Long run equilibria in an asymmetric oligopoly

Summary. Consider an oligopolistic industry composed of two groups (or populations) of firms, the low cost firms and the high cost firms. The firms produce a homogeneous good. I study the finite population evolutionarily stable strategy defined by Schaffer (1988), and the long run equilibrium in the stochastic evolutionary dynamics based on imitation and experimentation of strategies by firms in each group. I will show the following results. 1) The finite population evolutionarily stable strategy (ESS) output is equal to the competitive (or Walrasian) output in each group of the firms. 2) Under the assumption that the marginal cost is increasing, the ESS state is the long run equilibrium in the stochastic evolutionary dynamics in the limit as the output grid step, which will be defined in the paper, approaches to zero. Received: September 19, 1997; revised: June 18, 1998     

SEARCH UNEMPLOYMENT AND THE EFFECT OF AGGREGATE DEMAND POLICY: A DUAL LABOR MARKETS ANALYSIS

This paper examines the role of aggregate demand policy affecting unemployment under a model of dual labor markets. Recently, some papers have considered the sources of unemployment in OECD countries and have stressed the role of aggregate demand policy in reducing it. However, there exists the argument that aggregate demand policy may have an adverse effect on unemployment. Therefore, in this paper, we will consider in what situations aggregate demand policy has such an effect on unemployment, and propose an analysis of its microfoundation.     

Firm Heterogeneity and FDI in Distribution Services

Distribution services play a large role in intermediating production and consumption across borders. Using firm‐level data on Japanese multinationals in wholesale and retail sectors, this study examines FDI decisions of distribution firms for local distribution services at the extensive and intensive margin. Consistent with the model of heterogeneous firms on multinational production, I find that more productive multinationals are more likely than less productive multinationals to enter a larger number of markets, to penetrate less attractive markets and to generate larger sales per each market. While these findings are consistent with previous evidence on manufacturing multinationals, I find some distinctive determinants of FDI in distribution services.     

K-Asymptotics Associated with Deterministic Trends in Integrated and Near-Integrated Processes

Dealing with integrated and near-integrated processes, this paper investigates the validity of regression on deterministic trends of K terms as K becomes large. It is found that the regression tends to be valid in spite of the true process being free from deterministic trends, which implies that the distinction between stochastic and deterministic trends disappears in K -asymptotics of the integrated and near-integrated processes. It is also shown that in K -asymptotics the usual unit root test, based on the model with deterministic trends of K terms, becomes useless against near-integration since the unit root distribution remains unchanged.
JEL Classification Numbers: C12, C15, C22.     

Bounded Rationality in Economics: A Game Theorist's View

In this paper, we argue that it is essential to incorporate bounded rationality into game theory. Game theory has been applied to aspects of economics such as industrial organizati on on the basis of the naive interpret ation of game theory, which requires players to be ideally rational in an extremely unrealistic way. We stress the importance of establishing the perceptive interpretation of game theory by taking boundedly rational players' inductive reasoning processes into account. We explain my recent work, Matsushima (1997), which shows that the subjective games perceived by players in the long run are entirely different from the true objective game, and are trivial games in the sense that there exists a strictly dominant and subjectively Pareto-efficient strategy profile among the set of pure strategy profiles.
JEL Classification Numbers: C70, C90, D43, D80     

THE HEX GAME THEOREM AND THE ARROW IMPOSSIBILITY THEOREM: THE CASE OF WEAK ORDERS

The Arrow impossibility theorem when individual preferences are weak orders is equivalent to the HEX game theorem. Because Gale showed that the Brouwer fixed point theorem is equivalent to the HEX game theorem, this paper indirectly shows the equivalence of the Brouwer fixed point theorem and the Arrow impossibility theorem. Chichilnisky showed the equivalence of her impossibility theorem and the Brouwer fixed point theorem, and Baryshnikov showed that the impossibility theorem by Chichilnisky and the Arrow impossibility theorem are very similar. Thus, Chichilnisky and Baryshnikov are precedents for the result—linking the Arrow impossibility theorem to a fixed point theorem.     

Current accounts of Japanese airports

The paper examines the current account of 41 major airports. When we exclude depreciation costs, only seven airports are profitable. When depreciation is excluded, only three airports are making profits. Airports managed by local governments are very difficult to sustain financially without subsidies. Airports with more than 5.2 million passengers are profitable when depreciation is taken into account, however most local airports have fewer than 2.5 million passengers. When depreciation costs are excluded, airports need at least 2.7 million passengers to be viable.     

Founders' experiences for startups' fast break-even

While some previous studies have found that the role of founders' collective experiences is paramount in resolving problems inherent in startups, others have failed to substantiate this. This study claims that this incongruence is attributable to a failure to consider organizational processes in which founders' experiences translate into organizational assets through information distribution and interpretation. Using the data from the Panel Study of Entrepreneurial Dynamics, this study demonstrates that startups reach their break-even point faster when their founders have had work experience in the same industry, and that this effect becomes stronger when these firms commit more resources to information distribution and interpretation.     

Timing of trade liberalization

Abstract

This paper studies the effects of trade liberalization on growth and long-run global income inequality using a two-country model of human capital accumulation by credit-constrained households. I show that the timing of trade liberalization is a crucial determinant of its effects on growth. Moreover, I show that the size of the long-run income gap between the two countries depends on the difference in domestic income inequality when they open up to trade. Based on these results, I analyze the effects of redistributive policy within a country. I show that redistribution in one country may increase income per capita of its trading partner if it is undertaken in a steady state, while the opposite is true if the policy is undertaken during transition.