A note on the core of the overlapping generations model

In this note it is shown that, without certain restrictions on the coalitions that may form, the core of the overlapping generations model may be empty. The introduction of money, while expanding the trading possibilities, does not eliminate the problem.     

Decision analysis of auto emission control

In response to public pressure to reduce air pollution, governments are forced to consider alternate means to limit auto emissions. This paper addresses the problem of evaluating these regulatory policies and choosing the one that is best for society.Economic tradeoffs play an important role in the analysis of emission control policies. Cleaner air comes only at a price, and the judgments as to “How clean?” At what price?” and “At who's expense?” are crucial. Once these value issues are resolved, questions of implementation remain. “How do regulatory policies such as mandatory emission standards for cars compare with a system of emission taxes?” “Are there ways to collect a fee from drivers to compensate those who breathe their pollution, without taxing emissions directly?”Our approach is first to describe a decision-focused analytical procedure for evaluating various policy alternatives. This procedure is then demonstrated with a preliminary analysis of representative emission control plans for the Los Angeles air basin. Both emission standards and market or “pricing” alternatives are considered. These plans include: present (1975) emission standards; an emission tax; an increase in the gasoline tax; a policy of no government control.The preliminary analysis shows market mechanisms to be superior to present emission standards. Many significant advantages of market mechanisms are discussed, though this conclusion is due primarily to—in our opinion—inappropriate value judgments that are implicit in the present standards.The analytical framework is very general, and it can be applied to a wide variety of social decisions involving externalities. The quantitative models developed, though preliminary, can be used by organizations such as regional planning agencies or pollution control boards. However, these models must not be viewed as formulas for answers to social problems. Rather, they are intended as aids for the policy maker that will help him or her balance the many factors that influence the decision and provide insight to the wisest social course of action.     

Solving the multi-country real business cycle model using ergodic set methods

We use the stochastic simulation algorithm, described in Judd et al. (2009), and the cluster-grid algorithm, developed in Judd et al. (2010a), to solve a collection of multi-country real business cycle models. The following ingredients help us reduce the cost in high-dimensional problems: an endogenous grid enclosing the ergodic set, linear approximation methods, fixed-point iteration and efficient integration methods, such as non-product monomial rules and Monte Carlo integration combined with regression. We show that high accuracy in intratemporal choice is crucial for the overall accuracy of solutions and offer two approaches, precomputation and iteration-on-allocation, that can solve for intratemporal choice both accurately and quickly. We also implement a hybrid solution algorithm that combines the perturbation and accurate intratemporal-choice methods.     

Executive perceptions of adopting an environmental certification program

Environmental certification is playing an increasingly important role in the strategies of many businesses. This is due in large part to consumer demand for environmentally friendly products. Little is known, however, about why executives adopt environmental certification for a product or process, or how they view the benefits and challenges of certification. This paper seeks to advance our knowledge in this area by exploring executives' perceptions of benefits and challenges associated with adopting an environmental certification program. We surveyed executives in the kitchen cabinet industry about a second party certification scheme initiated for producers in that industry. Results suggest that perceptions of the benefits and challenges of environmental certification differ significantly based on whether the company had or had not adopted the certification scheme in question. The paper considers the implications for companies considering adopting environmental certification as well as for organizations providing certification schemes. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.     

Dynamic limit pricing a refcmulation

This paper offers a new formulation of the well known dynamic limit pricing problem developed by Darius Gaskins. Criticisms of Gaskins' model center around the lack of a game theoretic formulation and the ad hoc fringe expansion equation. In this paper, the expansion equation is based on the importance of internal finance. In the differential game, the dominant firm control price, thereby determining the available internal finance, and the maximum rate of growth, of the fringe. While the results of this study differ from those of Gaskins in a number of ways, dynamic limit pricing is found to be a feasible strategy.     

All strategy is local

The aim of strategy is to master a market environment by understanding and anticipating the actions of other economic agents, especially competitors. A firm that has some sort of competitive advantage-privileged access to customers, for instance--will have relatively few competitors to contend with, since potential competitors without an advantage, if they have their wits about them, will stay away. Thus, competitive advantages are actually barriers to entry and vice versa. In markets that are exposed, by contrast, competition is intense. If the incumbents have even brief success in earning greater than normal returns on investments, new entrants will swarm in to grab a share of the profits. Sooner or later, the additional competition will push returns as far down as the firms' costs of capital. For firms operating in such markets, the only choice is to forget about strategy and run the business as efficiently as possible. Barriers to entry are easier to maintain in a competitive arena that is "local", either in the geographic sense or in the sense of being limited to one product or a handful of related ones. The two most powerful competitive advantages-customer captivity and economies of scale-are more achievable and sustainable in circumscribed markets of this kind. Their opposites are the open markets and host of rivals that are features of globalization. Compapies entering such markets risk frittering away the advantages they secured on smaller playing fields.., Ifa company wants to grow but still obtain superior returns, the authors argue, the best strategy is to dominate a series of discrete but preferably contiguous markets and then expand only at their edges. WalMart's diminishing margins over the past 15 years are strong evidence of the danger of proceeding otherwise.     

Closed-loop equilibrium in a multi-stage innovation race

Summary. We examine a multistage model of an R&D race where players have multiple projects. We also develop perturbation methods for general dynamic games that can be expressed as analytic operators in a Banach space. We apply these perturbation methods to solve races with a small prize. We compute second-order asymptotically valid solutions for equilibrium and socially optimal decisions to determine qualitative properties of equilibrium. We find that innovators invest relatively too much on risky projects. Strategic reactions are ambiguous in general; in particular, a player may increase expenditures as his opponent moves ahead of him. Received: January 3, 2002; revised version: June 14, 2002 RID="*" ID="*" This is the final version of Judd (1985). The author gratefully acknowledges the comments of anonymous referees, Paul Milgrom, seminar participants at Northwestern University, the University of Chicago, the 1984 Summer Meetings of the Econometric Society, University of California at Berkeley, Stanford University, and Yale University, and the financial support of the National Science Foundation (SES-8409786, SES-8606581)