Platform strategy of video game software in Japan, 1984–1994: theory and evidence

This paper analyzes a model of platform competition in markets of system products composed of hardware and complementary software, with a specific focus on exclusive contracting. When hardware products are strongly differentiated, or when consumers value the marginal benefit of additional software variety highly, we find that, in equilibrium, hardware firms will engage in exclusive contracting of software development. This finding is strongly supported by our empirical results in the Japanese home video game industry, dominated by Nintendo from 1984 to 1994. Copyright © 2010 John Wiley & Sons, Ltd.     

The Foreign Exchange Origins of Japan's Economic Slump and Low Interest Liquidity Trap

Japan's macroeconomic problem has yet to be properly diagnosed. Throughout the 1990s, policy makers could not decide on the proper macro economic measures to combat the country's severe economic slump. We propose a unified explanation, with deep historical roots, of why aggregate private demand failed to recover after Japan's stock and real estate bubbles burst in 1991 and deflationary pressure continues. The problem is not purely ‘made in Japan’. It arises from Japan's unbalanced mercantile relationship with the United States. Starting in the early 1970s, numerous trade disputes between the two countries created tensions that were (temporarily) resolved by the yen going ever higher against the dollar up to 1995. In the last two decades, this persistent pressure for the yen to rise was further aggravated by Japan's large current‐account (saving) surpluses as the counterpart of America's large current account (saving) deficits. The legacy is the expectation that trade and financial tensions will recur so that the yen will be higher 10, 20, or 30 years from now –with Japan's (wholesale) price level forced correspondingly lower and nominal interest rates on yen assets remaining more than four percentage points less than those on dollar assets. This fear of yen appreciation, whose timing is erratic and unpredictable, now inhibits private domestic investment by both Japanese firms and households. Our theory also explains why, in the late 1990s, nominal interest rates on short‐term yen assets were compressed toward zero so as to destroy the normal profit margins of the banking system. In this liquidity trap, the Bank of Japan –whose monetary policy has been quite ‘expansionary’–is powerless to stimulate the flagging economy. To spring the liquidity trap, eliminate deflationary pressure, and restore macro economic balance in Japan, the American and Japanese governments must act jointly to quash the expectation that the yen will be higher in the future than it is today.     

A polyhedral approximation approach to concave numerical dynamic programming

This paper introduces a numerical method for solving concave continuous state dynamic programming problems which is based on a pair of polyhedral approximations of concave functions. The method is globally convergent and produces computable upper and lower bounds on the value function which can in theory be made arbitrarily tight. This is true regardless of the pattern of binding constraints, the smoothness of model primitives, and the dimensionality and rectangularity of the state space. We illustrate the method's performance using an optimal firm management problem subject to credit constraints and partial investment irreversibilities.     

The boundaries of business: commentaries from the experts

The World Leadership Survey, which began a worldwide dialogue on a set of important issues facing managers in the 1990s, continues with commentaries from four recognized experts, each of whom addresses the survey results from a different perspective. Kenichi Ohmae, chairman of McKinsey and Company in Tokyo, addresses "The Perils of Protectionism." Ohmae argues that the old definitions of national boundaries and corporate interests reflect obsolete economic theories. The real test of national well-being, Ohmae suggests, should be the economic welfare of a nation's citizens. Sylvia Ann Hewlett, economist and former director of the Economic Policy Council in New York, analyzes the survey in terms of "The Human Resource Deficit." According to Hewlett, four principles should guide corporate strategies in the 1990s: human resource development should move up the scale of corporate priorities; a family-friendly workplace will attract and keep talented workers; companies will take limited direct responsibility for training and education; the private sector will promote public investment in social issues. James E. Austin, the Richard P. Chapman Professor of Business at the Harvard Business School, writes about "The Developing-Country Difference." In developing countries, Austin observes, managers display attitudes and follow practices that diverge from those in developed nations. In particular, the role of government, investments in education and technology, and environmental concerns set these nations apart. Michel Crozier, president of the Centre de Sociologie des Organisations in Paris, writes about "The Changing Organization." In the 1990s, Crozier argues, managers need to break from old management theories and practice, questioning hierarchy, control, distance, access to information-the whole managerial system.     

