This paper examines the net benefit accruing to a government when choosing between a lower tax rate on future profits and an investment subsidy as investment stimulation. We hypothesize that either the firm or the government faces Knightian uncertainty in contemplating investment. In the presence of the firm's Knightian uncertainty, the government prefers the investment cost subsidy to tax rate reduction

To enter into a host country market with significant technological distance, a multinational corporation forms a joint venture affiliate with a local partner and collects licensing royalties from the affiliate. Both parties to the joint venture simultaneously decide their respective equity shares and the capital capacity of a continuous investment project via Nash bargaining. Since the multinational

We follow the Nash program to provide strategic justifications of the TAL family of rules for bankruptcy problems. The design of our game is inspired by an axiomatization of the TAL family of rules exploiting the properties of consistency together with certain degrees of lower and upper bounds to all creditors. Bilateral negotiations of our game follow the spirit of those bounds. By means of consistency

We analyze the problem of allocating indivisible objects and monetary compensations to a set of agents. In particular, we consider envy‐free and budget‐balanced rules that are least manipulable with respect to agents counting or with respect to utility gains. A key observation is that, for any profile of quasi‐linear preferences, the outcome of any such least manipulable envy‐free rule can be obtained

I use the middle products model of Sanyal and Jones to study the pass‐through of a tariff on the price of non‐traded final goods. I extend their analysis by comparing the short‐run effect of the tariff, when all factors are immobile, with the effects when labor is mobile between all sectors. It is shown that the short‐run pass‐through may vary from zero to a magnified effect on the price of the final

We first consider a closed model, where households' time discount depends on externality in consumption. We can prove that there is a unique steady state, which is a saddle point. Then we extend the model to a two‐country world, and derive the condition on the effects of consumption externality under which there is a unique free trade steady state with saddle‐point stability.

Jones's (2000) celebrated book has inspired a generation of work devoted to understanding the causes and consequences of outsourcing. While much of this work has focused on the outsourcing versus domestic production decision of the firm, with labor cost‐saving as the key driver for outsourcing, we further explore how preference‐based outsourcing may arise in a dynamic world equilibrium. We address

In kidney transplantation, immunosuppressants are being used to relax all immunological constraints, allowing patients to receive transplants from biologically incompatible donors. We propose an efficient way of using immunosuppressants in combination with a kidney exchange program. We introduce the top‐trading cycles and chains solution, a modification of the top‐trading cycles rule for the standard

The present model revisits the issue of unit and ad valorem taxes in a model of monopolistic competition. It is shown that if the assumption of full employment is relaxed, then taxation can increase employment conditionally when the elasticity of substitution among varieties is low. Moreover, with the same level of initial unemployment, ad valorem tax is better than unit tax in terms of employment

Under an often employed imitation mechanism, we investigate whether countries with different emission abatement benefits and costs can achieve an international environmental agreement. When the abatement efficiencies, ancillary benefits of abatement, and/or the numbers of countries are large, an international environmental agreement with full participation is the unique long‐run equilibrium. For the

In this study, we explore a method of ranking nomination rules as a collective decision‐making procedure. Nomination rules determine which alternatives are eligible for collective decision‐making by aggregating the opinions of nominators, which are expressed positively or negatively. It is possible to compare nomination rules based on their “nominating power” distributions because they can be seen

This paper attempts to challenge two puzzles in the welfare program. The first puzzle is “non‐take‐up welfare,” which occurs when needy people do not take up welfare. Second, in some countries, the benefit level is high, but the recipient ratio is low; while the other nations have lower benefit levels but higher recipient ratios. We present a model of welfare stigma in which both non‐take‐up and welfare

This paper examines the income distribution and welfare effects of appropriation activities in an economy. In the short run, with a given number of firms, appropriation can narrow wage inequality between skilled and unskilled labor when the capital resources accrued by appropriators are not large. However, wage inequality widens when the capital accrued is large. In the long run, with free entry and

We show that whether a technology leader invests more in R&D compared to a technology follower may depend on the R&D process and whether the follower is in the market. Considering Cournot competition, we show that if the firms are in the market, the technology leader (follower) invests more in R&D under a step‐by‐step R&D process (when the firms target similar technologies). However, if the technology

This paper investigates how the presence of social capital affects the externality arising from status‐seeking preference as a parable for inefficient antagonistic behavior. It is assumed that the stock of social capital accumulates through the strategic interaction among a finite number of rational, infinitely‐lived individuals. Using a differential game, we show that there are two types of Markov

In many emerging economies incumbent firms often use dubious means to deter entry of other firms. We analyze this scenario in a three‐stage game of entry deterrence. The incumbent has incomplete information about the entrant's costs but can increase this cost by resorting to unfair means (e.g. bribing a politician who harms the entrant). We completely characterize the optimal bribe and show that this

