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Local farsightedness in network formation International Journal of Economic Theory (IF 0.53) Pub Date : 2024-02-14 Pierre de Callataÿ, Ana Mauleon, Vincent Vannetelbosch
We propose the concept of local-k$k$ farsighted consistent network for analyzing network formation games where players only consider a limited number of feasible networks. A network g$g$ is said to be local-k$k$ farsightedly consistent if, for any network g′$g^{\prime} $ within the distance-k$k$ neighborhood of g$g$, either g$g$ is not defeated by g′$g^{\prime} $, or g$g$ defeats g′$g^{\prime} $. We
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Wars of attrition with spending constraints International Journal of Economic Theory (IF 0.53) Pub Date : 2024-02-14 Sung-Ha Hwang, Youngwoo Koh
We study wars of attrition with spending constraints. Specifically, there are two players with different values of the prize and costs of continuing wars, and they are endowed with limited budgets that can be used during the war. Two players compete by choosing the time at which they intend to give up within the constraints. We find the constrained mixed strategy equilibrium for this model and provide
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Submodularity and supermodularity in contest games International Journal of Economic Theory (IF 0.53) Pub Date : 2024-01-04 Emin Karagözoğlu, Kerim Keskin, Çağrı Sağlam
This paper presents various examples of two-player submodular or supermodular contest games. Emphasizing the three main elements of a contest model, our examples revolve around situations where (i) contest success function allows for a draw, (ii) winning prize is not exogenously given but rather jointly produced, or (iii) individual effort cost also depends on the rival's effort. We then illustrate
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Treating symmetric buyers asymmetrically International Journal of Economic Theory (IF 0.53) Pub Date : 2023-12-29 Shraman Banerjee
We investigate a finite-horizon dynamic pricing problem of a seller under limited commitment. Even when the buyers are ex ante symmetric to the seller, the seller can charge different prices to different buyers. We show that under the class of posted-price mechanisms this asymmetric treatment of symmetric buyers strictly revenue-dominates symmetric treatment. The seller implements this by using a priority-based
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A theoretical analysis on two-sided duopoly platforms and tax regimes International Journal of Economic Theory (IF 0.53) Pub Date : 2023-11-07 Sangita Poddar, Tanmoyee Banerjee (Chatterjee), Swapnendu Banerjee
We study the effects of three forms of taxation—a tax levied on the platform's revenue, an ad valorem tax on consumers' access fees and tax imposed on per-transaction fees of sellers, in vertically differentiated two-sided duopoly platforms with cross-side network effects. The level of informative advertising which increases the probability of finding sellers by buyers, declines with taxes for each
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Irresolute choice behavior International Journal of Economic Theory (IF 0.53) Pub Date : 2023-10-25 Edi Karni
This paper proposes a model of irresolute choice rationalizing random choice behavior and examines its applications to decision making under certainty, uncertainty, and risk. Depending on the context, the representations feature canonical signal spaces. Decisions are governed by random draws of signals generating stochastic choice functions. Application to portfolio selection and experimental testing
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Free entry in mixed oligopoly leads to insufficient privatization? International Journal of Economic Theory (IF 0.53) Pub Date : 2023-08-23 Leonard F. S. Wang, Yoshihiro Tomaru, Chan Zhou
This paper investigates privatization policy in mixed oligopoly when partial privatization changes a technological difference between semi-public and private firms. It shows that when the degree of privatization is partial, privatization is insufficient. Furthermore, privatization is more likely to be insufficient as the market becomes more competitive. If the cost efficiency gain is captured by decreasing
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Labor market distortion and its impact on wage inequality in the modernization of small-scale agriculture International Journal of Economic Theory (IF 0.53) Pub Date : 2023-07-14 Dianshuang Wang, Xiaochun Li, Zixin Hu, Run Yuan
This study investigates the impacts of labor market distortion on wage inequality by considering the modernization of small-scale agriculture. Owing to small-scale operations, agriculture requires an intermediate sector—an agricultural producer service sector—to facilitate the introduction of nonagricultural intermediate inputs and promote modernization. The basic model assumes perfect competition
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Fairness and formation rules of coalitions International Journal of Economic Theory (IF 0.53) Pub Date : 2023-07-11 Chiara Donnini, Marialaura Pesce
In this paper, we study the problem of a fair redistribution of resources among agents of an exchange economy and how certain limitations imposed on coalition formation may impact the set of allocations judged fair. The study is conducted in atomless economies as well as in the so-called mixed markets.
