Stock Prices and the Real Economy: Power Law versus Exponential Distributions

This paper explores the relationship between the stock prices and the real economy. The standard approach – the so called consumption-based asset pricing model – attempts to explain it based on the assumption of the representative agent. In this paper, we argue that the representative agent assumption is fundamentally flawed. Drawing on the recent advancement of “econophysics” on financial markets See Mantegna and Stanley (An Introduction to econophysics: correlations and complexity in finance, 2000) for the introduction to econophysics, we argue that in contrast to the neoclassical view, there is in fact a wedge between financial markets, the stock prices in particular, and the real economy.     

Which is better for durable goods producers,exclusive or open supply chain?

We explore the supply chain problem of a downstream durable goods monopolist, who chooses one of the following trading modes: an exclusive supply chain with an incumbent supplier or an open supply chain, allowing the monopolist to trade with a new efficient entrant in the future. The expected retail price reduction in the future dampens the profitability of the original firms. An efficient entrant's entry magnifies such a price reduction, causing a further reduction of original firms' joint profits. In equilibrium, the downstream monopolist chooses the exclusive supply chain to escape further price reductions, although it expects efficient entry.     

Implementation of multi-agent incentive contracts with the principal's renegotiation offer

The purpose of this paper is to explore a mechanism for supporting desired equilibrium actions in a one-principal, multi-agent model when the principal makes a renegotiation offer. We show that there exists a mechanism in which the principal's most preferred mixed strategy is always supported. Received: 30 May 1997 / Accepted: 10 October 1998     

SCIENTIFIC BREAKTHROUGHS AND NETWORKS IN THE CASE OF SEMICONDUCTOR LASER TECHNOLOGY IN THE US AND JAPAN, 1960s–2000s

United States organisations took a clear lead in semiconductor laser research until the mid‐1970s. After the 1980s, many important breakthroughs were developed by Japanese organisations. Exploring the journal Applied Physics Letters, this study examines how semiconductor laser technology developed in these two countries and how this change in the country‐level industrial leadership in the scientific research occurred. Examining the relationship among industrial organisations, research networks, and scientific breakthroughs, it discusses how these coevolved and how breakthroughs were channelled in different directions. R&D targets were channelled into small markets in the US, but were concentrated into the same markets in Japan.     

Price Effects of Target Ratcheting: A Progress Report on Medical Devices

Regulators, who have asymmetric information concerning the technology of regulated firms, often rely on incentive‐based regulation. While such a scheme is well known to be vulnerable to the adverse incentives of regulated firms, empirical research that quantifies the magnitude of distortion caused by incentive regulation is scarce. This paper is a progress report of our recent project on target ratcheting with an application to medical devices in Japan. A casual observation of detailed product‐level transaction data and reduced‐form analyses indicate the existence of pricing distortion in the wholesale market. The paper also proposes a two‐period bilateral bargaining model to match the data. A preliminary analysis finds evidence consistent with the hypothesis that target ratcheting distorts the pricing of regulated firms, but the magnitude of the distortion is estimated to be economically small.