null

The present paper examines the welfare effects of a dynamic Research and Development (R&D) game at the firm level in a two-country, two-firm, intra-industry trade context. Economists do not use the trade balance as a measure of economic welfare, but it is often used in the public arena. The primary result of the paper is that the dynamic time path of social surplus and the trade balance do not track well together. This paper suggests that economists thinking about dynamic R&D games will have to defend imports as having a positive effect on social surplus regardless of trade balance effects.

Consider a dynamic intra-industry trade model with two goods, two firms, and two countries in which product "reliability" is determined by R&D paths. This paper focuses on how a change in competitive conditions in terms of manufacturing costs affects the firms’ decision about optimal reliability. Briefly, the main result of the paper is that when the manufacturing costs are similar and closely track each other, a lower manufacturing cost prompts both firms to increase their R&D and product reliability. But when the manufacturing costs are not similar, either before or after the change, the results are quite different. A profit maximizing firm will sometimes take advantage of a reduction in its own manufacturing cost by actually doing less R&D—-and thus producing a less reliable product.

The paper introduces an innovative graph for teaching bilateral exchange rates. The currency quantities are on the axes, and the exchange rate is the ratio between them, i. e., the slope of a ray from the origin. Behavior is captured by "currency offer curves." The paper uses the model to address the issues surrounding China's export-led growth strategy, i. e., its policy of undervaluing the yuan.

The paper considers a dynamic two-firm model of intra-industry trade in which the firms compete for the same market on the basis of product reliability. By assumption, the home firm always has the reliability cost advantage but it may or may not have the manufacturing cost advantage. The results suggest that reliability improvement always helps customers in that they pay a lower full quality price. Comparing the home firm with the foreign firm, metrics such as price, sales, profit margins, and variable profits depend on the relative costs, with the low cost firm performing better. Finally, although this is not the common outcome, the paper suggests that it is possible for the reliability cost advantages gained by R&D expenditures to overcome manufacturing cost disadvantages.

This paper presents a GDP demand-side model that treats changes in GDP, the price level, money supply, and many other parameters, as comparative static exercises. The major conclusions are that (1) changes in stock prices may substitute for changes in GDP when the economy experiences shocks, (2) many Monday morning quarterback analyses of stock prices are flawed, and (3) normally stock prices increase because GDP increases.

Abstract  A “micro-micro” consumer problem of gasoline purchases is examined using daily price data. Comparing the optimizing consumer with one who buys gasoline at random, the paper finds optimizers save about 4% of their annual gasoline bill. The paper also provides some evidence about the costs of non-optimal gasoline buying strategies.

The goal of the present paper is to explore the optimal subsidy of R&D by both the foreign and home countries in a model based on Herguera and Lutz (The World Economy, 1998). While they assume the home country subsidy is designed to help the home country leapfrog the foreign, we assume countries choose subsidies to maximize social surplus. This paper suggests that while leapfrogging is perhaps not the goal a country should usually pursue, a positive subsidy is always optimal in the home country and sometimes in the foreign country.

The goal of the present paper is to explore the optimal subsidy of R&D by both the foreign and home countries in a model based on Herguera and Lutz (The World Economy, 1998). While they assume the home country subsidy is designed to help the home country leapfrog the foreign, we assume countries choose subsidies to maximize social surplus. This paper suggests that while leapfrogging is perhaps not the goal a country should usually pursue, a positive subsidy is always optimal in the home country and sometimes in the foreign country.

Data was collected from the U.S. eBay site for the categories of animation art and Stei teddy bears. It was found that U.S. consumers bought items from sellers in 13 countries whereas slightly over 20% of sellers were not in the U.S. In general the outcomes of the auctions (nal price, number of bids, and whether the item sold or not) were not aected by the country of the seller. For Stei teddy bears, auctions by sellers from Germany and Austria had more bids (as compared to U.S. sellers) and for Germany there was also an increase in the probability that an item sold. On the other hand, for animation art, Hong Kong sellers were penalized in the sense that there were fewer bids on their auctions and the probability of an item being sold was reduced. They were not penalized however in the nal auction price. Presented at 13th International Conference, Vaasa, Finland, May 2003