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This paper evaluates the comparative performance of emission and performance standards in a one-stage game of abatement R&D and Cournot duopoly, in terms of R&D propensity, output and social welfare. For each standard, firms simultaneously select R&D and output levels, given the standard’s exogenous constraint. A performance standard generates higher R&D investments and output, but lower profit, than the pollution-equivalent emissions standard. The same conclusion extends to social welfare only under high demand. We also conduct a similar comparison for each of the two instruments across the one-stage and the two-stage models. The two-stage model leads to higher levels of R&D and industry output for both standards. The same conclusion applies to the social welfare comparison for the emissions standard. However, for the performance standard, the same conclusion requires a damage parameter below a given threshhold. When the standards are chosen to maximize welfare, the performance comparison becomes highly parameter-dependent, except that social welfare is higher for the performance standard. Some policy implications are discussed.

We explore the issue of minorities' survival in the presence of positive network externalities. We rely on a simple example of thematic clubs to illustrate why and how such survival problems might appear, first considering the case of simple-network effects (fully anonymous externalities) and then the case of cross-network effects (type-dependent externalities). In both cases, the analysis is framed as a simple noncooperative game with a continuum of players and binary action sets. There is a unique and interior Nash equilibrium under mild network effects and two corner equilibria under strong network effects, with one club driven out. A utilitarian planner would accentuate the clustering effects of network externalities, and call for the disappearance of the minority club more often than the noncooperative solution. A simple myopic learning algorithm capturing the progression of network lock-in effects is studied. © 2013 Wiley Periodicals, Inc.

Over the last 10 years, the solar photovoltaic (PV) market has experienced tremendous growth due in part to government incentive programs. However the effect and welfare analysis of these policy instruments remain ambiguous. In the first chapter of my dissertation, we estimate a dynamic model of households investment decisions on rooftop PV systems to understand the impact of these programs on residential solar installations and evaluate the outcome of alternative incentive policies. The model separately evaluates the effect of system prices, up-front subsidies, tax credits and production revenues using a 5-year data set collected by the California Solar Initiative program, which subsidized solar installations in California. The results indicate that capacity-based subsidies are equally effective as production-based subsidies, but that the latter are more efficient. With a $100 social cost of carbon, the total subsidies in California would be welfare neutral. If California were only as sunny as Frankfurt, Germany, this value has to be $200 to be welfare neutral. We find that without subsidies, 85% of the existing installations would not have occurred. The second chapter of my dissertation is on the political economics of corruption. This is a relevant question in the Environmental Economics due to the human factors involved in government regulations. We investigate the effects of unhindered corruption in the entry-certifying process of an industry on market structure and social welfare. To gain entry, a firm must pay a bribe-maximizing official an exogenous percentage of anticipated profit, in addition to the usual set up cost. This would lead to a monopoly, but only in markets without pre-existing firms. A benevolent social planner may use bribery to the benefit of society by either manipulating the number of pre-existing firms in the market, or by setting up independent (corrupt) licensing authorities. A socially optimal number of firms in the market may be reache

Optimal investment in human capital through effective K-12 schooling is critical for building a productive work force. This investment is particularly important for minority and low income students. My dissertation uses econometric techniques to analyze the effects of different educational programs on the academic achievement of elementary and middle school students in Arizona. The first essay evaluates the effect of Arizona's new English program, the 4-hour ELD block, on the achievement of students. In the 2008-2009 academic year, Arizona law required that English Language Learner (ELL) students to be separated from their native English-speaking peers and interact in the same classroom for 4-hour per day with other ELL students. In this study dynamic panel data methods and regression discontinuity design are employed to analyze the effect of the 4-hour ELD block program on the academic achievement of students. Using data from one school district during the school years 2006 to 2010, this study shows that this new program did not have a notable effect on the state-wide test scores of ELL students. The second essay assesses the long-run and short-run effects of Teacher Incentive Fund (TIF) program in Arizona. The TIF program is a nationwide performance-based compensation plan that provides incentives to teachers based on the student performance. The TIF program started in Arizona in the 2007-2008 school year and targets high need schools. Using a panel data set from 2006-2007 to 2010-11 school year, the effect of the TIF program on the achievement of students is estimated using the difference-in-difference method. Comparing the short-run and long run effect of this program indicates that the long-run effect is greater than that of the short-run. Finally, by utilizing a rich set of panel data from 2006-2007 to 2010-2011 school years, the third essay studies the raw and value-added achievement gap between first and second-generation students with native students. This

