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A theoretical framework that helps to deal with markets without suspending their calculative properties is presented .

The market dynamics of a neoclassical production economy with heterogenous agents, convex technologies and idiosyncratic production risks are analyzed. The effects of endogenous fluctuations, precautionary savings, investment risks etc., on such an economy are examined.

The effects of economic liberalization on the domestic markets and economy of Bulgaria and Poland are discussed and analyzed. The impact of foreign exchange rate fluctuations during transition phase is examined.

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.

The impact of consumer bargaining on seller's offer price from the study of wholesale fruit and vegetable market in Marseille is examined.

Free-market economic ideas are maintained and propagated by the political Right and across the political spectrum, the term 'free-market' denotes a dominance of the market over politics. From the 1980s, the increasing tendency of nominally left political parties to embrace market solutions to societal problems is observed to have changed the parameters of left-right territory.

The significance of Internet for economists to understand the operations of markets is examined.

The soft budgets of economies in transition from socialistic system to capitalistic system are discussed. The need to provide social goods along with private goods and the political need to bail out firms with financial problems are also discussed. The presence of soft budget prevents efficiency in private goods market. However, greater competition is likely to make matters even worse.

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.

An analysis of the effects of human capital and market imperfections on the labor employment and labor reallocation in the transition countries is discussed.

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 [...]

Behavioral economics is examined in the context of the decentralized, private ownership market economy. The role of viability mechanisms that indirectly and adaptively coordinate producers and consumers out of equilibrium is examined.

The home market effect and bilateral trade patternsIndustry characteristics like transportation costs and differentiated products and their impact on home market are analyzed using monopolistic competition model in large countries.

Byline: Francois Degeorge (1,2,3), Boaz Moselle (2), Richard Zeckhauser (3) Keywords: risk; incomplete information Abstract: We analyze the risk level chosen by agents who have private information regarding their quality. We show that even risk-neutral agents will choose risk strategically to enhance their reputation in the market, and that such choices will be influenced by the mix of other agents' types. Assuming that the market has no strong prior about whether the agents are good or bad, good agents will choose low levels of risk, and bad agents high levels. Empirical evidence is gathered on 2462 firms over 24 years. The results support the model: agents of higher quality have less variable performance. Author Affiliation: (1) University of Lugano, via Giuseppe Buffi 13, CH-6904, Lugano, Switzerland (2) HEC School of Management (on leave), Paris (3) Centre for Economic Policy Research, London Article History: Registration Date: 02/10/2004

The economic tools are used to understand psychological phenomenon of cognitive errors in market. The impact of mistaken beliefs on errors in market is analyzed.

The role of microeconomic complementarities in economies with production externalities and demand spillovers is discussed. The transparency of public information in reducing common uncertainty in market place is emphasized.

Byline: Jan Guldager JArgensen (1), Philipp J.H. Schroder (2) Keywords: real costs; tariff costs; industry concentration; market structure; integration Abstract: Economic integration has had ambiguous effects on industry concentration. The literature on the topic proposes various explanations for these empirical findings. This paper provides an additional theoretical argument. It shows that in a world of monopolistic competition, integration alone (modeled as a reduction of trade barriers) may exert opposing forces on industry concentration, depending on whether the barrier consists of real (frictional) or tariff costs. In particular, the Herfindahl index of industry concentration falls for a reduction in real costs, but rises for a reduction in tariff costs. The reason is that real barriers burn up resources, such that industry profitability is reduced, reducing entry, and resulting in fewer firms and a correspondingly higher concentration. Under a tariff barrier, the redistributed tariff revenue stabilizes industry profitability, resulting in more firms and a lower concentration. Author Affiliation: (1) Department of Economics, University of Southern Denmark, Campusvej 55, DK-5230, Odense M, Denmark (2) Aarhus School of Business and DIW, Berlin (3) Aarhus School of Business, Fuglesangs Alle 4, DK-8210, Aarhus V, Denmark Article History: Registration Date: 12/10/2004

Byline: Jesper Antelius (1), Lars Lundberg (2) Keywords: job turnover; market structure Abstract: Does internationalization mean increased reallocation of employment among plants and thus higher adjustment costs? This paper studies the reallocation of jobs among plants in the Swedish economy 1986--97 using micro data. It turns out that the rate of job turnover is high in industries with high rates of innovation and employment growth, and low in concentrated industries with limited competition. However, we find no evidence for the view that increased openness to international competition would increase job turnover. In fact turnover is lower in export oriented industries where foreign ownership is frequent. Author Affiliation: (1) Trade Union Institute for Economic Research (FIEF), University of Stockholm, Sweden (2) Trade Union Institute for Economic Research (FIEF), University of orebro, Sweden Article History: Registration Date: 12/10/2004

Research shows that analytical capabilities and market information processing practices improve for organizations demonstrating more favorable learning values. This in turn affects market-based outcomes. These findings are discussed within the framework of current literature and future research.

