We examine whether an economy can have a bad (small or no formal sector, high taxes) as well as a good (small or no informal sector, low taxes) equilibrium. When the government maximizes instantaneous formal sector welfare, this can occur if the elasticity of average to marginal cost for the...

This paper compares emissions trading based on a cap on total emissions (permit trading) and on relative standards per unit of output (credit trading). Two types of market structure are considered: perfect competition and Cournot oligopoly. The e?ect of combining the two schemes is also...

We examine an incentive scheme for a group of agents, where all agents are rewarded if the group meets its target. If the group does not meet its target, only the agents that meet their individual target are rewarded. In environmental policy, the EU burden sharing agreement and the UK Climate...

We provide a theoretical justification for bi-sourcing, which refers to the situation where a final goods producer buys an input from an outside supplier and also produces it in-house. Bi-sourcing occurs if the marginal cost of producing the input in-house is higher than the marginal cost of...

We consider strategic government policies on the exports of final goods and on the input production when the inputs are non-tradable and produced by the foreign firms. If the policies consist of only per-unit tax/subsidies either on the final goods or on the inputs, it is optimal for the...

Significant amount of vertical technology transfer occurs between developed and developing country firms, yet the literature on intellectual property rights did not pay much attention to this aspect. We show that whether or not the incumbent and the entrant final goods producers are from the...

Considering Cournot competition, this note shows that, if the firms differ in labor productivities, the equilibrium wage rates under a centralized labor union are not independent of the number of firms and product differentiation if the labor union charges a uniform wage rate. However, if the...

We show the incentive for divisionalization by a monopolist producer. In contrast to the previous literature, where divisionalization occurs for product market advantage, we show that divisionalization occurs if it provides strategic advantage in the labor market. With unionized labor market, we...

In a successive Cournot oligopoly, we show the welfare effects of entry in the final goods market with no scale economies but with cost difference between the firms. If the input market is very concentrated, entry in the final goods market always increases welfare. If the input market is...

Common wisdom suggests that entry reduces profits of the incumbent firms. On the contrary, we show that if the incumbents differ in marginal costs and the entrants behave like Stackelberg followers, entry may benefit the incumbents who are relatively cost efficient while it always hurts the cost...