nep-mic New Economics Papers
on Microeconomics
Issue of 2007‒06‒30
ten papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Fringe firms: Are they better off in a heterogeneous market? By Susanne Wied-Nebbeling
  2. NGO Competition and the Markets for Development Donations By Aldashev, Gani; Verdier, Thierry
  3. Welfare improvement properties of an allowance market in a production economy. By Antoine Mandel
  4. The structuring of markets for infomediation: horizontal versus vertical dynamics By Kevin Mellet
  5. FDI, Market Structure and R&D Investments in China By Lundin, Nannan; Sjöholm, Fredrik; He, Ping; Qian , Jinchang
  6. Pre-empting Technology Competition Through Firm Acquisitions By Grimpe, Christoph; Hussinger, Katrin
  7. On the Effects of Emission Standards as Technical Barriers to Trade: A Foreign Duopoly Case By Tsuyoshi Toshimitsu
  8. An Index Formula for Production Economies with Externalities. By Antoine Mandel
  9. Walrasian non-tatonnement with incomplete and imperfectly competitive markets. By Gaël Giraud
  10. Production Externalities and Expectations Application to the Economics of Climate Change. By Antoine Mandel

  1. By: Susanne Wied-Nebbeling
    Abstract: This paper analyzes a market with three firms. One of them is the dominant firm and the two others are fringe firms. The formulation of demand allows a comparison between price competition with heterogeneous and homogeneous products. Because a parameterization is required to assure that market size is the same in both scenarios, no general conclusions can be drawn. But it can be shown that in large markets with relatively inelastic demand for the fringe firms’ products and a cost advantage of the dominant firm, the fringe firms are better off if they produce a heterogeneous product.
    Keywords: dominant firm, competitive fringe, price competition, heterogeneous products
    JEL: L11 L13
    Date: 2007–06–26
  2. By: Aldashev, Gani; Verdier, Thierry
    Abstract: Is competition for donations between development NGOs good for welfare? We address this question in a monopolistic competition model à la Salop (1979). NGOs - defined by the non-distribution constraint - compete for donations from donors by exerting fundraising effort. If the market size is fixed, the free-entry equilibrium number of NGOs is usually larger than the optimal number. However, if the market size is endogenous and NGOs both compete and co-operate in attracting new donors, the freeentry equilibrium number of NGOs is generally smaller than the optimal number. If NGOs can divert a part of funds for private use, for a certain range of outside option of NGO entrepreneurs multiple equilibria (with high diversion and no diversion of funds) exist.
    Keywords: monopolistic competition; NGOs; non-distribution constraint
    JEL: D43 L13 L31
    Date: 2007–06
  3. By: Antoine Mandel (Centre d'Economie de la Sorbonne)
    Abstract: This paper studies the welfare improvement properties of a market of allowances in an economy with a single type of externality. We show that thanks to the opening of such a market the Pareto optima can be decentralized as marginal pricing equilibria. However, the set of equilibria is much larger than this of Pareto optima. In order to discriminate the efficient equilibria we introduce a demand revealing mechanism tailored for this framework.
    Keywords: General equilibrium theory, Pareto Optimality, externalities, markets of allowances.
    JEL: D51 D62 Q54 Q58
    Date: 2007–05
  4. By: Kevin Mellet
    Abstract: Two factors play a decisive role in the structuring of Internet based markets for infomediation (informational intermediation) : network externalities and information processing. First, these are examined separately. The two-sided markets literature focuses on the impact of network externalities in a context of competition among 2-sided platforms. It explains the level of concentrationfragmentation of those markets, and explores its welfare implications. We shall call this model the "horizontal" model of structuring. Symetrically, a "vertical" process of division of labour among the infomediaries' value chain is observed. It results of the complexification of intermediation in a context of strong quality uncertainty and high codification investments. Intermediaries specialize and develop cooperative relationships with each others. Secondly, the paper examines the implications of the simultaneous co-existence of H and D dynamics on the structuring of the market for infomediation. This co-existence generates frictions. Two levels of frictions are distinguished : i) market governance (standards and certifications) ; ii) commercial interactions (the so-called 'coopetition'). Empirical illustrations are taken from the analysis of Internet based labour market intermediaries.
