We investigate experimentally the impact of continuous time on a four-player Hotelling location game. The static pure strategy Nash equilibrium (NE) consists of firms paired-up at the first and third quartiles of the linear city. In a repeated simultaneous move (discrete time) treatment, we largely replicate previous findings in which subjects fail to converge to the NE. However, in asynchronous move (continuous time) treatments we see clear convergence towards the NE.

While the competitive behavior of firms with regard to entry and exit activities serves as a driving force behind the business cycle, little attention has been paid to the issue of industry clusters when discussing belief-driven cyclical fluctuations. Faced with this deficiency, this study analyzes the possibility of the emergence of equilibrium indeterminacy from the perspective of industrial organization. By analyzing the effects of endogenous overhead costs in the market, this paper finds that belief-driven business cycle fluctuations are related to industry clusters. More specifically, a stronger spillover effect or a less pronounced congestion effect tends to increase the likelihood of local indeterminacy.

We propose a model of international oligopoly with two countries, two vertically-differentiated goods, and heterogeneous consumers in terms of their willingness to pay for quality. Various sources of pollution are taken into account: consumption, production and the transportation of goods between the two countries. Green persuaded consumers display consumption home bias: they derive additional satisfaction when consuming a domestic good because buying locally abates transportation pollution. We investigate whether consumption home bias effectively curbs global emissions. Finally, we uncover the environmental role played by the globalization of markets.

This article considers the national industrial relations policy aspects of the economic recovery agenda in Australia, in the context of the theory of monopsonistic competition, employment and productivity. This framework acknowledges the employer ability to exercise discretion in the setting of wages. The proposed reforms were unlikely to lead to any increase in economic growth through higher labour productivity or employment. Proposed agendas in enterprise bargaining, greenfields agreements and award simplification (as well as union regulation), would principally have reduced labour costs and incomes. In many circumstances, allowing employers to offer lower wages may lead to fewer filled jobs, higher labour turnover and absenteeism and lower employment. The incentive on employers to improve labour productivity may fall. Proposals to more energetically punish wage theft may have had the opposite effects, but these were abandoned by the government despite support from the other parties. In the end, the only part of the reform agenda to pass Parliament concerned changes to the definition and treatment of casual employees, but casual employment grew strongly before the Bill took effect, the crisis the Bill was meant to solve eased before the Bill was passed, and even if successful the changes would have done little to boost labour productivity.

This article fills a gap in the literature by quantifying impacts of fossil fuel subsidy reform on trade (inflow and outflow) in an oil-producing, “almost small”, economy, using Kuwait as an example. It employs a two-region economy-wide model with oligopoly behaviour in a general equilibrium framework. The model embodies unique elements of Kuwait's economic structure, idiosyncratic rigidities, and distortions, including oligopolistic industrial structure and labour markets. Simulations show that energy subsidies have minimal effects on trade and on non-energy exports, largely due to the pervasiveness of oligopolies that sustain large markups and their collusive pricing. Reforming energy subsidies generates higher pro-trade effects if implemented during low (not high) oil prices because its negative effects are partially offset by efficiency gains and reduction in oligopoly markups. Yet, contrary to claims by proponents of reforms, these effects remain largely constrained unless appropriate incentives are introduced. These results have important policy implications. In developing oil-exporting economies with pervasive oligopolies, microeconomic reform can be a channel through which to achieve pro-trade effects of energy subsidy reform. Further, benefits beyond export expansion, such as higher economic efficiency, could be better motivators of energy subsidy reform in oil economies.

We examine relations between strategic environmental policy, international R&D cartels and research joint ventures (RJVs), using a third-country model with Cournot duopoly. We indicate that forming an R&D/RJV cartel reduces governments' incentives to extract rent from consumers in the third country. Contrary to conventional wisdom, we find that social welfare under R&D cartels with full information sharing, i.e., RJV cartels, cannot surpass that under R&D/RJV competition, whereas forming an R&D/RJV cartel works well for environmental investment. Among the policy implications, we show that governments can maximize global welfare by collectively determining whether to allow R&D/RJV cartels.

