What Collusion? Unilateral Market Power as a Catalyst for Countercyclical Markups

This paper presents and tests a simple model of competitive and unilateral market power regimes that yields countercyclical markups. Following a decrease in demand in the short run, capacity-constrained firms may have a strong incentive not to lower their prices to the new competitive price. Demand shocks may introduce market power into a previously competitive market. Experimental posted offer markets support this conjecture with complete information on the market structure. With only private information, there appears to be a hysteresis effect concerning supracompetitive prices, i.e., markets with a history of supracompetitive pricing continue to generate supracompetitive prices following demand shocks. However, competitive markets also remain competitive following demand shocks when firms only have private information on costs and capacities.     

The first fifteen years: a personal view of the early history of the WFSF (1967-1982)

This article is based on a personal account on the early history of the WFSF. The author emphasizes that this organization was in many ways more a social movement than a professional organization, since it functioned as a critique of the emerging future think tanks, which were so closely linked to established powers. Moreover, from its beginning, the Federation attempted to be a real global organization and not only an affair of the so called developed world. It succeeded in having conferences in all continents.In that early period the Federation had given explicit support to individuals and institutions in the communist countries of Central/Eastern Europe, where future research institutions were to some extent ‘havens in a heartless world’. The Federation has also promoted international courses in future studies for graduate students, especially in Dubrovnik. Many of the participants later on became active (board) members of the WFSF. Finally, in those days the Federation promoted a number of research projects on the study of the future, producing an impressive number of books and journals. In short, the WFSF is a club to be proud of.     

INFLATION INEQUALITY IN THE UNITED STATES

Different spending patterns across households and differences in price increases across goods and services lead to unequal levels of inflation faced by different households. In this paper we measure the degree of inequality in inflation across U.S. households for the period 1987–2000. The broad picture that emerges from our results is that over our whole sample period there are substantial differences in the inflation experiences across U.S. households. We find that the cost of living increases were generally higher for the elderly, in large part because of their health care expenditures, and that the cost of living of poor households is most sensitive to the, historically large, fluctuations in gasoline prices. Still, when looking at the whole population, we find that individual households that are confronted with high inflation in one year do not generally face high inflation in the subsequent year as well.     

Bargaining power in stationary parallelogram games

A stationary variant of the repeated prisoners dilemma in which the game frontier is a parallelogram is analyzed. By using the probabilistic cheap talk concept of [3], the discount factor becomes fungible, and for a critical value of the discount factor a unique Pareto-optimal and Pareto-dominant solution can be found. The relative bargaining power of the players can be quantified in terms of the shape of the parallelogram. If the parallelogram is asymmetric, the solution results in an asymmetric allocation of payoffs. Players with more bargaining power receive a greater share of the allocation. The solution satisfies some standard bargaining axioms within the class of parallelogram games. A characterization is provided in terms of these axioms and one new axiom, weak-monotonicity, which is in the spirit of, but different from, the Kalai-Smorodinsky restricted-monotonicity axiom.Received: 15 January 2001, Accepted: 4 December 2003, We thank Wayne Shafer for interlocution and helpful comments.     

Governance and competence: how can they be combined?

Transaction cost economics faces serious problems concerningthe way it deals, or fails to deal, with bounded rationality,the efficiency of outcomes, trust, innovation, learning andthe nature of knowledge. The competence view yields an alternativeperspective on the purpose and boundaries of the firm. However,the competence view cannot ignore issues of governance and,in spite of serious criticism, transaction cost economics yieldssome useful concepts to deal with them. This paper aims to contributeto the development of theory and empirical research that connectsgovernance and competence perspectives.     

Project valuation in the pharmaceutical industry: a comparison of least‐squares Monte Carlo real option valuation and conventional approaches

Least‐squares Monte Carlo simulation (LSM) is a promising new technique for valuing real options that has received little or no attention in the pharmaceutical industry. This study demonstrates that LSM can handle complex valuation situations with multiple uncertainties and compounded American‐type options. The limited application of real option valuation (ROV) in the pharmaceutical industry is remarkable, given the importance of accurate project valuation in an industry that requires large investments in high‐risk projects with long pay‐back periods, which is furthermore suffering from ever‐increasing development costs and shrinking profit margins. The LSM model developed in this study is constructed as an extension of a discounted cash flow model that should be familiar to economists active in the pharmaceutical industry. A number of pharmaceutical projects have been evaluated using LSM ROV, binominal real option valuation and expected net present value techniques. The different results yielded by these methods are explained in terms of differences in risking assumptions and ability to capture the value of flexibility. The analysis provides a framework to introduce the basic concepts of real option pricing to a non‐specialist audience. The LSM model illustrates the potential for real‐life commercial assessment as the versatility of the technique allows for an easy customisation to specific business problems.     

R&D spillovers and productivity: Evidence from U.S. manufacturing microdata

This paper deals with the estimation of the impact of technology spillovers on productivity at the firm level. Panel data for American manufacturing firms on sales, physical capital inputs, employment and R&D investments are linked to R&D data by industry. The latter data are used to construct four different sets of `indirect' R&D stocks, representing technology obtained through spillovers. The differences between two distinct kinds of spillovers are stressed. Cointegration analysis is introduced into production function estimation. Spillovers are found to have significant positive effects on productivity, although their magnitudes differ between high-tech, medium-tech and low-tech firms. First version received: April 1997/final version received: April 1999     

An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production

This article provides guidance to prudent use of the World Input–Output Database (WIOD) in analyses of international trade. The WIOD contains annual time‐series of world input–output tables and factor requirements covering the period from 1995 to 2011. Underlying concepts, construction methods and data sources are introduced, pointing out particular strengths and weaknesses. We illustrate its usefulness by analyzing the geographical and factorial distribution of value added in global automotive production and show increasing fragmentation, both within and across regions. Possible improvements and extensions to the data are discussed.     

Neighbourhood Spatial Order,the Local Economy and Firm Mobility in Urban Areas of the Netherlands

Urban residential neighbourhoods in the Netherlands increasingly function as incubation zones for small‐scale businesses. Despite this development, little is known about whether and how the local production environment in these neighbourhoods shapes firm mobility behaviour. This article studies how two aspects of the local production environment — the built neighbourhood environment and zoning regulations — affect firm mobility of small‐scale businesses in urban residential neighbourhoods. To achieve this aim, we contrast two sets of urban neighbourhoods, pre‐ and post‐second world war neighbourhoods with a comparable low socio‐economic profile, but with distinct built environments and zoning regulations. We combine quantitative and qualitative methods to analyse available trade register data from the Dutch regional Chambers of Commerce, study neighbourhood zoning regulations, and conduct focus‐group and individual interviews with neighbourhood experts and entrepreneurs. The local built environment and its regulations appear to have a small but significant effect on the firm mobility behaviour of entrepreneurs in the neighbourhoods studied. Relocation intentions are higher among entrepreneurs in post‐war than in pre‐war neighbourhoods, which may (in part) be attributed to less favourable local institutional settings for businesses, but actual firm mobility does not differ between these neighbourhoods.