The Political Economy of Infrastructure Investment: Competition, Collusion and Uncertainty

Infrastructure, as it impacts transport costs, is crucial in determining equilibrium outcomes in spatial competition; however, infrastructure investment is typically exogenous. Our political economy analysis of infrastructure choice is based upon consumer preferences derived from Salop’s circular city model. In this setting, infrastructure investment has two effects: it directly lowers costs to consumers and indirectly affects market power. We show how political support for infrastructure investments depends crucially on the details of the market. Competition boosts popular support for infrastructure — often excessively so — while collusion leads to underinvestment. The uncertainty produced by infrastructure induced entry leads to traps and thresholds.

An Economic Analysis of Platform Sharing

We explore the managerial implications and economic consequences of platform sharing under models of horizontal and vertical product differentiation. By using a common platform across different products, firms can save on fixed costs for platform development. At the same time, platform sharing imposes restrictions on firms' ability to differentiate their products, and this reduces their profitability. It might appear that platform sharing across firms makes consumers worse off because firms cooperate in their product development processes to maximize their joint profit. We find, however, that platform sharing across firms benefits consumers in our framework because it intensifies competition in our horizontal differentiation model, and because it increases the quality of the lower-end product in our vertical differentiation model. We also show new channels through which a merger makes consumers worse off in the presence of platform sharing.

Political Economy of Infrastructure Investment: A Spatial Approach

The importance of infrastructure for growth is well established in the macroeconomic literature. Previous research has treated public investment in infrastructure as exogenous. We remedy this shortcoming by providing a political economy analysis of infrastructure choice based upon consumer preferences derived from spatial competition models. The transport cost parameter providesa natural index of infrastructure in these models. In this setting, infrastructure investment has two possible effects: to directly lower transaction costs and indirectly to affect market power. We begin with a single marketplace model in which only the direct effect is present and then bring in the indirect effect by extending the analysis to competition on the circle. Analysis of market structure, consumer participation, entry and transport cost curvature give a rich variety of results. Socially optimal outcomes occur in some cases but infrastructure traps are common. Our results suggest that in less developed countries competition enhancing policies are a key prerequisite for public support of infrastructure investmentSpatial Competition, Political Economy, Market Structure, Infrastructure Investment, Voting

Privatization in a Small Open Economy with Imperfect Competition

We look at privatization in a general equilibrium model of a small, tariff-distorted, open economy. There is a differentiated good produced by both private and public sector enterprises. A reduction in government production in order to cut losses from such production raises the returns to capital and increases the tariff revenue, which are welfare improving. However, privatization also leads to lower wages and possibly fewer private brands. This lowers workers’ welfare, which may make privatization politically infeasible. Privatization can improve workers’ welfare with complementary reforms, e.g., attracting foreign investment or trade liberalization.public sector enterprise; privatization; foreign investment; trade liberalization; monopolistic competition

Comparing Bertrand and Cournot Outcomes in the Presence of Public Firms

We revisit the classic comparison between Bertrand and Cournot outcomes in a mixed market with private and public firms. A departure from the standard setting, i.e., one where all firms maximize profits, provides new insights. A welfare-maximizing public firm's price is strictly lower while its output is strictly higher in Cournot competition. And whereas the private firm's quantity is strictly lower in Cournot (as in the standard setting), its price can be higher or lower. Despite this ambiguity, both firms, public and private, earn strictly lower profits in Cournot. The consumer surplus is strictly higher in Cournot under a linear demand structure. All these results also hold with more than two firms under a wide range of parameterizations. The ranking reversals also hold in a richer setting with a partially privatized public firm, where the extent of privatization is endogenously determined by a welfare-maximizing government. As a by-product of our analysis, we find that in a differentiated duopoly setting, partial privatization always improves welfare in Cournot but not necessarily in Bertrand competition.Bertrand; Cournot; public firms; partial privatization

PRIVATIZATION IN A SMALL OPEN ECONOMY WITH IMPERFECT COMPETITION

We look at privatization in a general equilibrium model of a small, tariff-distorted, open economy. There is a differentiated good produced by both private and public sector enterprises. A reduction in government production in order to cut losses from such production raises the returns to capital and increases the tariff revenue, which are welfare improving. However, privatization also leads to lower wages and possibly fewer private brands. This lowers workers’ welfare, which may make privatization politically infeasible. Privatization can improve workers’ welfare with complementary reforms, e.g., attracting foreign investment or trade liberalization.public sector enterprise, privatization, foreign investment, trade liberalization, monopolistic competition.

Differentiated duopoly under vertical relationships with communication costs

Platform sharing across manufacturers has recently become common practice in the automobile industry. Its important objective is to reduce procurement costs by taking advantage of the commonality of components, but this often reduces the degree of product differentiation. We investigate this trade-off through analyzing a model that incorporates manufacturer-supplier relationships with communication costs into a standard differentiated duopoly model, and find an interesting inverse relationship between the advantage of platform sharing and the costs for manufacturers to communicate with their potential suppliers. The result suggests that the information-technology revolution could be a reason for the recent prevalence of platform sharing in the automobile industry, and predicts that similar phenomena would prevail in various other industries as the IT revolution makes further progress. We then consider an extension of our model that incorporates an option for the manufacturers to jointly establish a B2B electronic marketplace in order to reduce their communication costs, and explore its welfare implications. Although the joint establishment of an e-marketplace could be viewed as an anticompetitive activity, we find that in our framework it increases welfare.Communication cost, differentiated duopoly, electronic commerce, electronic marketplace, manufacturer-supplier relationships, platform sharing, product differentiation

Trade and Expropriation: A Factor Proportions Approach

An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.Expropriation; Factor Proportions; Gains from Trade; Legal Services

Theoretical investigation of the Co-C bond activation in methylcobalamin and adenosylcobalamin-dependent systems: mechanistic insights.