The farm-gate price of raw milk in Iran is determined annually in negotiations among representatives of dairy processors, milk producers, and government officials. This study estimates the average bargaining power of dairy farmers and processors, through applying the generalized axiomatic Nash approach in a bilateral bargaining model. We employ annual data from 1990 to 2013 to estimate econometric representation of a bilateral bargaining model using a Monte Carlo expectation maximization algorithm. Results imply a higher bargaining power of 0.69 for processors, compared with 0.31 for farmers. This asymmetry of bargaining power causes unequal allocation of gains in the milk market.

The U.S. broiler industry is highly vertically integrated and increasingly concentrated in the number of firms and production areas. These structural elements could have implications for performance and the functioning of the law of one price (LOP) across regions. This article investigates this using data on four regional markets. Cointegration results indicate that regional prices are spatially linked in the long run, but pairwise cointegration was not found, suggesting that the LOP does not hold. Causality tests confirm the relative importance of price shocks from the South. This finding is reflective of price coordination by firms with production in multiple regions.

Consumer product manufacturers often compete in dynamic, multi-firm oligopolies using multiple strategic tools. While existing empirical models of strategic interaction typically consider only parts of the more general problem, this paper presents a more comprehensive alternative. Marketing decisions are dynamically optimal, consistent with optimal consumer choice, and responsive to rival decisions. Using a single-market case study that consists of five years of four-weekly data on ready-to-eat cereal sales, prices, and new brand introductions, we test several hypotheses regarding the nature of strategic interaction among several rival manufacturers. We find that cereal manufacturers price and introduce new brands cooperatively in the same period, but behave more competitively when dynamic reactions are included.

Small research firms developing biotechnology applications often focus on establishing intellectual property rights (IPRs), which can then be sold to more established firms with existing market channels. This paper presents a method for valuing the IPRs for an innovation that lowers product production costs below those associated with the patented process of a monopolist. The application to Glucocerebrosidase enzyme from transgenic tobacco suggests an IPRs value of about $1.75 billion. Despite the innovator's market power, significant surplus gains also accrue to consumers. Further, U.S. antitrust laws that prohibit IPRs acquisition by the current monopolist increase consumer welfare by almost 50%.

The purpose of this paper is to investigate the mutual compatibility of voluntary provision of public good and strategic behavior of consumers in the market for private goods. We study the existence of equilibrium private provision of a public good within general strategic equilibrium framework with a finite number of players. The mechanism for the provision of public good follows the one due to Bergstrom, Blume and Varian (1986) and the trading mechanism for private goods follows the strategic market game with wash sales due to Dubey and Shubik (1986). The new result of the paper is the demonstration of existence of an equilibrium point in pure strategies for finite number of players. Due to the existence of trivial equilibria at which all markets are closed, equilibrium points are constructed as limits of sequences of ε- equilibria of perturbed games.

Bilateral oligopoly is a simple model of exchange in which a finite set of sellers seek to exchange the goods they are endowed with for money with a finite set of buyers, and no price-taking assumptions are imposed. If trade takes place via a strategic market game bilateral oligopoly can be thought of as two linked proportional-sharing contests: in one the sellers share the aggregate bid from the buyers in proportion to their supply and in the other the buyers share the aggregate supply in proportion to their bids. The analysis can be separated into two “partial games”. First, fix the aggregate bid at B; in the first partial game the sellers contest this fixed prize in proportion to their supply and the aggregate supply in the equilibrium of this game is (B). Next, fix the aggregate supply at X; in the second partial game the buyers contest this fixed prize in proportion to their bids and the aggregate bid in the equilibrium of this game is (X). The analysis of these two partial games takes into account competition within each side of the market. Equilibrium in bilateral oligopoly must take into account competition between sellers and buyers and requires, for example, ((B)) = B. When all traders have Cobb-Douglas preferences (B) does not depend on B and (X) does not depend on X: whilst there is competition within each side of the market there is no strategic interdependence between the sides of the market. The Cobb-Douglas assumption provides a tractable framework in which to explore the features of fully strategic trade but it misses perhaps the most interesting feature of bilateral oligopoly, the implications of which are investigated.

Before 1936, private insurance against unemployment was mostly run by trade unions. Commercial companies, meanwhile, did not penetrate into this insurance branch, which is probably due to the advantages that trade unions had when dealing with adverse selection and moral hazard problems. Nevertheless, union-based unemployment insurance reached a lower level of development than other private social insurance schemes, like sickness insurance, perhaps because of the financial difficulties that economic crisis involved for unemployment funds. Also, unemployment insurance spread specially among urban and high-wage workers, although coverage rates in Spain were below those of other European countries with higher income levels. However, even in the latter private coverage against unemployment did not reach 10% of the working population. As in other European countries, Spanish unemployment union-funds implemented strict economic incentives to deal with moral hazard, but precisely this hindered the spreading of private unemployment insurance.

