Most recent papers:

• Retirement date effects on saving behavior: Endogenous labor supply and non‐separable preferences.
  Aylit Tina Romm.
  International Journal of Economic Theory. August 01, 2017
  This paper analyzes the effect of changing retirement dates on pre‐retirement saving, looking at the effect of a negative cross derivative of the utility function with respect to consumption and leisure. This effect is analyzed in the contexts of both exogenous and endogenous labor supply before retirement. In the case of exogenous labor supply, the relative decrease in saving in response to an increase in the expected retirement age is larger in the case of a negative cross derivative of the utility function (non‐separable preferences) than in the case of a zero cross derivative (separable preferences). However, in the case where labor supply before retirement decreases at the intensive margin in response to an increase in the retirement age, the relative decrease in saving in response to an increase in the expected retirement age is smaller in the case of a negative cross derivative than in the case of a zero cross derivative.

  August 01, 2017   doi: 10.1111/ijet.12132   open full text
• Other‐regarding principal and moral hazard: The single‐agent case.
  Swapnendu Banerjee, Mainak Sarkar.
  International Journal of Economic Theory. August 01, 2017
  Using the classic moral hazard problem with limited liability, we characterize the optimal incentive contracts when first an other‐regarding principal interacts with a self‐regarding agent. The optimal contract differs considerably when the principal is “inequity averse” vis‐à‐vis the self‐regarding case. Also the agent is generally (weakly) better‐off under an “inequity averse” principal compared to a “status seeking” principal. Then we extend our analysis and characterize the optimal contracts when both other‐regarding principal and other‐regarding agent interact.

  August 01, 2017   doi: 10.1111/ijet.12131   open full text
• Optimism and timing of market entry: How beliefs and information distortion create market leadership.
  Nuno Alvim, Tiago Pires.
  International Journal of Economic Theory. August 01, 2017
  This paper analyzes the relation between the timing of entry in markets and firms’ beliefs about the state of the world. We further study whether firms have incentives to become optimistic. We consider an endogenous timing model with incomplete information about demand and show the existence of a unique perfect Bayesian equilibrium where Bayesian firms with optimistic beliefs become market leaders and firms with pessimistic beliefs become market followers. Firms never become market followers when they are able to choose their beliefs by forgetting bad news. Our findings provide a justification for firms hiring and retaining managers with biased beliefs.

  August 01, 2017   doi: 10.1111/ijet.12130   open full text
• Trade liberalization and forest transition.
  Rafael González‐Val, Fernando Pueyo.
  International Journal of Economic Theory. August 01, 2017
  We develop a theoretical model that provides an additional explanation for the forest transition based on a trade liberalization scenario. We introduce a renewable natural resource (wood), used as an input by manufacturing firms, in a framework with economic geography foundations: transport costs affect the spatial distribution of firms. In a general equilibrium, the results reproduce the forest transition at a global scale: a decrease in transport costs has an initial negative effect on the worldwide stock of the natural resource, but this effect is offset over time as a consequence of industrial reallocation and eventually disappears in the long run.

  August 01, 2017   doi: 10.1111/ijet.12129   open full text
• Population invariance properties of social and economic networks.
  Youngsub Chun, Sunghoon Hong, Bong Chan Koh.
  International Journal of Economic Theory. August 01, 2017
  This paper investigates how a pairwise stable network changes upon the arrival of a new agent. Comparing the new networks obtained for the society after the arrival of a new agent with the initially pairwise stable network, we propose four different population invariance properties of a network: link invariance, distance invariance, connectedness invariance, and network invariance. We show that pairwise stability is incompatible with link invariance under certain assumptions on the allocation rule. However, if we consider specific models, positive results can be obtained. For instance, in the symmetric connections model, pairwise stability implies connectedness invariance.

  August 01, 2017   doi: 10.1111/ijet.12128   open full text
• Relaxing quality differentiation through capacity limitation: A note.
  Xavier Y. Wauthy, Nicolas Boccard.
  International Journal of Economic Theory. May 02, 2017
  We consider a duopoly stage game where an incumbent sells a high‐quality product while enjoying an ample production capacity. We study the quality–capacity best response of an entrant, before price competition takes place. We partially characterize equilibrium prices and payoffs in the corresponding Bertrand–Edgeworth pricing games and show that the entrant tends to rely exclusively on capacity limitation in a subgame perfect equilibrium, thereby showing that vertical differentiation is not robust to Bertrand–Edgeworth competition.