"This paper provides a thorough analysis of oligopolistic markets with positive demand- side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firm's rivals’ total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that is it always enhanced by having more firms in the market and/or by technological improvements. We also characterize the effects of market structure on industry performance, with an emphasis on departures from standard markets. The approach relies on latticetheoretic methods, which allow for a unified treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided." (author's abstract)

The notion of complementarity is fundamental to economics, as reflected in the large and growing number of studies that invoke alternate conceptions of this idea. Though complementarity has been studied for many years, its connection with theory of supermodularity is far more recent. Taking advantage of these techniques, the first three chapters of this dissertation study aspects of interest in network markets; endogenous information acquisition; and some insights into the comparison of player's equilibrium strategies. The last chapter applies this methodology to econometric identification.Chapter one provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. With a general complementarity structure on the model primitives allowing for products with low or high stand-alone values, a nontrivial fulfilled-expectations equilibrium exists. We formalize the concept of industry viability, investigate its determinants, and show that viability is always enhanced by having more firms in the market and/or by technological progress.The second chapter studies covert information acquisition in common value Bayesian games of strategic complementarities. Using the supermodular stochastic order to arrange the structures of information increasingly in terms of preferences, we provide novel, easily interpretable conditions under which the value of information is globally convex, and study the implications in terms of the equilibrium configuration. Our analysis also enlightens the effect of information on players' behavior.Chapter three proposes a simple approach to compare players' equilibrium choices in asymmetric games with strategic complementarities. We offer three applications of our idea to industrial organization and behavioral economics.The last chapter studies (nonparametric) partial identification of treatment response with social interactions. It imposes economically driven monotone conditions to the pri

"We provide an extensive and general investigation of the effects on industry performance (profits and social welfare) of exogenously changing the number of firms in a Cournot framework. This amounts to an in-depth exploration of the well-known trade-off between competition and production efficiency. We establish that under scale economies, welfare is maximized by a finite number of firms. Our results shed light on several theoretical issues and policy debates in industrial organization, including the relationship between the Herfindahl index and social welfare, free versus socially optimal entry, concentration and profitability, destructive competition and natural monopoly. Our analytical approach combines simplicity with generality." (author's abstract), "In dem Beitrag wird im Rahmen eines Cournot-Ansatzes eine allgemeine Untersuchung der Auswirkungen der exogen sich ändernden Anzahl von Unternehmen auf das Marktergebnis (Gewinne und soziale Wohlfahrt) vorgestellt. Dabei wird in einer analytischen Betrachtung das bekannte Trade-off zwischen Wettbewerb und Produktionseffizienz herausgearbeitet. Es wird gezeigt, daß beim Vorliegen von Größenvorteilen die Wohlfahrt durch eine endliche Zahl von Firmen maximiert wird. Das Ergebnis beleuchtet verschiedene Aspekte der wirtschaftstheoretischen und industriepolitischen Diskussion, einschließlich der Beziehungen zwischen den Herfindahl-Index und der sozialen Wohlfahrt, freiem versus sozial optimalem Markteintritt, Konzentration und Profitabilität, ruinösem Wettbewerb und natürlichem Monopol. Der analytische Ansatz vereint Einfachheit mit Allgemeinheit." (Autorenreferat)

Mechanism design theory has given economists a set of tools for designing institutions to achieve socially desirable outcomes. Unfortunately, the behavioral assumptions that these theories often rest are somewhat unrealistic. Testing these institutions in a laboratory setting gives us insight into what assumptions or properties of institutions make them behaviorally successful. Moreover these insights allow us to create new theories that offer, in principle, better actual performance. Thus, the interplay between experimental economics and economic theory seems vital in mechanism design to insure successful institutions. It is in this spirit that this dissertation precedes focusing entirely with mechanisms that were designed to achieve the Lindahl allocation in a public goods environment. The first chapter experimentally examines three such mechanisms in a laboratory setting. It finds that the mechanism that gets the closest to the Lindahl allocation is the one that induces a game with very strong stability of equilibrium properties. Unfortunately this mechanism also has some clear disadvantages: first, it is very complicated; second, payoffs to consumers while learning to play equilibrium are very low; and last, the mechanism gets more complicated when more people participate. The second chapter uses the insights from the first experiment to create a new institution which avoids some of the concerns outlined above while maintaining the strong stability of equilibrium property. The third chapter contributes a missing stability result into the literature. The final chapter of the dissertation experimentally compares the new mechanism introduced in chapter 2 with the most successful mechanism from the first experiment. The treatments in this experiment are designed to stress the above observed trouble areas.

