Price and quantity competition under free entry

This paper complements that of Cellini et al. (Cellini, R., Lambertini, L., Ottaviano, G. I. P., 2004. Welfare in a differentiated oligopoly with free entry: A cautionary note. Research in Economics, 58:125–33.), which shows that Cournot competition may generate higher welfare compared to Bertrand competition in an economy with free entry. Unlike them, we provide a more general proof for this result and show that Cournot competition generates higher welfare compared to Bertrand competition when the products are sufficiently differentiated. If the products are close substitutes, welfare is higher under Bertrand competition. We show that these qualitative results hold whether or not number of varieties increases market size. We also show when the active firms earn higher profits under Bertrand competition compared to Cournot competition.     

Environmental and Firm Level Influences on Inter‐Organizational Trust and SME Performance

We investigate the effects of focal firm knowledge intensity and uncertainty on inter‐organizational trust and subsequent performance of small and medium size enterprises (SMEs). We integrate the trust literature with transaction cost literature as both of these offer partial explanations of the dynamics of inter‐organizational trust in the context of an SME. We propose that knowledge intensity of the focal firm will have a positive relationship while uncertainty will have a negative relationship with inter‐organizational trust in an exchange relationship. Further, we propose a positive relationship between trust and SME performance, which will be contingent on the level of external and internal uncertainty faced by the focal firm. Empirical evidence, based on the survey data of 565 German SMEs, mostly supports our arguments.     

The Impact of Country Diversification on Wealth Effects in Cross-Border Mergers

We posit that country diversification via cross‐border mergers creates wealth by providing benefits for firms that are not available to their shareholders. We hypothesize that these benefits are inversely related to the extent of co‐movement in the economies of the bidder's and target's countries. We examine the wealth effects of U.S. targets and bidders involved in cross‐border mergers with firms in other countries during 1982–1991. We show that wealth effects vary, depending on country affiliations of two merging firms, and are inversely related to the degree of economic co‐movement between the two countries.     

Licensing under convex costs

We show that both the outside and inside innovators license a new product (or drastic process innovation) to all potential licensees in the presence of convex costs, which occur under decreasing returns to scale technologies. An implication of our analysis is that a monopolist producer may prefer technology licensing in a homogeneous goods industry. We also show that an inside innovator’s incentive for innovation may be higher than that of an outside innovator.     

Macroeconomic Implications of Changes in Corporate Tax Rates: A Review

Many countries have initiated structural reforms in corporate income tax (CIT) to attract investment and promote growth. There has been a continuous decline in CIT rates worldwide. It is expected that cuts in CIT rates may increase after-tax profits and encourage investment. A change in the CIT rate may also be shifted backward (by changing salaries and wages) and/or forward (by changing product prices). These are theoretical possibilities and may not have support from empirical evidence. In this paper we review empirical studies to assess the impact of CIT rate changes on the economy.