  May 02, 2017   doi: 10.1111/ijet.12127   open full text
• Student loans: When is risk sharing desirable?
  Bernhard Eckwert, Itzhak Zilcha.
  International Journal of Economic Theory. May 02, 2017
  In higher education, pure credit market funding leads to underinvestment due to insufficient risk pooling, while pure income‐contingent loan funding leads to overinvestment. We analyze whether funding diversity –a market structure in which credit markets coexist alongside income‐contingent loan funding –might restore efficiency of the educational investment process. In the absence of government intervention, we find that funding diversity improves pooling of individual income risks and, under some condition, leads to higher social welfare than pure credit market funding. If combined with a policy that restricts access to higher education, funding diversity even achieves full investment efficiency and strictly dominates credit market funding.

  May 02, 2017   doi: 10.1111/ijet.12126   open full text
• Changing partners in a cheap talk game: Experimental evidence.
  Olivier Bonroy, Alexis Garapin, Daniel Llerena.
  International Journal of Economic Theory. May 02, 2017
  This paper considers the effects that the opportunity to change partners has on communication. Our experiment concerns a standard cheap talk game in which a player observes a private forecast before disclosing it (truthfully or untruthfully) in a message that he sends to his partner. Two treatments are applied: in one, each team remains unchanged until the experiment ends; and in the other, players can change their partner. We find that the opportunity to change partners positively affects communication in the relationship. Interestingly, this effect is explained by higher levels of trust in the messages and not by more truthful disclosure of private information.

  May 02, 2017   doi: 10.1111/ijet.12125   open full text
• The theory of quantity discounts and optimal pricing.
  Winston W. Chang, Tai‐Liang Chen.
  International Journal of Economic Theory. May 02, 2017
  This paper explores a monopolist's optimal multi‐tier quantity‐discount prices and shows that only the last tier's marginal cost is relevant in determining the tier prices and each tier's price is equal to its preceding tier's marginal revenue. An increase in total output is associated with larger individual tiers’ own and cumulative outputs (the stretching effect), and the increases in their cumulative outputs are smaller if their tiers are closer to the first one (the ripple effect). The pricing structure is further characterized by the tier Lerner indices and the price elasticities defined on individual tiers’ own and their commutative outputs.

  May 02, 2017   doi: 10.1111/ijet.12124   open full text
• Virtual trade between separated time zones and growth.
  Sugata Marjit, Biswajit Mandal.
  International Journal of Economic Theory. May 02, 2017
  The purpose of this paper is to propose a model where trade has a direct and positive impact on growth rate of two trading nations beyond the level effect. We use the idea of virtual trade in intermediates induced by non‐overlapping time zones and show how trade can increase the equilibrium optimal rate of growth. In this structure the trade impact goes beyond the level effect and directly causes growth. Typically standard models of trade cannot generate an automatic growth impact. Virtual trade may allow production to continue uninterrupted in separated time zones such as between the USA and India, and that can lead to higher growth for both countries. Later we extend the model to incorporate the accumulation of skills which becomes necessary for sustaining steady state growth.

  May 02, 2017   doi: 10.1111/ijet.12123   open full text
• Let Tiebout pick up the tab: Pricing out externalities with free mobility.
  Hiroki Watanabe.
  International Journal of Economic Theory. February 09, 2017
  Free mobility has not been thought of as an effective tool to correct over‐ or underproduction of externalities. In this paper, we establish that foot voting can internalize the cost of negative externalities. Workers have to accept the wage and rent, however high or low these values are in equilibrium, if they cannot relocate. In reality, workers are mobile and they can effectively influence the equilibrium wage and rent to reflect the externalities by threatening to walk away if the current externalities are at an intolerable level. In an economy with free mobility, firms indirectly pay for the damage in the form of an increased labor or land cost and thus the externalities are partially internalized. We specify the condition under which a mobile economy is efficient in the presence of externalities, and discuss potential policy implications of our findings.