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Optimal growth with labor market frictions International Journal of Economic Theory (IF 0.53) Pub Date : 2023-07-04 Marco Guerrazzi
In this paper, I build a capital accumulation model in which labor has to be alternatively employed in the production of goods or in the recruitment of workers. Within this setting, I show that (i) the intensive measure of capital may converge towards its stationary value in a non-monotonic manner, (ii) Pareto-optimal allocations can also be achieved in a decentralized environment in which the wage
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The effects of trade liberalization on tax avoidance International Journal of Economic Theory (IF 0.53) Pub Date : 2023-06-21 Rui Pan, Dao-Zhi Zeng
Does trade liberalization aggravate tax avoidance? We build a three-country model of tax competition consisting of two nonhaven countries and one tax haven in which goods are traded between the nonhavens and firms may shift profits to the tax haven. When the nonhavens cooperate, the reduction in trade costs does not change the degree of tax avoidance. In contrast, when the nonhavens do not cooperate
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The wage fund theory and gains from trade in a dynamic Ricardian model International Journal of Economic Theory (IF 0.53) Pub Date : 2023-06-14 Sugata Marjit, Noritsugu Nakanishi
The theory of wage fund as the basic source of financial capital or credit is incorporated into a dynamic Ricardian trade model consisting of three classes of agents: the workers, the capitalist, and the producers of goods. We derive the modified golden rule based on a significantly different mechanism from the standard optimal growth framework. We show that, although international trade in a static
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Location choice with asymmetric data in the Hotelling model International Journal of Economic Theory (IF 0.53) Pub Date : 2023-06-09 Shuaicheng Liu
This paper analyzes the location choices of firms in the Hotelling model, in which one firm has consumer data and can practice price discrimination, while the other firm without data can only set uniform price. The equilibrium results show medium differentiation. The location choices of firms can alleviate the inhibition of data asymmetry on competition and increase consumer surplus. And we consider
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A new value for cooperative games based on coalition size International Journal of Economic Theory (IF 0.53) Pub Date : 2023-06-07 Surajit Borkotokey, Dhrubajit Choudhury, Rajnish Kumar, Sudipta Sarangi
We propose and characterize a new value for TU cooperative games based on egalitarian distribution of worths in smaller coalitions and players' marginal productivity in larger coalitions. This value belongs to the class of Procedural values due to Malawski. Our value is identical with the Shapley value on one extreme and the Equal Division rule on the other extreme. We show that our value is identical
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Axiomatic characterizations of the family of Weighted priority values International Journal of Economic Theory (IF 0.53) Pub Date : 2023-04-19 Sylvain Béal, Sylvain Ferrières, Adriana Navarro-Ramos, Philippe Solal
We introduce a new family of values for TU-games with a priority structure, which both contains the Priority value recently introduced by Béal et al. and the Weighted Shapley values (Kalai & Samet). Each value of this family is called a Weighted priority value and is constructed as follows. A strictly positive weight is associated with each agent and the agents are partially ordered according to a
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Environmental corporate social responsibility under price competition and the second-mover advantage: An endogenous timing approach International Journal of Economic Theory (IF 0.53) Pub Date : 2023-04-12 Chul-Hi Park, Sang-Ho Lee
We consider an environmental corporate social responsibility (ECSR) under price competition in a product differentiated duopoly and formulate an extensive endogenous timing game where firms choose ECSR and subsequently choose prices. We show that a successive sequential-move appears in the equilibrium wherein an ECSR leader adopts a lower degree of ECSR and thereupon chooses a price leader. Therefore
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Technology licensing and collusion International Journal of Economic Theory (IF 0.53) Pub Date : 2023-03-23 Neelanjan Sen, Priyansh Minocha, Arghya Dutta
This paper considers the possibility of technology licensing via fixed-fee, royalty or two-part tariff and tacit collusion between firms that produce homogeneous goods under asymmetric cost structures and compete in quantities. In contrast to Lin (1996), all forms of licensing facilitate (obstruct) collusion, if the initial cost difference between the firms is relatively less (more). Technology will
