上游企业创新动机的影响。我们的研究表明:上游企业的创新投入既取决于其国有股的比重又取决于下游企业的国别属性以及市场势力。具体而言,如果上游企业是一个私营企业,那么下游企业的国别属性不影响其研发投入。相反,倘若上游企业是一个纯粹的国有企业,那么只有当下游企业均为国外企业时,其研发投入不足,在其他情况下,上游企业的研发投入相同。假如上游企业是一个部分国有企业,那么下游跨国公司的市场势力越大,其研发动力越低。     

The Telecommunications Act of 1996 and its impact

This paper analyzes the effects on the implementation of the Telecommunications Act of 1996 (‘Act') on U.S. telecommunications markets and is based on my forthcoming book with the same title. The Act is a milestone in the history of telecommunications in the United States. Coming 12 years after the breakup of AT&T, the Act attempts to move all telecommunications markets toward competition. The Act envisions competition in all telecommunications markets, both in the markets for the various elements that comprise the telecommunications network, as well as for the final services the network creates. Building on the experience of the long distance market, which was transformed from a monopoly to an effectively competitive market over the last 12 years, the Act attempts to promote competition in the hitherto monopolized local exchange markets. The Act recognizes the telecommunications network as a network of interconnected networks. Telecommunications providers are required to interconnect with entrants at any feasible point the entrant wishes. Most importantly, the Act requires that incumbent local exchange carriers (‘ILECs') (i) lease parts of their network (unbundled network elements) to competitors ‘at cost'; (ii) provide at a wholesale discount to competitors any service the ILEC provides; and (iii) charge reciprocal rates in termination of calls to their network and to networks of local competitors. Moreover, the Act requires that ILECs that came out of the Bell System meet a number of requirements, including a public interest test, before they may enter into the long distance market. Thus, the Act provides some safeguards against the export of ILEC monopoly power to other parts of the network. Numerous legal challenges to the Act and its implementation have been raised by the ILECs resulting in very slow implementation of the Act, and, in many cases, in no substantial implementation of the provisions of the Act. Thus, more than 3 years after the passage of the Act, there is very little entry and competition in the local exchange markets. In response to the apparent failure of the implementation of the Act, there has been a wave of mergers in the U.S. telecommunications industry.     

South Carolina indigo,European textiles,and the British Atlantic economy in the eighteenth century

Europe's indigo imports grew rapidly from the 1720s, but the mid‐century wars (1739–48, 1756–63) had a devastating effect on the European textile industries and hence on the indigo trade. Britain's indigo market, however, boomed in wartime on the bases of prize indigo captured from France and Spain and of indigo imported from South Carolina. The rise of South Carolina's trade from the mid‐1740s was not caused, as the historiography claims, by its monopoly of the British market—such a monopoly never existed—but because the depression in South Carolina's major staple, rice, compelled a remodelling of the South Carolina plantation system, which produced an elastic supply of indigo. Carolina indigo was blighted by a poor reputation, not, as is usually argued, because British merchants maligned unfairly its quality, but because Carolina planters failed to achieve consistent production standards. Carolina indigo nevertheless succeeded in displacing French and Spanish indigo in the British and in some continental markets, reflecting the demand for cheap dyestuffs from manufacturers of low‐cost textiles, the fastest‐growing sectors of the European textile industries at the onset of industrialization.     

The Differential Impact of Accurate Product Cost Information in Imperfectly Competitive Markets: A Theoretical and Empirical Investigation*

Many researchers claim that costing systems that provide materially more accurate or precise cost reports have a strict value-enhancing effect on decisions (i.e., Cooper 1988, 1995; Cooper and Kaplan 1991; Christensen and Sharp 1994; Rogers. Comstock. and Pritz 1994; Swenson 1995; Gupta and King 1997). However, this study provides theoretical and empirical evidence that the value of more accurate cost information may be dependent upon the firm's competitive market structure, as well as the firm's product market strategy. We extend the theoretical work of Gal-Or 1986 to incorporate an endogenous imprecise cost signal in two imperfect market structures: Cournot competition and Bertrand competition with imperfectly substitutable products. In addition, we theoretically link market structure to product market strategy. To examine product market strategy, we employ a laboratory markets design that allows for strategic reaction by a rival firm in each of these markets, because the competitive position of a firm is determined by its capacity to produce at low cost, or to differentiate its product from other products (Porter 1985). Consistent with our theoretical work, we argue that firms that compete on the basis of cost leadership (which we demonstrate may be characterized as Cournot competition), benefit through increased profits from increased product cost accuracy, whereas firms that compete on the basis of product differentiation (which we demonstrate may be characterized as Benrand competition) do not benefit from such increased product cost accuracy. Our results are consistent with this contention. That is, profit is higher in the experimental cost leadership markets (operationalized as Cournot markets) when subjects know their true cost, while profit is higher in the experimental product differentiation markets (operationalized as Bertrand markets) when subjects receive uninformative cost reports and make their decisions based on expected costs. These results suggest that the value of more accurate cost reports may be dependent upon the firm's competitive market structure strategy and product market strategy.