Maria Luisa Petit

R&D cooperation or competition?

Abstract The economic literature provides empirical evidence of the existence of technological cartels, such as research joint ventures or deliberate sharing of technological knowledge. Our aim is to answer to the questions: (i) is the creation of technological cartels beneficial from a social welfare point of view? and (ii) do the firms have private incentives to form such cartels? We depart from the approach adopted in the literature by considering a dynamic model and allowing for the possibility that the firms are asymmetric. The results show the importance of the degree of existing technological spillovers and stress the differences between the symmetric and asymmetric cases.

Technology sharing cartels and industrial structure

Abstract The effects of “technology sharing cartels” on the behavior of firms and industrial structure are analyzed. Unit production costs are assumed to decrease with experience, which at any given time is proportional to the total production accumulated until that time. The “learning by doing” process is examined in a context of a duopolistic market, modeled as an infinite horizon dynamic game, for which subgame perfect (feedback) Nash equilibria are sought. Both symmetric and asymmetric oligopolies are examined. Since the models are non-linear and intractable by analytical techniques, equilibria are computed by using a computational procedure based on a policy iteration method.

Cohabitation or forced marriage? A study of the costs of failing to coordinate fiscal and monetary policies

ConclusionsThe costs of uncoordinated fiscal and monetary policies involve more than just efficiency losses. Of course there will be the usual efficiency losses associated with noncooperative decision making and they have appeared here. But these are not the main costs. A lack of cooperation between the government and the central bank also imposes a policy conflict which would not otherwise exist. A lack of co-operation provides one player (the central bank) with the opportunity to block the policy options of the other (the government). Hence noncooperation can cost the government its freedom to choose its preferred policy option.These two costs, additional policy conflicts and the loss of policy choice, may be more important than the efficiency losses which are traditionally cited as the reason for cooperating. In any case, they will have important implications both for domestic policy design and for international policy making since central banks evidently find it easier to cooperate among themselves than they do with their own (national) fiscal authorities. Thus, an independent central bank may be necessary to guarantee financial discipline, but it will not be much help if it and the fiscal authorities then fail to coordinate their activities.Zusammenfassung“Kohabitation” oder Zwangsheirat? Eine Untersuchung der Kosten einer unterlassenen Koordination von Fiskal- und Geldpolitik. — In vielen Ländern existieren zwei Entscheidungsträger, die jeder für sich die Fiskal- und Geldpolitik betreiben, nämlich die Regierung und die Zentralbank. Sind die Entscheidungen dezentralisiert, dann kann dies den optimalen Tradeoff zwischen Inflation und Wachstum verändern. In diesem Aufsatz wird im Rahmen der dynamischen Spieltheorie in einem ökonometrischen Modell der italienischen Wirtschaft der effiziente Tradeoff zwischen Inflation und Wachstum geschätzt, um zu untersuchen, wie sich die politischen Spielräume unterscheiden, wenn die Entscheidungen entweder kooperativ oder nicht kooperativ getroffen werden. Es zeigt sich, daß die Ergebnisse im Fall von Kooperation besser sind als ohne Kooperation. Darüber hinaus wird, wenn es keine Kooperation gibt, die Spanne der Wahlmöglichkeiten verringert, die den Politikern zur Verfügung steht. Demnach sprechen nicht nur Effizienzgewinne, sondern auch andere Gründe dafür, die Fiskal- und Geldpolitik zu koordinieren.RésuméCohabitation ou marriage forcé? Une étude sur les coûts de l’absence d’une coordination des politiques fiscales et monétaires. — Dans beaucoup de pays ce sont deux institutions qui prennent les décisions et qui coexistent et règlent la politique fiscale et monétaire séparément. Le fait que les décisions sont prises d’une manière décentralisée peut changer l’arbitrage le plus favorable de l’inflation-output. Dans l’article on utilise la théorie dynamique des jeux pour calculer l’arbitrage efficace d’inflation-output dans un modèle économétrique de l’économie italienne pour examiner les différences entre les courbes des possibilités politiques qui résultent des décisions coopératives et non-coopératives. Les résultats montrent que les conséquences obtenues au cas de non-coopération sont inférieures à celles d’une coopération et imposent un conflit politique qui n’existe pas d’autrement. En outre, au cas de non-coopération le nombre d’actions politiques possibles est réduit. Par conséquent, il y a plus de raisons que seulement l’augmentation de l’efficacité pour le désir de coordonner les politiques fiscales et monétaires.ResumenCohabitación o casamíento forzoso? Un estudio de los costos de la falta de coordinatión de la política fiscal y monetaria. — En muchos paises dos instituciones ejecutivas, el gobierno y el banco central, coexisten y manejan la política fiscal y la monetaria separadamente. La toma de decisiones de manera decentralizada puede conducir a un cambio en la relación óptima entre inflatión y producto. En este trabajo se utilizan juegos diferenciales para calcular la relación eficiente entre inflación y producto dentro del marco de un modelo econométrico de tiempo continuo de la economía italiana, con el fin de examinar las diferencias en las fronteras de posibilidad de políticas derivadas de decisiones cooperativas y no cooperativas. Se demuestra que los resultados obtenidos en el caso de no cooperation son inferiores a los del caso cooperativo, y que además imponen un conflicto de política no existente en otros casos. Además, la gama de politicas a election de los que deaden es reducida bajo no cooperacion. Por ello, hay más razones para desear una coordination de politicas fiscales y monetarias que la que representan los beneficios derivados de la eficiencia.