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The role of standard-setting organizations in deciding product quality and process innovation International Journal of Economic Theory (IF 0.53) Pub Date : 2023-03-15 Munirul Nabin, Pasquale Sgro, Surjasama Lahiri
We analyze the effect that the presence of a standard-setting organization (SSO) has on firms' choices of product quality and costly research and development (R&D) investment when consumers face uncertainty regarding product standardization. We construct a theoretical model with competing firms and compare frameworks where: (i) an SSO is exogenously absent and (ii) an SSO is present. Our first finding
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Pricing contingent convertibles with idiosyncratic risk International Journal of Economic Theory (IF 0.53) Pub Date : 2023-03-03 Xiaolin Wang, Zhaojun Yang, Pingping Zeng
We consider capital structure including equity, straight bonds (SBs), and contingent convertibles (CoCos) for nonfinancial firms. We price equity and CoCos by a utility-based method. We show that benefits from issuing CoCos increase dramatically with idiosyncratic risk and risk aversion. The firm value is concave in CoCos' conversion ratio and the optimal conversion ratio increases with risk aversion
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Optimality in an OLG model with nonsmooth preferences International Journal of Economic Theory (IF 0.53) Pub Date : 2023-02-02 Eisei Ohtaki
It is a well-known observation that, in the overlapping generations (OLG) model with the complete market, we can judge optimality of an equilibrium allocation by examining the associated equilibrium price. Motivated by recent development in decision theory under ambiguity, this study reexamines the above observation in a stochastic OLG model with convex but not necessarily smooth preferences. It is
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On the General Deviation Measure and the Gini coefficient International Journal of Economic Theory (IF 0.53) Pub Date : 2023-01-23 Doron Nisani
The General Deviation Measure introduces a progressive definition for financial risk measurement, which presents an alternative to the Coherent Risk Measure. This definition replaces the Translation Invariance and Monotonicity axioms with the Shift Invariance and Nonnegativity axioms, and it includes the Mean Absolute Deviation measure and other variations of the Value-at-Risk measurements. This research
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Rational stability of choice functions International Journal of Economic Theory (IF 0.53) Pub Date : 2023-01-16 Josep E. Peris, Begoña Subiza
Two independent approaches have been used to analyze choices. A prominent notion is rationalizability: individuals choose maximizing binary relations. An alternative is to analyze choices in terms of standards of behavior with the notion of von Neumann–Morgenstern (vNM)-stability. We introduce a new concept ( r - $r \mbox{-} $ stability) that in turn extends the notion of stability and rationality
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Setting an exam as an information design problem International Journal of Economic Theory (IF 0.53) Pub Date : 2022-12-30 Makoto Shimoji
We take a teacher's exam-setting task as an information design problem. Specifically, the teacher chooses a conditional distribution of grades given students' types. After observing their exam results, each student updates her belief regarding her type via Bayes' rule and chooses an action. Students' reactions to the same exam result could be different, depending on their heterogeneous prior beliefs
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A note on changes in additive risky benefits and risky costs International Journal of Economic Theory (IF 0.53) Pub Date : 2022-12-16 Mario Menegatti
We introduce a distinction between additive risky benefits and additive risky costs, showing that it is relevant in determining decision maker choices in the presence of changes in risk. Results obtained show the specific role of the order of risk change when facing the two types of risk. Similarities and differences with the case of multiplicative risks are discussed. Moreover, the analysis is performed
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Refining the Lorenz-ranking of rules for claims problems on restricted domains International Journal of Economic Theory (IF 0.53) Pub Date : 2022-12-05 Miguel Ángel Mirás Calvo, Iago Núñez Lugilde, Carmen Quinteiro Sandomingo, Estela Sánchez Rodríguez
The comparison of the central rules for claims problems, according to the Lorenz order, has been studied not only on the entire set of problems but also on some restricted domains. We provide new characterizations of the adjusted proportional rule as being Lorenz-maximal or Lorenz-minimal within a class of rules on the half-domains. Using this result, we rank the adjusted proportional, the minimal
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Introduction to the special feature section on economic policy and risk management International Journal of Economic Theory (IF 0.53) Pub Date : 2022-11-22 Takashi Kamihigashi
CONFLICT OF INTEREST The author declares no conflict of interest.