This paper outlines the fundamental features of the PJM day-ahead energy market and real-time energy market. The Day-ahead market is based on a voluntary least-cost security constrained unit commitment and dispatch with several fundamental design features that ensure the market is robust and competitive. This market offers market participants the option to lock in energy and transportation charges at binding day-ahead prices. The flexibility of the day-ahead market rules provide all participants with equal access to the day-ahead market through consistent price signals and by providing all participants with the ability to submit virtual demand bids and virtual supply offers. These mechanisms promote liquidity in the markets. Economic incentives drive the convergence of the day-ahead and real-time market prices. The real-time energy market is based on security-constrained economic dispatch and is cleared based on the actual system operating conditions. The LMP-based markets support reliable grid operations through efficient price signals. Index Terms--Electricity market, locational marginal pricing.

The electricity industry of the Nordic countries went through a major restructuring during the 1990s. A wholesale market with significant competition has been established. Nord Pool was established in 1993 as a Norwegian electricity exchange, and extended its trade to Norway and Sweden in 1996. It thus became the world's first multinational exchange for trade in electric power contracts, and presently it is the only truly international electricity market. There is one market operator, and there are five system operators. Each country has its own regulatory agency. There are no general cross border tariffs. In 2001, power contracts worth nearly NOK 412 billion, about 55 billion Euro, were cleared by Nord Pool, and the combined volume of contracts traded was 2769 TWh, that is more than seven times the physical consumption. An open market with a common framework has made the Nordic market the most liquid electricity market in the world. Three of the countries have full retail market access. Since deregulation of the electricity industry started, restructuring has taken place in all countries resulting in mergers and acquisitions. There is an ongoing concentration of ownership in the wholesale market, and the concentration of the production side causes concern. Index Terms--Deregulation, electricity markets, power exchange.

The New Electricity Trading Arrangements (NETA) in England and Wales are just over one year old and are generally acknowledged to have successfully enabled competitive pressures to emerge fully in the generation market for the first time since the electricity industry was liberalised in 1990. With their emphasis on treating electricity as far as possible like any other tradable commodity and their lack of a centralized clearing market, they represent a radical departure from conventional wholesale trading arrangements. This article explains the principles underlying NETA and examines how the arrangements have fared over their first year. Index Terms--Competition policy, Energy market restructuring, Energy markets, Energy trading and risk management.

This tutorial paper discusses some aspects of electricity markets from the perspective of the demand-side. It argues that increasing the short-run price elasticity of the demand for electrical energy would improve the operation of these markets. It shows, however, that enhancing this elasticity is not an easy task. The tools that consumers and retailers of electrical energy need to participate more actively and effectively in electricity markets are discussed. The paper also describes how consumers of electricity can take part in the provision of power system security. Index Terms--Contracts, load management, load modeling, load shedding, power demand, power industry, power system economics, power system security.

A market for pollution permits in which one firm has market power and one or more firms is noncompliant is examined. It is shown that the firm with market power may choose to hold more permits than it needs, and the one that is noncompliant may be socially desirable because it can mitigate the distortion caused by market power.

Byline: Christian Schultz (1) Abstract: This paper considers the effect of monopoly-promoting export cartels on domestic production. It is argued that export cartels facilitate tacit collusion by monitoring defections more efficiently. This slackens the incentive constraint of tacit collusion. Optimizing firms competing both in the domestic and export markets will often use the increased possibility for collusion in both markets. If the markets are not too different or there is constant returns to scale this is the case. Author Affiliation: (1) Centre for Industrial Economics and Institute of Economics, Studiestraede 6, DK, 1455, Copenhagen, Denmark Article History: Registration Date: 12/10/2004

