Macroeconomic Implications of Term Structures of Interest Rates Under Stochastic Differential Utility with Non-Unitary EIS

This paper proposes a continuous-time term-structure model under stochastic differential utility with non-unitary elasticity of intertemporal substitution (EIS, henceforth) in a representative-agent endowment economy with mean-reverting expectations on real output growth and inflation. Using this model, we make clear structural relationships among a term structure of real and nominal interest rates, utility form and underlying economic factors (in particular, inflation expectation). Notably, we show that, if (1) the EIS is less than one, (2) the agent is comparatively more risk-averse relative to time-separable utility, (3) short-term interest rates are pro-cyclical, and (4) the rate of expected inflation is negatively correlated with the rate of real output growth and its expected rate, then a nominal yield curve can have a low instantaneous riskless rate and an upward slope.     

Foreign Investment, Technology Transfer, and the Technology Gap: A Note

The paper analyzes a simple differential game model of international technology transfer via foreign direct investment, in which a subsidiary of a multinational corporation and a host-country firm are engaged in a technology accumulation race. In contrast to previous works, it is shown that an elasticity of the foreign firm's marginal quasi-rent plays a key role in determining the effects of technology spillover and of efficiency of learning activities on the technology transfer: those are positive if it is larger than unity in absolute value, and vice versa. Other comparative static results are reported.     

Aggressiveness of Managers in the Market with Network Effects: The Case of Biased Managers as Strategic Commitment

This paper analyzes a model wherein firms' owners hire biased managers in a differentiated goods duopoly with network effects. We show that whether firms hire an aggressive manager or not depends on both the degree of product differentiation and the strength of network effects in price competition whereas it does not depend on the degree of product differentiation or the strength of network effects in quantity competition. Thus, the attitudes of firms' managers depend on the type of competition and the relative magnitude of the strength of network effects to the degree of product differentiation. Copyright © 2015 John Wiley & Sons, Ltd.     

Wal‐Mart innovation and productivity: a viewpoint

Abstract Technology effects, business process development, and productivity growth are considered in the context of a single company: Wal‐Mart. The starting point is the 2001 McKinsey Global Institute report, which finds that over 1995–2000, a quarter of U.S. productivity growth is attributable to the retail industry, and almost a sixth of that is attributable to Wal‐Mart. Wal‐Mart is interesting as well because of its rapid growth in Canada. This is now Canada's largest private sector employer. We also consider other evidence relevant to public policy formation concerning Wal‐Mart and conclude with a discussion of options for partially filling important data gaps.     

Book Reviews

This paper reformulates Kalecki's investment models based on 'the principle of increasing risk'. First, it is shown that in his model risk can be interpreted as a conditional probability of bankruptcy of a firm, or the 'hazard rate' in reliability theory. Secondly, a simple static Kaleckian investment model is developed based on this interpretation. In the model, a slightly modified Kaleckian optimality condition for investment holds. It is also shown that, as Kalecki correctly pointed out, the principle of falling marginal efficiency of capital (or investment) is not required to obtain a finite level of investment. Finally, I consider sequential investment in an intertemporal model. In this model, a modified version of the Kaleckian optimality condition determines investment. In addition, as Kalecki emphasized, his increasing risk limits the level of investment even without increasing and convex adjustment costs associated with investment, by which the finite rate of investment is derived in the macroeconomics literature.     

Estimating switching costs involved in changing mobile phone carriers in Japan: Evaluation of lock-in factors related to Japan’s SIM card locks

This paper employs a web-based conjoint-type questionnaire to examine empirically user preference for a hypothetical Subscriber Identity Module (SIM) unlock situation in Japan’s mobile phone market. This paper also analyzes carriers’ other marketing strategies to lock in consumers. The empirical analysis in this study reveals the following: over 80% of survey respondents evaluate a highly compatible platform with the SIM unlocked. Approximately 70% of consumers find that the value of discounts on initial payments exceeds the discounts on one-year monthly payments. In addition, conditions set by continuing agreements for mobile carriers and mobile handsets reduce consumer benefit by 35% at the median in the case of SIM unlocking with compatible platforms.     

Price versus quantity in a duopoly with network externalities under active and passive expectations

This study examines the endogenous choice of strategic contracts in a duopoly composed of firms that produce goods with network externalities with some sort of compatibility. We adopt two types of expectations—active and passive—as consumers' expectations for each firm's equilibrium market share. In addition, we take into account the managerial case and entrepreneurial case with and without separation between ownership and management, as firms' internal structures. We derive the properties in the Cournot competition and the Bertrand competition as the equilibrium market structures under both passive and active expectations under imperfectly compatibility of networks.     

Can Small Class Policy Close the Gap? An Empirical Analysis of Class Size Effects in Japan

Can smaller classes lead to better educational outcomes and greater equality in achievement? We estimate the causal effects of class size on achievement tests by using discontinuous changes in class size under the Japanese public compulsory education system. We employ a value‐added model that uses achievement tests conducted at two different times during the same school year. Our results show that a reduction in class size has significantly positive effects on Japanese language test scores in the sixth grade, especially at schools in wealthy areas. However, we find no evidence that a universal small class policy closes the achievement gap among schools.     

Impossibility of Nash implementation in two-person economies

In this note, we prove two impossibility results of Nash implementation in two-person economies. First, we will show the non-existence of continuous and balanced mechanisms which implement the Walrasian correspondence. Second, by adding a convexity assumption of mechanisms, we present the impossibility of continuous implementation of Pareto optimal and individually rational allocations in balanced way. Received: 16 April 1996 / Accepted: 25 April 1997