THE CONSISTENCY OF PERFECT AND MONOPOLISTIC COMPETITION

In this paper I have suggested the formal consistency between the models of perfect and monopolistic competition. When products are differentiated only by their quality, the zero-profit equilibrium position of the perfectly competitive firm can be recast diagrammatically in a way which coincides with the traditional exposition of Chamberlinean tangencies. The illusory excess capacity theorem confuses average revenue product curves with demand schedules. These results should hardly be surprising. Indeed, if such a thing as “perfect” competition actually exists (even in theory), it must be conceivable within a model in which firms are allowed to compete in other dimensions as well as price.     

Status and welfare under monopolistic competition

This article departs from the traditional welfare analysis of social status seeking by incorporating scale economies, product differentiation, and monopolistic competition into a model. I argue that social status seeking could be welfare improving rather than the usual conclusion that social status seeking is welfare-reducing, under some assumptions that are not particularly strong. Market distortions of the quantity–variety and consumption–leisure trade-off may be corrected by social status seeking. Since modern societies are arguably closer to monopolistic competition than perfect competition, we may also need to rethink the long-held belief that the welfare effects caused by social status seeking are usually negative.     

Monopolistic competition,as you like it

We explore monopolistic competition with asymmetric preferences over a variety of goods provided by heterogeneous firms, and compute equilibria (approximating Cournot and Bertrand equilibria when market shares are negligible) through average Morishima elasticities of substitution. Further results concerning pricing and entry emerge under homotheticity and when demands depend on a common aggregator, as with Generalized Additively Separable preferences. Under additivity we can determine which goods are going to be provided under free entry, as well as the selection effects associated with changes in market size, consumers' income, aggregate productivity, and preference parameters.     

IS PERFECT COMPETITION AN EMPIRICALLY INADEQUATE MODEL?

This paper examines the empirical content of the neoclassical theory of the firm. The main models (perfect competition, monopolistic competition, pure monopoly) are specified in terms of observable anomalies. These models are then tested against data and against each other. The findings pave the way for an appraisal of the empirical status of the perfectly competitive model, relative to the data and relative to the other neoclassical models.     

MONEY SUPPLY VARIABILITY IN A MACRO MODEL OF MONOPOLISTIC COMPETITION

The effects of changes in money supply variability are examined for a macro model of monopolistic competition. Increases in money supply variability raise demand uncertainty causing individual firms to produce more for inventory. In addition, expected profits decrease, inducing a number of firms to leave the economy. Aggregate income then falls in spite of an increase in firm-level production. The result on aggregate income is standard, but the results on inventories and the number of firms in the economy distinguish this monopolistic macro model empirically from conventional macro models when changes in money supply variability occur.     

A SIMPLE MACROECONOMIC MODEL WITH MONOPOLISTIC FIRMS

This paper presents a simple macroeconomic model in which firms' outputs are imperfect substitutes, and explores the macroeconomic implications of monopolistic competition. The model is classical in some respects, but Keynesian in others. Multiple or unstable equilibria are not unlikely. Permanent price controls will, in principle, be desirable, since they allow a permanent and efficient increase in aggregate output. Small costs of price adjustment may induce large deviations of output from the natural rate. Fiscal policy will generally affect aggregate output, but the sign and magnitude of the government expenditure multiplier cannot be determined a priori.     

从PPI变化看当前稳增长与化解过剩产能

我国经济稳增长必须把化解过剩产能作为一项重要任务,这既是减少经济波动的需要,也是转变经济发展方式,为新兴产业发展腾笼换鸟的必然要求。建议多管齐下,实行五大战略:坚持实施扩大内需战略,大力促进消费需求增长和稳步推进城市化;坚持实施"走出去"战略,积极拓展国际新兴市场和转移国内过剩生产能力;坚持实施产业创新升级战略,大力优化行业技术和产品结构;坚持实施淘汰落后产能战略,严格控制过剩行业产能扩张;坚持建立健全产业引导调控战略,促进产业有序竞争发展。     

IMPOSED HEALTH INSURANCE IN MONOPOLISTIC MARKETS: A THEORETICAL ANALYSIS

The impact of public health insurance on price and output of medical care is analyzed within the context of monopolistic markets for health services. An important result, which is not obtained in competitive markets, is that indemnity benefits cause smaller price increases than service benefits, both directly and indirectly through the effect of benefit structure on the production of information. Various types of price regulation are considered, including limitation to "usual, customary, and prevailing" levels, a frequently used technique. With a simple dynamic model this type of regulation is shown to cause chronic price inflation.     

