/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

In this article, we present a springboard perspective to describe the internationalization of emerging market multinational corporations (EM MNEs). EM MNEs use international expansion as a springboard to acquire strategic resources and reduce their institutional and market constraints at home. In so doing, they overcome their latecomer disadvantage in the global stage via a series of aggressive, risk-taking measures by aggressively acquiring or buying critical assets from mature MNEs to compensate for their competitive weaknesses. We discuss unique traits that characterize the international expansion of EM MNEs, and the unique motivations that steer them toward internationalization. We further delineate peculiar strategies and activities undertaken by these firms in pursuit of international expansion, as well as internal and external forces that might compel or facilitate their propulsion into the global scene. We finally explain the risks and remedies associated with this international ‘springboarding’ strategy and highlight major issues meriting further investigation.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.jibs.8400275.pdf

International expansion of emerging market enterprises: A springboard perspective

This paper develops a signalling model with two signals, two attributes, and a continuum of signal levels and attribute types to explain new issue underpricing. Both the fraction of the new issue retained by the issuer and its offering price convey to investors the unobservable “intrinsic” value of the firm and the variance of its cash flows. Many of the model's comparative statics results are novel, empirically testable, and consistent with the existing empirical evidence on new issues. In particular, the degree of underpricing, which can be inferred from observable variables, is positively related to the firm's post-issue share price.

Signalling and the Pricing of New Issues

Economists have always recognised that human endeavours are constrained by our limited and uncertain knowledge, but only recently has an accepted theory of uncertainty and information evolved. This theory has turned out to have surprisingly practical applications: for example in analysing stock market returns, in evaluating accident prevention measures, and in assessing patent and copyright laws. This book presents these intellectual advances in readable form for the first time. It unifies many important but partial results into a satisfying single picture, making it clear how the economics of uncertainty and information generalises and extends standard economic analysis. Part One of the volume covers the economics of uncertainty: how each person adapts to a given fixed state of knowledge by making an optimal choice among the immediate 'terminal' actions available. These choices in turn determine the overall market equilibrium reflecting the social distribution of risk bearing. In Part Two, covering the economics of information, the state of knowledge is no longer held fixed. Instead, individuals can to a greater or lesser extent overcome their ignorance by 'informational' actions. The text also addresses at appropriate points many specific topics such as insurance, the Capital Asset Pricing model, auctions, deterrence of entry, and research and invention.

The analytics of uncertainty and information

Social interaction (peer) effects are recognized as a potentially important factor in the diffusion of new products. In the case of environmentally friendly goods or technologies, both marketers and policy makers are interested in the presence of causal peer effects as social spillovers can be used to expedite adoption. We provide a methodology for the simple, straightforward identification of peer effects with sufficiently rich data, avoiding the biases that occur with traditional fixed effects estimation when using the past installed base of consumers in the reference group. We study the diffusion of solar photovoltaic panels in California and find that at the average number of owner-occupied homes in a zip code, an additional installation increases the probability of an adoption in the zip code by 0.78 percentage points. Our results provide valuable guidance to marketers designing strategies to increase referrals and reduce customer acquisition costs. They also provide insights into the diffusion process of environmentally friendly technologies.

/pdf/peer-effects-in-the-diffusion-of-solar-photovoltaic-panels-32lorlyatt.pdf

Peer Effects in the Diffusion of Solar Photovoltaic Panels

This paper examines a market with asymmetric information where there are many signals available and where both the costs of signaling and the product value may depend on many privately known characteristics. Under a weak condition on the relationship between the marginal cost of increasing the signals and the product value, a separating set exists whereby the value of every seller's product is inferred from the seller's optimal choice of signals. The separating set constructed is Pareto dominant and corresponds to recently proposed equilibrium notions in signaling and screening models. Copyright 1987 by The Econometric Society.

Signalling with Many Signals

We present a structural model of how families decide who should care for elderly parents. We use data from the National Long-Term Care Survey to estimate and test the parameters of the model. Then we use the parameter estimates to simulate the effects of the existing long-term trends in terms of the common but untested explanations for them. Finally, we simulate the effects of alternative family bargaining rules on individual utility to measure the sensitivity of our results to the family decision-making assumptions we make.

Long-Term Care and Family Bargaining

Long-term care and family bargaining

Stackelberg versus Cournot oligopoly equilibrium

Governments often seek influence beyond their borders. One way is through what Thomas Schelling (1960, 1966) calls "brute force," taking direct physical control. Less extreme methods are to promise rewards for taking desired actions, or to threaten punishments for not carrying them out-"sanctions." Sanctions involve two parties, the sender and the target. (To help identify pronouns' antecedents, we consider a feminine sender and masculine target.) The sender's objective is to influence the target by threatening to impose some measure against him for acting contrary to her interest. Sanctions have long been important in international relations. Athens imposed a trade embargo against Megara, ultimately setting off the Peloponnesian War (431-404 BC). Sanctions are central to such international agreements as the United Nations Charter, the World Trade Organization, and the Montreal Protocol governing chlorofluorocarbons. U.S. law prescribes the use of sanctions in circumstances related, for example, to national security, human rights, intellectual property, and international trade.' Do sanctions actually achieve senders' objectives? A common claim is that they usually fail and are costly to senders. Recent U.S. legislation proposes to limit unilateral U.S. sanctions (except trade-related ones), on the grounds that they cost more than they are worth. History provides examples of sanctions that were costly and ineffectual, such as the League of Nations sanctions against the Italian occupation of Abyssinia, or U.S. sanctions against Cuba. United Nations sanctions against Iraq remain in place, having achieved less than full success, to say the least (see Gary Hufbauer et al., 1990). More systematic studies suggest that sanctions often do succeed, particularly when objectives are modest. Hufbauer et al. (1990) examine 116 episodes of sanctions with military or political objectives, deeming about one-third successful. Sanctions imposed under U.S. trade law have worked even better, about three-fourths of the time (see e.g., Sykes, 1992; Thomas Bayard and Kimberly A. Elliott, 1994; Elliott and J. David Richardson, 1997). Here we develop a simple framework to explain how sanctions can worl, and what is required for them to succeed. Our framework exploits advances in the theory of repeated games and bargaining under incomplete information. While a game-theorist would recognize the flavor of our results, the setting here is a fresh one.2 We find success more likely when the threatened measure costs the sender little relative to the gain from modifying the target's behavior, while the damage to the target is large relative to his cost of complying with the sender's will-results consistent with both intuition and empirical evidence (as well as with Adam Smith [1776 Book IV, Ch. I]). Moreover, a more patient sender is more likely to succeed, while the target's patience can work to the sender's disadvantage.3

Maxim Engers

Papers

Signalling with Many Signals

Long-Term Care and Family Bargaining

Long-term care and family bargaining

Stackelberg versus Cournot oligopoly equilibrium

Sanctions: Some simple analytics