Byline: Ian Domowitz (1) Keywords: Electronic markets; market microstructure; financial intermediation. Abstract: Relationships between trading cost, technology, and the nature of intermediation in the trading services industry are discussed. Electronic markets are linked to reductions in trading costs. Lower explicit costs are related to system development and operating costs. Electronic order book information is identified as a means of realizing implicit cost savings. The concept of liquidity management in electronic environments is introduced, and its potential is empirically illustrated. The empirical results suggest new roles for brokerage and exchange operations, and competition between the two. Competitive advantage with respect to the provision of liquidity management services is compared across types of intermediaries. Author Affiliation: (1) Electronic Market Initiatives ITG Inc., U.S.A Article History: Registration Date: 05/10/2004

The industrial networt paradign, or marketing as networks concept, is explored as to its theory, development, and knowledge production.

This paper extends the theory of multinational corporations, identifying three distinct influences of internal trade liberalization by a group of countries on the level and pattern of inward foreign direct investment (FDI). First, the tariff jumping motive encourages plant consolidation. Second, the export platform motive favours FDI with only a single union plant relative to exporting, and may induce a firm which has never exported to invest. Finally, reduced internal tariffs increase competition from domestic firms, which dilutes the other motives and may induce a `Fortress Europe' outcome of multinationals leaving union markets even though external tariffs are unchanged.

We compare first-price auctions to an exchange process that we term 'multilateral negotiations.' In multilateral negotiations, a buyer solicits price offers for a homogeneous product from sellers with privately known [...]

THE pharmaceutical industry is faced with the challenge of surviving and succeeding in an environment that has become more complicated and uncertain, and one that is characterised by rapid developments […]

This study looks at export performance based on market orientation, finding that it positively affects change in export sales, export profits, and change in export profits. Three environmental variables that affect export performance are market turbulence, competitive intensity, and technological turbulence. Obtaining and responding to market intelligence are critical for success in exporting.

A model is presented that depicts potential impacts of market integration programs on rural Latin American subsistence and cottage industries, focusing on mitigation of deforestation activities for agriculture.

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.

Byline: Robert R. Bliss (1), Mark J. Flannery (2) Abstract: Market discipline is an article of faith among financial economists, and the use of marketdiscipline as a regulatory tool is gaining credibility. Effective market discipline involvestwo distinct components: security holders' ability to accurately assess the condition of afirm (monitoring) and their ability to cause subsequent managerial actions to reflect thoseassessments (influence). Substantial evidence supports the existence of market monitoring.However, the existing evidence about market influence involves relatively rare events suchas management turnover. This paper seeks evidence that U.S. bank holding companies'security price changes reliably influence subsequent managerial actions. Although weidentify some patterns consistent with beneficial market influences, our methodology doesnot provide strong evidence that stock or (especially) bond investors regularly influencemanagerial actions. Day-to-day market influence remains, for the moment, more a matterof faith than of empirical evidence. Author Affiliation: (1) Research Department, Federal Reserve Bank of Chicago, 230 S. LaSalle St., Chicago, IL, 60604-1413, U.S.A. (2) Department of Finance, Insurance, and Real Estate, University of Florida, Gainesville, 32611-7168, U.S.A. Article History: Registration Date: 10/10/2004

Byline: Ari Hyytinen (1), Tuomas Takalo (2) Keywords: banking; disclosure; deposit insurance; market discipline; transparency Abstract: Transparency regulation aims at reducing financial fragility by strengthening market discipline. There are, however, two elementary properties of banking that may render such regulation inefficient at best and detrimental at worst. First, an extensive financial safety net may eliminate the disciplinary effect of transparency regulation. Second, achieving transparency is costly for banks, as it dilutes their charter values, and hence also reduces their private costs of risk-taking. We consider both the direct costs of complying with disclosure requirements and the indirect transparency costs stemming from imperfect property rights governing information and particularly infer the conditions under which transparency regulation cannot reduce financial fragility. Author Affiliation: (1) The Research Institute of the Finnish Economy (ETLA), Lonnrotinkatu 4B, FIN-00120, cHelsinki, Finland (2) Research Department, Bank of Finland, P.O. Box 160, FIN-00101, Helsinki, Finland Article History: Registration Date: 10/10/2004

