Corporate Social Responsibility or Payoff Asymmetry? A Study of an Endogenous Timing Game

We revisit an endogenous timing game by introducing corporate social responsibility into firms' payoffs. Previous research investigates an endogenous timing game in a mixed oligopoly, wherein one welfare‐maximizing public firm competes against profit‐maximizing private firms. It shows that the outcome is completely different from that of private oligopoly. In contrast to its result, we find that this change in payoff does not matter as long as the payoffs are symmetric. Our result indicates that asymmetry, and not welfare‐concerning objectives, yields specific results in the literature on mixed oligopoly.     

The “Services” Explanation for Resale Price Maintenance: Deleterious Results Missed in the Economics Literature and in Legal Decisions

Policy discussions and a U.S. Supreme Court decision interpret retailer services induced by retail price maintenance (RPM) as enhancing consumer surplus (CS) and welfare enhancing, marginalizing dissenting opinions that use similar models but with different parameters. However, if presales services stimulate demand by providing information about a product's value, they need not raise postsale value in use. Inframarginal consumers' presales perceived value may increase, but their postsale value may be unchanged, so their supposed CS gains are ephemeral, and their actual surplus falls proportional to price increase. We show that, even adding in gains to marginal consumers, effects on CS are far more negative than conceived of in this literature. Consequently, in a rule‐of‐reason antitrust environment, if RPM is challenged without alleging collusion or exclusion, presales demand‐inducing information provision is a flimsy defense if CS is the standard and not always convincing if total surplus is the standard.     

Tacit Collusion in Price‐Setting Oligopoly: A Puzzle Redux

We study tacit collusion in price‐setting duopoly games with strategic complements and substitutes. While this problem has been considered by several studies, this article sheds new light on the comparison by focusing on the relationship between dynamic stability of equilibrium and tacit collusion. We find when controlling for the absolute slope of the reaction functions, there are no robust differences in either the convergence properties or tacit collusion between complements and substitutes treatments.     

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.     

Sales and Firm Entry: The Case of Wal‐Mart

Temporary price reductions or “sales” have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six‐year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal‐Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss‐leader strategy.     

Profit Leak? Pre‐Release File Sharing and the Music Industry

Using data from an exclusive file‐sharing Web site that allows users to share music files using the BitTorrent protocol, I exploit exogenous variation in the availability of sound recordings in file‐sharing networks to isolate the causal effect of file sharing of an album on its sales. Using within‐album variation in illegal downloads and sales, I find that the effect is essentially zero: The elasticity of sales with respect to illegal downloads is one‐tenth of one percentage point. However, the finding that file sharing is not harmful to individual artists is not inconsistent with the well‐documented fact that file sharing is harmful to the music industry (the fallacy of composition). More important, I find that file sharing benefits more established and popular artists who are signed to major labels, which is consistent with recent industry trends.     

The Persistence of Dominant‐Firm Market Share: Raising Rivals' Cost on the New York Stock Exchange

To explain the persistence of dominant New York Stock Exchange (NYSE) market share in stock trading of listed securities from 1992 to 2002, we develop a dominant‐firm price leadership model and hypothesize that NYSE specialists raised the costs of rival market makers. The model predicts that natural and induced cost advantages will determine the NYSE's market share vis‐à‐vis the regional exchanges, electronic trading systems, and NASDAQ dealers. Empirically, NYSE market share increases with economies of scale and scope, abnormal price volatility, high asymmetric information, and with trading practices that raise rivals' costs, such as failure to display limit orders that bettered the existing quotes.     

PRODUCT DIFFERENTIATION – AN ALTERNATIVE TO CVDS: A COMMENT

This note is a comment to Wang (2008)'s contribution in the SAJE (Vol. 76 (3)). We show that when firms' strategic variables are prices and not quantities, Wang's findings are largely reversed. In particular, the foreign government levies an export tax on its producer as opposed to an export subsidy. Further, both the “optimal tax” and the domestic welfare are non‐monotonic in the degree of product differentiation.     