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Relative deprivation, time preference, and economic growth International Journal of Economic Theory (IF 0.53) Pub Date : 2022-11-11 Debajyoti Chakrabarty
We study the growth process among a large group of economies where consumption relative to a reference group determines the discount factor of the household agents. We characterize all possible balanced growth paths and their stability properties. The model can explain why two economies having similar production technologies, preferences, and total factor productivity growth rates can differ in labor
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Product design in monopolistic competition International Journal of Economic Theory (IF 0.53) Pub Date : 2022-11-02 Burak Dindaroglu
We consider a model of monopolistic competition where producers can manipulate an elasticity parameter at an early stage. We interpret this as a choice of product specialization. Lower marginal costs of production lead to more generic products in all equilibria, which lead to fewer varieties under free-entry. Entry of a new firm increases overall specialization and increases prices, that is, the environment
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“Love for variety,” outside option and extensive margin of demand International Journal of Economic Theory (IF 0.53) Pub Date : 2022-11-02 Sovik Mukherjee, Vivekananda Mukherjee
The paper models a uniform-price Bertrand-price-competition in a differentiated product oligopoly market, where the buyers' preference shows “love for variety.” The buyers differ from each other in their valuation of the differentiated product with a common outside option available to all. The model endogenously determines both the extensive and intensive margin of demand and the equilibrium number
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Preferential corporate income tax treatment: Valuation in the market portfolio International Journal of Economic Theory (IF 0.53) Pub Date : 2022-11-02 Junwook Yoo
In the setting of the market portfolio, the impacts of preferential corporate income tax treatments through the valuational reduction for risk are opposite to and offset the impacts through the expected proceeds. This suggests that focusing on the absolute valuation of tax-favored firms results in the undermeasurement of implicit taxes on returns on investments in tax-favored firms and the relative
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Strategic default, multiple installments, and the role of informal moneylender in microcredit contract International Journal of Economic Theory (IF 0.53) Pub Date : 2022-09-14 Khan Jahirul Islam
I model the role of strategic defaults and informal moneylenders on multiple-installment loan contracts offered by microfinance institutions (MFIs). The results show that a single-installment loan is not viable due to MFIs' vulnerability to strategic defaults and borrowers' lack of collateral. In contrast, a multiple-installment contract requires borrowers to borrow from the moneylender, who is immune
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Efficient regulated entry in competitive markets with demand uncertainty International Journal of Economic Theory (IF 0.53) Pub Date : 2022-08-30 Raúl Bajo-Buenestado
It is well-known that, in a competitive market, the number of firms in a free-entry equilibrium is the efficient one. This paper shows that this textbook result breaks down if firms face demand uncertainty. In this case, entry is excessive relative to the optimum and, therefore, regulation improves market efficiency. This occurs because, in the absence of regulation, entry is motivated by the profits
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International environmental agreements under different evolutionary imitation mechanisms International Journal of Economic Theory (IF 0.53) Pub Date : 2022-08-09 Hsiao-Chi Chen, Shi-Miin Liu
This paper explores how the formation and stability of international environmental agreements vary with two often adopted mechanisms: imitating-the-best-average and imitating-the-best-total rules. We first show that the possible long-run equilibria of two dynamics are the same. They are countries' full participation, no-participation, and the two equilibria combined. However, the occurring conditions
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Anticipation in leisure—Effects on labor-leisure choice International Journal of Economic Theory (IF 0.53) Pub Date : 2022-07-31 Bibaswan Chatterjee, Rolando Escobar-Posada, Goncalo Monteiro
This paper introduces the idea of a forward-looking reference benchmark on both consumption and leisure in the context of a Ramsey–Cass–Koopmans growth model by assuming that in addition to consumption and leisure the household utility also depends on reference benchmarks of future anticipated consumption and leisure. We analyze the macrodynamic equilibrium, contrasting it to the case when the reference
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Rules versus discretion in Central Bank communication International Journal of Economic Theory (IF 0.53) Pub Date : 2022-07-08 Raphael Galvão, Felipe Shalders