Social bookmarking has gained popularity since the advent of Web 2.0. Keywords known as tags are created to annotate web content, and the resulting tag space composed of the tags, the resources, and the users arises as a new platform for web content discovery. Useful and interesting web resources can be located through searching and browsing based on tags, as well as following the user-user connections formed in the social bookmarking community. However, the effectiveness of tag-based search is limited due to the lack of explicitly represented semantics in the tag space. In addition, social connections between users are underused for web content discovery because of the inadequate social functions. In this research, we propose a comprehensive framework to reorganize the flat tag space into a hierarchical faceted model. We also studied the structure and properties of various networks emerging from the tag space for the purpose of more efficient web content discovery.The major research approach used in this research is social network analysis (SNA), together with methodologies employed in design science research. The contribution of our research includes: (i) a faceted model to categorize social bookmarking tags; (ii) a relationship ontology to represent the semantics of relationships between tags; (iii) heuristics to reorganize the flat tag space into a hierarchical faceted model using analysis of tag-tag co-occurrence networks; (iv) an implemented prototype system as proof-of-concept to validate the feasibility of the reorganization approach; (v) a set of evaluations of the social functions of the current networking features of social bookmarking and a series of recommendations as to how to improve the social functions to facilitate web content discovery.

The paper examines a game-theoretic evolutionary model of an asset market with endogenous equilibrium asset prices. Assets pay dividends that are partially consumed and partially reinvested. The investors use general, adaptive strategies (portfolio rules), distributing their wealth between assets, depending on the exogenous states of the world and the observed history of the game. The main goal is to identify strategies, allowing an investor to "survive," i.e. to possess a positive, bounded away from zero, share of market wealth over the whole infinite time horizon. This work brings together recent studies on evolutionary finance with the classical topic of non-cooperative market games.

This thesis analyzes investment incentives of strategic firms in industries where either demand is uncertain, or the good produced is economically non-storable and demand fluctuates. In those industries, investment is a long run decision, whereas production has to be adjusted short-run. Prominent examples are recently liberalized utilities such as the electricity sector. Regulated monopolies have been replaced by a small number of competing firms, which often are considered to behave strategically in order to exercise market power. Whereas the regulatory regimes prior to liberalization induced generous (over-)investment choices, we observe increasing unease of experts and policy makers regarding investment incentives in liberalized electricity markets. The first three chapters of this thesis (part one) analyze total capacity choice of strategic firms prior to producing for the spot market. We first determine the equilibrium of the market game. In the remainder of the first part we analyze the interdependency of enhanced spot market competition and firms overall capacity choice. We first analyze the impact of complete elimination of market power at the spot market giving rise to marginal cost pricing. We then consider the impact of price caps at the spot market. And finally we study the impact of reduced market power at the spot markets due to forward contracting. In the second part of the thesis firms can invest into several technologies. This allows them to determine not only their total capacity but also it's precise composition. In the absence of strategic interaction, for a single regulated firm, this has already been thoroughly analyzed in the so called peak load pricing literature, which has been widely applied for electricity markets prior to liberalization. In order to accommodate for the completely changed situation after liberalization, however, we extend this framework to the case of strategically interacting firms. Based on data of the German electricity, (ECON 3) -- UCL, 2008

When modeling the effects of innovation on the marginal abatement cost (MAC) curve, many studies in environmental economics have posited, implicitly or explicitly, a uniform downward shift. The purpose of this paper is to thoroughly investigate this claim in a simple theoretical framework by introducing innovation in the production function of a price-taking, polluting firm in four economically meaningful ways. We establish that the effects of innovation on the MAC curve depend critically on the specific type of innovation, and that only innovation in end-of-pipe technology leads to a uniform downward shift of the MAC curve. A second class of results points to the fact that for other types of innovation in the overall production process, the scope for an upward shift of the MAC curve in response to innovation is easier to justify theoretically. These results call for a re-appraisal of various results in environmental policy obtained in theoretical work relying on this postulate.