The vitamin B12 derivates, otherwise known as cobalamin (Cbl), are ubiquitous organometallic cofactors. The biologically active forms of Cbl, such as methylcobalamin (MeCbl) and adenosylcobalamin (AdoCbl), act as cofactors in different physiological reactions for both prokaryotes and eukaryotes. A crucial aspect of the Cbl-mediated systems is the activation of the organometallic Co-C bond that plays a critical role in its catalytic activity. One of the most remarkable features of this Co-C bond is its unusual activation in AdoCbl-dependent enzymatic reactions, where a trillion-fold rate acceleration of the Co-C bond cleavage is observed inside the enzyme compared to the isolated AdoCbl. Although several hypotheses have been proposed previously, none can fully explain the trillion-fold rate acceleration that is observed for the Co-C bond cleavage. Thus, the factor(s) responsible for the unusual activation of the Co-C bond in the AdoCbl-dependent enzyme remains elusive. Nonetheless, this Co-C bond of MeCbl and AdoCbl cofactors is also known for its unique ability to be activated both thermally and photolytically within the enzymatic environment as well as in solutions. Even though the photochemistry of Cbl-dependent systems has been known for almost five decades, it has recently received a lot of attention due to its potential role in light-activated drug delivery, biomimetic catalysis, and a variety of other applications. Therefore, with these applications in mind, understanding the mechanistic insight into the activation of the Co-C bond is paramount for gaining a comprehensive knowledge of these reactions. In this dissertation, the mechanistic details of the activation of the Co-C in the photolysis and native catalysis of MeCbl and AdoCbl-dependent systems have been investigated using hybrid quantum mechanics/molecular mechanics (QM/MM) simulations, density functional theory (DFT), and time-dependent density functional theory (TD-DFT) methodologies. Overall, this dissertation is divided into six chapters. Chapter one gives an introduction, a historical overview of B12 chemistry, and possible applications in therapeutics and optogenetics. Chapters two and three discuss the photoactivation of the Co-C bond in MeCbl-dependent methionine synthase (MetH) and explore the role of the enzymatic environment on photoreaction. The photochemical data of isolated MeCbl cofactor in solution were also discussed and compared with the enzymatic environment to understand the effect of protein binding on the photolysis of Co-C bonds. The influence of mutation on the photolysis of Co-C is discussed in chapter three. Overall, in these two chapters, it was shown that the enzymatic environment affects the photolysis of the Co-C bond by modulating the electronically excited state. Chapter four provides an in-depth insight into the aerobic photolysis of MeCbl, with emphasis placed on the mechanistic details of the insertion of O2 in the activated Co-C bond. It was shown that the photochemical properties of MeCbl can also be modulated in the presence of molecular oxygen, i.e., in aerobic conditions. While chapters two to four cover the light-activation of the Co-C bond, chapter five focused on the activation of the Co-C bond during the native catalysis of AdoCbl-dependent methylmalonyl CoA mutase (MCM). The QM/MM methodology has been used to investigate the factor(s) responsible for the unusual activation of the Co-C bond that is observed in the enzyme as compared to AdoCbl in solution. While there are at least three previously reported hypotheses for the activation of the Co-C5ʹ bond including, substrate-induced conformational changes, electrostatic interaction between the Ado group and the enzyme, and involvement of tyrosine residue, none of these can explain this unusual activation. Thus, how the arrival of the substrate triggers the activation of the Co-C5ʹ bond remains an open issue

Discrete Innovation, Continuous Improvement, and Competitive Pressure

Does competitive pressure foster innovation? In addressing this important question, prior studies ignored a distinction between discrete innovation aiming at entirely new technology and continuous improvement consisting of numerous incremental improvements and modifications made upon the existing technology. This paper shows that distinguishing between these two types of innovation will lead to a much richer understanding of the interplay between firm’ incentives to innovate and competitive pressure. In particular, our model predicts that, in contrast to previous theoretical findings, an increase in competitive pressure measured by product substitutability may decrease firms’ incentives to conduct continuous improvement, and that an increase in the size of discrete innovation may decrease firms’ incentives to conduct continuous improvement. A unique feature of this paper is its exploration of the model’s real-world relevance and usefulness through field research. Motivated by recent declines in levels of continuous improvement in Japanese manufacturing, we conducted extensive field research at two Japanese manufacturing firms. After presenting our findings, we demonstrate that our model guides us to focus on several key changes taking place at these two firms; discover their interconnectedness; and finally ascertain powerful underlying forces behind each firm’s decision to weaken its investment in traditional continuous improvement activities.Competitive pressure, continuous improvement, discrete innovation, field research, location model, product substitutability, small group activities, technical progress