Entry costs and stock market participation over the life cycle

Several explanations for the observed limited stock market participation have been offered in the literature. One of the most promising is the presence of market frictions mostly in the form of fixed entry and/or transaction costs. Empirical studies point to a significant structural (state) dependence in the stock market entry decision, which is consistent with costs of this type. However, the magnitude of these costs is not yet known. This paper focuses on fixed stock market entry costs. I set up a structural estimation procedure which involves solving and simulating a life cycle intertemporal portfolio choice model augmented with a fixed stock market entry cost. Important features of household portfolio data (from the PSID) are matched to their simulated counterparts. Utilizing a Simulated Minimum Distance estimator, I estimate the coefficient of relative risk aversion, the discount factor and the stock market entry cost. Given the equity premium and the calibrated income process, I estimate a one-time entry cost of approximately two percent of the permanent component of the annual labor income. My estimated model matches the zero median holding as well as the hump-shaped age–participation profile observed in the data.     

Financial intermediation and entry-deterrence

Summary. In this paper, we analyze the interaction between an incumbent's financial contract with a bank and its product market decisions in the face of a threat of entry, in a dynamic model with asymmetric information. The main results of the paper are: there exists a separating equilibrium with no limit pricing; the low-cost incumbent repays more to the bank in the first period due to the threat of entry; and there are parameter values for which the bank makes more profits with the threat of entry than without. Received: July 19, 2002; revised version: December 4, 2002 Correspondence to: N. Jain     

Strategic resource dependence

We consider a situation where an exhaustible-resource seller faces demand from a buyer who has a substitute but there is a time-to-build delay for the substitute. We find that in this simple framework the basic implications of the Hotelling model (1931) are reversed: over time the stock declines but supplies increase up to the point where the buyer decides to switch. Under such a threat of demand change, the supply does not reflect the current resource scarcity but it compensates the buyer for delaying the transition to the substitute. The analysis suggests a perspective on costs of oil dependence.     

Market dynamics, dynamic resource management and environmental policy in the context of (strong) sustainability

In this paper, we investigate the relationship between market dynamics, dynamic resource management and environmental policy. In contrast to static market entry games, this paper draws attention to the effects of market dynamics on resource dynamics et vice versa, because (1) we show that feedback processes are necessary for obtaining a better understanding of what drives the dynamics between the evolution of common-pool resources and the number of harvesters and more importantly, (2) this analysis provides an environment discussing sustainability in an appropriate inasmuch dynamic way. The paper makes the following points: based on a co-evolutionary model, which incorporates resource and market dynamics simultaneously, it is shown that an increasing number of harvesters does not necessarily imply a lower stock of the common-pool resource in the long run. Further it is shown that a tax-scheme establish an output-sharing solution for coping with the overuse of common-pool resources. This results is in contrast to the prevailing literature, which mainly discusses tax-schemes and out-sharing as substitutes rather than as complements for solving the commons-problem. This conclusion holds even if we additionally assume harvesting-cost-reducing technological progress. On the other side if policy interventions ceased, strong resource sustainability in the sense of resource conservation is not possible, given technological progress is a relevant issue.     

Strategic entry and externalities in groundwater resources: Evidence from the lab

This study uses economics experiments to extend the literature on common-pool resources by focusing on entry investment behavior in a stylized, spatially explicit aquifer. The model consists of a two-stage game, where participants make an entry decision in the first stage and, if they choose to enter, decide how much resource to extract in the second stage. Results show that entry behavior and groundwater pumping decisions are significantly affected by the underlying spatial externalities of the resource. In instances where the impacts of groundwater use are spread across all resource users, we observe both a greater number of users choosing to use the resource and a higher intensity of use. The results support expectations from the model that groundwater management policies should focus on entry in addition to decisions related to the volume of pumping. The results also discern the interplay of entry with both hydrogeologic characteristics of the resource and the option to exit and reveal that the option to exit increases the intensity of extraction as well as initial entry rates.     

