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Articles 661 - 678 of 678

Full-Text Articles in Economic Theory

Excess Capacity: A Note, Sougata Poddar Jan 2003

Excess Capacity: A Note, Sougata Poddar

Economics Faculty Articles and Research

In a two period model of strategic entry deterrence where the incumbent firm moves before the entrant by installing capacity for production, Dixit (1980) argued that in a (perfect) equilibrium excess capacity would not be observed, contradicting Spence's (1977) result on the same issue. In this note, we show that Dixit may not always remain true when we allow for demand uncertainty.

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The Evolution Of Human Life Expectancy And Intelligence In Hunter-Gatherer Economies, Hillard Kaplan Jan 2003

The Evolution Of Human Life Expectancy And Intelligence In Hunter-Gatherer Economies, Hillard Kaplan

ESI Publications

The economics of hunting and gathering must have driven the biological evolution of human characteristics, since hunter-gatherer societies prevailed for the two million years of human history. These societies feature huge intergenerational resource flows, suggesting that these resource flows should replace fertility as the key demographic consideration. It is then theoretically expected that life expectancy and brain size would increase simultaneously, as apparently occurred during our evolutionary history. The brain here is considered as a direct form of bodily investment, but also crucially as facilitating further indirect investment by means of learning-by-doing.

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Research Joint Ventures, Product Differentiation, And Price Collusion, Luca Lambertini, Sougata Poddar, Dan Sasaki Mar 2002

Research Joint Ventures, Product Differentiation, And Price Collusion, Luca Lambertini, Sougata Poddar, Dan Sasaki

Economics Faculty Articles and Research

We investigate the interplay between firms’ decisions in product development, either joint or independent, and their ensuing repeated pricing, either collusive or Bertrand–Nash. A joint venture develops a single product, whereas independent ventures develop their respective products which can be differentiated. We prove that joint product development and the resulting lack of horizontal product differentiation may destabilise collusion, whilst firms’ R&D decisions have no bearings on collusive sustainability if differentiation is vertical. We also discover the non-monotone dependence of firms’ venture decisions at the development stage upon their time preferences, as well as upon consumers’ willingness to pay.

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Dirty Money, Gabriele Camera Jan 2001

Dirty Money, Gabriele Camera

Economics Faculty Articles and Research

An inter-governmental body is encouraging the replacement of currency with the objective of discouraging illegal economic activities. This policy is analyzed in a search-theoretic model where individuals choose legal or illegal production, settle trades via monetary or costly intermediated exchange, and where the government imperfectly monitors monetary transactions. Stationary monetary equilibria with both legal and illegal production exist, in which case the over-provision of currency may increment the extent of illegal production. This result holds also in the presence of intermediated exchange of legal goods. Equilibria with differing transaction patterns and degrees of illicit activities coexist.

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Strategic Flexibility In Information Technology Alliances: The Influence Of Transaction Cost Economics And Social Exchange Theory, Candace Ybarra, Margarethe Wiersema Jul 1999

Strategic Flexibility In Information Technology Alliances: The Influence Of Transaction Cost Economics And Social Exchange Theory, Candace Ybarra, Margarethe Wiersema

Business Faculty Articles and Research

Utilizing a model drawn from both transaction cost economics and social exchange theory, we analyze determinants of strategic flexibility in a sample of strategic alliances involved in joint development agreements or joint research pacts. Findings indicate that, in general, determinants suggested by transaction cost economics provided flexibility in modification and inflexibility in exit. From social exchange theory, trust was found to be positively related to both types of flexibility while another component of social exchange theory, dependence, was found to be negatively related to the strategic flexibility of the alliance. Results also found that factors suggested by both transaction cost …

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Standardization And The Stability Of Collusion, Luca Lambertini, Sougata Poddar, Dan Sasaki Mar 1998

Standardization And The Stability Of Collusion, Luca Lambertini, Sougata Poddar, Dan Sasaki

Economics Faculty Articles and Research

We characterize the interplay between firms' decision in terms of product standardization and the nature of their ensuing market behaviour. We prove the existence of a non-monotone relationship between firms' decision at the product stage and their intertemporal preferences.

