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We utilize a randommatching model to examine the relationships between market frictions and international trade. In our setting, an individual may choose to search abroad where she may have a cost advantage, but is less likely to meet potential trading partners, owing to higher market frictions. Interestingly, we find that international trade may be associated with lower welfare than autarky. We show how this is due to price distortions resulting from bargaining when there are opportunities for exchange across countries.

A study examining the extent to which costs can be minimized on public debt, in a scenario where short-term interest rates are dictated by monetary policy and there are risks and market impact constraints, is presented.

In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor sophisticated punishment strategies. This equilibrium induces an intertemporal market division in which the two firms alternate as monopolists--despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, the alternating monopoly reveals itself rather quickly. Moreover, it Pareto dominates the Cournot equilibrium--as it is close to the cartel outcome. Several examples of what well may be such alternating monopolies are presented. JEL classification: C73; D43; L13 Keywords: Dynamic competition; Oligopolistic competition; Stochastic games; Monopoly.

This paper presents an experiment to investigate the impact of information externalities in a search model. The model implies that information spillovers create an initial delay in action by agents, followed by a flurry of activity once some public information is revealed. Conversely, this experiment reveals a shorter delay prior to the first subject moving than the model suggests. Furthermore, the subsequent increase in activity is greater than predicted. However, as the sessions progress, the subjects exhibit a degree of learning in each treatment. They prolong their search for higher payouts and, hence, their behaviour approaches that of the model's optimal strategy.

There is a well identified empirical connection between the intensity of competition in product markets and better productivity performance (OECD, 2002a). In general, economy-wide competitive pressures appear to be relatively [...]

We analyze a dynamic version of the Akerlof-Wilson 'lemons' market in a competitive durable good setting. There is a fixed set of sellers with private information about the quality of their wares. The price mechanism sorts sellers of different qualities into different time periods--prices and average quality of goods traded increase over time. Goods of all qualities are traded in finite time. Market failure arises because of the waiting involved--particularly for sellers of better quality. The equilibrium path may exhibit intermediate breaks in trading.

In this paper we suggest an improved methodology for comparing the intensity of trade across and within national and provincial boundaries. Earlier efforts to assess border effects for provinces or for countries without internal trade statistics made fairly arbitrary assumptions about average distances for internal trade flows. We improve on earlier efforts by taking more complete account of the distribution of population within each province or country. Internal distance is estimated as a population-weighted average of intra-city and intercity distances as well as distances to and within rural areas. We find higher estimates of internal distances, and hence border effects, than found in previous studies.

This paper addresses two general questions. First, what is the effect of market structure on the development of a network in a dynamic model with rational expectations? Secondly, is the intuition that network externalities are 'economies of scale on the demand side' correct? These questions are examined in a model of durable good production in the presence of network externalities. Two results are presented. First, the Coase conjecture fails in its strongest sense when network benefits are increasing in the current network size. Secondly, a committed monopolist may be socially preferable to a time consistent producer when network externalities are sufficiently large. The analysis indicates an analogy between network externalities and learning-by-doing.

This article evaluates regions in the Russian Federation that are in need of economic assistance from the state; from a Russian perspective, both microeconomics and macroeconomics are necessary in determining the needs of each region, due to the distortion of facts about their socioeconomic conditions. Economic, integral, financial, and standard of life indicators are all taken into account; spheres of activity and economic potential in the territory are analyzed, as well as interterritorial interaction.

Using data on Asian equity markets, we observe that during periods of financial turmoil, deviations from the mean-variance framework become more severe, resulting in periods with additional downside risk to investors. Current risk management techniques failing to take this additional downside risk into account will underestimate the true Value-at-Risk with greater severity during periods of financial turmoil. We provide a conditional approach to the Value-at-Risk methodology, known as conditional VaR-x, which to capture the time variation of non-normalities allows for additional tail fatness in the distribution of expected returns. These conditional VaR-x estimates are then compared to those based on the RiskMetrics methodology from J. P. Morgan, where we find that the model provides improved forecasts of the Value-at-Risk. We are therefore able to show that our conditional VaR-x estimates are better able to capture the name of downside risk, particularly crucial in times of financial crises.

This article concludes that asset market crashes are not necessarily followed by crises, crashes without crises are not economically hazardous, and financial crises can be prevented after crashes.

