Patents and R & D: The tournament effect

We identify a new route through which patent protection may affect R&D incentives, the tournament effect. It may decrease R\&D incentives, in which case patent protection may either adversely affect the level of R&D, or may discourage licensing. In either case welfare may fall.Patents, R&D incentive, Tournament effect, Licensing

Group-lending: Sequential financing, lender monitoring and joint liability

We develop a simple model of group-lendingbased on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects. Moreover, under certain parameter configurations, group-lending schemes involving either sequential financing, or a combination of lender monitoringand joint liability are feasible. In fact, group-lending schemes with sequential financing may succeed even in the absence of joint liability, though the repayment rate will be lower. In the absence of joint liability, however, group-lending with lender monitoring is unlikely to be feasible.Group-lending, joint liability, peer monitoring, sequential financing, under-monitoring, lender monitoring

Bertrand competition with non-rigid capacity constraints

We examine a model of Bertrand competition with non-rigid capacity constraints, so that by incurring an additional per unit cost of capacity expansion, firms can produce beyond capacity. We find that there is an interval of prices such that a price can be sustained as a pure strategy Nash equilibrium if and only if it lies in this interval. We then examine the properties of this set as [a] the number of firms becomes large and [b] the capacity cost increases.Bertrand competition, capacity constraint

Land Acquisition: Fragmentation, Political Intervention and Holdout

This paper provides a theory of holdout based on the landowners' inability to manage large sums of money and consequent lack of consumption smoothing in case of sale. We find that under some reasonable conditions fragmentation increases holdout and moreover, this happens if and only if large landowners are relatively more willing to sale. Turning to the effects of politicization, we find that voice coupled with collective bargaining increases efficiency provided fragmentation is severe. Further, whether there is political intervention or not depends on the political maturity of the landowners, i.e. if they already have voice or not.Land acquisition; holdout; fragmentation; politics; voice; collective bargaining.

Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes

Consider a Bertrand-Edgeworth duopoly with linear cost functions. If the firms produce to stock then no Nash equilibrium in pure strategies exists. If, however, the firms produce to order then all subgame perfect Nash equilibria involve the firms charging a price equal to marginal cost.Bertrand paradox, Edgeworth paradox, linear cost

The Porter Hypothesis and Hyperbolic Discounting

We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.Porter hypothesis; abatement tax; R&D; hyperbolic discounting;

Mixed Duopoly with Price Competition

This paper examines coalition-proof Nash equilibria (CPNE) of a mixed duopoly with price competition where the public firm meets all the demand coming to it. If the private firm is free to supply less than demand, then the unique CPNE involves the competitive price. If however the private firm also has to supply all its demand, then the set of CPNE prices turns out to be an interval, with prices ranging from the socially optimal one, to the price under complete privatization.Mixed duopoly; coalition-proof Nash equilibrium; price competition

Free Entry Bertrand Competition

This paper examines Bertrand competition under free entry, when firm size vis-a-vis market size is exogenously given. A free entry Bertrand Nash equilibrium (FEBE) exists if and only if relative market size is sufficiently large. Further, there is a unique coalition-proof Nash equilibrium price that corresponds to the minimum FEBE price, leads to average cost pricing for all active firms and is decreasing in market size.Bertrand competition; free entry; coalition-proof; contestability

Entry Liberalization, Export Subsidy and R&D

We examine, in the context of less developed countries, the R&D behaviour of igopolistic firms who compete over R&D, as well as output levels. We also assume that the firms can sell in either of the two markets - the domestic, or the foreign. We show that entry liberalization, despite increasing the level of competitiveness, does not affect the level of R&D. An increase in export subsidy may, however, lead to an increase in domestic R&D. Both these results contradict the popular argument that the levels of domestic R&D is positively related to the level of domestic competitiveness. We also demonstrate that any foreign firm that may enter selects a level of R&D that is atleast as efficient as that selected by any domestic firm. Finally, we demonstrate that entry liberalization has a positive effect on exports, as well as aggregate output.Entry liberalization; export subsidy; R&D; competitiveness

The Porter Hypothesis and Hyperbolic Discounting

We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.Porter hypothesis, abatement tax, R&D, hyperbolic discounting.