CAPACITY EXPANSION IN MARKETS WITH INTER‐TEMPORAL CONSUMPTION EXTERNALITIES

This paper analyses market capacity expansion in the presence of inter‐temporal consumption externalities such as consumer learning, networks and bandwagon effects. An externality leads to an endogenous shift of market demand that responds to past market capacity. Whereas market capacity grows in waves, its magnitude depends on the degree of market concentration. The competitive environment contributes to S‐shaped time patterns of market capacity expansion. On the other hand, using a low introductory price, a monopolist plans an initially larger amount of market cultivation than a competitive market capacity expansion.     

GROWTH AND BUBBLES WITH CONSUMPTION EXTERNALITIES*

This paper explores the role of consumption externalities in an overlapping generations economy with capital accumulation. If consumers in each generation are concerned with other agents’ consumption behaviours, there exist intergenerational as well as intragenerational consumption externalities. It is the presence of intergenreational consumption externalities that may produce fundamental effects both on equilibrium dynamics and on steady‐state characterization of the economy. This paper demonstrates this fact in the context of a simple model of endogenously growing, overlapping‐generations economy with or without asset bubbles.     

网络外部性与补偿激励下的非线性定价

本文构建了一个一般性模型用以说明在非对称信息与网络外部性并存时,垄断厂商如何设计非线性价格合约甄别不同类型的消费者。模型表明两者的并存修正了经典逆向选择模型中"顶部无扭曲"和"单向扭曲"的基本结论。具体的消费量扭曲方式取决于网络是否存在拥挤:对于非拥挤性网络,消费量表现为单向扭曲;对于拥挤性网络,表现为双向扭曲;而对于中性网络则仍为顶部无扭曲。此外,本文还分析了引起双向扭曲的另一种原因,即由类型依赖的保留效用引起的补偿激励问题。     

SECTOR‐SPECIFIC EXTERNALITIES AND STATUS PREFERENCES IN THE UZAWA‐LUCAS MODEL*

This paper shows that introducing preferences for social status based on human capital holdings modifies the finding of Gómez (2004 ) that sector‐specific externalities associated with human capital in the goods sector do not violate the optimality of the competitive economy in the Uzawa–Lucas model. The effect of an increase in the degree of sector‐specific externalities is qualitatively the same as that of an increase in the strength of the desire for status. Hence, paradoxically, a greater degree of sector‐specific externalities makes human capital accumulation more excessive from the social point of view.     

ENDOGENOUS CYCLES IN A SIMPLE MODEL WITH LAGGED EXTERNALITIES ON PRODUCTIVITY

This paper presents a simple model of endogenous cycles. In the model, working experience creates learning‐by‐doing externalities that improve labor productivity but it takes long time before the externalities come into effect. In addition, individuals have preferences with a subsistence consumption level. In the presence of the subsistence consumption requirement, a productivity increase generates the income effect that surpasses the substitution effect, and individuals choose to increase leisure time at the expense of supplying labor. The interactions between productivity changes through the lagged externalities and labor supply generate cycles endogenously. The model analysis shows that the dynamics exhibit cyclical fluctuations around a unique steady state.     

SPATIAL PERFECT COMPETITION: A UNIFORM DELIVERED PRICING MODEL

Abstract.  Spatial competition is often probed in terms of spatial oligopoly and/or monopolistic competition in the literature. This paper considers spatial competition as a form of perfect competition, in the sense that the firms are assumed to be price-takers located at the centre of a market area and practising uniform pricing. It shows that under scale economy competitive equilibria can occur, and may actually be observed in the form of international price differentials. Both a very high price and a very low price can yield conditions of competitive equilibrium in spatially or otherwise separate markets.     

UNIQUENESS AND INDETERMINACY OF THE EQUILIBRIUM GROWTH PATH IN THE UZAWA‐LUCAS MODEL WITH SECTOR SPECIFIC EXTERNALITIES*

We introduce sector specific external effects of human capital on production in an otherwise Uzawa‐Lucas model of endogenous growth; and show that the problem of indeterminacy of the competitive equilibrium growth path does not exist even if the production function satisfies the increasing returns to scale at the social level.     

INVESTIGATING NONNEUTRALITY IN A STATE-DEPENDENT PRICING MODEL WITH FIRM-LEVEL PRODUCTIVITY SHOCKS

In a model with fixed cost of price adjustment and idiosyncratic shocks, two parameterizations match a large set of microeconomic facts, yet display different degrees of nonneutrality. Although there is substantial nonneutrality in both cases, the model does not behave like a time-dependent model, as changes in the distribution of firms account for roughly a third of the short-run response of the price level to a monetary shock. We use the model to examine how aggregating firm behavior can generate flat hazards; we also find that a recently developed steady-state statistic is an imperfect guide to characterizing nonneutrality.     