Antidumping jumping: Reciprocal antidumping and industrial location

Antidumping Jumping: Reciprocal Antidumping and Industrial Location. — Antidumping policies are often justified as legitimate actions by governments in their efforts to protect domestic producers from unfair foreign competition. The authors investigate the impact of antidumping rules on firms’ production decisions as to how much and where to produce. Antidumping measures may have unforeseen effects if they induce direct foreign investment and consequently increase domestic competition. The authors therefore focus on location choice and consider the strategies of national governments attempting to advance the interests of their citizens through antidumping legislation. The analysis also has implications for the effects of market integration policies, such as Europe 1992.     

Waiting for Signaling Quality

When a durable good of uncertain quality is introduced to the market, some consumers strategically delay their buying until the next period, with the hope of learning the unknown quality. I analyze the monopolist's pricing and waiting strategies when consumers have strategic delay incentives. I show when the monopolist offers introductory low prices in pooling equilibria. I also find two types of separating equilibria: one where the high‐type monopolist signals its quality by choosing a different price than the low‐type monopolist in the first period and another where the high‐type monopolist announces the product in the first period and waits to sell only in the second period. Waiting creates a credible cost for signaling; hence, the monopolist uses it as a signaling device.     

Price‐Match Announcements in a Consumer Search Duopoly

Using a model of sequential search, we show that announcements to price‐match raise prices by altering consumer search behavior. First, price‐matching diminishes firms’ incentives to lower prices to attract consumers who have no search costs. Second, for consumers with positive search costs, price‐matching lowers the marginal benefit of search, inducing them to accept higher prices. Finally, price‐matching can lead to asymmetric equilibria where one firm runs fewer sales and both firms tend to offer smaller discounts than in a symmetric equilibrium. Price increases grow in the proportion of consumers who invoke price‐matching guarantees and in the level of equilibrium asymmetry.     

EQUILIBRIUM FARM GATE PRICE IN THE CASE OF TWO SUCCESSIVE MARKETS WITH FIXED SUPPLY

This study aims to describe the evolution of the organisational structure of raw agricultural product markets in West African countries (the supply may be regarded as fixed) using microeconomic models to assess the evolution of the farm gate price; and focusing on the impact of the vertical integration of some firms on the producer price. This paper shows that the evolution of the commercial organisational structure of agricultural products has led to a gradual improvement in the producer price. It also shows that whatever the degree of vertical integration on these markets, it has a positive impact on the farm gate price. However, even if vertical integration also improves the price of agricultural input on the intermediary market, the intermediary firms undergo a deteriorating situation.     

Export Promotion Policies and the Crowding‐out Effect in Developing Countries*

Critics of export promotion policies have pointed out a fallacy of composition, where what is viable for a small country acting in isolation might not be viable when pursued by a group of countries simultaneously. This paper investigates the crowding‐out effect of the fallacy of composition; that is, whether developing countries that specialize in exports of manufactured products compete and crowd out one another's exports. The results of fixed‐effects panel estimation suggest that developing countries are not crowding out one another's exports. Instead, they are crowding out Western European countries’ exports of manufactured products.     

EU Anti‐dumping Measures against ASEAN Countries: Impact on Trade Flows*

In the present paper, anti‐dumping (AD) duties levied by the European Commission against products from ASEAN countries in the period 1991–2001 have been considered. The ASEAN countries were among the countries most targeted by AD measures imposed by the EU in the 1990s. A panel regression has been applied to estimate the impact of AD duties on trade in some 12 products that have been subject to AD duties targeting ASEAN countries in the period considered. A significant negative impact of AD duties is found, on both the value and the quantity of imports from ASEAN countries. Our estimation provides some (although not overwhelming) indications of trade diversion in favor of EU countries, but no evidence of trade diversion in favor of non‐targeted non‐EU countries.     

