A Theory of Favoritism in an International Oligopoly*

This paper offers an explanation of the fact that some foreign firms are favored at the expense of others, and characterizes the distribution of favors in terms of the cost parameters of firms. We present a model where favors must be bought: they come from competing contributions. This model is compared with a benchmark model with a benevolent government. We show how the distribution of favors in the favor‐seeking model deviates from the distribution that would be obtained if the government were really benevolent.     

More or Less Ambition in the Doha Round: Winners and Losers from Trade Liberalisation with a Development Perspective

What is at stake in the standoff and suspension of the Doha Round of trade talks? What impact would an agreement based on greater or lesser levels of ambition have on developing countries, whose economies are relatively dependent on agriculture? Using the MIRAGE computable general equilibrium model of the global economy, in this article we compare different scenarios for the Doha agricultural and NAMA negotiations, taking real numbers from the proposals on the table from the United States (US) and the European Union (EU) in December 2005. The results for both scenarios demonstrate the high stakes for successful completion of this negotiation given the positions articulated by the countries involved. A cooperative reform outcome by the US and the EU – based on the most ambitious components of their negotiating proposals – delivers noticeably more benefits than an unambitious outcome. We measure the degree of ambition in each scenario by the construction of a Mercantilist Trade Restrictiveness Index and focus the analysis on the impacts on developing countries.     

Stochastic rationality and Möbius inverse

Discrete choice theory is very much dominated by the paradigm of the maximization of a random utility, thus implying that the probability of choosing an alternative in a given set is equal to the sum of the probabilities of all the rankings for which this alternative comes first. This property is called stochastic rationality. In turn, the choice probability system is said to be stochastically rationalizable if and only if the Block–Marschak polynomials are all nonnegative. In the present paper, we show that each particular Block–Marschak polynomial can be defined as the probability that the decision-maker faces the loss in flexibility generated by the fact that a particular alternative has been deleted from the choice set.     

Technology and trade: Empirical evidences for the major five industrialized countries

Technology and Trade: Empirical Evidence for the Major Five Industrialized Countries. — The conclusion that prices alone cannot explain the major disturbances in trade market shares emerges from many empirical studies on international trade flows. This paper aims at introducing supply-side variables in market shares equations, namely R&D expenditures and gross fixed capital formation, along the lines of the new theory on international trade and of the literature on technology and trade relations. The empirical work is carried out on the major five industrialized countries and on twenty manufacturing industries. The results show that the supply-side variables have played a crucial role over the last decade.     

Liquidity-saving mechanisms in collateral-based RTGS payment systems

This paper studies banks’ incentives regarding the timing of payment submissions in a collateral-based RTGS payment system and how these incentives change with the introduction of a liquidity-saving mechanism (LSM). We show that an LSM allows banks to economise on collateral while also providing incentives to submit payments earlier. This is because in our model an LSM allows payments to be matched and offset in real time without any or very minimal funds. Under a collateral-based RTGS payment system, introduction of the LSM always improves welfare. The result contrasts with earlier work, which shows that under a fee-based RTGS system, the introduction of an LSM in some circumstances may reduce welfare.     

Comparative risk aversion: A formal approach with applications to saving behavior

We consider a formal approach to comparative risk aversion and apply it to intertemporal choice models. This allows us to ask whether standard classes of utility functions, such as those inspired by Kihlstrom and Mirman (1974) [16], Selden (1978) [27], Epstein and Zin (1989) [10] and Quiggin (1982) [25] are well ordered in terms of risk aversion. Moreover, opting for this model-free approach allows us to establish new general results on the impact of risk aversion on savings behaviors. In particular, we show that risk aversion enhances precautionary savings, clarifying the link that exists between the notions of prudence and risk aversion.