Capacity Competition in Differentiated Oligopolies: Entry Deterrence with Alternative Objective Functions

This paper aims to identify the possible implications of quantity competition in markets with differentiated products on entry deterrence. If capacity commitments characterise this industry, quantities can be expected as the choice variable of rational players, even in the presence of product differentiation. Different equilibria of a static game occur depending on the degree of asymmetry of players, incumbent and entrant, which will crucially affect the shape of their best response functions. Asymmetry can stem from players’ advantage in demand and costs, their different objective functions, or the first-mover advantage. We will analyse entry where incumbent maximises the weighted average of profit and revenue while entrant is maximising profit. The reduction of asymmetry may intensify competition in the industry and, consequently, reduce entry barriers. Our findings provide an insight that could be used for practical recommendations for conducting competition policy and other sector-specific regulations, where the introduction and higher intensity of competition are desirable.

Determinants of credit ratings: evidence from panel discrete model

This study aims to explore how changes in explanatory variables may affect the probability of sovereign credit ratings assigned by Fitch, which is assumed to be a binary choice variable. For this purpose annual data of selected developed and developing countries for the period 2000-2016 have been used. All the data have been collected from World Bank database and Fitch website. In the empirical analysis the binary logit model has been applied. It can be concluded that the determinants of sovereign credit ratings can help sovereigns to better understand the drivers of their credit rating.

Public Perception on Labeling Genetically Modified (GM) Foods in Ghana: Implications for Food Policy

Labeling of genetically modified (GM) food and other food ingredients from GM source has become an important national policy issues receiving serious attention not only in Ghana but globally. This paper focused on public perceptions of labeling of GM foods in Ghana as a way of garnering a view of the public understanding of the technology that has become so much controversial for which several millions of public sector money is spent on education in the last few years. The survey which elapsed over a period of three months, shows results that indicate a dearth of knowledge on the technology and yet a high demand for labelling of the products, even though not many people read the labels on food products. This leads to the question as to ‘who is doing the listening’. The authors conclude that the limited knowledge and technology essentials among others explain why the public seems to reject the technology and call for labelling of the products in spite of the fact that labelling is nothing but a choice variable, which has nothing to do with safety measure. Modifying the present attitude of the opponents of the technology and the demanders of labelling ignoring the cost that may be involved require extensive education and awareness creations throughout the country using tailor made communication forms to address various different groups.

A model for ordinal responses with heterogeneous status quo outcomes

The decisions to reduce, leave unchanged, or increase a choice variable (such as policy interest rates) are often characterized by abundant status quo outcomes that can be generated by different processes. The decreases and increases may also be driven by distinct decision-making paths. Neither conventional nor zero-inflated models for ordinal responses adequately address these issues. This paper develops a flexible endogenously switching model with three latent regimes, which create separate processes for interest rate hikes and cuts and overlap at a no-change outcome, generating three different types of status quo decisions. The model is not only favored by statistical tests but also produces economically more meaningful inference with respect to the existing models, which deliver biased estimates in the simulations.

Farmer preference for improved corn seeds in Chiapas, Mexico: A choice experiment approach

Appropriate technologies must be developed for adoption of improved seeds based on the farmers’ preferences and needs. Our research identified the farmers’ willingness to pay (WTP) as a key determinant for selecting the improved varieties of maize seeds and landraces in Chiapas, Mexico. This work also analyzed the farmers’ observed heterogeneity on the basis of their socio-economic characteristics. Data were collected using a semi-structured questionnaire from 200 farmers. A proportional choice experiment approach was applied using a proportional choice variable, where farmers were asked to state the percentage of preference for different alternative varieties in a choice set. The generalized multinomial logit model in WTP-space approach was used. The results suggest that the improved seed varieties are preferred over the Creole alternatives, thereby ensuring higher yields, resistance to diseases, and larger ear size. For the preference heterogeneity analyses, a latent class model was applied. Three types of farmers were identified: innovators (60.5%), transition farmers (29.4%), and conservative farmers (10%). An understanding of farmers’ preferences is useful in designing agricultural policies and creating pricing and marketing strategies for the dissemination of quality seeds.

A Formal Model of Arms Market with Cash-for-Favours

Both corruption and market imperfections are important facets of modern arms markets. In the standard literature of arms market, production, procurement, sales (exports) and purchases (imports) of arms take place in the shadow of corruption. Corruption is an integral part of the environment of the arms trade that exerts an influence upon the outcome in the arms market. In our work, we make corruption as a choice variable of the powerful players in the global arms market and examine the equilibrium consequence of corruption that is strategically chosen by armament firms. We develop a simple duopoly to characterize a perfect Nash equilibrium of cash-for-favors and establish perplexing comparative static properties of this equilibrium. The primary intuition here is that cash-for-favors can have serious impacts on the equilibrium of an oligopoly through their effects on the incentives of and constraints on individual firms. We offer a model of endogenous corruption, to our understanding for the first time, to examine the global arms market in order to establish that the equilibrium outcome in the arms market cannot be fully captured by the standard results of oligopoly. Researchers have to extremely careful in applying the standard tools of oligopoly to the arms market as our results suggest that endogenous corruption can reverse most of the known results of oligopoly.

Contrasting Trends in Firm Volatility

Over the past decades, the real and financial volatility of listed firms has increased, while the volatility of private firms has decreased. We first provide panel data evidence that, at the firm level, sales and employment volatility are impacted by changes in the degree of ownership concentration. We then construct a model with private and listed firms where risk-taking is a choice variable at the firm-level. Due to general equilibrium feedback, we find that both an increase in stock market participation and integration in international capital markets generate opposite trends in volatility for private and listed firms. (JEL G15, G32, L25)

RULE CONSEQUENTIALISM MAKES SENSE AFTER ALL

It is commonly claimed that rule consequentialism (utilitarianism) collapses into act consequentialism, because sometimes there are benefits from breaking the rules. I suggest this argument is less powerful than has been believed. The argument requires a commitment to a very particular (usually implicit) account of feasibility and constraints. It requires the presupposition that thinking of rules as the relevant constraint is incorrect. Supposedly we should look at a smaller unit of choice—the single act—as the relevant choice variable. But once we see feasibility as a matter of degree, there is no obvious cut-off point for how broadly we should think about the constraints on our choices. Treating “a bundle of choices” as a relevant free variable is no less defensible than treating “a single act” as the relevant free variable. Rule utilitarianism, rule consequentialism, and other rules-based approaches are stronger than their current reputation.

Issues in third-party intervention research and the role of destruction in conflict

Research on third-party intervention into conflict has accelerated in recent years. Although some studies have explicitly assumed that third parties only value peace, recent theory has modeled parties to a conflict more flexibly. In addition, empirical results provide evidence that third-party motives are more complex than straightforward peacemaking. In particular, although the United Nations attempts peacemaking missions, evidence suggests that United Nations interventions prolong conflict. We sample the literature on interventions and offer directions for further research. On the empirical side, we suggest that third-party research should exploit recent applications of statistical modeling that unravel the complexity created by the fact that the decision to intervene in a conflict may depend on the same factors that contribute to the duration of the conflict. On the theoretical side, in contrast to previous studies, we suggest modeling the destruction that armed conflict causes as a choice variable.