This paper models trading patterns when marketplaces exist and goods are differentiated. When first visiting the market, a buyer samples a stock of goods. If fortunate, the buyer finds a match, purchases one of these goods and then exits. If not, the buyer can now only match with the flow of new goods. In a steady state, the stock of unmatched traders on one side of the market is trying to match with the flow of new traders on the other side. This behaviour is shown to describe matching patterns between unemployed job seekers and vacancies in U.K. Job Centres.

In a model of two-dimensional spatial competition the notion of competition between market places is analyzed. While one dimension can be interpreted as geographical distance the other dimension is some product characteristic (like maturity of a futures contract). Initially single product firms select a specific location and variety and later, at a second stage, they compete in prices. In the present framework agglomeration economies arise endogenously due to savings in transportation costs for consumers. For many parameter constellations I demonstrate that entrants might prefer to settle in existing markets rather than setting up their business somewhere in between. In particular, the emergence of new market places is less likely as transportation costs decline. Despite the strong forces towards agglomeration, multiple markets will arise under free entry of firms when markets are large enough. Furthermore, pure strategy equilibria in location do exist when search costs are sufficiently important even for linear transportation costs. The agglomeration economies provide organizers of market places with some degree of market power. Indirect competition between fiscal authorities is analyzed when jurisdictions impose transactions taxes. Equilibrium tax rates depend positively on transportation costs. Hence the deregulation wave in financial markets may be understood as an equilibrium reaction to a significant decline in transportation costs. The model features strong incentives for the harmonization of regulation. Keywords: Two-dimensional spatial competition; Thick market externalities; Agglomeration economies; Transaction costs

We consider a common-property resource sold in imperfectly competitive markets. There is a dynamic externality (current harvests lower future stocks, raising future harvest costs) and a static (crowding) externality. Increasing industry size raises costs but lowers prices; thus, it has ambiguous welfare effects. The optimal industry size typically changes over time, so that a first-best outcome cannot be obtained with a fixed number of firms. Single-firm exploitation is optimal only under special circumstances. The socially optimal open-loop steady-state industry size corresponds to the static optimum; both generally differ from the closed-loop steady-state optimum.

This paper contrasts an auction and a dealership market. In the latter, parallel to the public market, market makers are allowed to trade with each other in a separate inter-dealer market. Since market makers are assumed to be risk averse, variations in asset holdings induced by trades with outside investors generate portfolio hedging trade. We find that the price at which market makers trade with each other in the inter-dealer market determines the prices quoted in the public market for outside investors. It is shown that an investor gets a better price in the dealership market as long as the market makers and speculators are imperfectly competitive and the delay between executing the customer's order and trading in the inter-dealer market is not too large. Keywords: Auction market; Dealership market; Inter-dealer trading

The increase in earnings inequality is primarily caused by greater marketization rather than by the interplay of globalization and technology. Marketization eliminates institutions that fostered wage stability and equality. Aside from workforce training and education, the process contributing to wage inequality can be reversed by curbing several factors including globalization, high unemployment and manufacturing-to-services shift.

This paper re-examines the relationship between the R & D intensity of an industry and its level of concentration, from the perspective of the Bounds approach to market structure. In so doing, it proposes an index which summarises those aspects of technology and tastes that are relevant to the determination of a lower bound to concentration. Keywords: Technology; Market structure; Industrial structure

This paper is concerned with decentralized models of market equilibrium in which the primary interest lies in the nature of the institutions that govern trade. There are two separate branches in this literature. In the first, the institutions that govern trade are taken to be given exogenously. The primary motivation for models in this class is essentially the study of comparative institutions. In particular the papers are interested in whether there are specific institutions that will generate Walrasian prices and allocations approximately when transactions costs are small. In the second branch of the literature, the institutions that govern trade themselves are made endogenous. These models characterize the nature of these endogenously generated institutions and examine their efficiency in environments where transactions costs are small.

The front cover story of The American Conservative (Barber, 2007), 'I shop therefore I am' was provocative yet insightful, playing on Descartes' proof 'I think, therefore I am,' a common [...]

IT IS NOW COMMONPLACE to speak of the power of 'the markets' relative to the prerogatives both of individual firms providing goods and services and of governments themselves. The markets [...]