Equilibrium number of firms and economic welfare in a spatial price discrimination model

We examine welfare implications of the equilibrium number of entering firms in a spatial price discrimination model. In contrast to Salop [Salop, S., 1979. Monopolistic competition with outside goods. Bell Journal of Economics 10, 141–156.], the equilibrium number of firms can be either excessive or insufficient from the normative viewpoint.     

Optimal privatization and uniform subsidy policies: A note

The privatization neutrality theorem states that the share of public ownership in a firm does not affect welfare under an optimal uniform tax‐subsidy policy. We revisit this neutrality result. First, we investigate the case in which the private firm is domestic. We show that this neutrality result does not hold unless public and private firms have the same cost function. Next, we investigate a case in which both domestic and foreign investors own the private firm. We show that the optimal degree of privatization is never zero, and thus, the neutrality result does not hold, even when there is no cost difference between public and private firms.     

Location equilibrium with asymmetric firms: the role of licensing

It is known that if exogenous cost heterogeneities between the firms in a spatial duopoly model are large, then the model does not have a pure-strategy equilibrium in location choices. It is also known that when these heterogeneities are stochastically determined after firms choose their locations, spatial agglomeration can appear. To tackle these issues, the current paper modifies the spatial framework by allowing firms to exchange the cost-efficient production technology via royalties. It is shown that technology transfer guarantees the existence of a location equilibrium in pure strategies and that maximum differentiation appears in the market.     

What role should public enterprises play in free-entry markets?

We investigate a desirable role of public enterprise in mixed oligopoly in free-entry markets. We compare the following three cases: (a) a public firm produces before private firms (public leadership), (b) all firms produce simultaneously (Cournot), (c) a public firm produces after private firms (private leadership). We find that private leadership is best and public leadership is worst, in contrast to the cases without entries and exits of private firms. We also investigate the welfare implication of privatization. We find that some important results shown by existing works do not hold under private leadership.     

Regional variations in exporters’ productivity premium: Theory and evidence

The international trade literature confirms that the average productivity of exporters is higher than that of nonexporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region‐specific transportation costs in a Melitz‐type heterogeneous‐firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant‐level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.     

Big is Beautiful when Exporting

This paper starts out from the observation that the export ratios of firms (export to sales ratios) vary greatly among firms and that they are systematically higher for larger exporters. We relate the difference in export ratios to firm‐level differences in transport costs. In accordance with the data, we assume that freight rates are a function of firm‐level export volumes. We test our model using Japanese manufacturing firm‐level data. We first estimate the elasticity of the freight rate with respect to firm‐level export volumes at the sector level. When feeding these estimates back into the model, it can explain more than 50% of the variation in firm‐level export ratios.     

Spatial Cournot competition and economic welfare: a note

We investigated welfare implications in location-quantity models in a symmetric linear city. We found that when firms are not agglomerated in equilibrium, increasing the distance between firms raises (reduces) producer surplus and social welfare (consumer surplus). Moreover, central agglomeration is always optimal for consumers among symmetric locations, but not necessarily for producers. Central agglomeration can be inefficient even if it is the unique equilibrium outcome. In short, the firms are more likely to agglomerate or locate closer than what welfare maximizers would dictate, whereas they locate farther apart than what consumer surplus maximizers would recommend.     

Partial Agglomeration or Dispersion in Spatial Cournot Competition

We revisit works by Pal and Matsushima, which, respectively, present different equilibrium locations. We consider nonlinear transport costs and show that Pal's result (dispersion) is more robust than Matsushima's (partial agglomeration). Pal's result holds true for any transport cost function, while Matsushima's does not hold under strong concavity or convexity of the transport cost function. If we consider sequential move of location. Pal's result holds for any transport costs. On the other hand, Matsushima's does not hold except for linear transport cost. We also discuss welfare and show that nonlinearity of the transport cost function yields rich welfare implications.