Endogenous quality choice: price and quantity competition

The present paper is concerned with addressing the issue of firms competing in both prices and quantities (capacity levels) within a simple differentiated duopoly where products are asymmetrically differentiated by quality location. A three-stage competitive model is investigated such that firms compete in quality, followed by choice of fixed capacity levels, and finally, they compete in prices. An output asymmetry always exists at equilibrium such that the high quality firm always carries excess production capacity relative to the low quality firm. Total production capacity, however, may not fully cover market demand for an incumbent duopoly.

Global Cement Industry: Competitive and Institutional Dimensions

The cement industry is a capital intensive, energy consuming, and vital industry for sustaining infrastructure of nations. The international cement market –while constituting a small share of world industry output—has been growing at an increasing rate relative to local production in recent years. Attempts to protect the environment in developed countries –especially Europe—have caused cement production plants to shift to countries with less stringent environmental regulations. Along with continually rising real prices, this has created a concerning pattern on economic efficiency and environmental compliance. This paper attempts to critically analyze the forces affecting pricing and production of cement from two perspectives. Porter’s five forces serve as our tool to analyze the competitive forces that move the industry from a market economy standpoint. On the other hand, the institutional economics framework serves to explain how governments and policymakers influence the structure and production distribution in the global market. Our findings suggest that the cement industry does not follow expected patterns of a market economy model. Additionally, it does not fully behave along the institutional economics paradigm. Hence, neither perspective explains the pricing or nature of the market on its own. Combining market forces within an institutional setting provides a more clear understanding of price dynamics and industry performance. We find that local regulation alone is insufficient to ensure market efficiency due to weak institutional governance in developing countries aligned with private business interests of global cement firms. Moreover, the global impact of local environmental non-compliance generates economic spillover effects that cannot be corrected by market forces alone. Due to asymmetries in governance and structure, this paper recommends the establishment of an independent international regulatory body for the cement industry that serves to provide sustainable industry development guidelines within a global context.Keywords: cement – global industry– institutional economics – Porter competition – market niche

Student Placement in Egyptian Colleges

We study students placement in Egyptian colleges under the current demand/supply placement mechanism implemented in Egypt (e-mechanism). We show that the e-mechanism is not Pareto efficient nor strategy proof and, moreover, it can not be improved to accommodate Pareto efficiency nor strategy proofness. The final conclusion is that it is better, from an efficiency point of view, to adopt a matching algorithm, like the Gale-Shapley mechanism, in students placement.Student placement, Gale-Shapley mechanism, e-mechanism, Egypt

Strategic Pricing: A Game In Market Economics

In this paper, game theory is applied to the case of price wars in a market scenario game towards a converging solution of Nash equilibrium. This is done using the famous Bertrand Game, starting first with a simple version of a game involving two players with undifferentiated products who move simultaneously by merely choosing their prices, and then proceed by extending the market scenario to a Differentiated Bertrand Game. The market scenario is based on two main rivals. “LOCAL” player is faced by a lower-priced “ASIAN” player who has a significantly lower quality product. Price wars dictate market outcomes. Implications of the game reveal interesting, but rather unexpected, results. Specifically, it is shown that resorting to a price war alone is not the optimum choice by the LOCAL player. Rather, the incumbent must not lower his price, even if faced by a lower priced competitor.  This runs in contrast to traditional price war theory. The introduction of lower priced substitutes do not reveal price reduction of the incumbent firm. A unique Nash equilibrium arises when the LOCAL player differentiates his products and charges higher prices compared to the ASIAN player. Consequently, price competition and price wars, when augmented by differentiated aspects of product quality, do not lead to price convergence nor necessarily lead to price reductions over time

Monopoly: The Case Of Egyptian Steel

The local steel industry in Egypt has been protected by high tariffs which were relaxed lately. The market is segmented according to steel type and there is a dominant steel producer acting as a monopoly in the market. Due to barriers to entry in the short run and the dominant market position of the monopoly, price elasticity became more demand inelastic. However, the dominant market player carries an innovative edge over its competitors. 

The Stability Of Virtual Equilibrium

The impact of information technology (IT) on the stability of market equilibrium is explained from a simple microeconomic standpoint. Attributes of a dynamically stable “virtual” market equilibrium are described assuming consumer rationality, an elastic supply curve, and minimum static market demand. Three conditions are necessary for long-run price stability of such a “virtual” equilibrium: (1) firm-specific strategic effects have to be completely offset by aggregate demand growth effects, (2) market equilibrium must arise under the constraint of demand sustainability, and (3) consumer indirect utility gains from information availability must exceed their respective disutility from locational search costs. Those conditions stem from more elastic supply together with less elastic demand compared to when IT is not utilized.&nbsp

Revisiting Egypt's Energy Policy

Egypt's oil and gas sector is one of the most strategic sectors in the economy being the single largest industrial activity in the economy, with exports of crude oil and petroleum products constituting 40% of Egypt's export revenues and 20% of its GDP. However, Egypt is currently trapped between dwindling oil production and increasing domestic consumption, a fact which threatens the country to become a net importer of crude oil as well as deprive it of strongly needed foreign exchange. Yet, Egypt has proven natural gas reserves and its future energy outlook seems to be more affiliated with natural gas especially for future export potential. Given these conditions, a restructuring of the sector is necessary for sustainable development. Suggested strategies in line with Egypt's development efforts are outlined including gradual reduction of energy subsidies and their expected impacts on the economy

Economic Growth And Information Technology: A Note

The usage of information technology (IT) towards sustainable economic growth is found to yield three main effects: (1) an efficiency effect , (2) a scale effect, and (3) a capital utilization effect. The first two effects are multiplicative whereas the third effect is additive on aggregate output productivity. In essence, this paper suggests that  IT is more productive only if the economy is capable of replacing its sustainable capital resources at a rate exceeding that of consumption sacrifice

Student Placement in Egyptian Colleges

We study students placement in Egyptian colleges under the current demand/supply placement mechanism implemented in Egypt (e-mechanism). We show that the e-mechanism is not Pareto efficient nor strategy proof and, moreover, it can not be improved to accommodate Pareto efficiency nor strategy proofness. The final conclusion is that it is better, from an efficiency point of view, to adopt a matching algorithm, like the Gale-Shapley mechanism, in students placement

Economic Growth and Information Technology: A Note

The usage of information technology (IT) towards sustainable economic growth is found to yield three main effects: (1) an efficiency effect, (2) a scale effect, and (3) a capital utilization effect. The first two effects are multiplicative whereas the third effect is additive on aggregate output productivity. In essence, this paper suggests that IT is more productive only if the economy is capable of replacing its sustainable capital resources at a rate exceeding that of consumption sacrifice