The path‐breaking work of Card and Krueger, showing that a higher minimum wage can increase employment, turned the age‐old conventional wisdom on its head. This paper demonstrates that this apparently paradoxical result is perfectly plausible in a competitive general equilibrium production structure of a small open economy with a non‐traded good, without recourse to monopsony, spatial heterogeneity

Recent advances in the theoretical literature on international trade have shown considerable interest in the demand side of the general equilibrium. This paper supplements the literature by highlighting the role of non‐marketed complementaries. Individuals derive utility by consuming two marketed commodities and a non‐marketed commodity. The non‐marketed commodity affects the relative demands of the

Ronald Jones made seminal contributions to general‐equilibrium theory, moving away from an emphasis on the existence of equilibrium to algebraic formulations which enabled us to characterize key relationships between parameters and variables, such as that between tariffs and domestic factor prices and welfare. But the analysis remained limited in value for policy evaluation: the analysis was local

We propose a refinement process of dynamic equilibria based on small random perturbations (SRPs) of the backward perfect foresight (bpf) equilibrium map in a class of one‐step, forward‐looking dynamic models. An equilibrium is selected if its stationary measure is the limit of the stationary measures associated with the processes generated by the SRPs of the bpf maps, as the perturbation size approaches

This paper illuminates one mechanism by which democracy may fail to mitigate income inequality despite a widespread preference against it. When income inequality aversion is prevalent, high‐skilled, higher‐wage workers may adjust their working time to reduce inequality. However, the decrease in societal efficiency due to forgone high‐skilled labor outweighs an increase in efficiency from lower‐skilled

It is our pleasure to dedicate this collection of papers to Marcus Berliant, in recognition of his achievements in the economics profession, and for his influence on his students, coauthors, and researchers in general equilibrium and spatial economics. Marcus already stood out as a brilliant and original figure when he obtained his PhD from Berkeley University in 1982, where he worked on “A General

The distributional effects of a major air regulation in the United State in 2015 were analyzed using Berliant and Strauss Index Numbers, a set of theoretical and empirical equity metrics, and reduced‐form models that estimate the mortality effects of air pollutant emissions and their source contributions. By viewing the effects of pollution on human mortality as an implicit tax, we found progressivity

This paper investigates the impact of a stricter tax compliance policy on firms’ pollution emissions in the presence of labor market frictions. In contrast to a situation with perfect labor markets, we find that under the right‐to‐manage wage formation, a stricter compliance policy increases emissions when the shadow cost of the emission limit is excluded, whereas it has no impact when the shadow cost

Standard intuition in a multiple buyers‐single seller framework suggests that the buyer who is willing to pay the most for an object under sale would acquire it not only under a take‐it‐or‐leave‐it (TOLI) selling mechanism but also under bargaining with the seller, assuming of course that the buyers are not differentiated in terms of bargaining power. In this note we present a frequently encountered

We delineate “cities” independent of administrative boundaries in Japan by using a network theory‐based method and GPS‐based human mobility data. We divide the country into approximately 1 × 1 km2 cells and detect the partition of cells that is optimal from the perspective of information theory. The resulting groups of cells are specified as cities. We find that the combination of two lognormal distributions

Schmitt‐Grohé and Uribe (1997) illustrate that a balanced‐budget rule can lead to local indeterminacy and sunspot equilibria. I extend their local analysis by using local bifurcation techniques to investigate the possibility of cyclic and sunspot equilibria under a balanced‐budget rule in a neighborhood of a locally determinate steady state. For a class of models, I show the generic existence of two

We consider an economy with three cities producing different outputs. Two cities produce intermediate goods, a type 1 city producing an intermediate “agricultural” good with capital and labor only, and a type 2 city producing an intermediate “industrial” good with capital, labor, and human capital. A type 3 city produces the final good which is obtained from the two intermediate goods and labor. The

By specifying the setting of the footloose capital model with firm heterogeneity, this paper examines the effects of trade liberalization on unemployment through two different mechanisms: firstly, we embed search frictions into the labor market; and secondly, we consider fair wages as the source of unemployment. In the model with search frictions, we find that both the expected wage and employment

We provide some characterizations of the absence of triangular arbitrage in the spot exchange rates of a group of countries. When the matrix of exchange rates of the group does not fulfill the conditions given in those characterizations, we provide a measure of distance to the space of matrices of exchange rates that are triangular arbitrage‐free. Using this distance, we compute the closest no‐arbitrage

We compare the effects of migration on the production of public goods, on income taxes, and on the welfare of residents in the sending and receiving countries. Migration is driven by income differences between countries. Alternative wage adjustment scenarios are considered: fully flexible wages, upward rigidity, and unemployment. We show that in all scenarios, emigration is detrimental to welfare for

We review fundamental contributions by Marcus Berliant, with a view to a way forward. We focus on two themes to which he has contributed significantly: general equilibrium theory with land and location and general equilibrium analysis of spatial agglomeration.