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 establishes a concept for Product, Process, and Methodology (PPM) systematization to handle both structural complexity (often referred as hard complexity) and computational complexity (also referred as soft complexity) in product realization. A systematization methodology is proposed to handle both these complexities through a four-stage process: Planning, Systematization, Solution and Unification. Planning is the first stage where system specification is defined. Systematization is a systematic decomposition of the problem into a set of discrete sub-problems. There are three kinds of systematization that can be employed in product realization: Methodology systematization, Product systematization and Process systematization. During the Solution stage, a number of computational alternatives, solution strategies or topological options for handling soft complexity are obtained for each sub-problem, and the best solution is selected. Unification is an aggregation or a reconstruction of an overall product solution from various alternative solutions to the sub-problems. A branching and bounding methodology has been employed here first to branch the complex product and process into `sub-domains' and `loops' and later bound these loops back into sub-domains and then further bound those sub-domains back into an integrated product development system. The branching and bounding methodology provides the product development teams the ability to refine successively the `goodness or fitness' of a baseline product concept as teams proceed from one nested loop to another. PPM systematization is a convenient way of organizing the process necessary for a new product realization or for developing future product upgrades. Keywords product systematization; product and process realization; structural complexity; computational complexity; concurrent engineering; planning; optimization; solution, INTRODUCTION The product environment in modern manufacturing is very complex. It consists of many components of products, processes, and services (Fleischer and Liker, 1997), including information technology (IT) services (hardware [...]

Contract design under incomplete information is often analysed in a bilaterally monopolistic setting. If the informed party's reservation value does not depend on its private information (its type), it is a standard result that the uninformed side offers 'low' types distorted contracts to reduce the information rent left to 'high' types. We challenge this result by embedding contract design in a matching market environment. We consider a market where players meet pairwise and where, in each match, either side may be chosen to make a take-it-or-leave-it offer. As frictions become sufficiently low, we find that the set of equilibria is independent of whether there is complete or incomplete information. In particular, all contracts are free of distortions.

Byline: Harold L. Cole (1), George J. Mailath (3), Andrew Postlewaite (3) Abstract: Economists typically analyze individuals' market behavior in isolation from their nonmarket decisions. While this research strategy has generally been successful, it can lead to systematic errors when agents' nonmarket behavior affects their market choices. In this paper we analyze how individuals' investment behavior changes as a result of nonmarket behavior. Specifically, we analyze a model in which individuals must decide how to allocate their initial endowment between two random investments, where the returns are perfectly correlated across individuals for the first investment but independent across individuals for the second. We consider an environment in which men and women match, with wealthier individuals more successful in matching. We show how individuals' concern about relative wealth can affect their investment decisions, and we provide conditions under which individuals bias their investments either toward or away from the investment with correlated returns. A modification of the model is used to explain why agents' investments might exhibit a home country bias. Author Affiliation: (1) Research Department, Federal Reserve Bank of Minneapolis, 250 Marquette Ave., Minneapolis, MN 55480, USA , US (2) Department of Economics, Bunche Hall 9377, UCLA, Los Angeles, CA 90095-1477, USA (e-mail: hlcole@econ.ucla.edu) , US (3) Department of Economics, 3718 Locust Walk, University of Pennsylvania, Philadelphia, PA 19104-6297, USA (e-mail: {gmailath apostlew}&amp commat econ.sas.upenn.edu) , US

This article examines the possible causes of the Asian Financial crisis during the late 1990s. The authors focus on the role of free market capitalism in the financial distress in Asia, and the potential need for tighter discipline among market particpants or more government control over borrowers and creditors.

This article examines the impact of margin requirements on the gold and silver markets' trading activities by analyzing the role of time to contract-expiration in margin levels and trading activity relationships. The authors reveal the cost that markets impose on futures traders, the age of contract maturity is found to influence trading activity, small traders and speculators are found to be more vulnerability to margins, and margins increase following periods of volatility and decrease after stability.

This article examines relative prices and the flow of goods between countries in both data and in real business cycles. The author finds that output increases cause a worsening of terms of trade in real business, but not in data; restriction of asset markets has little impact on goods in specific countries.

This article re-evaluates the authors' previous explanations for profitability momentum strategies. The authors also provide support for behavioral models that propose delayed overreactions to be the reason for momentum profits.

This article evaluates institutional corporate bond trading to estimate transaction costs for over-the-counter bond markets. The author finds that larger trades have lower trading costs, small institutions pay more than large institutions in order to trade, and large bond dealers charge less than small ones.