Les issues analysées dans ce travail sont essentiellement liées à la performance des marchés en présence des imperfections. Trois thèmes en corrélation caractérisent cette thèse : le fonctionnement des marchés avec l'interaction stratégique parmi les entreprises, l'effet de l'information asymétrique sur l'efficacité des marchés compétitifs, et le rayon pour l'intervention publique en présence des imperfections du marché. En particulier, les sujets du travail sont : l'analyse des marchés d'assurance avec l'information asymétrique, les oligopoles mixtes et la privatisation, la concurrence fiscale pour les IDE, et les fusions dans les oligopoles. Cette dissertation contient cinq essais dans la théorie micro-économique appliquée qui croisent les bornes entre l'organisation industrielle et l'économie publique. Nous montrons comment l'intervention publique peut améliorer la performance et augmenter l'efficacité des marchés caractérisés par un certain degré d'imperfection : l'information imparfaite et/ou la concurrence imparfaite. / The issues analyzed in the present work are essentially related to the performance of markets in the presence of imperfections. Three basic, interrelated themes characterize this thesis: the functioning of markets with strategic interaction among firms, the effect of asymmetric information on the efficiency of competitive markets, and the scope for public intervention in presence of market imperfections. In particular, the analysis of insurance markets with asymmetric information, mixed oligopolies and privatization, policy competition for FDI, and mergers in oligopolies, are the subjects of the present work. This dissertation is a collection of five essays in applied microeconomic theory that cross the boundaries between industrial organization and public economics. We show how public intervention, taking the form of redistributive taxation, direct public provision of private goods, and antitrust activity, may improve the performance and incre, Doctorat en sciences économiques (ECON 3) -- UCL, 2008

This dissertation consists of three essays in Empirical Industrial Organization. In each essay I develop and estimate an econometric model to quantify unobserved structural parameters of the underlying theoretical model. The first study develops a dynamic model of consumer behavior in the market for paid television services. A representative consumer supply side model is then used to recover the cost structure of cable providers. Simulation of counterfactual experiments allows me to measure the effect of satellite entry on optimal cable prices. Using data on cable and satellite systems across local U.S. television markets over the period 1997-2006, I estimate parameters of the structural models. Estimation results suggest presence of significant consumer switching costs, amounting to approximately $109 and $186 (in 1997 dollars) for cable and satellite systems respectively. In the absence of satellite competitor cable prices would be on average 19 percent higher than observed ones. The second essay evaluates the degree of collusion among sugar refiners in Ukraine. I show that government regulation may facilitate collusion between the members of the association of producers. I extend the existing empirical literature on collusion by developing an empirical model of collusive behavior when the objective function of a cartel is not known. Under the assumption that a cartel implements a proportional reduction technique of collusion parameter that measures the degree of monopolization has structural interpretation. Using data from the Ukrainian manufacturing enterprise register between 1993 and 2000, I estimate the degree of monopolization in the Ukrainian sugar refining industry. Estimation results suggest moderate degree of collusion ranging between 89 and 95 percent of the Cournot equilibrium quantity. The third essay proposes an empirical model of firm level fixed capital investment when financial markets are imperfect. In this case, firms operating in a "constrained

This dissertation collects essays that focuses on two branches of the economic literature on imperfect competition: the one of IO on the decision of firms' location and the one of economic growth on market structure and technological progress. Chapter 2 deals with the issue of firms' location and proposes a model that sheds light on how the geographic distribution of firms is affected by strategic interaction in presence of vertically differentiated products. The remaining Chapters, instead, have a common root; they, in fact, deal with the link existing between market structure and growth. More precisely, Chapter 3 studies how knowledge spillovers across firms influence this link and introduces the basic framework which is further extended in Chapters 4 and 5 to allow for strategic interaction and multi-product firms respectively. In all these models technological progress takes the form of cost reductions. The model-setting considered in these Chapters belongs to the class of creative accumulation models, whose introduction in the economic literature is relatively recent and can be attributed to Smulders and van de Klundert and Peretto. Finally, Chapter 6 follows the creative destruction tradition initiated by Grossman and Helpman and Aghion and Howitt and develops a growth model with product quality innovations of random size. In all the Chapters of this dissertation, we adopt a normative perspective by comparing the market equilibrium solution to the optimal one., (ECON 3)--UCL, 2007

