Transparency on the consumer side and tacit collusion

This paper investigates the effects on tacit collusion of increased market transparency on the consumer side of a market in a differentiated Hotelling duopoly. Increasing market transparency increases the benefits to a firm from undercutting the collusive price. It also decreases the punishment profit. The net effect is that collusion becomes harder to sustain. In the limiting homogeneous market, the effect vanishes. Here market transparency does not affect the possibilities for tacit collusion.     

Employment flexibility in large companies: change and continuity

Claims that companies have increasingly turned to temporary workers, outworkers and subcontracting to enhance their ‘numerical flexibility’ are scrutinised using data from a survey of industrial relations in large companies. The survey reveals considerable continuity in the use of these employment practices. Recent reports published by the National Economic Development Office and ACAS are shown to overstate the extent of change in the 1980s.     

Rethinking the costs related to global warming: A survey of the issues

One approach to the economic analysis of global warming seeks to balance the costs of damage from or adaptation to it with the costs of mitigating it. The costs of adaptation and damage have been estimated using techniques of environmental evaluation, but are subject to a wide margin of uncertainty. The costs of mitigation, principally by reducing the emissions of CO₂, have been estimated using different kinds of economic models, some of the results of which have suggested that very little abatement of carbon emissions is justified before the costs of abatement exceed the benefits of it in terms of foregone damage and adaptation costs. The paper analyses the extent to which this conclusion is a function of the modelling assumptions and techniques used, rather than likely practical outcomes, with regard to the models' treatment of unemployed resources, revenue recycling, prior distortions in the economy due to the tax system and possible dynamic effects from the introduction of a carbon-energy tax. It concludes that, with different and arguably more appropriate treatment of the above issues, especially when the secondary benefits of reducing CO₂ emissions are also taken into account, it is not clear that even substantial reductions in the use of fossil fuels will incur net costs, especially if there is the prospect of even moderate costs from global warming.     

Introduction to “Economic and Financial Governance in the European Union after a decade of Economic and Political Crises.”

ABSTRACT

This paper offers the Introduction to the Special Issue “Economic and Financial Governance in the European Union after a decade of Economic and Political Crises.” We introduce the five papers. We distill three important lessons they offer for EU integration.     

Random coefficient regression and the long-run phillips curve for the U.S.

This research suggests that a random coefficient regression model is well-suited for analyzing long-run versus short-run movements in wages and unemployment and is an improvement over some empirical techniques typically used.     

A note on the independence of irrelevant alternatives in probabilistic choice models

The purpose of this note is to show that there is no necessary relationship between the independence of irrelevant alternatives (IIA) property and stochastic independence of the errors in probabilistic choice models.     

An equilibrium analysis of information aggregation and fluctuations in markets with discrete decisions

This paper shows how the interaction between decentralized information gathering and discreteness of investment decisions at the individual level can generate random fluctuations in aggregate investment that involve occasionally large allocation errors. This interaction is illustrated in a model in which private information is costly to acquire and prices reveal information. The unique rational expectations equilibrium outcome of the model is shown to always be noisy and characterized by investment levels which may be high simply because uninformed investors are buying under the impression that the high price is a signal of good investment opportunities.     

Analysis of the effects of settlement of interfirm lawsuits

This study examines the effects of news on settlement of interfirm lawsuits. We hypothesize that the defendant firms suffer damaged reputation as news on the interfirm lawsuit remains in the ‘public eye’, as such ending the litigation process through settlement is good news for the defendant firms. Thus, the stock market will react positively to the defendants when news of a settlement is announced. On the other hand, settlements end the free publicity that the plaintiffs enjoy. In addition the plaintiffs settle for less money than they initially seek. Thus, the implication of a reduced cash flow expectations that the announcement of settlements brings to the plaintiffs will cancel out the positive reputation effect. Therefore, there will be no significant stock market reaction to the plaintiffs when a settlement is announced. Furthermore, the stock market will show no significant reaction to the defendants who have been the subject of more than one lawsuit in a relatively short period of time prior to a settlement because their reputation is too severely damaged to be remedied through removal of their name from the limelight. The results of our analysis support the hypotheses and offer some insight for strategy development. Copyright © 2006 John Wiley & Sons, Ltd.