Power in consensus: Legitimacy,global value chains and inequality in telecommunications standard-setting

Power is central to GVC research, but the concept is usually restricted to ‘direct’ market power that generates rents. This paper examines ‘diffuse’ conceptualizations of power in GVCs that focus on social construction, arguing that they exist along a continuum from ‘fractured’ to ‘encompassing’. Then, empirically, it shows how different types of power intermix in telecommunications standard-setting from 1999 to 2021, using a comprehensive dataset of every finalized work item in 3GPP. Given powerful network effects in telecommunications, the industry is ripe for monopolistic rents and unequal value capture on a global scale. However, these are attenuated by a layering of power relations, and particularly, an intermediary form of social construction – legitimacy – which is the primary driver of telecommunications standard-setting, and a new type of constitutive power in GVCs, alongside governmentality and hegemony. This is illustrated by focusing on two major shifts in legitimacy in 3GPP – the rise of Huawei and network operators. The paper shows how power becomes layered with collective forms of power partially neutralizing inter-firm forms of dyadic power, which attenuates monopolistic value capture.     

Independent Service Organizations and Economic Efficiency

Following the Supreme Court's Kodak decision, numerous antitrust cases have revolved around practices of manufacturers which deter independent service organizations (ISOs) from servicing the manufacturer's equipment. Such practices include tying equipment sales to service, tying service sales to other "aftermarket" products, and refusing to sell replacement parts to ISOs. We show that interbrand systems competition without ISOs curbs service and equipment price distortions and, under plausible conditions, confers greater benefits to users of durable equipment than intrabrand service competition with ISOs. Hence, the effect of manufacturers' practices that foreclose ISOs from service aftermarkets can be efficiency promoting rather than anticompetitive.     

TRANSACTION COST, TWO-PART TARIFFS, AND COLLUSION

When two goods exhibit demand complementarity, the sellers would generally charge lower prices under collusion than under rivalry–a cartel internalizes cross effects that independent firms ignore. For the particular case of "two-part" tariffs consisting of entrance fees and per-unit prices, this paper shows that entrance fees are indeed lower under collusion than under rivalry, but that per-unit prices are unaffected. The demand complementarity arises from transaction costs borne by consumers who enter the market. The policy implication is that collusion can be socially preferable to competition in the presence of such transaction costs.     

The monopolistic polluter under environmental liability law: incentives for abatement and R&D

This article analyzes the output, abatement, and investment decisions made by a monopolistic polluter under environmental liability law. The model applied considers both integrated and end-of-pipe abatement technologies. We find that in the case of fixed technology, in many instances negligence produces more favorable results than strict liability in terms of social welfare. The reason is that output under strict liability is always less than first-best output, whereas output under negligence is not similarly limited. However, this ranking of liability rules may be reversed when technology is endogenous. Under such conditions investment in both integrated and end-of-pipe abatement technologies under negligence is guided by motives foreign to the social planner, whereas the polluter’s calculus under strict liability is similar to that of the social planner.     

Non-clearing labor markets and minority employment in municipal government

This paper posits a public choice model for explaining the variation across cities in the minority share of local government employment. The paper argues that, when hiring under conditions of excess supply, vote-maximizing local public employers exchange public sector jobs for political support from identifiable special interest groups. The model is tested for two local government occupations — police officer and firefighter — using a sample of cities above 50,000 in population. The results are compatible with the basic hypothesis that the greater the excess supply for an occupation, the higher the share of minority employment in that occupation. We are indebted to James D. Adams, Bernard Bernstein, Ali Rassuli, and Loren Solnick for helpful comments on an earlier draft. The authors alone are responsible for the contents of the paper.     

Municipal residency laws: Effects on police employment,compensation, and productivity

This paper offers an alternative model of the effects of residency laws in municipal labor markets. Unlike previous studies, the model assumes that public employee labor markets are characterized by conditions of excess supply and that public services are produced under noncompetitive conditions. The model also implies that productivity improvements increase rather than reduce labor demand, yielding different results with respect to the wage and employment effects of residency requirements. The non-clearing market model is tested using data on municipal police officers. The results are more compatible with the disequilibrium model than with models based on a competitive equilibrium.     

