nep-mic New Economics Papers
on Microeconomics
Issue of 2010‒12‒23
fourteen papers chosen by
Vaishnavi Srivathsan
Indian Institute of Technology

  1. Political leadership change: A theoretical assessment using a human capital ?learning by doing? model By Miguel Rocha de Sousa
  2. Hotelling competition with multi-purchasing By Anderson, Simon P.; Foros, Øystein; Kind, Hans Jarle
  3. Contracts between Legal Persons By Kornhauser, Lewis A.; MacLeod, W. Bentley
  4. Immigrants' Employment Outcomes over the Business Cycle By Orrenius, Pia M.; Zavodny, Madeline
  5. Product differentiation on a platform: the informative and persuasive role of advertising By Dries DE SMET; Patrick VAN CAYSEELE
  6. Green Leader or Green Liar ? Differentiation and the role of NGOs By Mireille Chiroleu-Assouline
  7. Evolving Asian Power Balances and Alternate Conceptions for Building Regional Institutions By Wang, Yong
  8. Who might engage in mobile-commerce? Extended tam model and mobile shopper typology. By Blanca López Catalán
  9. Generosity in bargaining: Fair or fear? By Breitmoser, Yves; Tan, Jonathan H.W.
  10. Peers, neighborhoods and immigrant student achievement - evidence from a placement policy By Åslund, Olof; Edin, Per-Anders; Fredriksson, Peter; Grönqvist, Hans
  11. Price Competition on Graphs By Adriaan R. Soetevent
  12. The Swedish national innovation system and its relevance for the emergence of global innovation networks By Chaminade, Cristina; Zabala, Jon Mikel; Treccani, Adele
  13. Adoption Technology Targets and Knowledge Dynamics: Consequences for Long-Run Prospects By Verónica Mies
  14. Quantifying Ethnic Cleansing: An Application to Darfur By Olsson, Ola; Valsecchi, Michele

  1. By: Miguel Rocha de Sousa (Universidade de Évora, Departmento de Economia e NICPRI-UE)
    Abstract: We present an economic growth model with human capital, based upon Arrow (1962), in which we assess the impact of political leadership change either in governments or political parties. The change of leadership might be seen as a change in embedded human capital, and thus we might evaluate the loss or gain for society due to these political activities. The approach is theoretical using Arrowian economic setting. We formulate the conditions in which it is worth it, or how long does it take to recover from a political leadership change. The embedded process is an economic one, known as ?learning by doing?, but this time applied to political processes.
    Keywords: Arrow?s model, Human capital, Learning by doing (LBD), Political leadership, Rotation of leaders, Time to recover from political leadership change
    JEL: J24 O41
    Date: 2010
  2. By: Anderson, Simon P. (Dept. of Economics, University of Virginia); Foros, Øystein (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Kind, Hans Jarle (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: We analyze a Hotelling model where consumers either buy one out of two goods (single-purchase) or both (multi-purchase). The firms’ pricing strategies turn out to be fundamentally different if some consumers multi-purchase compared to if all single-purchase. Prices are strategic complements under single-purchase, and increase with quality. In a multi-purchase regime, in contrast, prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with quality due to overlapping characteristics. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase.
    Keywords: Multi-purchase; incremental pricing; content competition
    JEL: G00
    Date: 2010–12–11
  3. By: Kornhauser, Lewis A. (New York University); MacLeod, W. Bentley (Columbia University)
    Abstract: Contract law and the economics of contract have, for the most part, developed independently of each other. In this essay, we briefly review the notion of a contract from the perspective of lawyer, and then use this framework to organize the economics literature on contract. The title, Contracts between Legal Persons, limits the review to that part of contract law that is generic to any legal person. A legal person is any individual, firm or government agency with the right to enter into binding agreements. Our goal is to discuss the role of the law in enforcing these agreements under the hypothesis that the legal persons have well defined goals and objectives.
    Keywords: contract law, law and economics, contract breach, contract theory, incomplete contracts
    JEL: K12 J33
    Date: 2010–12
  4. By: Orrenius, Pia M. (Federal Reserve Bank of Dallas); Zavodny, Madeline (Agnes Scott College)
    Abstract: Immigrants have figured prominently in U.S. economic growth for decades, but the recent recession hit them hard. Immigrants’ labor market outcomes began deteriorating even before the recession was officially underway, largely as a result of the housing bust. An analysis of employment and unemployment rates over the past 15 years shows that immigrants' labor market outcomes are more cyclical than those of natives. The greater cyclicality of immigrants' employment and unemployment is concentrated among less-educated immigrants, but college-educated immigrants nonetheless have more cyclically-sensitive employment outcomes than college-educated natives.