Endogenous property rights regimes, common-pool resources and trade

A model is developed where opening to trade affects a dynamic common-pool resource stock and welfare through a community's voting decision to institute a property rights regime regulating the stock. The model finds that resource stock levels can decline even when a Markov perfect equilibrium path for labor and property rights regimes are chosen to maximize welfare. Thus, opening to trade can be welfare maximizing even when resource stock declines. Experimental results show that under certain conditions, subjects briefly follow a Markov perfect equilibrium path for property rights regime choice but labor allocations are myopically chosen indicating that some resource dynamics may be considered by subjects.     

Entry Deterrence in a Unionized Oligopoly

We investigate wage determination between an incumbent firm and its labour union under threat from another firm entering its product market. In equilibrium, it may be optimal for a labour union of the incumbent firm to lower its wage demand. This may make it possible for the incumbent firm to maintain a higher employment level, in that the lower wages can help the firm deter the entry of a rival firm. This will yield a higher profit for the incumbent firm and a lower utility level for the labour union compared with those in an equilibrium with no threat of entry.
JEL Classification Numbers: J51, L10     

A Stackelberg Game Model of Trade in Renewable Resources with Competitive Sellers*

We model international trade in renewable resources between a single buyer and competitive sellers as a Stackelberg differential game. The buyer uses unit and ad valorem tariffs to indirectly encourage conservation of the renewable resource under study. First, we show that the efficacy of these trade policy instruments in promoting conservation depends fundamentally on whether harvesting costs are stock dependent or independent. When harvesting costs are stock independent, the optimal open‐loop tariffs are dynamically consistent. In contrast, when harvesting costs are stock dependent, the optimal open‐loop tariffs are dynamically inconsistent. Secondly, we point out that whether the terminal value of the resource stock is higher with the stock independent or the stock dependent cost function cannot be resolved unambiguously. Thirdly, we show that it does not make sense for the buyer to use both tariffs simultaneously. Finally, we discuss the implications of these and other findings for renewable resource conservation in general.     

知识与跨国公司进入模式选择——一个不同于交易成本的框架

交易成本理论在分析企业进入模式的选择时,将机会主义作为关键的假设,但这种分析忽略了知识是以各种方式结合在一起的,这种结合减弱了机会主义的威胁,因此一种不同于交易成本的框架——知识为基础的框架建立起来了。这个框架将知识为基础的能力区分为建构能力和组合能力,它们影响着进入模式的选择。企业的知识战略对进入模式的选择也有直接或间接的影响。     

Shared Renewable Resources: Gains from Trade and Trade Policy

This paper examines the effects of international trade and trade policy in a two‐country, two‐good model with an open‐access renewable resource that is internationally shared. We show that both countries may still benefit from trade when they specialize in the production of their comparative advantage good, although the shared resource is reduced by trade. In addition, we demonstrate that the steady state utility of a resource‐good importing country may be reduced by trade, even if it specializes in the production of a non‐resource good. Import tariffs and export taxes on a resource good may increase or decrease the shared stock level depending on the production patterns in a trading steady state. The trade policy is likely to be Pareto‐improving when the shared stock rises, while both countries may be made worse off by the trade policy when the shared stock falls.     

Exhaustible resources,technology choice and industrialization of developing countries

How should the world economy adapt to the increased demand for exhaustible resources from countries like China and India? To address that issue, this paper presents a dynamic model of the world economy with two technologies for production; a resource technology, which uses an exhaustible resource as an input and an alternative technology, which does not. I find that both the time path of resource extraction and the adoption of the alternative technology depend on the optimal allocation of capital across the technologies, and on the size of the capital stock in relation to the resource stock. In particular, if the capital stock is low, only the resource technology is used initially and the alternative technology is adopted with a delay. Next, I use the model to analyze the effects of industrialization of developing countries on the extraction of oil and technology choice for energy production. As a result of industrialization, the alternative technology for energy production is adopted earlier.     

