THE MARKET SELECTS THE WRONG FIRMS IN THE LONG RUN*

We consider the effects of free entry on the market structure and social welfare of an asymmetric Cournot oligopoly. Even if we allow for the existence of different types of firms initially, only one type (in almost all cases) can survive in the long run. Free entry leads an economy to a symmetric equilibrium, in which the excess entry theorem holds. Further, we consider the socially optimal policy for this economy. In cases of either (i) a concave demand (which implies strategic substitutability) or (ii) strategic complementarity (which implies a convex demand), the type of firms that should remain in the market to achieve social optimality does not necessarily coincide with the type of firms that will survive in the long run. The market may select not only the wrong number of firms but also the wrong type of firms in the long run.     

Work and family practices in Japanese firms: their scope,nature and impact on employee turnover

Using firm-level data from Japan, this study examines the effects of four commonly used work and family practices on employee turnover: flextime, maternity leave, child care leave, and nursing care leave. Overall, we find statistically significant associations between work and family practices and female employee turnover in Japan. In stark contrast, we do not find such a statistically significant linkage between work and family practices and male employee turnover. As such, this study highlights the potential moderating effect of individual characteristics such as gender on the relationship between work and family practices and employee attitudes and behaviours.     

Economic influences on perceived value,quality expectations and customer satisfaction

Consumer research has extensively analysed psychological determinants of customer satisfaction. As macro‐level customer satisfaction data were not available until recently, researchers have only taken first steps towards analysing economic determinants of customer satisfaction. Based on a more complex conceptual framework and on data from Germany and Japan, this article examines how economic processes influence the perceived value of goods and services, quality expectations and customer satisfaction. Using principal component analysis, regression analysis and structural equation modelling, this study finds that perceived value is positively influenced by both economic growth and lagged economic expectations. Customer satisfaction is positively influenced by economic growth and negatively by current economic expectations, with half of the impact mediated by perceived value. Economic expectations positively influence expectations regarding the quality of goods and services. These results imply that consumer researchers should no longer ignore economic influences on consumer attitudes. Marketing managers are advised to be cautious not to misinterpret economic‐induced variations in customer satisfaction as caused by corporate performance.     

Designing the optimal public pension system

This paper uses a two‐period overlapping generations model in order to provide a theoretical design for the optimal public pension system based on a partial equilibrium analysis. Household preferences depend on two periods' consumption and leisure and are positively homogeneous of degree m with respect to consumption in the working and retired periods. We present characteristic features of the optimal public pension system in this paper. First, differences in the population growth rate do not affect the large/small relation between the optimal net lifetime burden rates of generations. Second, we present the optimal public pension system explicitly if m < 1 and m ≠ 0. Third, the difference between the market time‐preference rate and the social time‐preference rate provides a crucial insight into the optimal burden rate of each generation.     

Environmental regulation and technology transfers

This paper analyzes the situation in which a national government introduces environmental regulations. Within the framework of an international duopoly with environmental regulations, an environmental tax imposed by the government in the home country can induce a foreign firm with advanced abatement technology to license it to a domestic firm without this technology. Furthermore, when the domestic firm's production technology is less efficient than that of the foreign firm, the foreign firm may freely reveal its technology to the domestic firm. These improvements through the voluntary transfer of technology imply that environmental regulations have positive impacts on innovation.     

Relative risk aversion once more: An analysis of Japanese households' financial asset holding pattern

It is widely accepted that as the total assets increse, households tend to diversify their portfolios. In other words, absolute risk aversion is decreasing. On the other hand, the proportion of risky assets may increase or decrease depending on whether relative risk aversion (RRA) is decreasing or increasing, and its direction is still left open as an empirical question. This study examines the constancy of RRA from Japanese individual households' financial asset holding data collected in 1984. Constant RRA implies that the proportion of risky assets in one's portfolio is constant regardless of the amount of total assets. A casual observation of household portfolio holding pattern suggests that this implication is clearly violated by the data, because there are substantial proportion of households which do not hold any risky assets. Zero-holding, however, may be interpreted as a result of fixed transaction cost incurred by individual investors when they hold risky assets. Then, we pose a question, ‘Do investors hold constant proportion of risky assets, when they decide to hold them?’ In order to explain a substantial number of zero risky asset holders in the sample, we propose a portfolio selection model with a transaction cost, and estimate the model using a variant of Heckman's two-step method. In estimation we control for individual investors' socioeconomic characteristics, as well as income and total assets. The construction of the model imposes nonlinear restrictions on the two estimators, from which we can test the specification of the model. The estimation results suggest that there is a statistically significant decreasing tendency linked to total assets but that its rate of change tapers off as total assets increase. Our results are consistent with the previous studies which tended to support constant RRA for the higher asset holders, and complement previous studies in explaining lower asset holders' investment behavior.     

Joint Allocation of Leisure and Consumption Commodities: A Japanese Extended Consumer Demand System 1979—90

In this study we estimate the parameters of a household expenditure function which includes joint choice of leisure and consumption commodities in scope without a separability assumption. We have used Japanese prices, wage rate, labour supply, and expenditure data on ten commodity groups, collected from 47 cities over 12 years. This data set has the advantage that separate observations are available for each data point for all the variables. We employed the AI demand system, for estimation. Controlling for time-specific effects, the result implied a definite rejection of the weak separability of labour supply and commodity choice, and non-rejection of the homogeneity and symmetry restrictions on the demand system. All the own-price elasticities are significantly negative, and both substitutes and complements are observed across commodity groups. As for the negativity, all but one of the eigenvalues of the substitution matrix are negative. The result as a whole showed consistency with demand theory. The estimated compensated labour supply elasticity is 0.39, which is in reasonable agreement with the previous studies.