    Keywords: business cycle, recession, employment, immigrants
    JEL: J21 J61 J64 E32
    Date: 2010–12
  5. By: Dries DE SMET; Patrick VAN CAYSEELE
    Abstract: Both sides of a two-sided market are usually modeled as markets without product differentiation. Often however,it will be profit maximizing to differentiate one or two sides in two or more types. In a simple theoretical model,inspired by Yellow Pages,we show that this decision crucially depends on the appreciation of these differentiated types by the other side. We argue that this consists of two parts: first, a preference for informative advertisement by users and second, the effect of persuasive advertisements on users. The relation between both effects drives the monopolist decision to engage in product differentiation. We test this conceptual framework in an empirical investigation of Yellow Pages. We find that Yellow Pages publishers offer large ads even though users don't value them at all. The economic rationale for this is that each advertisement type contributes directly (by the price paid for it) and indirectly (by increased usage) to revenues. Large ads are mainly set for this direct contribution, small ads for this indirect contribution. If a platform can choose the size, it will make the size difference between small and large ads as large as possible, in order to attract as much users as possible, but also to induce self selection among advertisers.
    Keywords: two-sided markets, product differentiation, Yellow Pages, advertising
    JEL: D42 L12 L86
    Date: 2010–01
  6. By: Mireille Chiroleu-Assouline (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper addresses how corporate environmentalism can be a means of differentiation and of green-washing. Since consumers can seldom directly observe a firm's environmental quality (a problem not easily solved through eco-labeling), published environmental reports and advertising can mislead them. As a result, the role of the NGO becomes both crucial and ambiguous. On the one hand, by helping to increase consumer awareness, NGOs enlarge the market share of green differentiated firms. On the other hand, the risk that consumers will punish a firm perceived to be supplying inaccurate environmental information may bring about the paradoxical result of discouraging differentiation efforts.
    Keywords: Differentiation, environmental concern, imperfect competition, quality, advertising, NGO.
    Date: 2010–12
  7. By: Wang, Yong (Center for International Political Economy)
    Abstract: The paper aims to examine economic interdependence and balancing power politics, and their mixed implications for regional institution building in East Asia based on the concept of common security. By pointing out the gap between the violent conflict prediction and the stability and prosperity reality following the end of the Cold War, the paper gives analysis to the factors affecting the security relations in the region, including (i) the role of the US, (ii) the rise of the PRC, (iii) ASEAN's efforts at regional cooperation, the (iv) the PRC–Japan rivalry. The author concludes that economic interdependence and regional cooperation in Asia have constrained a power struggle from spiraling out of control, while open regionalism has become a reasonable approach to regional institution building. Finally, the paper makes policy recommendations with respect to principles and steps in moving to a new regional security order.
    Keywords: East Asia; Regional Cooperation; Power Politics; Balance of Power; Regional Institutions; Common Security
    JEL: F53
    Date: 2010–12–01
  8. By: Blanca López Catalán (Department of Business Administration, Universidad Pablo de Olavide)
    Abstract: Research into mobile-shopping (MS) is currently the focus of much attention both from scholars and the world of business due to the extent to which mobile devices offer vast business opportunities in all global markets. However, few works have compared the validity of the extended Technology Acceptance Model addressing a range of different typologies of possible mobile-buyers. This research helps to understand the different types of potential m-shoppers and the most important ways to favour their intention to use mobile phones to buy. The goal of this work is twofold: to identify potential m-purchasers based on the reasons and impediments they perceive in mobile shopping, and to highlight major differences in the extended Technology Acceptance Model (TAM) with perceived control and subjective norms in the groups of buyers to emerge. These two goals and the representativeness of the sample, particularly with regards to age intervals, are the main contributions toward this kind of analysis. Using a sample of 471 Spanish mobile phone users of different ages who have never bought via the mobile, the research shows the differences in extended TAM model between groups of potential buyers. A structural equations analysis is performed. As a result, the extended TAM model is confirmed. Multisample analysis for four types of potential m-shoppers according to the drivers and impediments to m-shopping (relational, inexperienced, indifferent and transferred buyers) has evidenced that extended TAM does not impact all potential buyers equally.
    Keywords: Mobile-shopping
    Date: 2010–12
  9. By: Breitmoser, Yves; Tan, Jonathan H.W.
    Abstract: Are "generous" bargaining offers made out of fairness or in fear of rejection? We disentangle risk and social references by analyzing experimental behavior in three majority bargaining games: (1) a random-proposer game with infinite time horizon; 2) a one round proposer game with disagreement payoffs equal to the infinite horizon continuation payoffs; and, (3) a demand commitment game. Inequity aversion predicts very differently across these games, but risk aversion does not. Observed strategies violate neither stationarity nor truncation consistency. This allows us to use structural models of bargaining behavior to estimate the latent type shares of subjects with CES, inequity averse, and Prospect theoretic preferences. The Prospect theoretic, i.e. reference-dependent, model of utility explains the observations far better than any mixture of alternative models.