  February 09, 2017   doi: 10.1111/ijet.12121   open full text
• Agglomeration patterns in a long narrow economy of a new economic geography model: Analogy to a racetrack economy.
  Kiyohiro Ikeda, Kazuo Murota, Takashi Akamatsu, Yuki Takayama.
  International Journal of Economic Theory. February 09, 2017
  The mechanism of self‐organization of agglomerations in a long narrow economy of a new economic geography model is elucidated by a theoretical comparative study with a racetrack economy. Computational bifurcation theory is used to systematically obtain the equilibria of these economies. A chain of spatially repeated core–periphery patterns à la Christaller and Lösch emerges when agglomeration forces are large. Peripheral zones are enlarged recurrently to engender an agglomeration shadow en route to an atomic mono‐center. A megalopolis with two core places connected by an industrial belt emerges when agglomeration forces are small.

  February 09, 2017   doi: 10.1111/ijet.12120   open full text
• Immigration policies, labor complementarities, population size and cultural frictions: Theory and evidence.
  Thomas Osang, Shlomo Weber.
  International Journal of Economic Theory. February 09, 2017
  In this paper we consider a model of international migration due to Fujita and Weber, with two heterogeneous countries, and show that in equilibrium the larger country attracts more immigrants, while choosing a lower quota. Moreover, a higher degree of labor complementarity and lower degree of cultural friction between natives and immigrants yield a higher immigration quota. We test the empirical validity of the model by using time‐series country‐level data. Even in the absence of direct evidence of strategic and non‐cooperative choice of countries’ immigration quotas, both cross‐section and panel data approaches indicate that cross‐country immigration patterns are consistent with the majority of our theoretical findings.

  February 09, 2017   doi: 10.1111/ijet.12119   open full text
• Endogenous labor supply and international trade.
  Takanori Ago, Tadashi Morita, Takatoshi Tabuchi, Kazuhiro Yamamoto.
  International Journal of Economic Theory. February 09, 2017
  We construct an international trade model with an elastic labor supply and analyze the impacts of technological progress on the equilibrium outcomes of working hours and economic welfare. We show that the labor supply is inverted U‐shaped with respect to technological progress. We also show that welfare is U‐shaped with respect to trade costs whereas welfare and technological progress are positively related. We then show that working hours in developed countries are longer in the first stages of development, but shorter in the second stages of development.

  February 09, 2017   doi: 10.1111/ijet.12118   open full text
• Social comparisons in consumption, international capital flows and tax competition.
  Juin‐Jen Chang, Yi‐Ling Cheng, Shin‐Kun Peng.
  International Journal of Economic Theory. February 09, 2017
  This paper explores the implications of consumption externalities for capital mobility, the distribution of firms and tax competition. In the absence of tax competition, the country with higher consumption externality attracts more capital/firms. In contrast, under tax competition, because the country with higher consumption externality will impose a higher tax rate on capital, due to the strong negative effect of taxation, the country with lower externality attracts more capital. Besides, as trade openness increases, capital agglomerates in the country with lower consumption externality. We also show that there may exist an efficiency‐enhancing role for tax competition.

  February 09, 2017   doi: 10.1111/ijet.12117   open full text
• Cournot, Bertrand or Chamberlin: Toward a reconciliation.
  Mathieu Parenti, Alexander V. Sidorov, Jacques‐François Thisse, Evgeny V. Zhelobodko.
  International Journal of Economic Theory. February 09, 2017
  This paper compares the market equilibria in a differentiated industry under Cournot, Bertrand, and monopolistic competition. This is accomplished in a one‐sector economy where consumers are endowed with separable preferences. When firms are free to enter the market, monopolistically competitive firms charge lower prices than oligopolistic firms, while the mass of varieties provided by the market is smaller under the former than the latter. If the economy is sufficiently large, Cournot, Bertrand and Chamberlin solutions converge toward the same market outcome, which may be a competitive or a monopolistically competitive equilibrium, depending on the nature of preferences.

  February 09, 2017   doi: 10.1111/ijet.12116   open full text
• Beyond urban form: How Masahisa Fujita shapes us.
  Marcus Berliant, Tomoya Mori.
  International Journal of Economic Theory. February 09, 2017
  Literature from several phases of the career of Masahisa Fujita is surveyed chronologically, with a view toward future contributions in these areas. First we address the economic structure of the interior of a city with mobile consumers, adding production. Next we provide a critical discussion of the new economic geography, in particular distinguishing between recent approaches employing two regions and more than two regions, both in theory and in application to data. Finally, we discuss knowledge creation in groups and briefly touch on his current work in artificial intelligence.

