Bertrand Games and Sharing Rules

We consider asymmetric Bertrand games with arbitrary payoffs at ties or sharing rules, and identify sufficient conditions for the zero-profit outcome and the existence of Nash equilibria. Subject to some technical conditions on non-tied payoffs the following hold. If the sharing rule is strictly tie-decreasing all players but one receive zero equilibrium payoffs, while everybody does so if non-tied payoffs are symmetric. Mixed (pure) strategy Nash equilibria exist if the sharing rule is (norm) tie-decreasing and coalition-monotone. I would like to thank Fernando Branco, the audience at Pompeu Fabra (Barcelona), ISEG (Lisbon), University of Mannheim, ESEM 2003 (Venice), EARIE 2005 (Porto), two anonymous referees, and the editor Dan Kovenock for very useful comments. This research received financial support under project POCTI/ECO/37925/2001 of FCT and FEDER.     

Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints

Universal service objectives are pervasive in telecommunications, and have gained new relevance after the introduction of competition in many markets. Despite their policy relevance, little work has been done allowing for a thorough discussion of instruments designed to achieve universal service objectives under competition. We intend to fill this gap, and disaggregate the problem into interacting forms of regulatory intervention such as uniform pricing and coverage constraints. It is shown that these are not competitively neutral and may have far-reaching strategic effects. Under uniform pricing, equilibrium coverage of both incumbent and entrant may be lower than without regulation. These effects depend on which measures are imposed at the same time, thus no single measure can be evaluated in isolation. We also point out that different groups of consumers are affected in different ways, making welfare comparisons difficult.     

Asymmetry, stability and growth in a step-by-step R&D-race

We define a notion of stability of equilibrium in an infinitely repeated step-by-step R&D race. The unique symmetric equilibrium is shown to be unstable, and stable asymmetric equilibria arise, if product market competition is intense, firms are patient, imitation is difficult and innovations are large. Some predictions based on symmetric equilibria, e.g. that less patient firms always invest less in research, or that more intensive competition leads to higher economic growth, are reversed for “realistic” values of the underlying parameters.     

Surviving the EU? The future for national employment models in Europe

The claim by the European Union (EU) to be both the moderniser and the effective saviour of distinctive European ways of doing things is challenged by this review of the multi‐tiered influence of the EU on change in national models. Competition and macroeconomic policy is argued to be more significant than soft law in reshaping national models and in constraining innovation and change to meet new conditions. Lip service is paid by the EU to different paths of development, but the contradictions and synergies across institutional and policy approaches that underpin the notion of varieties of capitalism go unrecognised. European employment models are seen as primarily contributing to social protection, but the potential role for distinctive models to promote comparative advantage, as under varieties of capitalism analysis, is not on the policy agenda.     

Market volatility and inequality in earnings: experimental evidence

We analyze the volatility of actions in experimental oligopoly markets. Can the volatility, measured as the total variation in actions, be predicted by inequality in earnings of the previous period? We examine two types of differentiated markets, Cournot and Bertrand, and two informational conditions. We find for both types of markets and regardless of the information available to firms that inequality in earnings is a major factor for explaining volatility. The more equal profits are distributed, the less volatility is observed.     

Internet peering as a network of relations

This paper applies results from recent theoretical work on networks of relations to analyze optimal peering strategies for asymmetric Internet Service Providers (ISPs). From a network of relations perspective, ISPs’ asymmetry in bilateral peering agreements need not be a problem, since when these form a closed network, asymmetries are pooled and information transmission is faster. Both these effects reduce the incentives for opportunism in general, and interconnection quality degradation in particular. The paper also explains why bilateral monetary transfers between asymmetric ISPs (Bilateral Paid Peering), though potentially good for bilateral peering, may have negative effects on the sustainability of the overall peering network.     

Works Councils and Labour Productivity: Looking beyond the Mean

After more than 25 years of empirical investigation, the analysis of works council effects on establishment productivity is still an active field of economic research. I present first evidence for works council regression coefficients along the unconditional log labour productivity distribution in Germany. The highest (lowest) coefficients were found at the bottom (top) of the distribution, which suggests that works councils have the most beneficial effects at low levels of productivity. Importantly, coefficients are positive at each productivity level. The results shed light on a classical theoretical argument concerning moderating factors for the productivity effect of employee participation.