COMPETITION,REGULATION AND WELFARE IN THE PRESENCE OF NETWORK EXTERNALITIES*

In this paper we consider a simple model of an industry with network externalities, where a benefit to each consumer from network services depends on the size of the network. We first consider a single network and cover the cases with and without fixed cost of entry. We then turn to the two‐network industry, where the incumbent network and a new entrant network compete for the market and may differ both in their marginal costs and demand structures. In addition, we identify several situations where public policy may play a crucial role in sustaining socially advantageous network service provision.     

PRODUCTION AND CONSUMPTION OF EDUCATION IN A R&D-BASED GROWTH MODEL

We develop a R&D‐based growth model with endogenous accumulation of human capital. We investigate the idea that education is a good entering in the preferences of individuals. We seek to analyse how the decisions of individuals to invest in human capital can be altered by changes in economic policies and how they can be reflected on the level of growth in the long run. We show that policy changes affect growth through their effect on the decision of individuals to invest in human capital. The effects obtained depend whether individuals enjoy to acquire education or if they consider it as a ‘bad’. In the absence of any policy intervention, the level of growth can be excessive or insufficient compared with the optimum.     

MACROECONOMIC AND REDISTRIBUTIONAL EFFECTS OF CONSUMPTION TAXES IN THE USA*

This paper studies the effect of an increase in consumption taxes using a dynamic general equilibrium model of overlapping generations calibrated to the US economy. When the proceeds are used to reduce income taxes, the reform raises the aggregate capital and labour supply in the long run. Workers increase labour supply immediately in response to the reform, while consumption rises only gradually. The tax reform also transfers wealth from old consumers to young consumers. As a result, while future generations experience significant welfare gains, current generations, particularly old consumers, tend to experience sizable welfare losses. When the proceeds are used for a lump‐sum transfer, the aggregate capital and labour both decrease in the long run. This reform is welfare‐improving for the current low‐income households.     

HUB‐AIRPORT COMPETITION: CONNECTING TIME DIFFERENTIATION AND CONCESSION CONSUMPTION*

This paper develops a network model to analyse the economic effects resulting from the non‐price competition between the home country's and neighbouring country's hub‐airports. Focusing on the trade‐off relationship between the length of the connecting time in the hub‐airport and the consumption opportunities of the transfer passengers, we demonstrate theoretically that even though the hub‐airport bears a cost disadvantage over its rival in providing the hub‐airport service, it still has a chance to earn more profits than its rival by the setting of the connecting time. This finding suggests a new methodology for hub‐airports that attempt to alleviate price competition.     

INEFFICIENT LOCK‐IN AND SUBSIDY COMPETITION*

This article studies a subsidy game among two asymmetric regions in a new trade model. Capital can freely move among regions, but capital rewards are repatriated to the region of residence. The activity of the modern sector is associated with positive spillovers. We study subsidy competition, starting from an equilibrium where the industry core is inefficiently locked in to the smaller region. When regions weigh workers’ and capitalists’ welfare equally, subsidy competition results in a relocation of industry to the larger region, restoring an efficient allocation. When workers’ welfare is weighted more heavily, the smaller (core) region may pay subsidies that are high enough to prevent a relocation of industry.     

MACROECONOMIC VOLATILITY AND COUNTERFACTUAL INFLATION‐TARGETING IN HONG KONG

The present paper evaluates macroeconomic adjustment in Hong Kong with an estimated dynamic stochastic general equilibrium (DSGE) model under a fixed exchange rate regime. We find that exports and world inflation shocks are the dominant sources of GDP volatility, with the risk premium taking on importance during the Asian crisis after 1997. A counterfactual simulation, assuming a flexible exchange rate regime with inflation targeting, shows that inflation would have decreased slightly, but interest‐rate volatility would have increased significantly. The welfare gains from switching out of the currency board system appear to be marginal.     

MONOPOLISTIC COMPETITION WITH EFFICIENCY GAPS AND A HECKSCHER‐OHLIN TRADE PATTERN*

We develop a two‐factor, three‐sector model of international trade in which the monopolistically competitive firms are characterized by different fixed production costs. We show that, depending on the pattern of the international distribution of factor endowments, the trade pattern is determined not only by relative factor endowments as suggested by Heckscher and Ohlin, but also by absolute factor endowments via a mechanism of competitive selection in the monopolistically competitive sector.     

MULTIPLIER EFFECTS OF PUBLIC SERVICES IN A TWO‐SECTOR MODEL OF MONOPOLISTIC COMPETITION

In a two‐sector model of monopolistic competition, this paper explores what impacts an expansion of government spending on public services has on national income. In the short run where entry and exit of firms are restricted, a rise in government spending on services like health care (which has only a role of substituting for market services) increases national income, but that on services like elderly care (which has not only this role but also another role of contributing to home production of services) decreases it. These results are reversed in the long run. Welfare effects of public services are also examined.