RESOURCE CURSE,POLITICAL ENTRY,AND DEADWEIGHT COSTS

A simple model of political entry in a two‐sector economy is developed to analyze the effects of natural resource wealth on economic policy, political development, and civil insurrection. The model emphasizes the role of political entry and deadweight costs of taxation on the joint determination of these economic and political outcomes. Contrary to popular belief, my model shows that natural resource abundance is an economic blessing even in a rent‐seeking society, although resource dependence can be negatively associated with economic performance. In a contested political market, dictators care about popular support and hence resource wealth can help reduce the deadweight cost of taxation (and hence the cost of public good provision). On the other hand, natural resource wealth can be a political curse, because it encourages political entry and hence it induces incumbent dictators to run more repressive regimes. With constant returns counterinsurgent technology, however, the equilibrium number of insurgents is independent of the size of resource wealth. The onset of civil war, therefore, depends on the counterinsurgent technology and whether the costs of entry deterrence are affected by resource wealth. This helps clarify the two seemingly contradictory hypotheses that “resource wealth enhances regime durability” and “resource wealth fuels conflict.”     

Preemptive Spacing With Vertical Differentiation When Input Quality is of Inelastic Supply

This paper examines a model of vertical differentiation in which an incumbent engages in preemptive spacing to prevent entry. Input quality is of fixed supply, and the incumbent prevents high-end entry by producing a product with all the quality available. It also commits to the production of a minimum-quality product to deter low-end entry. There is no entry in equilibrium, and the incumbent monopolist chooses to sell only its high-quality product. Commitment to the production of the minimum-quality product is used merely as a credible threat to vigorously compete should an entrant also produce a minimum-quality product.     

Renewable Resource Use and Nonseparable Amenity Benefits

We incorporate amenity benefits into an overlapping generations model with a renewable resource as a factor of production, source of amenity benefits and store of value. Unlike the conventional renewable resource problems studied under the assumption of additive consumption and amenity benefits, we let amenity benefits affect the utility of consumers in a nonseparable fashion. We examine the role that weights given to consumption and amenities have for harvesting and the resource stock. We characterize dynamics and stability of steady state equilibria with a logistic resource growth function. We demonstrate in parametric and numerical models that the weights given to consumption and amenities in the utility function matter substantially for the steady state equilibrium stock and its stability and dynamics. Both conventional saddle point equilibria and indeterminacy with infinite number of equilibria and saddle-node bifurcation is possible depending on the weights given to consumption and amenities. In addition, we show that for each inefficient equilibrium stock, there is a unique subsidy rate that can move the economy from an inefficient equilibrium to an efficient one. The presence of indeterminacy provides a challenge to resource policies, because the system becomes unpredictable. Therefore, expectations and market psychology may play an important role in resource utilization and provision of amenities.     

Oil price and Gulf Corporation Council stock indices: New evidence from time-varying copula models

Using a time-varying GJR copula approach, we determine the conditional dependence of the GCC stock indices on oil price between 2007 and 2016. We show how to improve the forecasting accuracy of the co-movement of energy and stock prices in an equally weighted portfolio. Contrary to prior findings, we demonstrate that due to the different co-movements across the GCC stock indices, portfolios of oil assets and several GCC stocks are less likely to be affected by systemic risk. The different co-movements across several stock indices over time provide different entry and exit points for stock investors. This approach is in line with the ‘buy low/sell high’ adage.     