We propose a theoretical framework to study Central Bank communication and to assess the benefits of commitment to a disclosure rule. Our model features a coordination environment, where agents have dispersed private information and their interests are not aligned with those of the Central Bank. Public information can lead to undesirable coordination among agents. We show that anything goes when the
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Endogenous fertility cycles and childcare services International Journal of Economic Theory (IF 0.53) Pub Date : 2022-05-21 Kazunobu Muro
We construct a two-sector overlapping generation model with endogenous fertility, where one sector produces goods and the other produces childcare services. The elasticity of fertility-related expenditures on services is crucial for determining labor participation and whether fertility converges to a steady state with monotone or oscillation. If capital intensity in the goods sector is greater than
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Human capital, innovation, and growth International Journal of Economic Theory (IF 0.53) Pub Date : 2022-05-16 Clas Eriksson, Johan Lindén, Christos Papahristodoulou
This paper explores the interaction between human capital and innovation in the process of economic growth. Using a model of endogenous growth, we focus on how taxes and other policy instruments affect the incentives to invest in human capital. In contrast to many other growth models we find that the taxation of human capital has a substantial negative effect on its accumulation. This in turn reduces
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Belief aggregation for representative agent models International Journal of Economic Theory (IF 0.53) Pub Date : 2022-05-16 Alexander Zimper
Representative agent models pin down equilibrium asset prices of an underlying heterogeneous agents economy through the utility maximization problem of a representative agent evaluated at aggregate endowment levels. This paper considers a complete markets asset exchange economy in which all economic agents are expected utility maximizers who share the same risk preferences but may have heterogeneous
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Vertical cross-ownership, input price discrimination, and social welfare International Journal of Economic Theory (IF 0.53) Pub Date : 2022-04-08 Ji Sun, Leonard F. S. Wang
In this paper, we analyze the impact of vertical cross-ownership with input price discrimination on social welfare. A higher degree of product differentiation will raise industry profit, consumer surplus, and social welfare; under forward cross-ownership, a higher degree of cross-ownership has the same effect, in addition, it will reduce rival firm's profit and increase upstream firm's profit; however
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The object allocation problem with favoring upper ranks International Journal of Economic Theory (IF 0.53) Pub Date : 2022-03-24 Mehdi Feizi
We introduce (strict) favoring upper ranks, which is an extension of favoring higher ranks for random assignments. We demonstrate that ex post favoring ranks implies (strict) favoring upper ranks, and envy-freeness implies favoring upper ranks. Moreover, for at least four agents, no mechanism satisfies strict favoring upper ranks and either equal division lower bound or equal treatment of equals and
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Technology advantage, terms of trade, and pattern of trade International Journal of Economic Theory (IF 0.53) Pub Date : 2022-03-07 Cheng-Te Lee, Shang-Fen Wu
We develop a two-country, two-sector model of trade, and assume that the differences between two countries are not only the diversities of human capital distributions but also relative production technologies. We find that, in addition to the diversity effect, both the terms of trade effect and the relative technology effect can also matter for the pattern of trade. We prove that, unlike previous results
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Do oligopolistic firms benefit from being forced to act non-strategically? International Journal of Economic Theory (IF 0.53) Pub Date : 2022-03-07 Mehdi Fadaee, Hamideh Esfahani
The present study seeks to answer the question of whether acting non-strategically can benefit firms. In a static Cournot framework, if a subset of firms are constrained to the equilibrium level of output, being non-strategic will have no impact on profits of neither constrained nor strategic firms and provided that sufficiently large number of firms are restricted, a marginal quantity contraction
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Chamberlin without differentiation: Soft capacity constrained price competition with free entry International Journal of Economic Theory (IF 0.53) Pub Date : 2022-02-28 Marie-Laure Cabon-Dhersin, Nicolas Drouhin
We show that the long-term properties of price and cost in Chamberlin's monopolistic competition model can be reproduced with a soft capacity constrained price competition oligopoly model for a homogeneous good with free entry.
