Long-run Positions and Short-run Dynamics in a Classical Growth Model

The aim of this paper is to study the qualitative impact of short-run disequilibria on long-run positions. In this perspective, we refer to a classical framework. We underline that one-sector classical growth models only deal with perfectly adjusted situations (steady-state equilibria). Such models assume that short-run dynamics are neutral in the long run which means that the steady state is defined independently of the transient dynamics. In order to show that this situation is not always realized, we propose a modified version of Kurz's growth model (“Technical change, growth and distribution: a steady-state approach to ‘unsteady’ growth”, in Kurz H. D.: Capital Distribution and Effective Demand, Blackwell, Oxford, 1990, pp. 210–239) that integrates short-run disequilibria. We obtain dynamics that exhibit a multiplicity of equilibria. Therefore, short-run events can no longer be neglected, since they contribute to the emergence of the long-run equilibrium.     

Preventing competition using side payments: when non-neutrality creates barriers to entry

Network neutrality is often advocated by content providers, stressing that side payments to Internet Service Providers would hinder innovation. However, we also observe some content providers actually paying those fees. This paper intends to explain such behaviors through economic modeling, illustrating how side payments can be a way for an incumbent content provider to prevent new competitors from entering the market. We investigate the conditions under which the incumbent can benefit from such a barrier-to-entry, and the consequences of that strategic behavior on the other actors: content providers, users, and the Internet Service Provider. We also describe how the Nash bargaining solution concept can be used to determine the side payment.     

Dynamic programming for valuing American options under a variance-gamma process

Lévy processes provide a solution to overcome the shortcomings of the lognormal hypothesis. A growing literature proposes the use of pure-jump Lévy processes, such as the variance-gamma (VG) model. In this setting, explicit solutions for derivative prices are unavailable, for instance, for the valuation of American options. We propose a dynamic programming approach coupled with finite elements for valuing American-style options under an extended VG model. Our numerical experiments confirm the convergence and show the efficiency of the proposed methodology. We also conduct a numerical investigation that focuses on American options on S&P 500 futures contracts.     

Postponement Strategies for Global Downstream Supply Chains: A Conceptual Framework

Postponement is a well-known organizational concept and usually relates to the deferment in time of manufacturing and/or logistics operations. In the current global competitive landscape, situations where postponement can be applied are rapidly increasing. Faced with the wide range of customs duties and free-trade agreements currently in place, companies need to (re)design their postponement strategies to customize their products appropriately, and to the proper degree, in each market. As the actual location where operations take place has a major impact on a company’s overall performance, the spatial perspective must also be taken into account when designing global postponement strategies, alongside the conventional temporal perspective. Heretofore, the academic literature does not offer any comprehensive framework on a global scale either for handling what is known as the postponement boundary problem, or for conceptualizing the related postponement strategies. Building on previous research, the aim of the present study was to investigate the postponement concept in a global environment with a downstream focus. The intended purpose is twofold: first, to review and expand previous studies on the subject and, second, to provide some guidelines for conceptualizing global postponement strategies. A structured literature review was first conducted, followed by the development of a framework that combines both the temporal and the spatial dimensions. Finally, the framework was applied to a group of 28 business cases taken from the literature, to act as a bridge between academic theories and practitioners’ current business operations.     

Leblon Cachaça: A born global in a traditional industry

This case describes the trajectory of Leblon, a cachaça producer that since its inception regards the world as a market for its product. Founded by entrepreneurs in 2005, the firm's production process is divided between Brazil and France, and it serves several world markets besides the U.S. and Brazil. The company is a truly born global, and the most striking feature of the firm's strategy is super premium positioning. The case was developed based on interviews with the CEO and the head of operations, complemented by secondary information. The case is suitable for use in graduate courses that address issues relating to born globals, international entrepreneurship, and international marketing.     