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Network Structure And Entry In The Deregulated Airline Industry, Joseph Berechman, Sougata Poddar, Oz Shy Jan 1998

Network Structure And Entry In The Deregulated Airline Industry, Joseph Berechman, Sougata Poddar, Oz Shy

Economics Faculty Articles and Research

We explore how an incumbent airline firm structures its route network under the threat of entry caused by deregulation. We show that entry induces the incumbent firm to strategically alter its flight operating network from a fully connected network (FC) to a hub-and-spoke network (HS). While most of the literature always assumed that the use of of HS network is primarily for the purpose of cost reduction, we show that hub-and-spoke operation can be used as a strategic device by the incumbent firm when it faces a threat of entry in its operating zone.

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Gatt, Dispute Settlement And Cooperation: A Reply, Dan Kovenock, Marie Thursby Jan 1997

Gatt, Dispute Settlement And Cooperation: A Reply, Dan Kovenock, Marie Thursby

Economics Faculty Articles and Research

In our 1992 paper, we analyzed GATT and its dispute settlement procedure (DSP) in the context of a supergame model of international trade featuring both explicit (GATT) and implicit (non-GATT) agreements. Our paper departed from the previous economics literature on GATT enforcement (see, for instance Hungerford (1991) and Ludema (1990)) by incorporating the ``twin engines of international obligation and retaliation'' (Hudec, 1990). International obligation imposed a cost of violating an explicit international agreement, such as GATT, while retaliation could take place either within the rules stipulated by the international agreement or by punishment outside of the agreement. In Section 2 …

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Demand Fluctuations And Capacity Utilization Under Duopoly, J. J. Gabszewicz, Sougata Poddar Jan 1997

Demand Fluctuations And Capacity Utilization Under Duopoly, J. J. Gabszewicz, Sougata Poddar

Economics Faculty Articles and Research

This paper studies the impact of uncertain demand on firms' capacity decisions when they operate in an oligopolistic environment. We define a two-stage game where firms choose capacity in the first stage without knowing which state of nature is going to realize, and output levels in the second, knowing which state is realized. We prove the existence of a symmetric subgame perfect equilibrium at which firms are in excess capacity compared with the capacity they would choose in the Cournot certainty equivalent game.

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The All-Pay Auction With Complete Information, Michael R. Baye, Dan Kovenock, Casper G. De Vries Jan 1996

The All-Pay Auction With Complete Information, Michael R. Baye, Dan Kovenock, Casper G. De Vries

Economics Faculty Articles and Research

In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widely used in economics to model rent seeking, R&D races, political contests, and job promotion tournaments. We fully characterize equilibrium for this class of games, and show that the set of equilibria is much larger than has been recognized in the literature. When there are more than two players, for instance, we show that even when the auction is symmetric there exists a continuum of asymmetric equilibria. Moreover, for economically important configurations …

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Capital Structure And Product-Market Rivalry: How Do We Reconcile Theory And Evidence?, Dan Kovenock, Gordon Phillips Jan 1995

Capital Structure And Product-Market Rivalry: How Do We Reconcile Theory And Evidence?, Dan Kovenock, Gordon Phillips

Economics Faculty Articles and Research

This paper presents empirical evidence on the interaction of capital structure decisions and product market behavior. We examine when firms recapitalize and increase the proportion of debt in their capital structure. The evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing. This finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition. Following the empirical evidence we introduce the "strategic investment" effects of debt and argue that this effect, in conjunction with agency …

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Rigging The Lobbying Process: An Application Of The All-Pay Auction, Michael R. Baye, Dan Kovenock, Casper G. De Vries Jan 1993

Rigging The Lobbying Process: An Application Of The All-Pay Auction, Michael R. Baye, Dan Kovenock, Casper G. De Vries

Economics Faculty Articles and Research

In a world where a politician can explicitly auction off a prize to the high bidder, the standard auction literature can be used to analyse political behavior. The justice system, however, precludes politicians from explicitly selling the prize to the highest bidder. Thus politicians cannot let it become public knowledge that they are in the business of selling political favors. An institution has emerged in political markets to overcome this constraint which are termed as lobbying. Lobbyists make implicit payments to the politician through campaign contributions. If these up-front payments were rebated to those failing to receive the prize, it …

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Rational Choice: The Contrast Between Economics And Psychology, Vernon L. Smith Jan 1991

Rational Choice: The Contrast Between Economics And Psychology, Vernon L. Smith

Economics Faculty Articles and Research

Rational Choice--the published record of a conference on economics and psychology--frames the issues as a contest between economic theory and the falsifying evidence from psychology. According to a third perspective, that of experimental economics, most standard theory provides a correct first approximation in predicting motivated behavior in laboratory experimental markets, but the theory is incomplete, particularly in articulating convergence processes in time and in ignoring decision cost. This view has roots in the work of Herbert Simon and Sidney Siegel, but it is not plainly represented in contemporary research in economic pyschology.