家族企业的控制目标、盈利目标与研发投入

以2011—2016年中国沪深两市家族企业为样本,采用二手数据Tobit回归方法,研究了家族企业控制目标和盈利目标的实现与否对研发投入的影响。结果显示:供应商对家族企业的威胁越大,家族企业管理者为了实现控制目标越倾向于增加研发投入;家族企业管理者对盈利目标和控制目标的重视遵循注意力顺序理论,即当盈利目标未实现时,家族企业管理者更关注盈利状况,较少关注控制威胁,因此会减少研发投入;当盈利目标实现后,家族企业管理者才关注控制威胁、增加研发投入;家族企业的资源禀赋优势有助于控制目标的实现。     

Renewable resource and capital with a joy-of-giving resource bequest motive

In this article we ask whether a privately owned natural renewable resource can be conserved and managed efficiently when households have a joy-of-giving resource bequest motive. We model an overlapping generations economy in which firms have access to a CES production technology combining the natural resource, physical capital and labor. Our results shed light on the interplay between the resource bequest motive and the substitutability/complementarity relationship between capital and the natural resource in the determination of the equilibrium propensity to use the resource. The mere existence of the bequest motive does not guarantee that the resource will be conserved in the long run. When the resource is highly substitutable with capital, the equilibrium actually never exhausts the resource stock whatever the intensity of the bequest motive. When the resource is a poor substitute for capital, the equilibrium preserves the resource only if the taste for bequeathing is strong enough. Be the economy in over-accumulation or in under-accumulation of the natural resource, it always increases aggregate consumption to run the stock of capital at a level lower than the efficiency level.     

Shared renewable resources and gains from trade under technology standards

Using a two‐country, two‐good model of international trade, we examine gains from trade and strategic interaction in resource management among countries that share renewable resources such as fishery stocks. Two goods are a resource good, which is the harvest of the shared stock, and some other good that may be thought of as manufactures. The productivity of the resource good depends on harvesting technology and the stock level. This paper focuses on technology standards (e.g., restrictions on fishing gears, vessels, areas, and time) over other methods for resource management because they are most commonly implemented in fisheries. Technology standards are modeled as a restriction on the harvesting technology; that is, under strict technology standards, firms exploit resources as if they are using inferior harvesting technology. We show that an opening up of trade may reduce the shared stock and cause steady‐state utility to decrease in a resource‐good importing country and increase in a resource‐good exporting country. Strikingly, when the shared stock is in jeopardy (a high demand for the harvest), steady‐state harvest is maximized after an opening up of trade by what we call multilateral resource management in this paper and both countries gain from trade.     

Optimal Extraction of a Polluting Nonrenewable Resource with R&D toward a Clean Backstop Technology

We study the optimal extraction of a polluting nonrenewable resource within the following framework: environmental regulation is imposed in the form of a ceiling on the stock of pollution and a clean unlimited backstop technology can be developed by research and development. More specifically, the time taken to develop a new technology depends on the amount spent on R&D. A surprising result is that the stringency of the ceiling and the size of the initial stock of the polluting nonrenewable resource have a bearing on whether environmental regulation speeds up the optimal arrival date of this new technology. Compared to a scenario with no environmental externalities, stringent environmental regulation drives up the optimal R&D investment and brings forward the optimal backstop arrival date only in the case of a large initial resource stock. Otherwise, if the initial resource stock is small, regulation reduces optimal R&D and postpones the optimal backstop arrival date. These results are explained by the two roles played by the backstop technology. First, the backstop serves to replace oil once it has been exhausted. As extraction is slowed down by regulation, the exhaustion of the nonrenewable resource is postponed and the long‐run gains of innovation are lowered. Second, environmental regulation raises the short‐run gains of innovation by increasing the cost of consuming just oil.     

Entry Threats and Inefficiency in ‘Efficient Bargaining’

We study limit pricing in a model of entry with asymmetric information, where the incumbent firm's wage is endogenously determined through ‘efficient bargaining’ with its union. In the presence of entry threat, the incumbent firm‐union pair may face a conflict between rent sharing and transmitting its cost information. When the wage is not observable to outsiders and employment is the only signalling instrument, over‐employment features in all entry deterring contracts. When the wage is also observable, information transmission becomes easier. Most of the time, then, but not always, the efficient contract deters (induces) entry against the low (high) cost incumbent.