Regionalism and Federalism: a Comparative Analysis of the Regulation of Economic Tensions between Regions by Canadian and American Federal Intergovernmental Transfer Programmes

Regionalization is a contradictory process meaning both subnational fragmentation of territorial states and their supranational integration at a larger scale. In this paper federalism, as a division of sovereignty between several orders of government within the same political system, is conceived as an institution designed to regulate regionalization. But federal pacts are subject to two symmetrical risks: either, a risk of a centralizing drift towards a unitary state; or a risk of disintegrating into as many sovereign states as previous federated units. Thus, in the first section of the paper, we define a ‘true’federal system as a political order where an institutional device permanently tackles the problem of self-conservation of the federal principle. Then, in the second section, we show that self-conservation of a federal system or its evolution towards centralization or dissolution, are not first order dependent on economic issues, but on specific institutional forms that rule the game of political and social actors. To demonstrate this we take a comparative view of equalization programmes for tax revenues which distinguish Canadian federalism from its US counterpart. For these programmes channel competition between governments on political grounds and participate in the self-reproduction of the federal covenant. On the contrary, a lack of equalization liberates economic competition between federal states – tax war, social dumping – and leaves the ground free for centralization or dissolution of the federation. — La régionalisation est un processus contradictoire qui signifie à la fois la fragmentation infranationale des Etats territoriaux et leur intégration supranationale à plus grande échelle. Dans cet article, le fédéralisme, en tant que division de l’ordre politique entre plusieurs ordres de gouvernement, est conçu comme une institution établie pour réguler un tel processus. Mais les pactes fédéraux sont soumis à deux risques symétriques: un risque de centralisation conduisant à la formation d’un grand Etat unitaire; un risque d’éclatement en autant d’Etats unitaires qu’il y a d’unités fédérées. Ainsi, dans la première partie de l’article, un “vrai” système fédéral est défini comme un ordre politique dans lequel un dispositif institutionnel assure la permanence du principe fédéral. Puis, dans la deuxième partie, il est montré que cette permanence, ou, à l’inverse, une évolution vers la centralisation ou l’éclatement, dépend moins de problèmes économiques que de l’efficace des formes institutionnelles qui gouvernent le jeu des acteurs politiques et sociaux dans une fédération. Pour le montrer, dans la troisième partie de l’article, est mobilisée une approche comparative des programmes de redistribution interrégionale des recettes publiques au Canada et aux USA. Lorsque ces programmes ont des objectifs de péréquation comme au Canada, ils orientent la concurrence politique entre les ordres de gouvernement sur le terrain politique et participent de la reproduction du pacte fédéral. Au contraire, un manque de péréquation comme aux USA favorise la concurrence économique entre les Etats fédérés – guerre fiscale, dumping social – et laisse ainsi la voie libre pour la centralisation ou, dans d’autres contextes, à la dissolution de la fédération.     

Product market objectives and the formation of research joint ventures

In this paper we extend the existing literature on research and development (R&D) investments and research joint ventures (RJVs) in two important ways. First, we analyze and compare the case where firms collude in the product market to the benchmark case of competition in the output market. Second, we allow firms to form coalitions endogenously as a separate stage in the game. We develop profit functions that depend on the partition of firms into joint ventures and the nature of product competition between venture partners. Our results illustrate the restrictive nature of some assumptions made in the literature. Typically multiple RJVs of different sizes form in equilibrium. In general, RJVs should not be promoted if they entail product market collusion. Given the information available to policy‐makers, it is unlikely that an R&D policy more refined than analyzing and allowing RJVs on a case‐by‐case basis is feasible. Copyright © 1999 John Wiley & Sons, Ltd.     

Economists in the PITS?

Academic economists today are caught in a “Publication Impossibility Theorem System” or PITS. In order to further their careers, they are required to publish in A-journals, but for the vast majority this is impossible because there are few slots open for them in such journals. Such academic competition maybe useful to generate hard work; however, there may be serious negative consequences: the wrong output may be produced in an inefficient way, the wrong people may be selected, and losers may react in a harmful way. This article suggests several ways to remedy this situation.