Technology diffusion in a differentiated industry

This paper investigates the adoption timing pattern of a cost-reducing innovation in a differentiated oligopolistic industry. It compares price and quantity market competition with the second-best optimal adoption rule. The diffusion pattern typically depends on the degree of product differentiation, and on the ability of firms to precommit, or not, to a certain adoption date. When goods are imperfect substitutes, market competition leads always to later adoption dates than it is socially optimal. When goods are sufficiently close substitutesı the last adoption occurs always earlier than in the optimum; the first adoption might also occur earlier but only if preemption is a credible threat

McShane-Whitney extensions in constructive analysis

Within Bishop-style constructive mathematics we study the classical McShane-Whitney theorem on the extendability of real-valued Lipschitz functions defined on a subset of a metric space. Using a formulation similar to the formulation of McShane-Whitney theorem, we show that the Lipschitz real-valued functions on a totally bounded space are uniformly dense in the set of uniformly continuous functions. Through the introduced notion of a McShane-Whitney pair we describe the constructive content of the original McShane-Whitney extension and examine how the properties of a Lipschitz function defined on the subspace of the pair extend to its McShane-Whitney extensions on the space of the pair. Similar McShane-Whitney pairs and extensions are established for H\"{o}lder functions and $\nu$-continuous functions, where $\nu$ is a modulus of continuity. A Lipschitz version of a fundamental corollary of the Hahn-Banach theorem, and the approximate McShane-Whitney theorem are shown

Technology diffusion in a differentiated industry.

This paper investigates the adoption timing pattern of a cost-reducing innovation in a differentiated oligopolistic industry. It compares price and quantity market competition with the second-best optimal adoption rule. The diffusion pattern typically depends on the degree of product differentiation, and on the ability of firms to precommit, or not, to a certain adoption date. When goods are imperfect substitutes, market competition leads always to later adoption dates than it is socially optimal. When goods are sufficiently close substitutesı the last adoption occurs always earlier than in the optimum; the first adoption might also occur earlier but only if preemption is a credible threat.Innovation; Diffusion; Horizontal Differentiation; Imperfect Competition;

Upstream horizontal mergers, bargaining, vertical contracts

Contrary to the seminal paper of Horn and Wolinsky (1988), we demonstrate that upstream firms, which sell their products to competing downstream firms, do not always have incentives to merge horizontally. In particular, we show that when bargaining takes place over two-part tariffs, and not over wholesale prices, upstream firms prefer to act as independent suppliers rather than as a monopolist supplier. Moreover, we show that horizontal mergers can be procompetitive, even in the absence of efficiency gains

Cost reducing investiment, competition and industry dynamics

We characterize the dynamic equilibrium path ofa competitive industry with free entry and exit, where atomistic fmns undertake investment over time in order to reduce their future production costs. Investment reduces both total as well as marginal cost of production; however, the associated dynamic scale economies are eventually bounded. Cost reduction is deterministic and there are no inter-firm spill-overs. Marginal cost in any time period is stricdy increasing in output and active firms incur a positive fixed cost even if no output is produced. The industry equilibrium path is socially optimal. Equilibrium prices are (weakly) decreasing over time. Firms invest in cost reduction and eam negative net profit when they are young. In later periods, they face prices aboye their mínimum average cost, produce beyond their mínimum efficient scale and eam strictly positive net profit. No frrm enters after the initial time periodo Though all fmns are ex ante identical, sorne fmns may exit before others (shake-out). Exiting fmns have relatively "small size" compared to incumbents; as the industry matures, concentration and the average size of incumbent fmns increase. Heterogeneity in behaviour and size of fmns emerges endogenously through differences in their length of stay in the industry

Environmental consciousness and moral hazard international agreements to protect the environment

A group of countries that can potentially commit to cooperation to protect the environment are identified as environmentally-conscious countries. Conditions are examined under which they can provide self-financing side payments, to a second group of less environmentally-conscious countries, so that the two groups form a global or partial stable coalition that agrees to emit at the first-best global welfare optimum. A mechanism is also developed which must be incorporated into the agreement between the two groups, in order to induce all countries to emit at the desired level, even when global pollution has nonpoint source pollution characteristics

On centralized bargaining in a symmetric oligopolistic industry

In this paper we study interactions between labor and product markets, in an imperfectly competitive industry with centralized wage bargaining. Firms jointly bargain with the union over wages and then compete in prices or quantities. We show that the negotiated wage is independent of the number of firms, the degree of substitutability of firms' products, and the type of market competition, in a broad c1ass of industry specifications, including the standard syrnmetric linear demand system-linear one factor (labor) technology. This result is robust to various union objectives. Thus, unions are better-off as the market becomes more competitive because aggregate! employment increases. Finally,. motivated by the wage independence property, we propose that the bargained wage in a Bertrand homogenous market be taken as the limit of that of a differentiated market as the degree of substitutability goes to one

Upstream horizontal mergers, bargaining, vertical contracts.

Contrary to the seminal paper of Horn and Wolinsky (1988), we demonstrate that upstream firms, which sell their products to competing downstream firms, do not always have incentives to merge horizontally. In particular, we show that when bargaining takes place over two-part tariffs, and not over wholesale prices, upstream firms prefer to act as independent suppliers rather than as a monopolist supplier. Moreover, we show that horizontal mergers can be procompetitive, even in the absence of efficiency gains.

Wages and Productivity Growth in a Competitive Industry.

The model studies the evolution of productivity growth in a compehtlve industry. The exogenous wage rate determines the firms' engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globaIly stable. In the steady state, the number of active firms, their unit labor cost and supply depend on the growth rate but not on the level of the wage rate. In addition to providing comparative statics of the steady state, the paper characterizes the industry's adjustment path.Process innovation; Industry dynamic; Wages;