Scale economies and existence of sustainable monopoly prices

The size of the firm relative to market demand is crucial to a determination of whether there exist sustainable monopoly prices. In the one product case the size of the firm is its minimum efficient scale. In the multiproduct case size is defined by a set of outputs at which cost complementarities are present. The analysis shows that when the size of the firm is sufficiently large, there exist anonymously equitable Aumann-Shapley prices. Further, at these prices natural monopoly is sustainable against rival entry. The Aumann-Shapley price are also shown to be quantity sustainable in the sense of Brock and Scheinkman.     

Scale economies in manufacturing: Problems of robust estimation

The purpose of the paper is to develop a cost frontier model and its robust estimation for analyzing the impact of scale economies in the manufacturing sector. Indirectly our estimates provide a test of the new growth theory which emphasizes the role of increasing returns to scale as a major force in the sustained growth process. An illustrative application to the South Korean manufacturing sector finds strong supportive evidence for significant scale economies, though in recent years it may be declining for the Korean economy.     

Scale and scope economies for drug abuse treatment costs: evidence for Washington State

Drug abuse treatment has been pervasive in the US in the recent years, and the associated direct treatment costs approached $18 billion in 2001. However, there have been few published studies on scale economies, and none on scope economies, for drug abuse treatment costs. We estimate a restricted cost function for 17 hospitals in Washington State that provided inpatient and/or outpatient drug abuse treatment during the years 1997–2004. We find significant evidence of scale economies for hospitals that provide only outpatient drug abuse treatment services. The marginal costs of outpatient services are even smaller for hospitals that produce both outpatient and inpatient drug abuse treatment services. Further, these joint-production hospitals exhibit diseconomies of scope, or specialization economies. These results all imply that recent trends towards additional outpatient treatment services will enhance cost efficiency.     

Directional duality theory Directional duality theory

In this paper we introduce a complete duality theory based on directional distance functions. This duality theory parallels the duality theory based on radial distance functions in Färe and Primont (1995).     

Scale economies with regard to price adjustment costs and the speed of price adjustment in Australian manufacturing

This paper aims to examine the impact of firm size, industry concentration and the length of production on industry speed of price adjustment. To motivate the paper, an industry pricing model in error correction form is derived from firm pricing behaviour. As a new development, firms are assumed to have price adjustment costs that are a function of their size. The empirical model is estimated using two‐digit Australian manufacturing industry data for the period 1994:3 to 2006:1. The results suggest that the industry speed of price adjustment is positively related to firm size and negatively related to industry concentration and the production lag. Implied values for industry speeds of price adjustment are generally small when compared to other country industry studies. However, the industry average median lag of 7.1 quarters indicates a slightly faster speed of price adjustment than the estimate for the Australian consumer price index by Dwyer and Leong (2001 Dwyer, J. and Leong, K. 2001. Changes in the determination of inflation in Australia 1–44. Reserve Bank of Australia Research Discussion Paper 2001‐02 [Google Scholar]).     

A note on multiproduct economies of scale and economies of scope

Two measures of (local) economies of scale for a firm producing more than two products are derived using measures of product-specific economies of scale and economics of scope. The latter is especially useful for econometric estimation and testing.     

Attention economies

A new theoretical model is developed which describes the structure of competition for attention and characterizes equilibria. The exogenous fundamentals of an attention economy are the space of receiving subjects with their attention capacity, and the potential set of competing firms (senders) with their radiation technology. The endogenous variables explained by the theory are equilibrium audiences (the clients belonging to a sender), their signal exposure and attention, and the diversity of senders surviving the contest for attention. Application of the equilibrium analysis suggests that international integration or progress in information technologies tend to decrease global diversity. Local diversity, perceived by the individual receivers, may increase nonetheless.     

Scale economies,cost complementarities and technical progress in Indian banking: evidence from fourier flexible functional form1

The paper analyses the relations between foreign policy and export performance. The paper deals with exports of selected European countries and the USA to Middle Eastern countries including Israel. Cointegration analysis is used to identify common stochastic trends in export series. A long-term relationship implies no significant influence of foreign policy differences on trade performance. According to the Johansen tests applied to bivariate and multivariate models, German, Austrian, Dutch and EU exports to Israel are cointegrated with the US exports, while Swiss exports are never cointegrated with the exports of these countries. This result confirms the importance of foreign policy in trade performance.     

On duality and the benefit function

This paper investigates the duality relationships between Marshallian and compensated price-dependent consumer demands. We associate the compensated price-dependent demand with Luenberger’s benefit function, which has nice aggregation properties and provides a general basis for conducting welfare analysis. As an analog to the well-known “Slutsky equation,” we derive a “Luenberger equation” establishing the general relationships between Marshallian and compensated price-dependent slopes. Our duality results strengthen the conceptual linkages between positive economic analysis and welfare analysis.     