The institutional environment of Portuguese banking during the golden age years of economic growth (1950–73) has been criticised in many instances, at the time and in recent literature. Direct observers of the period as well as historians have stressed two main aspects of that environment: excessive protection of existing banks, allowing them to obtain high rents, which represented a disincentive for them to compete and innovate; excessive concentration of their activity on short-term commercial paper, thus preventing them from contributing to finance growth. There seems to be a contradiction here, however, with the high growth rates of the years 1950 to 1973. The apparent contradiction is not limited to Portugal, in fact, as rapid growth in many economies in that period occurred within a framework of heavily regulated financial systems. This is the ‘financial paradox’ of the golden age. Portugal is an interesting case in the international perspective. As in the rest of the western world, legislation repressed banking quite tightly, but banks circumvented the law and competed with each other. The signs of competition were visible mostly in two dimensions: the growth of time deposits and geographical expansion.

The impact of private benefits extraction on the values of oligopolistic firms is analyzed. Private benefits are assumed to generate costs which are passed through the organizational structure and create price distortion in the downstream product market. We prove that this may affect the profit (i.e. the market value) of the firms in a positive sense since the intensity of rivalry is curbed by the cost increase.

In oligopoly, private benefits extraction may enhance the profits while still generating a welfare loss: this suggests that corporate governance cannot be divorced from competition policy in industries where managerial opportunism generates expropriation costs.

This paper studies the production strategies of firms in a duopoly market of homogenous products characterized by quantity competition. Demand is partially unknown and firms are free to produce once, whenever they want before the existence of demand. We show that the nature of the equilibrium in such a game depends on the importance of the information spillovers between a leader and a follower. A Pareto-optimal sequential entry may happen. Therefore, the existence of information spillovers can be sufficient to bypass the leader's rent dissipation result in a duopoly quantity competition framework.

This paper introduces two equilibrium concepts which extend the notion of Stackelberg competition to cover a general equilibrium framework. From the benchmarks of Cournot-Walras economies and of strategic market games, the introduction of an active leader modifies the working of market power and the configuration of strategic interactions. In the context of a simple pure exchange economy, asymptotic identification and welfare results are thus obtained, about Stackelberg general equilibria, compared to Cournot general equilibria and to the competitive equilibrium.

Cet article traite de l'exclusion par manipulation des marchés de permis d'émission. Dans un premier temps, nous déterminons la valeur de l'exclusion que le permis représente. Puis, nous définissons la stratégie de surachat des permis et évaluons son impact sur le prix du permis. Nous en tirons alors un certain nombre de conclusions en termes de dotations initiales et de politique économique, après avoir illustré ces résultats par une application numérique.

Cet article étudie les interactions entre le choix technologique de flexibilité des firmes et la collusion tacite dans un duopole. On montre que l'émergence des technologies flexibles facilite la collusion tacite lorsque les firmes se livrent une concurrence en prix ; en revanche, si la concurrence est en quantités, les technologies flexibles rendent la mise en oeuvre d'un accord de collusion tacite plus difficile. On caractérise les configurations technologiques qui émergent dans ce contexte de jeux répétés. On en déduit que les accords de semi-collusion encouragent l'adoption des technologies flexibles.

Nous étudions l'émergence de fluctuations endogènes dans un modèle à générations imbriquées dans lequel les producteurs se livrent une concurrence à la Cournot avec libre entrée. L'économie est caractérisée par un taux de marge variable et des rendements croissants. Nous analysons l'influence de la variabilité du taux de marge et du niveau des rendements croissants sur l'indétermination locale de l'équilibre stationnaire et l'existence de cycles endogènes. Nous montrons que des fluctuations endogènes stochastiques et déterministes peuvent émerger si les rendements sont faiblement croissants et sont proches des rendements constants. Par ailleurs, de telles fluctuations peuvent apparaître lorsque la demande de travail est décroissante et a une pente inférieure à celle de l'offre de travail.