Are ASEAN Countries Havens for Japanese Pollution‐Intensive Industry?

In an era of closer worldwide economic integration, the role that environmental regulations play in shaping a country's comparative advantage is greater than ever. This has led to fears that ‘dirty’ firms will relocate from developed to developing countries where environmental regulations may be less stringent – the so‐called pollution haven hypothesis. To date, however, there is little support for the existence of pollution havens despite anecdotal evidence and the theoretical predictions. In this paper we employ a unique industry‐level dataset for Japan and examine whether Japanese industries have relocated production to their ASEAN neighbours in response to the relative stringency of Japanese environmental regulations. Not only do we find no evidence for pollution‐haven‐consistent behaviour but also some indication that the complex relationship between the characteristics of Japanese dirty industries and environmental regulations may actually have reduced Japanese outward FDI to the Philippines.     

The quality effect: Does financial liberalization improve the allocation of capital?

We document evidence of a “quality effect” of financial liberalization on allocative efficiency, as measured by dispersion in Tobin's Q across firms. We predict that financial liberalization, by equalizing access to credit, is associated with reduced variation in expected marginal returns. We test this prediction using a new financial liberalization index and firm-level data for five emerging markets: India, Jordan, Korea, Malaysia, and Thailand. We find robust evidence that financial liberalization, rather than financial deepening, is associated with improved allocative efficiency.     

The regulations for indoor air pollution in Japan: a public health perspective

In recent years public health problems caused by indoor air pollution, known as ‘Sick Building Syndrome in housing’, or ‘Sick House Syndrome’ in Japan, have been drawing strong public concern. After conducting extensive exposure assessment, government authorities have taken effective measures to solve the problem. However, as a result of diversification and increase in quantities of industrial chemicals, existing regulations do not cover enough ranges of various potential hazardous chemicals. Hence, the regulations seek to be changed from hazard‐based regulation to a risk‐based one. Good indoor air quality (IAQ), which does not pose unacceptable health risks from all pollutants affecting indoor air, should be ensured for all public people. The objective of this study is to clarify the remaining issues to be solved urgently, related to the regulations to ensure a good IAQ. We reviewed enormous numbers of the existing governmental and industrial voluntary standards and/or guidelines, literature and documents concerning IAQ research in the past 40 years. Our results showed six subjects from those remaining issues. Based on these subjects we created a new scheme to control the IAQ; we especially regarded a comprehensive labeling system as one of the important strategies.     

An Analytical Evaluation Method of the Operational Risk Using Fast Wavelet Expansion Techniques

A financial institution that adopts an advanced measurement approach (AMA) as a method of computing operational risk capital has to measure 99.9 % value-at-risk (VaR) as the amount of an operational risk. The most popular method to satisfy the AMA standards requires the evaluation of aggregate (compound) loss distribution, which is called the loss distribution approach (LDA). The Monte Carlo (MC) method is a well known method for calculating VaR under the LDA. However, when using the MC method to calculate VaR, the statistical error of VaR for the fat-tailed distribution increases and the computation time increases in proportion to the expected value of frequency distribution. Since the MC method has these problems, this paper presents a new methodology to compute VaR under the LDA using fast wavelet expansion techniques. The key features of our algorithm are follows: (1) Scale transformation technique for loss distributions, (2) Double exponential transformation for oscillatory integrals, (3) Finite series expansion of the wavelet scaling coefficients, (4) Wynn’s epsilon algorithm to accelerate the convergence of those series, (5) Efficient cubic spline interpolation method to calculate the moment generating function. We illustrate the effectiveness of our algorithms through numerical examples.     

Why do only the G7+2 countries among United Nations members discuss about international public goods? A simulation study

This article investigates why only the Group of 7 plus China and Russia (G7 + 2 countries) among 194 United Nations members discuss about international public goods? By simulating the heterogeneity of income, prices and preference parameters on the total provisions and the number of free riders, we find that the number of contributors for international public goods is 15 under the 194 member countries, while the others are free riders. In addition, the contributors are the top 15 powerful countries with largest dropout value over the world. Then, the discussion with only 15 countries for public goods is meaningful. As large as the heterogeneity of parameters is, the number of contributors becomes closer to G7 + 2.