  February 09, 2017   doi: 10.1111/ijet.12115   open full text
• Introduction.
  Marcus Berliant, Tomoya Mori, Kazuo Nishimura, Makoto Yano.
  International Journal of Economic Theory. February 09, 2017
  There is no abstract available for this paper.

  February 09, 2017   doi: 10.1111/ijet.12114   open full text
• Endogenous timing under price competition and unions.
  Luciano Fanti.
  International Journal of Economic Theory. November 02, 2016
  We investigate the endogenous order of moves in a duopoly under price competition with a unionized labor market. We show that the established results are not robust to the presence of unions. We find that when product substitutability is sufficiently high and unions are sufficiently wage‐interested the sub‐perfect equilibrium is the simultaneous choice of prices by firms (in sharp contrast to the received literature) and, moreover, the well‐known result that in price games there is always a preference for being a follower no longer holds true under unionization.

  November 02, 2016   doi: 10.1111/ijet.12102   open full text
• Monotonicity implications for the ranking of rules for airport problems.
  Miguel Ángel Mirás Calvo, Carmen Quinteiro Sandomingo, Estela Sánchez Rodríguez.
  International Journal of Economic Theory. November 02, 2016
  The airport problem is a classic cost allocation problem that has been widely studied. Several rules have been proposed to divide the total cost among the agents, attending to the characteristics of the problem or via game theory. The axiomatic approach provides a way to choose among rules. Our main goal is to provide some tools to evaluate how rules differentially treat larger airlines as compared to smaller airlines. We use the Lorenz and no‐subsidy orderings to compare rules. We introduce some monotonicity and boundedness properties that imply a specific ranking with respect to the nucleolus and the Shapley value.

  November 02, 2016   doi: 10.1111/ijet.12101   open full text
• Comparative statics under κ‐ambiguity for log‐Brownian asset prices.
  Dejian Tian, Weidong Tian.
  International Journal of Economic Theory. November 02, 2016
  This paper examines the comparative statics of optimal risky demand when economic agents are both risk averse and ambiguity averse. In a setting with log‐Brownian asset prices and κ‐ambiguity but virtually for all utility functions, we show that the greater the Arrow–Pratt coefficient of absolute risk aversion under ambiguity, the less the optimal demand for risky assets. This monotonic property is demonstrated with varying risk‐free interest rate and allows for distinct estimated model parameters across agents.

  November 02, 2016   doi: 10.1111/ijet.12100   open full text
• Does foreign media entry discipline or provoke local media bias?
  Hon Foong Cheah.
  International Journal of Economic Theory. November 02, 2016
  This paper studies how the entry of an imperfectly informed foreign media outlet removes the government's role as the sole provider of information, altering its reporting to maximize citizen support. We find that while foreign media entry typically lowers local media bias, it can also exacerbate bias in countries with an incompetent government. The resulting deterioration in local media quality can outweigh the additional information from a foreign media of moderate quality, leaving citizens worse off. When analyzing a government's decision to suppress foreign media, we find that suppression is most heavily used in countries with a moderately competent government.

  November 02, 2016   doi: 10.1111/ijet.12099   open full text
• Endogenous timing of moves in Bertrand–Edgeworth triopolies.
  Attila Tasnádi.
  International Journal of Economic Theory. November 02, 2016
  We determine the endogenous order of moves in which the firms set their prices in the framework of a capacity‐constrained Bertrand–Edgeworth triopoly. A three‐period timing game that determines the period in which the firms announce their prices precedes the price‐setting stage. We show that the firm with the largest capacity sets its price first, while the two other firms set their prices later. Our result extends a finding by Deneckere and Kovenock from duopolies to triopolies. This extension was made possible by Hirata's recent advancements on the mixed‐strategy equilibria of Bertrand–Edgeworth games.

  November 02, 2016   doi: 10.1111/ijet.12098   open full text
• On asymmetric Bertrand duopoly with price uncertainty.
  Bogumił Kamiński, Maciej Łatek.
  International Journal of Economic Theory. November 02, 2016
  We examine a market where consumers are compelled to rely on noisy price signals to choose among homogeneous products. The noise originates from price uncertainty due, for example, to an unknown currency exchange rate used in a transaction, or demand uncertainty due to consumers’ not being sure of the structure of their future demand. Standard theoretical models and empirical research of markets with noisy prices show that they are detrimental to consumers’ welfare. This paper identifies conditions under which opposite results can be obtained. In particular, it shows that in a market with a cost leader moderate noise levels can be beneficial to consumers’ welfare.