    Keywords: Two-sided markets; competition; vertical specialization; regulation; coopetition; labour market intermediaries.
    Date: 2007
  5. By: Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN)); He, Ping (National Bureau of Statistics of China); Qian , Jinchang (National Bureau of Statistics of China)
    Abstract: FDI can be an important channel for developing countries’ ability to get access to new technology. The impact of FDI on domestically-owned firms’ technology development is less examined but it is frequently argued that technology externalities or demonstration effects could have a positive impact. Another and so far little examined effect of FDI on technology development in domestically-owned firms is through the impact on competition. We examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ R&D. Our analysis is conducted on a large dataset including all Chinese large and medium sized firms over the period 1998-2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.
    Keywords: China; FDI; Competition; R&D
    JEL: F23 L11 O31
    Date: 2007–06–21
  6. By: Grimpe, Christoph; Hussinger, Katrin
    Abstract: This paper investigates the motive of pre-empting technology competition through mergers and acquisitions (M&A). Exploiting the patent application procedure at the European Patent Office we introduce a new measure for the possibility to create entry barriers in technology markets. Our results show significant evidence that firms engage in horizontal M&A to pre-empt competition in technology markets.
    Keywords: pre-empting technology competition, mergers and acquisitions
    JEL: G34 L20 O34
    Date: 2007
  7. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: Employing an environmentally differentiated duopoly model, we analyze how emission standards affect imports, the environment, and social welfare. We show that a strict emission standard is not necessarily import-restrictive, whereas it may possibly degrade the environment. Furthermore, we present evidence that the effect of emission standards on net social surplus depends on the mode of market competition and the degree of marginal social valuation of environmental damage.
    Keywords: emission standards, environmentally differentiated duopoly, green market
    JEL: D43 F12 F13 L52 Q28
    Date: 2007–06
  8. By: Antoine Mandel (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: In this paper we prove an index formula for production economies with externalities. We allow for non-convexities in the production sector and set the firms behavior according to general pricing rules. We derive as corollaries existence of a general equilibrium in such a setting.
    Keywords: General equilibrium theory, existence of equilibrium, increasing returns, externalities, degree theory.
    Date: 2007–06–19
  9. By: Gaël Giraud (Centre d'Economie de la Sorbonne)
    Abstract: Static competitive equilibria in economies with incomplete markets are generically constrained suboptimal. Allocations induced by strategic equilibria of imperfectly competitive markets are also generically inefficient. In both cases, there is scope for Pareto-improving amendments. In an extension of the limit-price process introduced in Giraud [20] to incomplete markets (with infinitely many uncertain states) populated by finitely many players, we show that these two inefficiency problems can be partially overcome when rephrased in a non-tatonnement process. Traders are myopic and trade financial securities in continuous time by sending limit-orders so as to select a portfolio that maximizes the first-order approximation of their expected indirect utility. We show that financial trade curves exist and converge to some second-best efficient restpoint unless some miscoordination stops the dynamics at some inefficient, but locally unstable point.
    Keywords: Incompet markets, imperfect competition, second-best efficiency, non-tatonnement.
    JEL: D11 D41 D50 E1
    Date: 2007–04
  10. By: Antoine Mandel (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: In this paper, we extend the problem of decentralization of Pareto optima in an economy with production externalities to the case where the production capacities upon which Pareto optimality is defined may differ from the aggregate of the firms expectations about their production possibilities. This issue is raised in order to deal with the seemingly different expectations of firms and governments about the economic consequences of climate change. We show the government can create a "production allowance" market in order to force the firms to produce in a way it considers as optimal. The results are then applied to the analysis of the economic and welfare consequences of climate change.
    Keywords: General equilibrium theory, Pareto optimality, externalities.
    Date: 2007–06–19

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