Viable Ramsey economies

The Ramsey model of economic growth is revisited from the perspective of viability theory. The Ramsey model, augmented with minimal consumption and sustainability criteria, becomes a viability problem. The framework allows for a clear picture of optimal viable, optimal non‐viable, and viable non‐optimal paths. The drastic sacrifices in terms of present consumption required by the implementation of Brundtland sustainability are visualized, the rich countries bearing the major part of the burden. The econometric analysis of viability sets enhances the role of technological progress in ensuring Brundtland sustainability. Preference parameters such as the pure time preference rate are statistically non‐significant.     

Information and incentives in labor-managed economies

The incentive problems that result in labor-managed economies from attempting to eliminate the inefficient allocation of labor due to this institutional arrangement are discussed. Games are searched for such that, at an equilibrium, firms have revealed truthful information and labor is allocated efficiently. It is shown that such games do not exist if output is not observable, and even if aggregate deficits or surpluses are permitted. By contrast, if output is observable, balanced games exist in which it is dominant strategy for each firm to be truthful.     

Aid and institutions in transition economies

We investigate whether aid contributed to institutional development in transition economies. We find that aid flows have a positive effect on democratization, especially on constraints on the executive and political participation. At the same time, total aid has no effect on overall quality of governance, while US aid appears to have a negative impact on some dimensions of governance. Aid’s differential impact on democracy and governance is consistent with uneven development of institutions and the democracy consolidation hypothesis. We also find that aid has a non-linear effect on democracy. Openness has a positive effect on both democracy and good governance. Oil resources have an adverse effect on democracy. Adult mortality, civil war and adherence to Islam are all detrimental to good governance.     

Tariff strategies and small open economies

In this paper we examine the issue of optimal tariffs for a small economy that trades with a large economy. We define 'small' and 'large' in the sense that the world prices are determined solely by the large country, and, therefore, the small country faces exogenously given world prices. Within this framework it is shown that there exist situations in which the small country has an incentive to behave as a Stackelberg leader by committing itself to a non-zero optimal tariff. Although the small country is unable to directly affect world prices, by pre-committing to a non-zero trade tax it may induce a reduction of the large country's optimal trade tax, thereby indirectly improving its terms of trade and welfare. JEL Classification: F13, F35
Stratégies de droits de douane et petites économies ouvertes. Ce mémoire examine le problème des droits de douane optimaux pour une petite économie qui commerce avec une grande. On définit 'petit' et 'grand' en un sens économique: les prix mondiaux sont déterminés seulement par le grand pays et le petit pays fait face à des prix mondiaux exogènes. A l'intérieur de ce cadre d'analyse, les auteurs montrent qu'il existe des situations dans lesquelles le petit pays est incitéà se conduire en leader à la Stackelberg en s'engageant fermement dans une politique de droit de douane optimal différent de zéro. Même si le petit pays ne peut pas influencer directement les prix mondiaux, en adoptant une politique ferme de droits de douane positifs, il peut amener le grand pays à réduire son niveau de droit de douane optimal, et, ce faisant, améliorer ses propres termes d'échange et son propre niveau de bien-être.     

CBD hypothesis and economies of agglomeration

Economies of agglomeration as a rationale for the formation of central business district of a city is examined. In a simultaneous location problem of firms and workers on a line segment, a locational interaction effect among firms is introduced. As an optimal solution to the cost minimization problem, a locational pattern is obtained in which the outermost zone is occupied by workers, the middle zone by firms, and the innermost zone by both workers and firms.     

Endogenous vs. exogenous comparative advantage and economies of specialization vs. economies of scale

This paper draws the distinctions between the concepts of endogenous and exogenous comparative advantages and between the concepts of economies of specialization and scale. A comparison between the equilibrium model endogenizing the degree of specialization and endogenous comparative advantages, neoclassical trade model with exogenous comparative advantages, and an extended Dixit-Stiglitz model with a tradeoff between economies of scale and transaction costs is used to explore the equilibrium implications of the distinctions.     

Ecosystems,externalities, and economies

This paper incorporates an ecosystem model into a model of a simple economy. The decisionmaking agents in the ecosystem are individual organisms aggregated to the species level. A species may provide utility directly to humans, or it may provide utility indirectly because it is used either as a raw material in goods fabrication or as sustenance for other species. We describe a comparative static equilibrium of the ecosystem where species' demands for other species are equal to the supplies of those other species, and energy is conserved. The ecosystem is then embedded in the economy so that the effects of human intervention can be traced through both the ecosystem and the economy. Human intervention creates ecosystem externalities such that ecosystem equilibria are shifted and the new equilibria affect the utility or the production processes of other humans. This framework allows us to describe in principle which ecosystem services can be efficiently usurped by humans, which waste flows can be efficiently allowed into ecosystems, and which ecosystem organisms and physical attributes can be efficiently maintained.