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Upstream privatization and downstream licensing International Journal of Economic Theory (IF 0.53) Pub Date : 2022-02-28 Yi Liu, Leonard F.S. Wang, Chenhang Zeng
This study attempts to investigate the impact of downstream foreign licensing on upstream privatization policy in a vertically related market, in which a public firm and a domestic private firm supply exclusively to downstream domestic and foreign firms, respectively. We show that downstream licensing occurs when the cost differential between downstream duopolists is small, and the optimal strategy
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To make or to buy from a common supplier? Strategic considerations and welfare consequences International Journal of Economic Theory (IF 0.53) Pub Date : 2022-02-13 Wei-Jen Wen, Wen-Chieh Lee, Chung-Yen Lo
Consider two downstream firms that each can either produce an input in-house or purchase it from an upstream supplier. We show that depending on the difference between the supplier's and the downstream firms' in-house production costs, outsourcing by both firms could help them achieve a Pareto improvement or leave them trapped in a prisoner's dilemma. Furthermore, we find that two downstream firms
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Introduction to the special issue in honor of William Thomson International Journal of Economic Theory (IF 0.53) Pub Date : 2022-02-04 Youngsub Chun,Kazuo Nishimura,Makoto Yano
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What role should public firms play in the upstream market? International Journal of Economic Theory (IF 0.53) Pub Date : 2022-02-02 Yongfu Liang, Leonard F. S. Wang, Yapo Yang
We investigate the upstream public firm's desirable option of production timing in the vertically related upstream market. We find that multiple equilibria may exist, including the Cournot-type and Stackelberg-type, with different degrees of privatization in the presence of upstream firms' efficiency gap. These equilibrium outcomes are also influenced by the intensity of downstream market competition
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Cournot–Bertrand comparisons under R&D competition: Output versus R&D subsidies International Journal of Economic Theory (IF 0.53) Pub Date : 2022-01-27 Jiaqi Chen, Sang-Ho Lee
We compare Cournot and Bertrand competitions with R&D investment under output versus R&D subsidy policies. We demonstrate that Cournot firms invest more (less) in R&D and the government grants more (less) subsidies than for Bertrand firms with output (R&D) subsidies. We also find that both competition modes yield the same welfare with output subsidy, while Bertrand yields higher welfare than Cournot
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Inward-looking policies, finite change, and employment: The capital reallocation effect International Journal of Economic Theory (IF 0.53) Pub Date : 2022-01-21 Sugata Marjit, Kausik Gupta
It is well recognized that there emerged a trend of inward-looking trade policies even before the COVID pandemic crippled the world. These were reflected in both BREXIT and US-China trade conflicts. As countries become inward-oriented, usually local prices start rising. With this backdrop, this paper explores how rising local prices are likely to affect employment in the short and long runs when we
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Pollution in a globalized world: Are debt transfers among countries a solution? International Journal of Economic Theory (IF 0.53) Pub Date : 2022-01-19 Marion Davin, Mouez Fodha, Thomas Seegmuller
We analyze the effects of a debt relief, that is, a decrease in public debt of a low-income country financed by a high-income country, on environmental quality. Under perfect mobility of assets, the debt relief increases the overall capital stock, and environmental quality when public abatements are sufficiently efficient. Welfare in both countries can also improve. Under a weak mobility of assets
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Second-language acquisition behavior and hegemonic language International Journal of Economic Theory (IF 0.53) Pub Date : 2022-01-19 Kentaro Hatsumi
We construct a game-theoretic model in which there are multiple countries with their own languages and each citizen can gain from additional communication in her secondarily acquired language. We demonstrate that in any equilibrium, a hegemonic language, which is a language that all citizens in other countries want to study, emerges. Such an equilibrium is more likely to exist if the size of the population
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Financial market incompleteness and international cooperation on capital controls International Journal of Economic Theory (IF 0.53) Pub Date : 2022-01-17 Shigeto Kitano, Kenya Takaku
We examine how the degree of financial market incompleteness affects welfare gains from international cooperation on capital controls. When financial markets are incomplete, international risk sharing is disturbed. However, the optimal global policy significantly reverses the welfare deterioration due to inefficient risk sharing. We show that when financial markets are more incomplete, the welfare
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Ascendant altruism and asset price bubbles International Journal of Economic Theory (IF 0.53) Pub Date : 2021-12-06 Stefano Bosi, Thai Ha-Huy, Cao-Tung Pham, Ngoc-Sang Pham
We consider an overlapping generations economy with altruism toward parents and a long-lived asset that delivers no dividends (pure bubble asset). We explore the role of ascendant altruism on the dynamic properties of equilibrium and rational bubbles in the cases of exogenous and endogenous growth.