Market and Welfare Effects of Mandatory Country‐of‐Origin Labeling in the U.S. Specialty Crops Sector: An Application to Fresh Market Apples

This study provides a new framework of analysis of the market and welfare effects of mandatory country‐of‐origin labeling (MCOOL) for fruits and vegetables that accounts for heterogeneous consumer preferences, differences in producer agronomic characteristics, and retailer market power. The market and welfare effects of MCOOL are shown to be case‐specific and dependent on the labeling costs at the farm and retail levels, the strength of consumer preference for domestic products, the market power of retailers, the marketing margin along the supply chain, and the relative costs of imported and domestic products. Simulation results for the U.S. market of fresh apples indicate that domestic producers are the most likely beneficiaries of MCOOL, followed by domestic consumers. Being unable to exercise market power on consumers or suppliers of fresh apples, retailers will lose if the implementation of MCOOL entails fixed costs. Imports of fresh apples decline after MCOOL introduction.     

Subjectivity in Professionals' Incentive Systems: Differences between Promotion‐ and Performance‐Based Assessments

We examine how managers assess performance and promotion prospects—that is, the ex ante likelihood of promotion—and the conditions under which these assessments diverge. We argue that managers apply different cognitive schemas when they make different assessments. To the extent that a signal provides different information about future versus current contributions, assessed performance and promotion prospects are likely to diverge. In two experiments, we manipulate professionals' promotion eligibility and level of consultative decision making. We find that experienced managers assess performance and promotion prospects differently, but only when professionals are promotion eligible. Specifically, more (as opposed to less) consultative decision making decreases promotion prospects while not affecting assessed performance (Experiment 1) or even improving it (Experiment 2). By contrast, more consultative decision making improves both assessments when professionals are not eligible for promotion. We shed light on the relations between subjective assessments, including that promotion is not necessarily the consequence of superior assessed performance.     

A HISTORY OF THE PAN‐PACIFIC COAL TRADE FROM THE 1950S TO 2011: EXPLORING THE LONG‐TERM EFFECTS OF A BUYING CARTEL

Since the early 1960s, the Pan‐Pacific coal trade has underpinned East Asia's industrial development. While the genesis of this trade lay in investment decisions by United States‐based companies that pioneered exports from Australian and western Canadian mines, its development was largely shaped by the strategies of the Japanese steel mills who acted as a buying cartel. By the early 1980s, this cartel had engineered an oversupplied market characterised by constantly falling prices. By 2001, however, this strategy proved counterproductive, as exports of coking coal in particular were concentrated in the hands of an oligopoly of super‐efficient producers that drove up prices.     

The internal impact of a customs union; Baden and the Zollverein

Tariffs can affect the growth of states. But how do they affect regional growth within states? Using Baden's 1836 entry into the Zollverein, the customs union of German states, I investigate the internal impact of a change in tariffs. With a new data set of regional employment data I demonstrate that the Zollverein had a substantial positive effect. Two market access effects are shown, one follows the standard market access predictions and the second triggers the direct investment by Swiss entrepreneurs in German regions close to their home base. Furthermore occupational change within the crafts sector was shifting labour towards higher taxed occupations and towards the region close to Switzerland.     

Anti‐dumping Shock and the Productivity Response of Chinese Industries

This paper provides a comprehensive analysis of the productivity effects of antidumping (AD) measures on Chinese industries. Industry‐year panel data and generalized method of moments estimators are used in the empirical analysis. Productivity indicators are calculated using data envelope analysis. The empirical results show that China's industrial total factor productivity has improved under the pressure of AD measures taken by developed countries, and the mechanism inspires technological progress but hurts technological efficiency. Developing countries' AD measures have no significant productivity effects on China's targeted industries, except for slightly positive effects on technological efficiency. These results indicate that China should pay more attention to technological innovation and take different counter‐measures for different cases of AD measures.     

WHEN DO VERTICAL RESTRAINTS HARM COMPETITION? THE ECONOMICS‐BASED APPROACH AND ITS APPLICATION IN THE BATSA CASE

An “effects‐based” or “economics‐based” approach to competition policy requires a theory of harm that causally links a business practice and its allegedly anti‐competitive effects and also weighs anti competitive effects against the pro‐competitive effects of the practice. This implies a shift away from per se prohibitions of certain practices towards case‐by‐case analysis – a move that has been hotly debated, especially in Europe. Using a case study of the recently concluded British American Tobacco case, we study the core features of an effects‐based approach to vertical restraints. We find the approach followed in the British American Tobacco South Africa case generally consistent with an effects‐based analysis, but highlight some limitations.