Volume 16, Issue 6:

Geroski, Paul A.

"Thinking Creatively About Markets"

JEL codes: L0, L1, M2, M3
Keywords: market boundaries, strategic markets

Abstract: The paper takes a broad view of how economists identify market boundaries. Three types of definition are distingiuished: trading markets, anti-trust markets and strategic markets. The first is based on the familiar law of one price, while the second follows US DIJ guidelines and is designed to identify positions of market power. Neither of these definitions suits the needs of one of the more recent and fastest growing users of economics, namely those responsible for corporate strategy decisions inside firms. The paper reviews why market definitions are a fundamental part of strategy decisions, and identifies several ways that such users might define market boundaries.

Sleuwaegen, Leo, Belderbos, René, and Jie-A-Joen, Clive

"Cascading contingent protection and vertical market structure"

JEL codes: F13; L13
: Antidumping; Cascading contingent protection; Market structure; Strategic trade policy

Abstract: Cascading contingent protection may occur when protection of an upstream industry transfers injury to the downstream industry and increases the likelihood that this industry asks and receives protection. This paper examines cascading protection within a sequential petitioning model where the upstream industry acts as leader. The analysis identifies market structure and the vertical linkage between the upstream and the downstream industry as important determinants of the occurrence of cascading protection. It is shown that the circumstances which make cascading protection more likely to occur also make it more likely that this protection has serous negative welfare consequences.

McCloughan, Patrick and Stone, Ian

"Life duration of foreign multinational subsidiaries: Evidence from UK nothern manufacturing industry 1970-93"

JEL codes: C41; F23; L1
Keywords: Duration analysis; MNE (Multinational Enterprise); Post-entry performance

Abstract: Duration analysis is employed to examine the survival of 252 foreign manufacturing plants in the UK Northern region during 1970-93. Contrary to expectations, the hazard function is approximately inverse quadratic rather than monotonic decreasing. Greenfield entrants face a lower risk of failure than acquisition entrants, particularly early in life. Acquisitions of older plants exhibit stronger survival than acquisitions of recently established plants, so that the age of (indigenous) acquired plant at the point of foreign takeover appears to matter to the survival of acquisition entrants. Plant size and industrial concentration also emerge as important. Home country of parent firm and location within region are unimportant. Consistent with the inverse U-shaped hazard function, the lognormal regression model provides a reasonably satisfactory fit to the data, certainly tighter than the Weibull model.

Miravete, Eugenio J.

"Infant-industry tariff protection with pressure groups"

JEL codes: C73, F12, L61
Keywords: Learning by doing; Time-consistent protection; Infinite horizon; Markov perfect equilibria

Abstract: This paper analyzes the increasing tariff protection in the Spanish iron and steel industry over the first third of the 20th century. Learning effects are explicitly included to model a dynamic game of trade liberalization. The government chooses the tariff level while firms decide how much to produce each period. Firms' production decisions determine their future cost levels. Assuming that learning reduces only fixed costs, the dynamic game may be solved in closed form, so that the optimality and time consistency of the actual policy can be evaluated. Furthermore, the model is used to measure the relative importance of producers and consumers on the government's equilibrium tariff strategy. The model is calibrated for year 1913 and it is shown that the existence of important, unexploited dynamic economies of scale may have justified high tariff levels at that time. In addition the results also show that the Spanish iron and steel producers behved more competitively than what is commonly assumed, and that the government's protection policy was not significantly conditioned by steel producers.

Malueg, David A. and Tsutsui, Shunichi O.

"Distributional assumptions in the theory of oligopoly information exchange"

JEL codes: L13; D43; D82
Keywords: Information exchange; Cournot equilibrium; Accuracy effect

Abstract: We analyze the profitability of information sharing among Cournot oligopolists receiving private information about random demand. In this setting, previous authors showed information exchange to be unprofitable when firms' marginal costs are constant and outputs are perfect substitutes. We introduce a measure of the increase in the accuracy of firms' demand forecasts when information is shared. We provide two examples showing when this measure is large, information exchange is profitable, even though firms' marginal costs are constant and outputs are perfect substitutes. Moreover, we show that in the linear-conditional-expectations framework, which has been standard in the literature, this measure reveals these accuracy gains to be severely limited.

Aiginger, Karl and Mueller, Dennis C. and Weiss, Christoph

"Objectives, topics and methods in industrial organization during the nineties: Results from a survey"

JEL codes: L0; L1; L4; L5; D4; B0
Keywords: Market structure; State of art in industrial organization; Experts' survey; Antitrust policy; Empirical research

Abstract: We conducted a survey among 114 experts on industrial organization regarding their opinions on the way markets work, on the proper role of competition and industrial policy, and on the methods which should be used to analyze industrial markets. The experts assessed the importance of research topics and methods during the last year and their probable development in the future. The sample appears to provide a valid representation of European experts, the response pattern does not seem to depend on the personal characteristics of the respondents.