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Notes On The Effect Of Capital Gains Taxation On Non-Austrian Assets, Dan Kovenock, Michael Rothschild Jan 1985

Notes On The Effect Of Capital Gains Taxation On Non-Austrian Assets, Dan Kovenock, Michael Rothschild

Economics Faculty Books and Book Chapters

This paper is an attempt to assess the effect of capital gains taxation on non-Austrian assets, such as claims to profits of continuing enterprises. As compared to taxation on an accrual basis, the capital gains tax discourages sales of appreciated assets. This is the "lock-in" effect. Because assets subject to capital gains taxation are generally held a long time, conventional estimates suggest that the effective rate of capital gains taxation is low. We contend that conventional estimates could seriously underestimate the effective rate of capital gains taxation because they ignore uncertainty. We construct a model which allows us to calculate …

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Price Determination In A Competitive Industry With Costly Information And A Production Lag, Reuven Glick, Clas Wihlborg Jan 1985

Price Determination In A Competitive Industry With Costly Information And A Production Lag, Reuven Glick, Clas Wihlborg

Business Faculty Articles and Research

We analyze the role of information for price and output adjustment when competitive firms with rational expectations cannot directly distinguish between industrywide and firm-specific cost disturbances. Firms may become informed about industrywide cost conditions by acquiring information at a cost. The sensitivity of price and output to cost disturbances decreases as more firms choose to purchase information. The equilibrium industry share of informed firms increases as the cost of information falls and total cost variability increases. The equilibrium share of informed firms is largest when there is a comparable degree of variability in both industrywide and firm-specific costs.

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Natural Monopoly And The Contestable Markets Hypothesis: Some Preliminary Results From Laboratory Experiments, Don R. Coursey, R. Mark Isaac, Vernon L. Smith Jan 1984

Natural Monopoly And The Contestable Markets Hypothesis: Some Preliminary Results From Laboratory Experiments, Don R. Coursey, R. Mark Isaac, Vernon L. Smith

Economics Faculty Articles and Research

The concept of natural monopoly is one of the most familiar in economics. Many supposed natural monopolies are the object of widespread state, local, and federal regulation. It was in addressing issues of public utility regulation that Demsetz laid the foundation for an alternative scenario for decreasing cost markets. Demsetz's article promoted a debate over whether a formal auction system might provide a practical approach to monopoly control. This literature is rich in examining the practical difficulties of implementing such an institution. The important characteristic of the contestable markets hypothesis, as we interpret it, is that at least two firms …

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Capital Gains Taxation In An Economy With An ‘Austrian Sector’, Dan Kovenock, Michael Rothschild Jan 1983

Capital Gains Taxation In An Economy With An ‘Austrian Sector’, Dan Kovenock, Michael Rothschild

Economics Faculty Articles and Research

This paper examines the effects of a proportional capital gains in an economy with an Austrian sector (with wine and trees) and an ordinary sector. We analyze the effect of capital gains taxation (on both an accrual and a realization basis) on the efficiency with which resources are used within the Austrian sector. Since time is the only input which can be varied in the Austrian sector, this amounts to looking at the effect of capital gains taxation on the harvesting time or selling time of assets. Accrual taxation decreases the selling time of Austrian assets. Realization taxation decreases the …

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An Experimental Study Of Competitive Market Behavior, Vernon L. Smith Jan 1962

An Experimental Study Of Competitive Market Behavior, Vernon L. Smith

Economics Faculty Articles and Research

Recent years have witnessed a growing interest in experimental games such as management decision-making games and games designed to simulate oligopolistic market phenomena. This article reports on a series of experimental games designed to study some of the hypotheses of neoclassical competitive market theory.

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