    Keywords: coalitional bargaining; non-cooperative modeling; random utility model; quantal response equilibrium; laboratory experiment
    JEL: C78 D78 C72
    Date: 2010–12–14
  10. By: Åslund, Olof (Uppsala Center for Labor Studies); Edin, Per-Anders (Uppsala Center for Labor Studies); Fredriksson, Peter (Uppsala Center for Labor Studies); Grönqvist, Hans (SOFI)
    Abstract: We examine to what extent immigrant school performance is affected by the characteristics of the neighborhoods that they grow up in. We address this issue using a refugee place¬ment policy which provides exogenous variation in the initial place of residence in Sweden. The main result is that school performance is increasing in the number of highly educated adults sharing the subject’s ethnicity. A standard deviation increase in the fraction of high-educated in the assigned neighborhood raises compulsory school GPA by 0.9 percentile ranks. Particularly for disadvantaged groups, there are also long-run effects on educational attainment.
    Keywords: Peer effects; Ethnic enclaves; Immigration; School performance
    JEL: I20 J15 Z13
    Date: 2010–11–30
  11. By: Adriaan R. Soetevent (University of Amsterdam)
    Abstract: This paper extends Hotelling's model of price competition with quadratic transportation costs from a line to graphs. I propose an algorithm to calculate firm-level demand for any given graph, conditional on prices and firm locations. One feature of graph models of price competition is that spatial discontinuities in firm-level demand may occur. I show that the existence result of D'Aspremont et al. (1979) does not extend to simple star graphs. I conjecture that this non-existence result holds more generally for all graph models with two or more firms that cannot be reduced to a line or circle.
    Keywords: spatial competition; Hotelling; graphs
    JEL: D43 L10 R12
    Date: 2010–12–13
  12. By: Chaminade, Cristina (CIRCLE, Lund University); Zabala, Jon Mikel (CIRCLE, Lund University); Treccani, Adele (CIRCLE, Lund University)
    Abstract: Sweden is considered to be one of the most advanced countries in terms of innovation worldwide. Sweden always ranks high in all international reports on Science and Technology indicators such as the ones regularly published by the OECD or Eurostat. As many small countries, the Sweden economy has a strong international orientation and this is also reflected in the national innovation system. The NIS is dominated by internationally oriented industrial firms and universities. Furthermore, since 1988, the country has experienced a growing trend of mergers and acquisitions of technology intensive firms by foreign companies (Vinnova, 2006) whose presence, particularly in certain industries, is very noticeable. The aim of this paper is to explore the links between the NIS in Sweden and the participation of Swedish firms and Swedish universities in Global Innovation Networks. More specifically, it attempts to answer the following questions: a) To what extent are Swedish actors participating in GINs? b) To what extent is the Swedish NIS attracting GINs? c) What is the role of the Swedish NIS in supporting the participation of Swedish Universities and Swedish firms in GINs? d) What is the role of the Swedish NIS in attracting actors in GINs into Sweden?. The paper is based on secondary sources and has a rather descriptive nature. In its current form (June 2010) is a report submitted to the EU Commission as part of the deliverables of the INGINEUS project
    Keywords: globalization; innovations systems; Sweden
    JEL: O30
    Date: 2010–06
  13. By: Verónica Mies
    Abstract: When targeting frontier technologies, less developed economies usually face obstacles to achieve high growth in the long run, because of their low level of knowledge relative to the adoption technology target. If the intensity in which the adoption activity uses knowledge is high, then the less developed economy may end up trapped in a low growth equilibrium. We show that in this case it is beneficial to target less advanced technologies, which helps to compensate the scarcity of knowledge during the transition. Nevertheless, polarization is possible. If knowledge intensity in the adoption activity is low, then possessing a low stock of knowledge allows targeting the technology frontier even in a poor R&D environment. In this case, all economies achieve a high growth equilibrium in which only income level differences persist in the long run.
    Keywords: R&D, adoption, innovation, growth, development, transitional dynamics.
    JEL: O30 O33 O40
    Date: 2010
  14. By: Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Valsecchi, Michele (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper has two objectives: First, to develop and critically examine various measures of ethnic cleansing on the basis of a review of the existing literature. Second, to apply the suggested measures to a unique sample of 530 villages in Southwestern Darfur. Our data shows that 57 percent of the popu- lation from the targeted groups have ‡ed the area and that their share of the total population has fallen from 70 to 46 percent. The degree of ethnic diversity at the regional level is very high but due to the high level of segregation, ethnic diversity at the village level is extremely low. Our results suggest that admin- istrative units with a more pronounced pattern of segregation also experienced a greater degree of ethnic cleansing.<p>
    Keywords: Ethnic cleansing; genocide; Darfur
    JEL: O41 P16
    Date: 2010–12–13

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