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Merger under horizontal and vertical product differentiation International Journal of Economic Theory (IF 0.53) Pub Date : 2021-10-15 Neelanjan Sen, Drishti Narula
This paper studies the possibility of a merger when firms are asymmetric in marginal costs and produce vertically and horizontally differentiated products. The merger of two firms that produce the better-quality products (w.r.t. third firm) is possible, if the quality difference (net of cost) or the horizontal product differentiation between the firms that merge is high. If the quality difference (net
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Multi-tier pricing in uniform and non-uniform tax/subsidy systems International Journal of Economic Theory (IF 0.53) Pub Date : 2021-10-14 Winston W. Chang, Tai-Liang Chen
This paper examines the optimal specific tax/subsidy policy for a monopoly under multi-tier pricing. It shows, among other things, that an increase in a specific tax on any tier will raise (reduce) the cumulative output of preceding (succeeding) tiers in the non-uniform scheme. In contrast, increasing the tax under the uniform scheme will reduce the output for all tiers and their cumulative output
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The impact of environmental policy on wage inequality International Journal of Economic Theory (IF 0.53) Pub Date : 2021-10-13 Kuo-Hsing Kuo, Shang-Fen Wu, Cheng-Te Lee
Consider a small open Harris and Todaro's model. This paper analyzes the impact of the policy of environmental protection on skilled–unskilled wage inequality. We find that, in the economy with urban unemployment, if the elasticity of substitution between unskilled labor and pollution in the urban low-skill sector is small (large) enough then a rise in the pollution tax will expand (narrow down) skilled–unskilled
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Note on collusion with network externalities in price versus quantity competition International Journal of Economic Theory (IF 0.53) Pub Date : 2021-10-12 Kangsik Choi, DongJoon Lee
We compare collusion stability under Bertrand and Cournot duopoly with differentiated network products. Contrast to previous studies, we show that (i) the range of collusion incentive is narrower under Cournot competition than under Bertrand competition, unless network externalities are sufficiently strong; (ii) collusion in prices (quantities) is more stable than in quantities (prices) if network
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Wheels and cycles: Suboptimality and volatility of corrupted economies International Journal of Economic Theory (IF 0.53) Pub Date : 2021-09-15 Stefano Bosi, David Desmarchelier, Thai Ha-Huy
We consider a simple economy where production depends on labor supply and social capital. Networking increases the social capital (“greases the wheel”) but also the corruption level (“sands the wheel”). Corruption is a negative productive externality. We compare the market economy, where the negative externality is not taken into account by individuals, with a centralized economy, where the planner
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Indeterminacy in a model with production externality and inferiority in consumption International Journal of Economic Theory (IF 0.53) Pub Date : 2021-09-15 Kazumichi Iwasa, Kazuo Nishimura
We study the dynamic property of a constant returns two-sector model with sector-specific externality. In this study, we consider two types of consumption good, one of which is a pure consumption good and the other is a consumable capital good. Then, we examine the case where households tend to consume more pure consumption goods and consume less consumable capital ones. We show that if a consumable
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Pecuniary externalities, bank overleverage, and macroeconomic fragility International Journal of Economic Theory (IF 0.53) Pub Date : 2021-09-15 Ryo Kato, Takayuki Tsuruga
Pecuniary externalities in models with financial friction justify macroprudential policies for preventing excessive risk taking by economic agents. We extend the Diamond and Rajan model of banks with production factors and explore how a pecuniary externality affects a bank's leverage. We show that the laissez-faire banks in our model take on excessive risks compared with the constrained social optimum