nep-mic New Economics Papers
on Microeconomics
Issue of 2006‒08‒19
twelve papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Multi-Product Firms and Product Switching By Andrew B. Bernard; Stephen Redding; Peter K. Schott
  2. Are Internet Prices sticky? By Patrick Lünnemann; Ladislav Wintr
  4. Competing Technologies in the Database Management Systems Market By Tobias Kretschmer
  5. Simulating Knowledge-Generation and -Distribution Processes in Innovation Collaborations and Networks By Andreas Pyka; Nigel Gilbert; Petra Ahrweiler
  6. The Influence of Product Markets on Industrial Relations By William Brown
  7. Asymmetric Information about Rivals’ Types in Standard Auctions: An Experiment By James Andreoni; Yeon-Koo Che; Jinwoo Kim
  8. Optimal income taxation with single and couple households By GALLEGO A., Juan Miguel
  9. Collateral Restrictions and Liquidity Under-Supply: A Simple Model By Ana Fostel; John Geanakoplos
  10. A Gold Rush Theory of Economic Development By Ralph Ossa
  11. Knowledge Flow and Sequential Innovation: Implications for Technology Diffusion, R&D and Market Value By Sharon Belenzon
  12. Pareto, Anonymity, and Independence: Four Alternatives By Donald E. Campbell; Jerry S. Kelly

  1. By: Andrew B. Bernard; Stephen Redding; Peter K. Schott
    Abstract: This paper examines the frequency, pervasiveness and determinants of product switching among U.S.manufacturing firms. We find that two-thirds of firms alter their mix of five-digit SIC products everyfive years, that one-third of the increase in real U.S. manufacturing shipments between 1972 and 1997is due to the net adding and dropping of products by survivors, and that firms are more likely to dropproducts which are younger and have smaller production volumes relative to other firms producingthe same product. The product-switching behavior we observe is consistent with an extended model ofindustry dynamics emphasizing firm heterogeneity and self-selection into individual product markets.Our findings suggest that product switching contributes towards a reallocation of economic activitywithin firms towards more productive uses.
    Keywords: Heterogeneous firms, Product differentiation, Product market entry and exit
    JEL: D21 E23 L11 L60
    Date: 2006–08
  2. By: Patrick Lünnemann; Ladislav Wintr
    Abstract: This paper studies the behaviour of Internet prices. It compares price rigidities on the Internet and in traditional brick-and-mortar stores and provides a cross-country perspective. The data set covers a broad range of items typically sold over the Internet. It includes more than 5 million daily price quotes downloaded from price comparison web sites in France, Germany, Italy, the UK and the US. The following results emerge from our analysis. First, and contrary to the recent findings for common CPI data, Internet prices in the EU countries do not change less often than online prices in the US. Second, prices on the Internet are not necessarily more flexible than prices in traditional brick-and-mortar stores. Third, there is substantial heterogeneity in the frequency of price change across shop types and product categories. Fourth, the average price change on the Internet is relatively large, but smaller than the respective values reported for CPI data. Finally, panel logit estimates suggest that the likelihood of observing a price change is a function of both state- and time-dependent factors.
    Date: 2006–06
  3. By: Aloisio Araujo; Luciano I. de Castro
    Abstract: We prove the existence of monotonic pure strategy equilibrium for many types of asymmetric auctions with n bidders and unitary demands, interdependent values and independent types. The assumptions require monotonicity only in the own bidder's type. The payments can be a function of all bids. Thus, we provide a new equilibrium existence result for asymmetrical double auctions and a small number of bidders. The generality of our setting requires the use of special tie-breaking rules. We present a reasonable counterexample for interdependent values auctions that shows that sometimes all equilibria are trivial, that is, they have zero probability of trade. Nevertheless, we give sufficient conditions for non-trivial equilibrium existence.
    Date: 2006–08
  4. By: Tobias Kretschmer
    Abstract: In this paper, we study the dynamics of the market for Database Management Systems(DBMS), which is commonly assumed to possess network effects and where there is stillsome viable competition in our study period, 2000 - 2004. Specifically, we make use of aunique and detailed dataset on several thousand UK firms to study individual organizations'incentives to adopt a particular technology. We find that there are significant internalcomplement effects - in other words, using an operating system and a DBMS from the samevendor seems to confer some complementarities. We also find evidence forcomplementarities between enterprise resource planning systems (ERP) and DBMS and findthat as ERP are frequently specific and customized, DBMS are unlikely to be changed oncethey have been customized to an ERP. We also find that organizations have an increasingtendency to use multiple DBMS on one site, which contradicts the notion that differentDBMS are near-perfect substitutes.