Departing from a widely used restriction in the IO literature to symmetric equilibria my thesis studies firm diversity and firm similarity as equilibrium phenomena. The first four chapters look at this issue in a context where firms decide on a cost reducing action, like R&D, before competing in the product market. I first consider firm asymmetry in terms of instability of the symmetric equilibrium in the case where firms also compete in the cost reduction stage. Second, for the same case, I consider firm asymmetry as Stackelberg equilibrium of an endogenous timing game where firms also decide on the timing structure of the investment phase. In either case spillovers encourage symmetry. Then, (jointly with Rabah Amir ) I consider the problem of a precompetitive cartel which chooses prior actions to maximize the joint non cooperative profit, and I provide sufficient conditions for the collusive solution to require identical actions by the firms. In light of the results, it seems that both symmetric and boundary solutions deserve more attention than what the prevailing literature might suggest. For instance, in the model of d'Aspremont and Jacquemin (Cooperative and Noncooperative R&D in Duopoly with Spillovers, American Economic Review, 1988, 78, 1133-1137), boundary and symmetric collusive solutions sometimes deliver larger aggregate cost reduction than what results from non cooperative ones, also with very small spillovers, which is an unnoticed property in the literature. The fifth chapter look at firm diversity in a context with free entry where firms also decide at what time to enter the market. Unlike the case of given number of entrants, here earlier movers compete to deter entry. In the case of endogenous timing, sequential entry is never observed and multiple equilibria obtain, encompassing infinitely many asymmetric market configurations. / S'éloignant d'une limitation aux équilibres symétriques qui est largement employée dans la littérature d'économie indu, Doctorat en sciences économiques (ECON 3)--UCL, 2007

The thesis consists of five chapters. The first of them contains introduction. Chapter 2 considers a broad class of two player symmetric games, which display a fundamental non-concavity when actions of both players are about to be the same. This implies that no symmetric equilibrium is possible. We distinguish different properties of the payoff functions, like strategic substitutes, complements and quasi-concavity, which are not necessarily imposed globally on the joint action space. For each of these cases we provide conditions to secure the existence of exclusively asymmetric equilibria. Moreover we consider the case of convex payoff functions. A number of applications from industrial organization and applied microeconomics literature are provided. In Chapter 3 we generalize to the extent possible the known results for the case of games with one-dimensional action sets to the general case of games with strategic complemantarities with action spaces that are complete lattices. One key issue addressed is the extent to which all equilibria tend to be symmetric for the general case of multi-dimensional (i.e. only partially ordered) strategy spaces. We find that the scope for asymmetric equilibrium behavior is definitely broader than in the one-dimensional case, though still quite limited. Another key question investigated here is whether asymmetric pure strategy Nash equilibria are always Pareto dominated by symmetric pure strategy Nash equilibria. While this need not hold in general for games with strategic complementarities, we identify different sufficient conditions that guarantee that such dominance holds. In Chapter 4 we deal with the effects of market transparency on prices in the Bertrand duopoly model. The analysis is intuitive and simple when we consider two types of strategic interaction between firms in an industry - strategic complementarities and substitutabilities. We present also traditional comparative statics analyses, demanding additionally some oth, (ECON 3)--UCL, 2006

This thesis deals with different forms of strategic complementarities in industrial organization problems. Chapter 2 is an attempt to develop a unified approach to endogenous heterogeneity by constructing a general class of two-player symmetric games that possess only asymmetric pure-strategy Nash equilibria. These classes of games are characterized in some abstract sense by two general properties: payoff non-concavities and some form of strategic substitutability. While the second characteristic allows to show the existence of pure strategy Nash equilibria, the second precludes these equilibria to be symmetric. Other two classes of games that always possess asymmetric, but never symmetric, pure-strategy equilibria, although they are not of strategic substitutes are also studied. This chapter also generalizes a number of models dealing with two-stage games, with long term investment decisions in the first stage and product market competition in the second stage. Chapter 3 investigates the effects of forward looking behaviour in technology adoption. The setup is an overlapping generations model where agents choose between two alternative networks taking into consideration both the installed base and the expected base. The latter element is the distinctive feature of the approach. It is shown that a unique equilibrium exists, on which agents coordinate their expectations. While exhibiting hysteresis, the equilibrium adoption path does not comply with technologies locking in. Network choices are characterized both in terms of their long run properties and the expected time of adoption. Chapter 4 studies the problem of a monopolist who produces a good with network externalities and faces the possibility of selling a new higher quality. Within the vertical product differentiation it identifies the necessary and sufficient conditions for quality improvement to take place when a good, produced by a monopolist, exhibits positive network externalities. When network effects a, (ECON 3)--UCL, 2006

