Yoshiyasu Ono

Helping Minor Firms Reduces Welfare

The effect on national welfare of uneven technical progress and eli mination of a firm is analyzed under the existence of a Cournot oligopolistic sector. An increase in the share of an inefficient firm, owing to its innovations, results in a shift of production from more efficient firms to the inefficient firm, causing a less efficie nt allocation of production. It may decrease welfare even though the innovation itself is beneficial. Conversely, policies keeping ineffic ient firms from innovations or eliminating them may increase welfare, though they make the market structure more oligopolistic. Copyright 1988 by Royal Economic Society.

Tariffs, Quotas, and Market Structure

This paper examines the effects of tariffs and quotas on the pricing pattern of producers in the case of duopoly by a domestic monopolist and a foreign monopolist. It is pointed out that tariffs and quotas may induce completely different pricing patterns in the two producers. Under a quota, it is always profitable for the home producer to be a price leader and for the foreign producer to be a follower, whereas under a tariff either producer may become a leader. It is also proved that, whatever leader-follower relation is chosen under a tariff, a quota always bring about a higher domestic price than the tariff as long as both permit the same amount of imports.

A Reinterpretation of Chapter 17 of Keynes's General Theory: Effective Demand Shortage Under Dynamic Optimization

This article is an attempt to formalize Chapter 17 of Keyness General Theory using a continuous dynamic optimization model with perfect foresight. I present two subjective interest rates: the time preference rate and the liquidity premium that, respectively, govern the consumption-saving and portfolio decisions. Under optimal household behavior, they are equalized to the market rate of interest. In the monetary economy described by Keynes, however, the equality can be inconsistent with the condition of market equilibrium, in which case persistent stagnation occurs. A new analytic method based on dynamic optimization is proposed as an alternative to IS-LM analysis. Copyright 2001 by American Economic Association.

The Role of Free Entry in an Oligopolistic Heckscher-Ohlin Model

Retaining the basic properties of the Heckscher-Ohlin trade model, namely, free entry and exit, fully integrated international commodity markets, and the same number of sectors with that of factors, the authors develop a two-country model with Cournot oligopoly. In this economy, factor price equalization and the standard Heckscher-Ohlin theorem on comparative advantage hold. Between two countries which are identical except for size, however, autarkic prices are different even though the level of trade is zero under the free-trade regime. Nevertheless, free trade reduces the oligopoly price and increases welfare. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Trade and Industrial Policy under International Oligopoly

The existence of firms with different levels of efficiency within a country plays an important role in this in-depth analysis of industrial and trade policies in a multi-country trade-theoretic framework. Sajal Lahiri and Yoshiyasu Ono examine various industrial policies, R&D subsidies and trade policies under conditions of imperfect competition in a product market created by the presence of Cournot oligopolistic interdependence in production. Trade is defined broadly to include trade in commodity as well as trade in capital, specifically foreign direct investment. While the first part of the book focuses on commodity trade and assumes full employment, the latter considers foreign direct investment and assumes the presence of unemployment. Given the importance of industrial policies and the prevalence of imperfect competition, together with ongoing attention to theoretical issues concerning industrial economics, this research will excite interest amongst researchers, advanced students and policy makers in this field.

Macroeconomic Dynamics in a Multi-country Economy: A Dynamic Optimization Approach

Using a multicountry model with perfect-foresight dynamic optimization by infinitely-lived households, the authors analyze the dynamics of macroeconomic nonmonetary and monetary variables. The authors show that the most patient country initially accumulates foreign debt but eventually decumulates this debt and becomes a creditor. It monotonically increases its consumption and experiences monotonic price and exchange-rate appreciation. The moderately-patient country initially accumulates foreign assets but eventually decumulates them, and becomes a debtor. Its consumption also follows a humped path. The least patient country monotonically decumulates foreign assets, lowers its consumption, and experiences rising inflation and exchange-rate depreciation. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Tariffs vs. quotas under duopoly of heterogeneous goods

Abstract This paper analyzes a model of duopoly with heterogeneous goods where behavior patterns are endogenously determined by producers. It is shown that the source of non-equivalence of tariffs and quotas is not the monopolistic behavior of the domestic producer over consumers, but a certain kind of his behavior against the foreign producers. This result is then extended to the cases of a general Nash-type oligopoly and monopolistic competition. The paper also examines how the behavior patterns of the producers are affected by tariffs and quotas and proves non-equivalence of tariffs and quotas in the duopoly situation where the pricing behavior of the producers is endogenously determined by trade policies.

Asymmetric Oligopoly, International Trade, and Welfare: Synthesis

This paper analyzes the relationship between market shares and welfare under the assumption of Cournot-oligopolistic interdependence in production. The model is general enough to deal with multiple countries, oligopolists with different levels of marginal costs within each country, and any distribution of world demand across countries. It is found that the elimination of a “minor” firm harms the country if the countrys total production is “very little.” However, such a policy always benefits the country if it exports the commodity. The welfare effect of production subsidies and the case of foreign ownership of firms are also discussed.

R&D Subsidies Under Asymmetric Duopoly: A Note

This paper analyses the question of optimum R&D subsidies in the context of a two-stage asymmetric Cournot duopoly model with endogenous R&D. For the special case of symmetric duopoly, whether the firms should be subsidized or taxed in their R&D activities crucially depends on the concavity/convexity property of the demand function. It is also shown that a firm with some initial cost advantage should be subsidized in its R&D activities and a firm without should be taxed. In this way, we obtain policy implications that cast doubts on the universal applicability of competition policies. JEL Classification Numbers: L13, L52, H25.

International Asymmetry in Business Activity and Appreciation of a Stagnant Country's Currency

This paper develops a two-country, two-commodity continuous-time dynamic optimization model that accommodates a liquidity trap and persistent unemployment. It investigates a theoretical possibility of international asymmetry in business activity and a stagnant countrys currency appreciation, which has been the common experience of Japan and the USA after Japans total capital liberalization. It is found that if the marginal utility of consumption relative to that of liquidity exogenously declines in a country, its current account improves and the home currency appreciates. Consequently, home products lose competitiveness, causing home employment to decrease and foreign employment to increase.