The Effects of Uncertain Divestiture as Regulatory Threat

It has been argued that the threat of regulatory intervention affects firm behavior. We investigate the pricing decision of the dominant firm under regulatory threat, considering the probability of intervention as a function of the price. Our focus is on the case where the potential divestiture of the firm serves as a threat of regulatory intervention. It is shown that under certain conditions associated with the marginal expected penalty, the mere threat of divesting a certain portion of the firm’s manufacturing plants leads to a lower price than the actual divestiture of that same portion. Numerical examples illustrate that with relatively small-scale divestiture, the firm’s price under the threat may be lower than that under the actual divestiture, within a relatively broad range of regulator’s attitudes toward intervention.     

Cross-selling across stores or within a store? Impacts of cross-buying behavior in online shopping malls

Abstract

This study investigates the impacts of cross-buying behavior in an online shopping mall where customers can purchase from additional product categories from various independent stores. We focus on the extent to which store loyalty and relationship duration moderate the cross-buying effects on three behavioral traits: customers’ purchase rate, lifetime duration, and spending. The results reveal that customers who engage in cross-buying more intensely purchase more frequently, have longer expected lifetime duration, and spend higher amounts in each transaction. The impacts on purchase frequency and customer retention are even greater for customers who exhibit higher behavioral loyalty toward some stores. However, store loyalty is found to weaken the association between cross-buying and average spending. Further, relationship duration appears to weaken the effects of cross-buying on purchase rate and spending. These results provide new insights into the impacts of cross-buying on customer value as well as managerial implications for shopping mall owners.     

A price competition game under free entry

This study builds a game of Bertrand-like price competition in a market with free entry. Under the assumption of a standard U-shaped average cost curve, it demonstrates that even if the number of sellers is small, a long-run competitive outcome can be supported as a Nash equilibrium. This game provides unifying treatments to the standard Bertrand equilibrium, the long-run competitive outcome, Demsetz’s equilibrium as well as other types of equilibria that have not been known in the existing literature.This paper is dedicated to Professor Mukul Majumdar to celebrate his sixtieth birthday. I am deeply indebted to Mukul for his generosity and kindness towards me throughout my career. I am also grateful to Tapan Mitra and anonymous referees for their very useful comments and suggestions in the revision and to Fumio Dei, Jim Friedman, Koji Ishibashi, Atsushi Kajii, Takashi Kamihigashi, Kunio Kawamata, Kei-ichi Koda, Takashi Negishi, Michihiro Ohyama, Santanu Roy, and Yoshimasa Shirai for useful conversations and correspondence and, in particular, Motonari Kurasawa, who drew to my attention Demsetz’s work.     

Analysis of the energy access improvement and its socio-economic impacts in rural areas of developing countries

Access to modern energy is one of the most basic requirements for development. In rural areas of developing countries, there are a large number of people who do not have access to LPG and depend on traditional biomass such as wood, crop, and dung for cooking. In addition, energy has numerous and complex links with poverty reduction. Therefore, it is important to estimate the impacts of energy access improvement on socio-economic situation in the rural areas of developing countries quantitatively. This study focuses on socio-economic impacts of cooking demand through changes in stoves adopted by the rural households. We have developed an energy-economic model of rural areas in India to analyze the links between energy, income, and health hazard, applying both opportunity cost for using fuelwood and exposure to Resipirable Suspended Particulate Matter (RSPM). As a result of the analysis, there is a positive relation between the opportunity cost and the average RSPM exposure of women in the rural areas. Following to increase in the opportunity cost, that is, income, the cost of an improved wood stove becomes relatively lower first than that of a traditional wood stove, and then a gas stove attains price competitiveness. It is achieved that the average RSPM exposure is below the WHO and Japanese criteria for Suspended Particulate Matter (SPM), 190 and 100 [μg/m³], at the opportunity cost of US$9 and 15/GJ, respectively.     

Exchange rates,price levels,and inflation targeting: Evidence from Asian countries

This study examines how the adoption of inflation-targeting influenced exchange rate pass-through and volatility in four Asian countries –Indonesia, South Korea, the Philippines, and Thailand – over the sample period of January 1990 to June 2007. We find that adopting inflation targeting helped reduce pass-through in South Korea, and Thailand, while the results are less clear for Indonesia and the Philippines. Nevertheless, the findings indicate that inflation targeting caused a decline in exchange rate volatility in all four countries. The important lesson from the experiences of these Asian countries is that the adoption of inflation targeting contributes to achieving the ultimate goal of inflation stability through reducing exchange rate pass-through or variability.     

Trade imbalances and harmonization of competition policies

The present study constructs a game in which the two countries strategically set competition policies in their respective non-tradable service sectors. These policies affect the countries’ utilities through the presence of trade imbalances. We demonstrate that in the presence of persisting trade imbalances, in a Nash equilibrium, the trade-deficit country maintains perfect competition while the trade-surplus country restricts competition. This shows it highly difficult to harmonize their policies to achieve the first best state under the current international trade regime, which is centered around the principle of reciprocity.     

HISTORY‐DEPENDENT PATHS AND TRADE GAINS IN A SMALL OPEN ECONOMY WITH A PUBLIC INTERMEDIATE GOOD*

This study reexamines McMillan's (International Economic Review 19 (1978), 665–78) analysis of a dynamic small open economy with a public intermediate good. Concerning the trade patterns of the open economy, we find results that were overlooked in McMillan's analysis. Among others, if labor endowment is of intermediate size, there are two saddle‐point steady states, and the initial stock of the public good determines the long‐run trade pattern. We also add a gains‐from‐trade analysis to McMillan's model and demonstrate that if the economy has a comparative advantage in a good with productivity less sensitive to the public intermediate good, the economy may lose from trade at the steady state.     

Foreign Direct Investment, Human Capital and Environmental Pollution in China

By using provincial socioeconomic and environmental data, this paper examines the relationship between human capital, FDI and pollution emissions in China. The result shows the impact of FDI on pollution emission is highly dependent on the level of human capital. FDI is negatively associated with pollution emissions in provinces with the higher levels of human capital, whereas FDI is positively related to pollution emissions in provinces with the lower levels of human capital. This suggests that pollution haven hypothesis (PHH) holds only in those provinces with low human capital. This study also finds that the sign of FDI’s effect on each pollutant’ emission requires the different threshold level of human capital, which may help to reconcile the current conflicting PHH empirical evidences partially.     

International Trade with a Public Intermediate Good and the Gains from Trade*

This paper presents a one‐primary factor, two‐consumer good, and two‐country model of international trade where each country’s government supplies a country‐specific public intermediate good so as to attain efficient production. By introducing the Marshallian adjustment process, it is demonstrated that the country with larger factor endowment exports the good whose productivity is more sensitive to the public intermediate good. Our normative analysis of free trade shows the following results. First, at least one country gains from trade. Secondly, if a country incompletely specializes in the trading equilibrium, the country necessarily loses from trade.