Innovation is today at the centre of competition in most industries. As a stylized fact, an important channel through which engage in non-price competition is research and development (R&D), whose primary outcome is pure innovation. Firms carry out both product and process innovation, but the bearings of these two factors on R&D efforts have been investigated separately. Most of the rather large theoretical literature on R&D has focused upon process innovation, while product innovation has drawn particular attention in empirical studies. Recently, two different streams of research have emerged: one has contributed to the analysis of complementarities within R&D portfolios in monopoly or oligopoly models; the other has described the dynamics of adoption of product and process innovation and is commonly known as "technology life cycle" of the product. The aim of the present book is to bridge the two aforementioned streams of research by combining the theory of supermodular games and the theory of differential games. Starting from simple static monopoly models where we show that process and product innovation are complementary, we arrive at more complex dynamic oligopoly games where the presence of complementarity becomes an inherent feature of dynamic optimization. In particular, we investigate the technology life cycle and the issue of strategic interaction in differential games. Moreover, we study financial contracting in presence of complementary investment activities and different aspects that characterize advertising efforts., L'innovation est aujourd'hui au centre de la concurrence dans la plupart des industries. Il est à noter qu'un canal important par lequel les entreprises s'engagent en concurrence non-prix est la recherche et développement (R&D), dont le résultat premier est la innovation pure. Les entreprises investissent dans l'innovation de processus et dans l'innovation de produit, mais l'étude de ces deux facteurs concernant la R&D a été fait séparément. La majeure partie de l'ample littérature sur la R&D s'est focalisée sur l'innovation de processus, tandis que l'innovation de produit a reçu une attention particulière dans les études empiriques. Récemment, deux différents domaines de recherche ont émergé: l'un a contribué à l'analyse des complémentarités dans les portefeuilles de R&D en modèles de monopole ou d'oligopole; l'autre a décrit la dynamique de l'adoption du produit et de l'innovation de processus et il est généralement connu comme "cycle de vie technologique" du produit. Le but du livre actuel est d'établir un lien entre les deux domaines de recherche mentionnés ci-dessus en combinant la théorie des jeux supermodulaires et la théorie des jeux différentiels. À partir d'un modèle simple de monopole statique où nous prouvons que l'innovation de processus et l'innovation de produit sont complémentaires, nous arrivons à des jeux d'oligopole dynamiques plus complexes où la présence de la complémentarité devient une caractéristique inhérente d'optimisation dynamique. En particulier, nous étudions le cycle de vie technologique du produit et la question de l'interaction stratégique dans les jeux différentiels. Nous étudions aussi la contratation financière en présence d'activités complémentaires et les différents aspects qui caractérisent l'investissement en publicité., (ECON 3)--UCL, 2005

An objective ranking of economics departments worldwide in terms of graduate education is derived. The central idea is that the value of a department is the sum of the values of its PhD graduates, as reflected in the values of their current employing departments. The scores are thus derived as solutions to a linear system of simultaneous equations in the values. The sample includes the top fifty-four departments, the composition of which is determined endogenously using a criterion requiring a minimum of four placements in the departments comprising the sample. Two other related rankings are proposed, which place more emphasis on more recent faculty recruitments. The results point to a very high concentration in the economics PhD education market worldwide, confirming the dominance of the top U.S. departments, in particular of Harvard and M.I.T. Nevertheless, a modest de-concentration trend is under way. The rankings are in close agreement with the 1994 National Research Council survey ranking based on the perceived quality of PhD programs.

We prove that the coefficient of absolute prudence is greater than k - times coefficient of absolute risk aversion for the utility function if and only if the coefficient of absolute prudence is (3-k) times the coefficient of absolute risk aversion for the inverse utility function. Moreover this is also equivalent to (k-2)-concavity of the first derivative of the inverse utility function.

We consider the issue of first versus second-mover advantage in differentiated-product Bertrand duopoly with general demand and asymmetric linear costs. We generalize existing results for all possible combinations where prices are either strategic substitutes and/or complements, dispensing with common extraneous assumptions. We show that a firmwith a sufficiently large cost lead over its rival has a first mover advantage. For the linear version of the model, we invoke a natural endogenous timing scheme coupled with equilibrium selection according to risk-dominance. This yields sequential play with the low-cost firm as leader as the unique equilibrium outcome.

