Global implications of national unconventional policies

Financial integration in the markets for banks' assets and liabilities makes balance sheet constraints highly correlated across countries, resulting in a high degree of financial and macroeconomic interdependence. Likewise, under financial integration unconventional policies aimed at stabilizing domestic financial and credit conditions could entail large international spillovers. Therefore, stabilization by one country will also benefit other countries, reducing incentives to implement credit policies in a classic free-riding problem, especially when these policies entail domestic costs. We show that this outcome can emerge in an open economy model featuring financial intermediaries that face endogenously determined balance sheet constraints.     

Un modello non lineare sul funzionamento dei mercati azionari

Si analizza il funzionamento di un mercato azionario dove gli agenti sono caratterizzati da razionalità limitata, comportamento eterogeneo e disponibilità limitata di risorse finanziarie. La dinamica del mercato azionario viene spiegata attraverso un sistema non lineare del secondo ordine, a tempo continuo. Vengono esaminate le biforcazioni verificantesi al variare di un parametro avente particolare significato dal punto di vista finanziario. Ciò consente di rilevare l'esistenza di diverse modalità di funzionamento asintotico. Come suggerito dall'intuizione, al crescere del numero degli agenti dotati di minore razionalità, la dinamica del mercato diviene sempre più irregolare.

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Summary A stock market model is conceived within which investors are qualified by bounded rationality, asymmetric behaviour, and restricted availability of money. The stock market is represented through a second order nonlinear model which is continuous in time. Attention is attached to the bifurcations that arise when a financially meaningful parameter is suitably varied. In this way a range of asymptotic behaviours is detected. As one would expect, an excess in traders with low rationality results in an unstable market.

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Si ringraziano sentitamente il Prof. S. Baldone, il Prof. M. Gatto, il Dott. M. Miari, il Prof. L. Peccati ed il Prof. S. Rinaldi per i preziosi suggerimenti offerti.     

Non‐Negative Quantity Constraints and the Duration of Punishment

In an oligopoly supergame, firms face an obvious technological constraint: the positivity of their production quantities. Applicability of single‐period optimal punishment hinges critically upon the degree of supermodularity in the stage game, as well as upon the positivity constraints on prices and/or quantities. If both prices and quantities are constrained to be positive, then the relevant multi‐period punishment prescribes securitylevel payoffs (where individual rationality binds) when and only when the game is perfectly supermodular, i.e. is either a Bertrand supergame with perfect substitute products or a Cournot supergame with perfect complement products. JEL classification numbers: D43, L13, C72.     

Process and product R&D by a multiproduct monopolist: a reply to Lin

With reference to Lambertini (2003), Lin correctly points outthat, if R&D efforts for process innovation are endogenous,then process and product R&D are strategic complements.Then, he also proves that the opposite holds when spilloversare nil. Objecting to Lin's second claim, I show that monopolyprofits are everywhere increasing in the extent of informationsharing within the firm. Consequently, the full internalisationof spillovers restores the complementarity between process R&Dand product proliferation.     

European monetary union, adjustment, and exchange rate variability

This paper uses a three-country, three-good, factor-specific model of trade with wage rigidities to investigate how European Monetary Union is likely to affect exchange rate variability. Focusing on international macroeconomic adjustment under both exogenous and optimizing monetary policies, it shows that the relative variability (against external currencies) of the euro and a basket of predecessor currencies depends on the relative sizes and specialization patterns of countries and the relative importance of different shocks. Monetary union is likely to decrease (increase) aggregate European exchange rate variability for shocks to industries in which large (small) euro area countries specialize.     

RJVs in product innovation and cartel stability

Abstract. We characterise the interplay between firms' decision in product development undertaken through a research joint venture (RJV), and the nature of their ensuing market behaviour. Participant firms in an RJV face a trade-off between saving the costs of product innovation by developing similar products to one another, e.g., by sharing most of the basic components of their products, and investing higher initial efforts in product innovation in order to develop more distinct products. We prove that the more the firms' products are distinct and thus less substitutable, the easier their collusion is to sustain in the marketing supergame, either in prices (Bertrand) or in quantities (Cournot). This gives rise to a non-monotone dependence of firms' product portfolio upon their intertemporal preferences. Received: 1 October 1998 / Accepted: 14 December 2002 We thank the seminar audience at Centre for Industrial Economics, University of Copenhagen, where all three authors were affiliated at the time we presented the first draft of this paper, and also the two anonymous referees for Review of Economic Design for their detailed comments. The usual disclaimer applies.     

Workers’ enterprises are not perverse: differential oligopoly games with sticky price

We take a differential game approach to study the dynamic behaviour of labour managed (LM) firms, in the presence of price stickiness. We find that the oligopoly market populated by LM firms reaches the same steady state equilibrium allocation as the oligopoly populated by profit-maximising (PM) firms, provided that the LM membership and the PM labour force are set before the market game starts. The conclusion holds under both the open-loop solution and the closed-loop solution. The result confirms the point made by Sertel (Eur Econ Rev 31:1619–1625, 1987) in a static framework.