The possibility of mixed-strategy equilibria with constant-returns-to-scale technology under Bertrand competition

Abstract. We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assumptions the only equilibrium is marginal-cost pricing.     

The impact of political cycle: Evidence from coalmine accidents in China

This paper examines the impact of political cycle on coalmine accidents in China. The political cycle is formed by the major local meetings of legislative bodies held every year in all provinces of China. This is because the government has a strong incentive to maintain social stability during the meetings and to focus on economic growth in other times. We test how such cycles affect coalmine fatality using monthly data at the provincial level between 2000 and 2010. We find that the number of accidents and casualties were significantly lowered during the local events of “two sessions” after controlling for other time fixed effects. The temporary reduction of accidents seemed to have been achieved by controlling production rather than by improving safety measures. The magnitude of the cycle for accidents is enlarged in provinces where media exposure is stronger and where the vice governor in charge of safety is faced with a possible extension to another term in the current post.     

Does quality influence choice of general practitioner? An analysis of matched doctor–patient panel data

The impact of quality on the demand facing health care providers has important implications for the industrial organization of health care markets. In this paper we study the consumers' choice of general practitioner (GP), assuming they are unable to observe the true quality of GP services. A panel data set for 484 Norwegian GPs, with summary information on their patient stocks, renders the opportunity to identify and measure the impact of GP quality on the demand, accounting for patient health heterogeneity. We apply a multi-equation model in the LISREL format, with GP quality and patient health as latent determinants of demand for GP services. Patient excess mortality rate at the GP level is one indicator of quality. Our results indicate that GP quality has a clear positive effect on demand, even when patient heterogeneity is accounted for.     

Local Linear Impulse Responses for a Small Open Economy*

Traditional vector autoregressions derive impulse responses using iterative techniques that may compound specification errors. Local projection techniques are more robust to this problem, and Monte Carlo evidence has suggested they provide reliable estimates of the true impulse responses. We use local linear projections to investigate the dynamic properties of a model for a small open economy, New Zealand. We compare impulse responses from projections to those from standard techniques, and consider the implications for monetary policy. We pay careful attention to the dimensionality of the model, and focus on effects of policy on gross domestic product, interest rates, prices and exchange rates.     

Competition versus efficiency: What drives franchise values in European banking?

This paper investigates how stock market investors perceive the impact of market structure and efficiency on the long-run performance potential of European banks. To that end, a modified Tobin’s Q ratio is introduced as a measure of bank franchise value. This measure is applied to discriminate between the market structure and efficient-structure hypotheses in a coherent forward-looking framework, in which differences in banks’ horizontal and vertical differentiation strategies are controlled for. The results show that banks with better management or production technologies possess a long-run competitive advantage. In addition, bank market concentration does not affect all banks equally. Only the banks with a large market share in a concentrated market are able to generate non-competitive rents. The paper further documents that the forward-looking, long-run perspective and the noise-adjustment of the performance measure overcome most of the drawbacks associated with testing these hypotheses in a multi-country set-up. Finally, notwithstanding the international expansion of bank activities, the harmonization of regulation and the macroeconomic convergence in the European Union (EU15), we still find that country-specific macroeconomic variables have a significant impact on bank performance. The findings indicate that there is a trade-off between competition and stability that should be taken into account when assessing mergers or acquisitions.     

THE ECONOMICS AND ORGANISATION OF CHINESE MINING IN COLONIAL AUSTRALIA

This article describes Chinese mining in colonial Australia using the examples of gold mining in southern New South Wales (NSW) and the Northern Territory as well as tin mining in northern NSW. Chinese miners were often more successful than their European counterparts. One reason for this success was the effective use that the Chinese made of large cooperative groups, a particularly efficient way to work a mining claim. Earlier studies of Chinese mining in Australia chiefly chronicled the racism and violence experienced by the Chinese and underestimated their significant economic contribution. Reasserting their economic importance challenges an exclusive focus on race.     

UNIVERSAL ACCESS,PARALLEL TRADE AND INCENTIVES TO INNOVATE

Governments often subsidize poorer groups in society to ensure their access to new drugs. We analyse the optimal income‐based price subsidies in a strategic environment. We show that universal access is less likely to arise when price arbitrage prevents international price discrimination. When this is not the case, under some income ranges, bilateral universal coverage can be supported by equilibrium subsidies together with bilateral partial provision. In such a case, international health policy coordination becomes relevant. We also show that asymmetric universal access to medicines across countries can arise, even when countries are ex ante symmetric, when international price discrimination is possible and governments cannot design subsidies proportional to either income or quality.     

Measures of economies with an arbitrarily large number of equilibria

Balasko (1978) shows that in a compact subset of the space of economies, not too many economies can have too many equilibria. We extend Balasko’s result to the whole set of economies for a suitable measure. We show that the measure of economies with a large number of equilibria approaches zero as this number tends to infinity. An analogous result in the infinite‐dimensional setting is also established.     

MODELLING TIME SERIES DATA OF MONETARY AGGREGATES USING I(2) AND I(1) COINTEGRATION ANALYSIS

The objective of this paper is to consider methodology for modelling time series data of monetary aggregates such as monetary base and broad money. A brief review is made with regard to the likelihood‐based cointegration analysis of I(2) (integrated of order 2) data and I(2)‐to‐I(1) transformations. The paper then investigates procedures for econometric modelling of monetary aggregates, which are in general deemed to be I(2) variables analogous to price indices. It is shown that I(2)‐to‐I(1) transformations centering on a money multiplier play an important role in the modelling procedures. Finally, the study presents an empirical illustration of the proposed methodology using monetary aggregate data from Japan.     

The role of credit in the Great Moderation: A multivariate GARCH approach

During the Great Moderation, financial innovation in the US increased the size and scope of credit flows supporting the growth of wealth. We hypothesize that spending out of wealth came to finance a wider range of GDP components such that it smoothed GDP. Both these trends combined would be consistent with a decrease in the volatility of output. We suggest testable implications in terms of both growth of credit and output and volatility of growth. In a multivariate GARCH framework, we test this view for home mortgages and residential investment. We observe unidirectional causality in variance from total output, residential investment and non-residential output to mortgage lending before, but not during the Great Moderation. These findings are consistent with a role for credit dynamics in explaining the Great Moderation.