Market-Share Import Restraints in Oligopoly

This paper contributes to the theoretical analysis of proportional import restraints; that is, restraints that are defined in terms of percentage market share rather than in terms of volume of imports. It is shown that an increase in the market share of foreign firms from zero has a negative effect locally on domestic welfare. In the case of a domestic oligopoly, domestic firms may prefer a proportional restraint over an equivalent volume restraint.     

Essential equilibria of discontinuous games

We introduce spaces of discontinuous games in which games having essential Nash equilibria are the generic case. In order to prove the existence of essential Nash equilibria in such spaces, we provide new results on the Ky Fan minimax inequality. In the setting of potential games, we show that games with essential Nash equilibria are the generic case when their potentials satisfy a condition called weak upper pseudocontinuity that is weaker than upper semicontinuity.     

Political intergenerational risk sharing

In a stochastic two-period OLG model, featuring an aggregate shock to the economy, ex-ante optimality requires intergenerational risk sharing. We compare the level of intergenerational risk sharing chosen by a benevolent government and by an office-seeking politician. In our political system, the transfer of resources across generations is determined as a Markov equilibrium of a probabilistic voting game. Low realized returns on the risky asset induce politicians to compensate the old through a PAYG system. This political system typically generates an intergenerational risk sharing scheme that is (i) larger, (ii) more persistent, and (iii) less responsive to the realization of the shock than the social optimum. This is because the current politician anticipates her transfers to the elderly to be compensated by future politicians through offsetting transfers, and hence overspends.     

Worker absenteeism and incentives: evidence from Italy

In Italy, employees are fully insured against earning losses due to illness. Since worker's health is not easily verifiable, absenteeism due to illness is considered an empirical proxy for employee shirking. The Bank of Italy Household Survey (SHIW) provides individual data on days of absence. Controlling for personal characteristics and potential determinants of health status and family responsibilities (age, gender, education, marital status, children at home), we show that the nature of employment contracts affects workers' incentives to provide effort: sickness absences, at least partially, hide opportunistic behaviours. The type of occupation and the labour contracts affects workers' behaviour in that more protected and difficult to monitor jobs show significantly higher levels of absenteeism: employees in public sector or in large firms, with permanent contracts or with longer tenure, individuals living in regions with low unemployment rates. Copyright © 2010 John Wiley & Sons, Ltd.     

Engel’s curve and product differentiation: A dynamic analysis of the effects of quality on consumer’s choice

The application of Engel’s Curve in a single-product perspective may dramatically change the role of quality in affecting the dynamics of economic performance. This paper introduces a specification of preferences that regards quality as luxury, and quantity as necessary. The analysis is carried out by using a framework similar to Grossman’s and Helpman ’s (1991), while quality is defined as in Stokey (1988). The resulting consumer’s demand crucially depends on quality. Quality is potentially able to prevent the process, implied by neoclassical models, that leads the value of consumption goods to decline over time. By doing so, quality also affects the consumption bundle shares and the variety-specific consumption growth rates, thus influencing all dynamic quantitative variables of the economy. I thank Professor Beniamino Moro for his guidance and encouragement. I thank Stephen Wright for his comments and suggestions. I have benefited from the support of Alessio Moro, Dario Unali, Debora Fletcher, Emilio Merella, Esteban Jaimovich, Francesca Lamanna, Matteo Bellinzas, Mauro Merella and all my friends. I am also indebted to Professor Cuong Le Van and Professor Stephen Parente for their advice. I thank two anonymous Referees for their useful remarks.     

Competition, human capital and income inequality with limited commitment

We develop a dynamic model with two-sided limited commitment to study how barriers to competition, such as restrictions to business start-up and non-competitive covenants, affect the incentive to accumulate human capital. When contracts are not enforceable, high barriers lower the outside value of ‘skilled workers’ and reduce the incentive to accumulate human capital. In contrast, low barriers can result in over-accumulation of human capital. This can be socially optimal if there are positive spillovers. A calibration exercise shows that this mechanism can account for a sizable portion of cross-country income inequality.     

On the anti-competitive effects of quantity discounts

We analyze the competitive effects of quantity discounts in an asymmetric duopoly. We find that for a sizeable set of parameter values, quantity discounts harm the smaller firm and reduce consumers' surplus. They can even decrease social welfare, i.e. the sum of producers' and consumers' surpluses. However, the circumstances in which quantity discounts may decrease social welfare are limited and difficult to identify in practice.     

Adaptive expectations and cobweb phenomena: Does heterogeneity matter?

This paper studies a cobweb-type commodity market characterized by a strictly monotone demand and supply, in which n types of firms operate. Types differ in a key parameter governing price expectations which are supposed to be adaptive. The unique steady state of the resulting economic dynamics is characterized in terms of stability and the impact of the number of firms types is studied: to this end the notions of structural and behavioural degree of instability, which are introduced in the paper, prove to be crucial in determining whether stability or instability prevail. The case of market integration is also considered and conditions to have stability (or instability) in terms of the original markets' parameters are given. The baseline structure is extended in two directions. The first extension assumes the point of view of an authority who is uncertain about the firms types. In this case the structural degree of instability determines how heterogeneity affects the probability of ending up with a stable outcome. The second extension consists in endogenizing the choice of predictors through a discrete choice-based evolutionary mechanism. In both cases the amount of the heterogeneity and its possible variations play a critical role in shaping the range of possible long-run outcomes of the model.