  November 02, 2016   doi: 10.1111/ijet.12097   open full text
• Ideologies, status quo, and parties’ outside options in parliamentary politics.
  Tsung‐Sheng Tsai, C. C. Yang.
  International Journal of Economic Theory. August 05, 2016
  This paper discusses the effect of the status quo policy versus parties’ “outside options,” which are defined as the benefits when parties are not in government, on the determination of the political equilibrium in parliamentary politics. As the value of outside options increases, the status quo becomes less important relative to outside options in terms of the parties’ bargaining strength. It is shown, among other things, that if the value of outside options is intermediate, two extreme parties may form a “disconnected coalition” in equilibrium; and if the value of outside options becomes sufficiently high, the status quo no longer maintains its grip on outcomes and the median‐voter theorem holds in essence.

  August 05, 2016   doi: 10.1111/ijet.12094   open full text
• Informal versus formal search: Which yields better pay?
  Semih Tumen.
  International Journal of Economic Theory. August 05, 2016
  Estimates on the effect of job contact method (i.e., informal versus formal search) on wage offers vary considerably across studies, with some finding a positive correlation between getting help from informal connections and obtaining highly paid jobs, while others finding a negative one. In this paper, I investigate theoretically the sources of discrepancies in these empirical results. Using a formal job search framework, I derive an equilibrium wage distribution which reveals that informal search yields for some groups higher and for some others lower wages than formal search. The key result is the existence of non‐monotonicities in wage offers. Two potential sources of these non‐monotonicities exist: peer effects and unobserved worker heterogeneity in terms of the inherent cost of maintaining connections within a productive informal network. The model predicts that a greater degree of unobserved heterogeneity tilts the estimates toward producing a positive correlation between informal search and higher wages, whereas stronger peer influences tend to yield a negative correlation. This conclusion informs the empirical research in the sense that identification of the true correlation between job contact methods and wage offers requires a careful assessment of the unobserved heterogeneity and peer influences in the relevant sample.

  August 05, 2016   doi: 10.1111/ijet.12093   open full text
• Predetermined exchange rate, monetary targeting, and inflation targeting regimes.
  Shigeto Kitano.
  International Journal of Economic Theory. August 05, 2016
  Many works analyzing the Mundell–Fleming dictum compare the predetermined exchange rate regime and the monetary targeting regime under flexible exchange rates. Reflecting on the fact that many emerging market countries have shifted to the inflation targeting regime, this paper aims to extend the literature to include the latter. The results of our analysis show that the interest rule with an inflation target is superior (or at least equal) to the two above‐mentioned regimes in absorbing both real and monetary shocks.

  August 05, 2016   doi: 10.1111/ijet.12092   open full text
• Anticipated consumption and its impact on capital accumulation and growth: “Forward‐looking” versus “backward‐looking” consumption reference.
  Goncalo Monteiro, Stephen J. Turnovsky.
  International Journal of Economic Theory. August 05, 2016
  This paper introduces the idea of anticipated pleasure into the Ramsey growth model, by assuming that in addition to current consumption, an agent's current utility depends upon a reference consumption level based on expected future consumption. Two alternative specifications of the anticipated future consumption levels are considered: an external index and an internal index. We analyze the macrodynamic equilibrium, comparing it to both the standard Ramsey model and the model of habit formation. We establish a number of theoretical propositions characterizing the impact of the anticipated consumption reference on the transitional dynamics and long‐run equilibrium, supplementing these with numerical simulations.

  August 05, 2016   doi: 10.1111/ijet.12091   open full text
• Integration strategies of emerging multinational corporations: Theoretical approach.
  Artur Klimek.
  International Journal of Economic Theory. May 05, 2016
  The traditional approach to multinational corporations typically assumes that advanced economies are sources of foreign direct investment, while emerging economies are merely passive recipients of the foreign capital. This paper presents a new model of multinational corporations originating in emerging countries. The new approach assumes that headquarters are located in a less developed country and production can be internationally dispersed. The paper attempts to define an optimal strategy of foreign production with respect to different levels of input prices, productivity of firms and market sizes.