European competition law and the non-profit sector

Although there has been a debate in the USA for more than two decades about competition policy and non-profit organisations, the debate has not yet had the same prominence in Europe. Only in the last few years, even in the USA, has anti-trust policy toward the sector been examined. The paper examines the position for two groups of competition issues in European Community law: first, the problem of the lawfulness of grant aid, given the rules against state subsidies distorting competition; and second, the application of the rules for competition in the single market including EC anti-trust law. Particular legal problems are identified for non-profits which use geographical catchment area agreements with similar organisations. Finally, the paper examines a range of policy issues which arise on consideration of Community law, including the idea of community development as a locally autarchic objective, the terms of competition for grants and contracts, and the possible implications of the future application of European competition law to non-profits in the Community.This paper is part of a series of studies on non-profit organisations and competition policy; others include 6, 1991; 1992a,b. Many people, all of whom know much more about the law and the economics of this subject than I do, have helped me with this paper. I am particularly grateful to Richard Steinberg, Tymen van den Ploeg, Richard Whish, Martin Knapp, Jeremy Kendall and Stephen Lloyd who read and commented on earlier drafts. Richard Whish urged me to greater caution on the meaning of undertaking and interstate trade effects, pointed out the relevance of the subsidiarity provisions in Maastricht, put me straight on the merger regulations, and saved me from a number of legal errors. I am grateful to Jeremy Kendall for pointing out the BUPA case to me, and to Tymen van den Ploeg for directing me to theDaily Mail case and explaining its significance to me with greater patience than I deserved. I have also benefited from advice from Lindsay Driscoll, Nigel Tarling, Bridget Phelps, Anita Randon and Janet Morrison. I am grateful also to all the people who attended an NCVO seminar on 27 April 1992 at which a late draft of the paper was given for their comment. None of them is responsible for my errors. Although I am employed by the National Council for Voluntary Organisations, London, the paper represents my own views and not those of the Council.     

A middleman in an ambiguous situation—Experimental evidence

This paper describes how undergraduates play intermediaries. A series of experiments was conducted to see how subjects play the monopolistic intermediary against given but unknown supply and demand. The results show that most subjects search for the bid and the ask prices that equalise the purchasing quantity with the selling quantity; then, keeping the trading quantity, they adjust the prices to obtain a locally maximum profit. This suggests that monopolistic firms can act as intermediaries even if they are not as informed as they are supposed to be discussed in the market microstructure theory. In addition, we investigate how people cope with ambiguity.     

THE DEMAND FOR EXCESS RESERVES, LIABILITY MANAGEMENT, AND THE MONEY SUPPLY PROCESS

Commercial bank behavior is not adequately dealt with in existing macro models of the financial sector. The central role of a demand for excess reserves (or free reserves) function in models of the money supply process is particularly suspect. In this paper, it is argued that changes in commercial bank behavior induced by alterations in economic and financial conditions and various banking regulations, along with the central bank's approach to policy, have combined to alter the excess reserve function and the relationship between bank reserves and the money supply. Empirical work presented suggests that the "demand" for excess reserves has indeed undergone structural change. Thus, the study indicates that conventional approaches to commercial bank behavior and the demand for excess reserves need to be reworked.     

Females and illness: recent trends in sex differences in the United States.

Data from the national Health Interview Survey for 1957-72 show that females have higher age-standardized rates of acute conditions, chronic conditions, and disability due to acute conditions, compared to males. More males, however, suffer limitations of activity or mobility due to chronic conditions, Females' excess morbidity for acute conditions persists when reproduction-related events are excluded. From 1957-72, females' disadvantage for acute conditions continues unchanged. But for chronic conditions, males are "catching up" to females in overall prevalence, and their conditions are becoming more severe relative to females'. These trends are compatible with trends in sex mortality differences over the same period. Four types of explanation are advanced to account for females' excess morbidity: interview behavior, illness behavior, acquired health risks, and inherited health risks. Empirical evidence suggests the first two factors inflate female rates compared to males; the last two do the opposite. It is hypothesized that excess female morbidity is due primarily to social and psychological factors, and a procedure to test this is stated.     

WHY ARE BETTER SEATS “UNDERPRICED”?

Faced with competition, one's behavior often depends on that of his competitors. The determination of price is one response to competition, and an important one indeed. But it is not the only one. All contracting parties may gain, if price can be reduced to encourage restraints on behavior. This paper shows that "behavior which restrains behavior" may be effectively induced by the simple expedient of a reduction in price.     

Has the rise in globalization reduced U.S. inflation in the 1990s?

This article investigates whether increased globalization of the U.S. economy has helped hold down inflation in the 1990s. Based on several measures, we find that globalization has increased. Further, we find that import prices exert a greater impact on prices of products in industries faced with greater import penetration. High foreign excess capacity accounts for much of the recent decline in U.S. inflation. Our results suggest that the decline in inflation is explained by the interaction of increased globalization and high excess foreign capacity. Globalization by itself does not lead to less inflation, just greater sensitivity to foreign economic conditions.