The functional form of the aggregate import demand equation: Italy, 1960–1980

Abstract The authors investigate the functional form of the aggregate import demand equation in Italy by using the Box and Cox transformation and a non-linear full information maximum likelihood procedure instead of the two-step procedure usually followed.

Optimization in Continuous Time and Policy Design in the Italian Economy

After an introduction to the advantages of continuous time macroeconometric models, the authors briefly illustrate a macroeconometric model of the Italian economy specified as a system of 23 stochastic differential equations and show the application of optimal control techniques (based on Pontryagins maximum principle) to this model. They illustrate the results obtained and examine their economic implications, amongst which the possibility of obtaining a better macroeconomic performance by means of a different policy mix.

R&D and foreign direct investment with asymmetric spillovers

This paper analyzes how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, considering different sources of asymmetry such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We show that a better ability to manage knowledge flows incentivizes the firm to invest more in R&D. By introducing geographically bounded spillovers, we also find that one-way foreign direct investment (FDI) stimulates the multinational enterprise to raise its own R&D and that an FDI equilibrium is more likely to occur. Finally, spillovers localization leading to two-way FDI is welfare improving when compared with non-localized spillovers.

Learning by Doing and Technology Sharing in Asymmetric Duopolies

The existence of an experience curve for the firm has theoretical foundation in Arrow’s pioneering work (Arrow, 1962). The study of the learning-curve effect was initiated, however, almost thirty years earlier by Wright (1936). It was further developed by Alchian (1959), Hirschleifer (1962), Hirschmann (1964), and by an important work by the Boston Consulting Group (1972). The learning-curve phenomenon appears to be related, in the first place, to the introduction of new products. It has been observed that a doubling in accumulated production of a new product can result in a decline of unit costs by a factor of 10 to 50 percent of their initial level (Teng and Thompson, 1983). Empirical documentation concerning the learning curve can be found in several papers that appeared in the period from the early sixties to more recent years (e.g., Lundberg, 1961; Alchian, 1963; Hollander 1965; Zimmerman, 1982; Lieberman, 1984; Alder and Clark, 1991). This literature considers cost reduction as an outcome of experience and cumulative output is the variable commonly chosen to represent that experience. The revival of interest in the study of the learning curve can be attributed to some important recent contributions that suggest the existence of a link between learning by firms and incremental innovations in both production processes and products (see in particular Rosenberg, 1976; Nelson and Winter, 1982).

The Strategic Timing of R&D Agreements

We present a model of endogenous formation of R&D agreements among firms in which also the timing of R&D investment is made endogenous. The purpose is to bridge two usually separate streams of literature, the noncooperative formation of R&D alliances and the endogenous timing literature. Our approach allows to consider the formation of R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable R&D agreement due to the strong incentive to invest noncooperatively as leaders. In such a case, to be stable a R&D agreement requires that the joint investment occurs at the initial stage, avoiding any delay. When instead R&D spillover rates are sufficiently high, the cooperation in R&D constitutes a profitable option, although firms also possess the incentive to sequence their investment over time. Finally, when spillovers are asymmetric and the knowledge leaks mainly from the leader to the follower, to invest as follower becomes extremely profitable, making R&D alliances hard to sustain unless firms strategically delay their joint investment in R&D.

A Note on the Costs of Uncoordinated Fiscal and Monetary Policies

By using optimal control methods, it is possible to identify the best inflation-output combinations which are compatible with a given empirical model. In general, these tradeoffs are calculated on the assumption that optimal policy decisions are centralised; i.e. that the political institutions concerned with planning act in complete agreement. However, this is not the case in many countries where two decision making institutions, the government and the central bank, can co-exist, and manage fiscal and monetary policy separately.

The Optimal Degree of Wage-Indexation in the Italian Economy: Rerunning History by Dynamic Optimization

The use of continuous time dynamic models in economics has important advantages not only from the point of view of pure theory (as pioneered by Richard Goodwin) but also from the point of view of policy applications. One decisive advantage from the point of view of economic policy is the possibility of obtaining information from the model on the optimal paths of instruments and targets at each point in time and not only at discrete intervals.