Regional Economic Integration and Article XXIV of the GATT

This paper studies the economic impact of regionalism under the realistic assumptions of constant tariffs and asymmetric bloc formation. As an extension of the Krugman framework, the impact is decomposed into several components, each of which has a clear economic implication. Economic integration definitely worsens outsiders' welfare even if the external tariffs of the bloc are unraised. Bloc members' welfare first increases with the expansion of the bloc; but when about half of the world is united into the bloc, welfare begins to decrease. Simulation results shed some light on the incentive structure of major participants, who face various configurations of regional integration.     

ALTERNATIVE STRATEGIES OF A PUBLIC ENTERPRISE IN OLIGOPOLY REVISITED: AN EXTENSION TO STACKELBERG COMPETITION

This paper revisits De Fraja and Delbono (1989), which is the seminal paper on mixed oligopoly, in order to pay more attention to Stackelberg competition. First, we show that, even in Cournot competition, if the number of private firms is sufficiently small, privatization necessarily reduces social welfare. Second, we demonstrate that when a public firm is a Stackelberg leader before and after privatization, privatization necessarily reduces welfare irrespective of the number of private firms. Moreover, we show that even when a public firm remains a follower, privatization reduces welfare if the number of private firms is relatively small.     

Time Preference and Trade Imbalance

This paper presents a unified theory of trade and investment in a world where the rate of time preference varies between countries. In the framework proposed by Buiter (1981 ), we can analyze a situation wherein two countries have different rates of discount. Here, the value of the debt to income does not converge to zero but remains constant even in the long run. Furthermore, we show that the existence of less‐capital‐intensive nontradables promotes capital movements: since a more patient country incompletely specializes in less‐capital‐intensive nontradables, capital must flow out of it.     

Virtual Word of Mouth and Willingness to Pay for Consumer Electronic Innovations

The authors examine the impact of virtual word‐of‐mouth (vWOM) communication on willingness to pay (WTP) for an innovation. A series of hypotheses are developed that link vWOM to the credibility of innovation information, perceived utilitarian value, and the perceived hedonic value of an innovation, which are in turn hypothesized to influence WTP. The authors test these hypotheses using data collected in Japan from 658 potential adopters of e‐readers and from 565 potential adopters of smartphones. Findings indicate that, in both samples, vWOM is positively correlated with the perceived credibility of innovation information, which in turn is positively correlated with both perceived utilitarian value and perceived hedonic value. WTP is also positively correlated with an innovation's perceived utilitarian and perceived hedonic value. In addition, the path between vWOM and perceived hedonic value is positive and significant in both samples. However, the path between vWOM and perceived utilitarian value is positive and significant in the smartphone sample, but not in the e‐reader sample. The empirical findings provide support for theoretical arguments that link WTP for complex consumer electronic products to consumer perceptions of utilitarian and hedonic value. The results also have important implications for the creation of vWOM strategies designed to reduce the price sensitivity of potential adopters.     

Issues on Japan's Intellectual Product

Evidence suggests that Japan's basic research levels seem to lag behind that of the USA. This paper seeks to investigate (1) the reasons for this difference in the context of societal impact on the creation of intellectual products, (2) the influence of the different legal systems as they relate to the treatment of intellectual products, and (3) the aspect of market size as an essential factor in the creation of intellectual products protected by copyright. This last category includes intellectual products such as visual products, publications, music, and computer software. © 1997 John Wiley & Sons, Ltd.     

BOOK REVIEWS

Regulation and Development by Jean‐Jacques Laffont, Cambridge, Cambridge University Press, 2005, xxiii + 268 pp. The Economics of Microfinance by Beatriz Armendáriz de Aghion and Jonathan Morduch, Cambridge, Mass., MIT Press, 2005, xiv + 346 pp. Asian States: Beyond the Developmental Perspective edited by Richard Boyd and Tak‐Wing Ngo, London, RoutledgeCurzon, 2005, xv + 224 pp. Growth, Structural Change and Regional Inequality in Malaysia by Asan Ali Golam Hassan, Aldershot, Ashgate, 2004, xiv + 245 pp. The Monetary Geography of Africa by Paul R. Masson and Catherine Pattillo, Washington, D.C., Brookings Institution Press, 2005, xx + 217 pp.     

The Choice Between Flexible Exchange Rates, Capital Control and the Currency Board in Asian Countries: A Perspective from the "Impossible Trinity"

We attempt to compare adjustment costs under exchange rate regimes in East Asian economies during their recovery processes. The criteria are the degree of overshooting in exchange rates, the changes in country risks, and the severity and duration of the recovery processes. Linear ranking is difficult. Managed rates with capital control worked for macroeconomic performance despite the welfare loss due to blocking capital flows. The currency board system worked well for stability, but recent experiences of Argentina and Hong Kong were deflationary. Under flexible rates, many economies that received IMF grants suffered a drastic initial downturn but later recovered vigorously. JEL Classification Numbers: F31, F32, F33.