  May 05, 2016   doi: 10.1111/ijet.12088   open full text
• Arms build‐up and arms race in optimal economic growth.
  Juan M. C. Larrosa.
  International Journal of Economic Theory. May 05, 2016
  I analyze a model of strategic interdependence between two economies linked by investments in defensive capital for deterrence purposes. I adapt a two‐agent dynamic setting where weapon production affects consumption. Individually both economies determine their balanced growth path by taking this interdependence into account in different grades of awareness. I associate two types of equilibria with internal or external determinants for defense production analogous to scenarios of arms build‐up or arms race. I find that a defense sector is compatible with economic growth but a tight arms race can harm growth.

  May 05, 2016   doi: 10.1111/ijet.12087   open full text
• The entrepreneurship Beveridge curve.
  Thomas Gries, Stefan Jungblut, Wim Naudé.
  International Journal of Economic Theory. May 05, 2016
  The rate of creation and failure of start‐up firms can be modeled as a search and matching process as in labor market matching models. Setting out an endogenous growth model with entrepreneurship, we derive an entrepreneurship Beveridge curve. We use this to illustrate that whether or not a start‐up is successful depends on the efficiency with which entrepreneurial abilities are matched with business opportunities. The entrepreneurship Beveridge curve is a potentially useful analytical contribution to the formalization of the economics of entrepreneurship. We identify a number of extensions and applications.

  May 05, 2016   doi: 10.1111/ijet.12086   open full text
• Incentives versus insurance in the design of tax‐financed unemployment insurance.
  Torben M. Andersen.
  International Journal of Economic Theory. May 05, 2016
  The distortions of job‐search incentives caused by unemployment benefits and their financing are well known. However, a benefit‐tax scheme also provides insurance having direct utility effects as well as indirect effects on risk taking. The latter mitigates or may even dominate standard incentive effects to produce a non‐monotone relation between efficiency (incentives) and equity (insurance). An increase in benefits (and thus tax rate) may up to some point increase average income and reduce inequality. However, optimal utilitarian policies always position the economy at a point where marginal policy changes involve a trade‐off, otherwise policies would not be optimal.

  May 05, 2016   doi: 10.1111/ijet.12085   open full text
• On the topology of the set of critical equilibria.
  Andrea Loi, Stefano Matta.
  International Journal of Economic Theory. May 05, 2016
  In this study, we explore the connection between the dimension of a pure exchange smooth economy and the topology of the set of the critical equilibria. In particular, using the dual framework developed by Balasko, we show that the set of regular equilibria is path connected if two consumers (goods) and at least four goods (consumers) exist, or if the sum of the number of goods and consumers is even. This result depends mainly on the fact that a real projective space of dimension n, ℝℙn, which is embedded in ℝℙn+1, does not disconnect ℝℙn+1 unless n=1.

  May 05, 2016   doi: 10.1111/ijet.12084   open full text
• Experts, conflicts of interest, and reputation for ability.
  Filippo Pavesi, Massimo Scotti.
  International Journal of Economic Theory. May 05, 2014
  We analyze a model of cheap talk in which an expert who faces a conflict of interest with a decision maker is concerned about establishing a reputation for having accurate information. In this environment, an increase in reputation above a certain threshold always makes truthful revelation more difficult to achieve, since experts with greater reputation can more easily sway the beliefs of decision makers in a desired direction. Thus, higher levels of reputation exacerbate the incentives of biased experts to misreport their private information. Decision makers may therefore be better off consulting less reputable experts when conflicts are more pronounced.

  May 05, 2014   doi: 10.1111/ijet.12037   open full text
• Bayesian Nash equilibrium in “linear” Cournot models with private information about costs.
  Sjaak Hurkens.
  International Journal of Economic Theory. May 05, 2014
  Calculating closed‐form solutions of general Cournot models where firms have private information about costs is very cumbersome. Most authors therefore consider linear demands and constant marginal costs. However, within this framework, the non‐negativity constraint on prices (and quantities) has not been properly dealt with and the correct calculation of all Bayesian Nash equilibria is more complicated than expected. Moreover, multiple symmetric and interior Bayesian equilibria may exist for an open set of parameters. The reason for this is that linear inverse demand is not really linear, since there is a kink at zero price: P(Q)=max{a−bQ,0} rather than P(Q)=a−bQ.