Recent U.S. legislation (Gramm-Leach-Bliley Act) allows commercial banks to enter merchant banking, i.e. hold equity in non-financial firms. A stylised auction-theoretic model is developed to investigate the effects of bank equity stakes in firms on the competition in bank loans. The main finding is that the largest stake confers a competitive advantage to the holding bank and constitutes a barrier to entry in equity acquisition, resulting in high interest rates charged to firms. This finding unearths an antitrust dimension in the controversial debate on the separation of banking and commerce in the U.S., and provides a theoretical basis for recent empirical evidence on the relationship between bank equity holdings and the cost of debt finance in Germany and Japan.

Studies of second-b est environmental regulation ofiden tical polluting agents have invariably ignored potentially welfare-improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset. Yet, cost asymmetry between oligopoly firms may well give rise to private as well as social gains. A trade-off is demonstrated for the regulator, between private costs savings and additional social costs when asymmetric treatment is allowed. Asymmetry is indeed optimal for a range of plausible parameter values. Further, it is demonstrated that for a broad class of abatement cost functions, there is scope for increasing welfare while keeping both total output and total emission constant. Some motivating policy issues are discussed in light ofthe results, including international harmonization and global carbon dioxide reduction.

While ordinal complementarity is more general than cardinal complementarity, the corresponding global sufficient conditions placed on the primitives of a constrained optimization problem are generally not comparable. We explore this issue in detail for the special case of a Cournot firm. We derive necessary and sufficient conditions for downward-sloping best-responses by imposing the ordinal test only for output levels that are actually reached. Both global tests, cardinal and ordinal, are shown not to be critical sufficient conditions. Finally, we confirm that checking supermodularity of suitably transformed profits can work when the global tests for ordinal and cardinal complementarity both fail.

This paper considers the well-known Levhari-Mirman model of resource extraction, and investigates the effects of the information structure of the dynamic game - open-loop, Markovian or history-dependent - on the equilibrium consumption path and the overall utility of the agents. The open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.

The literature on supermodular optimization and games is surveyed from the perspective of potential users in economics. This methodology provides a new approach for comparative statics based only on critical assumptions, and allows a general analysis of games with strategic complementarities. The results are presented in a simplified yet rigourous manner, without reference to lattice theory, for the special case of onedimensional parameter and actions sets, with the emphasis being on wide accessibility. Detailed applications are presented for well-known models of consumer behavior, monopoly pass-through, Bertrand and Cournot competition, strategic R&D, search and matching. Wherever appropriate, useful tricks for applications and comparative comments are inserted.

In view of the uncertainty over the ability of merging firms to achieve efficiency gains, we model the post-merger situation as a Cournot oligopoly wherein the outsiders face uncertainty about the merged entity's final cost. At the Bayesian equilibrium, a bilateral merger is profitable provided the non-merged firms sufficiently believe that the merger will generate large enough efficiency gains, even if ex post none actually materialize. The effects of the merger on market performance are shown to follow similar threshold rules. The findings are broadly consistent with stylized facts. An extensive welfare analysis is conducted, bringing out the key role of efficiency gains and the different implications of consumer and social welfare standards.

Consider a marketing division of a monopoly firm that faces two marketing options: Market enlargement and elasticity improvement. These options are conceived in terms of the target of the firm’s advertising campaigns: Potential new consumers versus existing consumers. Using a CES demand function in a simple model, we demonstrate that the two activities are complementary, so that for some cost configurations, the firm will find it profitable to implement the two options together when either option alone would result in a loss. This calls for the marketing division to be integrated, rather than decentralized.

Consider a marketing division of a monopoly firm that faces two marketing options: Market enlargement and elasticity improvement. These options are conceived in terms of the target of the firm’s advertising campaigns: Potential new consumers versus existing consumers. Using a CES demand function in a simple model, we demonstrate that the two activities are complementary, so that for some cost configurations, the firm will find it profitable to implement the two options together when either option alone would result in a loss. This calls for the marketing division to be integrated, rather than decentralized.

Consider a marketing division of a monopoly firm that faces two marketing options: Market enlargement and elasticity improvement. These options are conceived in terms of the target of the firm’s advertising campaigns: Potential new consumers versus existing consumers. Using a CES demand function in a simple model, we demonstrate that the two activities are complementary, so that for some cost configurations, the firm will find it profitable to implement the two options together when either option alone would result in a loss. This calls for the marketing division to be integrated, rather than decentralized.