    Keywords: Database software, indirect network effects, technology adoption, microdata
    JEL: L86 O33
    Date: 2006–08
  5. By: Andreas Pyka (University of Augsburg, Department of Economics); Nigel Gilbert (School of Human Sciences, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom); Petra Ahrweiler (Research Center Media and Politics, Institute for Political Science, University of Hamburg, Germany)
    Abstract: An agent-based simulation model representing a theory of the dynamic processes involved in innovation in modern knowledge-based industries is described. The agent-based approach al-lows the representation of heterogeneous agents that have individual and varying stocks of knowledge. The simulation is able to model uncertainty, historical change, effect of failure on the agent population, and agent learning from experience, from individual research and from partners and collaborators. The aim of the simulation exercises is to show that the artificial innovation networks show certain characteristics they share with innovation networks in knowledge intensive industries and which are difficult to be integrated in traditional models of industrial economics.
    Keywords: innovation networks, agent-based modelling, scale free networks
    JEL: O31 O32 L22
    Date: 2006–08
  6. By: William Brown
    Abstract: Product markets are the foundation on which industrial relations institutions are built. Trade union strength is partly dependent upon the state of the labour market, but it is imperfections in the product market that are the precondition of their winning benefits for their members. Sectoral agreements consequently formed the basis for collective bargaining in most industrialised countries. But international competition has destroyed this for much of the private sector. Quasi-markets have undermined it for much of the public sector. The paper assesses the empirical economic literature on the impact of product markets. It considers enthnographic insights into how competitive pressures feed through to managerial behaviour. It concludes with alternative strategies - co-operative bargaining, legislative intervention, and consumer campaigns - that seek to defend labour standards from competitive erosion.
    Keywords: product markets; John Commons; trade union power; collective bargaining; labour; wages; bargaining structure
    JEL: B52 M54 N34
    Date: 2006–08
  7. By: James Andreoni; Yeon-Koo Che; Jinwoo Kim
    Date: 2006–08–11
  8. By: GALLEGO A., Juan Miguel
    Abstract: This paper reviews the literature on optimal income taxation with single and couple households. In the seminal works of Mirrlees and Atkinson and Stiglitz the household is composed by one member. However, I described a model where households can have more than one member. There is an economy which is composed by both one-memberand two member families. This structure introduces vertical and horizontal equity considerations. For linear taxation the results of Sheshinski hold, however in optimal income taxation additional results to those of Mirrlees should be considered.
    Date: 2004–10–01
  9. By: Ana Fostel (Dept. of Economics, George Washington University); John Geanakoplos (Cowles Foundation, Yale University)
    Abstract: We show that very little is needed to create liquidity under-supply in equilibrium. Credit constraints on demand by themselves can cause an under-supply of liquidity, without the uncertainty, intermediation, asymmetric information or complicated international financial framework used in other models in the literature. We show that the under-supply is a non-monotone function of the demand distortion that causes it, a result that may have interesting implications for emerging markets economies. Finally, when we make the credit constraint endogenous, the inefficiency can be large due to the presence of a multiplier.
    Keywords: Liquidity under-supply, Credit constraint, Non-monotonicity, Multiplier, Collateral equilibrium
    JEL: D51 E44 F30 G15
    Date: 2004–06
  10. By: Ralph Ossa
    Abstract: This paper presents a model of social learning about the suitability of local conditions fornew business ventures and explores its implications for the microeconomic patterns ofeconomic development. I show that: i) firms tend to 'rush' into business ventures with whichother firms have had surprising success thus causing development to be 'lumpy'; ii) sufficientbusiness confidence is crucial for fostering economic growth; iii) development may involvewave-like patterns of growth where successive business ventures are first pursued and thengiven up; iv) there is, nevertheless, no guarantee that firms pursue the best venture even in thelong-run.
    Keywords: Economic Development, Social Learning, Lumpiness
    JEL: O10 O12 O14
    Date: 2006–03
  11. By: Sharon Belenzon
    Abstract: It is shown that spillovers can enhance private returns to innovation if they feed back into the dynamic researchof the original inventor (Internalized spillovers), but will always reduce private returns, if theoriginal inventor does not benefit from the advancements other inventors build into the"spilled" knowledge (Externalized spillovers). I empirically identify unique patterns ofknowledge flows (based on patent citations), which provide information about whether"spilled" knowledge is reabsorbed by its inventor. A simple model of sequential innovationwith dynamic spillovers is developed, which predicts that market value and R&Dexpenditures should rise with Internalized spillovers and fall with Externalized spillovers.These predications are confirmed using panel data on U.S. firms between 1981 and 2001. Tothe extent that firms internalize some of the spillovers they create, the classicalunderinvestment problem in R&D will be mitigated and the central role of spillovers inpromoting economic growth will be enhanced.
    Keywords: market value, patents, R&D and spillovers
    JEL: O31 O32 O33
    Date: 2006–05
  12. By: Donald E. Campbell (Department of Economics, College of William and Mary); Jerry S. Kelly (Department of Economics, Syracuse University)
    Abstract: For four alternatives and an even number of individuals, we prove a conjecture in a companion paper: It is impossible for a social choice rule to satisfy all of (1) Pareto, (2) anonymity, (3) full domain, and (4) independence of some alternative, a relaxation of ArrowÕs IIA.
    Keywords: Pareto, anonymity, independence
    JEL: D70 D71
    Date: 2006–08–16

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