  May 05, 2014   doi: 10.1111/ijet.12036   open full text
• The spatial selection of heterogeneous quality: An approach using different demand elasticities.
  Ching‐mu Chen, Dao‐Zhi Zeng.
  International Journal of Economic Theory. May 05, 2014
  This paper incorporates heterogeneous demand elasticities and the quality/skill complementarity of production in a footloose capital model in order to explain the spatial selection of firms with differentiated quality. We find that when trade becomes freer, high‐quality firms agglomerate in the region that accommodates more high‐skilled labor, whereas low‐quality firms move to the region that hosts more low‐skilled labor. If trade freeness is high, the spatial separation of high‐ and low‐quality firms occurs. This paper also points out the positive effect of integration on welfare owing to the specialization of product quality.

  May 05, 2014   doi: 10.1111/ijet.12035   open full text
• Natural resources and patterns of overtaking.
  Volker Böhm, Tomoo Kikuchi, George Vachadze.
  International Journal of Economic Theory. May 05, 2014
  This paper shows how intergenerational trading of non‐depletable natural resources may affect investment in physical capital, implying distinct patterns of overtaking between countries. Specifically, the results indicate that the elasticity of the marginal utility of natural resources plays a crucial role. When the elasticity is less than unity, a resource‐abundant country may be overtaken by a resource‐scarce country. In this case, savings are withdrawn from productive investment to acquire natural resources. Conversely, when it is greater than unity, the reverse pattern of overtaking may occur since investment in natural resources and in physical capital go hand in hand.

  May 05, 2014   doi: 10.1111/ijet.12034   open full text
• Externality and information asymmetry in the production of local public goods.
  Myeonghwan Cho.
  International Journal of Economic Theory. May 17, 2013
  A traditional argument in public economics says that externality favors centralization (decision‐making by the central government) and information asymmetry favors decentralization (decision‐making by local governments). In this paper, we find a linkage between externality and information asymmetry with regard to the relative efficiency of centralization and decentralization. In addition, we study the incentives of local governments to reveal their private information. When the uncertainty of private information is sufficiently high, it is possible to improve efficiency by providing a cost incentive for local governments to truthfully reveal their information. Without providing a cost incentive, it is also possible to improve efficiency with the local governments revealing their information partially, but not completely.

  May 17, 2013   doi: 10.1111/j.1742-7363.2013.12013.x   open full text
• Common‐value auctions with asymmetrically informed bidders and reserve price.
  Xinyan Shi.
  International Journal of Economic Theory. May 17, 2013
  In this paper, I study common‐value auctions with a reserve price. First, I consider a static auction in which one bidder has perfect information about the value of the object and the other does not have any private information. Then I consider a dynamic auction in which the informed bidder obtains private information in two consecutive periods, while the other does not have any private information. In both auctions, I derive the optimal reserve price and establish conditions under which the exclusion principle fails. In addition, I compare the dynamic auction with the single‐period auction and provide conditions under which one auction outperforms the other.

  May 17, 2013   doi: 10.1111/j.1742-7363.2013.12012.x   open full text
• Mixed incentive contracts in partnerships.
  Hong Chao, Kevin Siqueira.
  International Journal of Economic Theory. May 17, 2013
  This paper illustrates the impact of mixed contracts on teamwork and welfare in a partnership when production depends on the efforts of agents in their own tasks as well as their efforts in helping other teammates. We show that a mixed contract that combines compensation based on team output with that of a tournament based on individual output leads to higher welfare than a purely team‐output‐based contract, despite the possibility of sabotage and the possible adverse impacts that the contract may have on the allocation of agent efforts.

  May 17, 2013   doi: 10.1111/j.1742-7363.2013.12011.x   open full text
• Efficiency and stability in a strategic model of hedonic coalitions.
  Antoni Rubí‐Barceló.
  International Journal of Economic Theory. May 17, 2013
  This paper analyzes the partitioning of a society into coalitions in a setting where heterogeneous players produce private and club goods. Their preferences are hedonic and are represented by a utility function with two arguments, namely their consumptions of these two goods. The focus is on the compatibility of overall societal welfare with individual incentives to move the coalition or accept new coalition mates under alternative utility specifications and agents’ productivities.

  May 17, 2013   doi: 10.1111/j.1742-7363.2013.12014.x   open full text