Consider a marketing division of a monopoly firm that faces two marketing options: Market enlargement and elasticity improvement. These options are conceived in terms of the target of the firm’s advertising campaigns: Potential new consumers versus existing consumers. Using a CES demand function in a simple model, we demonstrate that the two activities are complementary, so that for some cost configurations, the firm will find it profitable to implement the two options together when either option alone would result in a loss. This calls for the marketing division to be integrated, rather than decentralized.

We provide a simple theoretical foundation, based on the theory of Markov chains, for the objective empirical procedure for journal ranking devised by Liebowitz and Palmer. An elementary characterization is derived that substantially clarifies the meaning, scope and underlying intuition of the procedure, and allows a precise illustrative discussion of its strengths and weaknesses. Several suggestions are made to correct its shortcomings, which may prove useful in much-needed future rankings. The present analysis suggests that a suitably amended version of the LP procedure would emerge as a highly adequate measure for ranking journals.

This survey provides an extensive account of research in economics based on the stochastic games paradigm. Its area-by-area coverage is in the form of an overview, and includes applications in resource economics, industrial organization, macroeconomics, market games, experimental and empirical economics. For methodologically defined frameworks, the coverage is somewhat more detailed (to the extent that the material is not covered elsewhere in this volume), and includes the open-loop concept, the linear-quadratic model, myopic equilibrium, games of perfect information, and stochastic games with a continuum of players.

For Bertrand duopoly with linear costs, we establish via a single counterexample that: (i) A new monotone transformation of the firms' profit functions may lead to the supermodularity of transformed profits when the standard log and identity transformations both fail, and (ii) Topkis's notion of critical sufficient condition for monotonicity of a Bertrand firm's best-reply correspondence cannot be extended to rely only on positive unit costs.

In the standard two-stage framework of R&D/product market competition, this paper provides a performance comparison between monopoly and the cartelized research joint venture, using two well-known models based on different versions of the R&D spillover process. According to the model with a wider scope of application, monopoly always leads to a higher propensity for R&D and, when R&D costs are low, to the best overall market performance. The results also allow for a comparison between the two underlying models of strategic R&D.

This chapter considers a recent trend in the application of stochastic games to economics characterized by the use of the lattice-theoretic approach to capture the monotonic properties of Markovian equilibria. The topics covered are: (i) a general framework for discounted stochastic games with Liptchitz-continuous and monotone equilibrium strategies and values, (ii) a model of capital accumulation, (iii) two classes of games with perfect information, in strategic bequests and oligopoly with commitment. In view of the restriction to pure-strategy equilibria and of the natural monotonicity property of strategies and value functions in most economic applications, this approach appears most promising.

The paper analyzes the process of market selection of investment strategies in an incomplete asset market. The payoffs of the as-sets depend on random factors described in terms of a discrete-time Markov process. Market participants make dynamic investment de-cisions based on their observations and time. We show that a trader distributing wealth across available assets according to the relative expected returns eventually accumulates the entire market wealth. The result obtains under the assumption that the trader's strategy is asymptotically distinct from the CAPM strategy (prescribing in-vestment in the market portfolio). This assumption turns out to be essentially necessary for the conclusion.

A two-period symmetric Cournot duopoly with linear demand and costs is analyzed under linear (or more general) returns to scale in process R&D. Subgame-perfect equilibrium may call for one firm to fully innovate while the other firm remains just as before. The outcome is a polar duopoly or monopoly (one firm endogenously exiting). Two research joint venture schemes and the noncooperative solution are compared. Due to built-in symmetry, a joint lab does not always lead to the best performance. Overall, our findings differ quite substantially from those based on strongly decreasing R&D returns and symmetric outcomes

We compare simultaneous versus sequential moves in R&D decisions within an asymmetric R&D/Cournot model with linear demand (for differentiated products), general R&D costs, and spillovers. Simultaneous play and sequential play (with and without a specified leader) can emerge as appropriate formulations, depending on the ratios of spillover rate over demand cross-slope, but not on R&D efficiency. When at least one ratio is above 1/2, a sequential solution mitigates competition and leads to higher profits for each firm, and to higher social welfare. When uniquely specified, the stronger firm emerges as the R&D first-mover