Process R&;D and Product Line Deletion by a Multiproduct Monopolist

Relative to single-product firms, a multiproduct monopolist can internalize the negative externalities of its R&D investments (the ``cannibalization effect') in two ways: (1) To lower R&D investment for each product; and (2) To delete some of its product lines so as to enlarge the market size for the remaining lines. It is shown that line deletion is profitable if products are close substitutes. If products are not close substitutes, the multiproduct monopolist keeps all product lines and invests less in cost-reducing R&D than single-product firms engaging in Cournot competition with product differentiation. However, it invests more in R&D than single-product firms if there are significant economies of scope in R&D, or if the oligopolistic firms can cooperate in their R&D decisions.      

How to promote R&D-based growth? Public education expenditure on scientists and engineers versus R&D subsidies

This paper compares the positive and normative implications of two alternative measures to promote R&D-based growth: R&D subsidies to firms and publicly provided education targeted to the development of science and engineering (S&E) skills. The model accounts for the specificity of S&E skills, where individuals with heterogeneous ability choose their type of education. Although intertemporal knowledge spillovers are the only R&D externality, the analysis suggests that R&D subsidies may be detrimental to both productivity growth and welfare. Moreover, they raise earnings inequality. In contrast to R&D subsidies, publicly provided education targeted to S&E skills are found to be unambiguously growth-promoting and neutral with respect to the earnings distribution.     

On the Coexistence of Banks and Markets*

We examine the coexistence of banks and financial markets by studying a credit market where the qualities of investment projects are not observable and the investment decisions of entrepreneurs are not contractible. Standard banks can alleviate moral‐hazard problems, while financial markets operated by investment banks can alleviate adverse‐selection problems. In competition, standard banks are forced to increase repayments, since financial markets can attract the highest‐quality borrowers. This, in turn, increases the share of shirkers and may make lending unprofitable for standard banks. The coexistence of financial markets and standard banks is socially inefficient. The same inefficiency may occur with the entrance of sophisticated banks, operating with a combination of rating and ongoing monitoring technologies.     

Capital accumulation during the transition from plan to market1

This paper focuses on the process of capital accumulation and the forces that drive it in the countries undergoing the transition from plan to market. The methodological framework for analyzing the determinants of aggregate business investment draws on the neoclassical accelerator model, extending it to reflect some of the specificities of the transition environment. The model is estimated on data for the economies in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS). The results highlight the role of some key drivers of capital accumulation in an economy in transition, in particular, the relatively significant accelerator response to output, the importance of adjustment effects and financing constraints and the relatively minor role of the cost of capital.     

Optimal search auctions

We study the design of profit maximizing single unit auctions under the assumption that the seller needs to incur costs to contact prospective bidders and inform them about the auction. With independent bidders’ types and possibly interdependent valuations, the seller's problem can be reduced to a search problem in which the surplus is measured in terms of virtual utilities minus search costs. Compared to the socially efficient mechanism, the optimal mechanism features fewer participants, longer search conditional on the same set of participants, and inefficient sequence of entry.     

INCOME INEQUALITY, RECIPROCITY AND PUBLIC GOOD PROVISION: AN EXPERIMENTAL ANALYSIS

This paper analyses the impact of income inequality on public good provision in an experimental setting. A sample of secondary school students were recruited to participate in a simple linear public goods game where income heterogeneity was introduced by providing participants with unequal token endowments. The results show that endowment heterogeneity does not have any significant impact on contributions to the public good, and that consistent with models of reciprocity, low and high endowment players contribute the same fraction of their endowment to the public pool. Moreover, individuals appear to adjust their contributions in order to maintain a fair share rule.     

完善我国地方税制的思考

完善地方税制是我国分税制改革的内在要求。1994年我国分税制改革后建立的地方税制还存在着一些不完善之处。本文提出了完善地方税制的设想。     

Improving the perceptions of hotel managers

This research seeks to identify the importance of various capabilities and psychosociological factors of hotel managers, in order to improve their perception of the competitive environment emerging in the post-Internet era. Specifically, the study analyzes the relevance of education, experience, globalization capabilities, networking, creativity and vision of the future, and other factors related to personality and leadership, to advance the accuracy of this perception. The research used questionnaires with Spanish hotel managers, a Delphi study with international experts, and structural equation modeling to test the hypotheses formulated. The results corroborate the model established, and stress the importance of the education and globalization capabilities in this field.     

All in the family: why non-democratic leaders have more children

Economists have come to learn that politics matters. But survival matters the most to those involved in politics. We provide a theory whereby non-benevolent, non-democratic leaders increase their expected family size to raise the likelihood that a child will be a match at continuing the regime’s survival. As a consequence, having a larger family size raises the non-democratic leader’s expected rents that they can exploit from the citizenry. In contrast, democratic leaders have a lower desire to appropriate rents from the citizenry, and therefore have a diminished desire to have additional children for these purposes. We construct a data set of the number of children of country leaders as of August 31, 2005. We find that in a sample of 221 country leaders, fully non-democratic leaders have approximately 1.5–2.5 more actual children as compared to if they are fully democratic. This empirical relationship is established controlling for a full array of country specific as well as individual specific variables. Our finding also continues to hold when using alternative measures of family size. This paper has been prepared for a conference honoring Herschel I. Grossman at Brown University in April of 2006. We thank our discussant, Murat Iyigun, an anonymous referee, Michelle Garfinkel and conference participants for excellent suggestions.     

The Inflationary Consequences of a Currency Changeover on the Catering Sector: Evidence from the Michelin Red Guide*

This paper examines the inflationary consequences of a currency changeover in the catering market. Empirical evidence from the Michelin Red Guide shows that: (i) differently from restaurants in non‐euro countries, restaurants in the euro area experienced abnormal price increases just after the changeover; and (ii) among restaurants in the euro area, tourist restaurants are responsible for most of the abnormal price increases. These results suggest that proposed explanations for the changeover effect, such as menu adjustment and rounding up, are only part of the story. We present a simple model of the catering market that is consistent with the evidence.