Manchester School最新文献

This paper studies how product design and pricing strategies are affected by the existing relationship between the characteristics that integrate the product. The analysis shows that complementarity and low substitutability encourage the provision of quality incorporated to the products and increase the quality distortion and cannibalization problems that are common in segmented markets. A two-product strategy with a common attribute is shown to be a feasible strategy for reasons other than cost savings, namely attribute dependence. In addition, menu pricing is found to be the most profitable strategy, and a commonality strategy is more profitable than a common-product strategy.

Price competition is more intense than quantity competition in private oligopolies, wherein all firms are profit maximizers. However, in mixed oligopolies where one state-owned public firm competes with profit-maximizing private firms, price competition may not result in tougher competition than quantity competition. In this study, we introduce common ownership, a distinct feature of recent financial markets, into a mixed oligopoly model and investigate how common ownership affects this ranking. We show that under common ownership, quantity competition is likely to be tougher than price competition. Moreover, we find that common ownership harms welfare regardless of the competition mode. Common ownership enhances private firms' profits under Bertrand competition while these may decline under Cournot competition.

We consider a model of corruption in the form of surround-bidding in a first-price procurement auction in which bidders' private cost follows uniform distribution. We find that the briber's high-price bidding function is less aggressive than honest suppliers' while his low-price one is more aggressive. As the bribery cost increases, both the briber's low-price and high-price bidding functions become less aggressive. The winning probability and expected profit of the briber increase, while the winning probability and expected profit of honest suppliers decrease. Surprisingly, although the briber's high-price bid may be the winning bid, which is harmful to the procurer, the procurer's expected payment decreases, that is, the procurer benefits from surround-bidding corruption, because the benefit due to more intense competition outweighs the harm caused by the briber's high-price bid.

This paper investigates the predictive power of the shadow rate for the inflation rate in countries with a zero lower bound (the US, the UK and Canada) and in those with negative rates (Japan, the Euro Area and Switzerland). Using shadow rates obtained from two different models (the WX(3) and the KANSM(2) ones) and for different LB parameters we compare the out-of-sample forecasting performance of an inflation model including a shadow rate with a benchmark one excluding it. Both specifications are estimated by OLS (Ordinary Least Squares) and includes a range of macroeconomic factors computed by means of principal component analysis. Both point and density forecasts of the inflation rate are evaluated. The models including the shadow rate are found to outperform the benchmark ones according to both sets of criteria except in countries operating an official inflation targeting regime. Both types of shadow rates appear to produce equally accurate out-of-sample inflation forecasts.

The presence of exogenous global shocks due to the 2007/2008 economic and financial crisis and the current global pandemic crisis are deeply hampering economic operators' overall ability to access credit. Small and medium-sized enterprises and start-ups are most severely affected by credit rationing. This paper investigates whether access to bank loans in the early stage of a start-up's lifecycle is a predictor of a firm's default in a time of economic crisis. We ground our analysis on a firm-level longitudinal data set of Italian new capital companies born from 2004 to 2006. Implementing a discrete-time proportional hazard model we study their likelihood of default up to 2014 after controlling for a consistent number of other firms, industry and innovation related characteristics. The main findings confirm that access to bank loans significantly enhances the resilience of Italian start-ups. By taking into consideration the sectoral degree of innovation where firms operate, we also find that bank financing still exerts a positive influence on firm survival in both less and more innovative industries. However, there is evidence of a stronger positive influence on of long-term debt on the survival of firms operating in low- and medium-low innovative industries.

This paper studies the incentives for, and the welfare effects of, pre-donation in a vertically related industry where two downstream firms that produce a homogenous good jointly bargain, using the generalized Nash rule, with an upstream firm over a linear input price before they engage in Cournot competition. We theoretically show that the downstream industry has no incentive to make any pre-donation and this is irrespective of its bargaining power and also irrespective of whether it is a monopoly or a symmetric or asymmetric duopoly. Also, irrespective of the said structures of the downstream industry, we show computationally that (i) the upstream firm finds to make unilateral pre-donation optimal if and only if its bargaining power is sufficiently small and (ii) its optimal pre-donation (whenever positive) always yields Pareto welfare gains.

We consider a two-period model with strategic inventory and explore the welfare implications of banning input price discrimination. We find that inventory incentive is stronger under input price discrimination. Under uniform pricing, an increase in an inventory of a firm equally lowers the rival's wholesale price. It expands the rival's production, suppresses the firm's output, and weakens the incentive. We also find that the weak incentive leads to higher quantity-weighted average wholesale and retail prices. Therefore, allowing input price discrimination alleviates double marginalization and leads to higher consumer surplus and social welfare.

This study constructs a vertical structure model in which a foreign firm holds upstream partial passive ownership and examines tariff-induced free technology transfer from the firm to its downstream rival. We show that a strategic tariff can induce technology transfer when the share of foreign ownership is large, which always yields higher welfare under both vertical separation and integration, while vertical integration can better induce technology transfer. We also consider an extensive analysis with some variations, such as upstream or downstream competition, downstream passive ownership, government commitments to no-tariff policies, and foreign firm commitments to no-licensing strategies, and discuss policy implications regarding the pro-competitive effect of foreign passive ownership when free technology transfer is involved.

We extend the Regression Discontinuity model to evaluate the procyclicality of employment effect of minimum wage and show that previous estimates may be biased due to failure to account for the local non-employment rate. The results suggest that the positive employment effect of increasing minimum wage is strongly procyclical, that is, is more pronounced in areas with low non-employment rates. Under an assumption that employers have no direct impact around the cut-off point, the results suggest that a higher minimum wage increases labour supply of young workers.

We investigate whether the textual sentiment affects European depositors' behavior in withdrawing their deposits. We construct two textual sentiments able to capture the perceived uncertainty. Our findings suggest that a high frequency of uncertainty and weak modal words in the European Central Bank (ECB) president's monthly speeches leads both households and non-financial corporations to withdraw their bank deposits. We also find that non-financial corporations' deposits are more sensitive than households' deposits to these textual sentiments. These findings suggest that regulators and policymakers could expand the already existing early-warning systems for the banking sector by considering the frequency of uncertainty and weak modal words in the ECB president's speeches.