Economics - Research Publications

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    Economic progress and skill obsolescence with network effects
    Kennedy, PW ; King, IP (Springer Science and Business Media LLC, 2005-07)
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    Residual wage disparity and coordination unemployment
    Julien, B ; Kennes, J ; King, I (WILEY, 2006-08)
    How much of residual wage dispersion can be explained by an absence of coordination among firms? To answer, we construct a dynamic directed search model with identical workers where firms can create high‐ or low‐productivity jobs and are uncoordinated in their offers to workers, calibrated to the U.S. economy. Workers can exploit ex post opportunities once approached by firms, and can conduct on‐the‐job search. The stationary equilibrium wage distribution is hump‐shaped, skewed significantly to the right, and, with baseline parameters, generates residual dispersion statistics 75–90% of those found empirically. However, the model underestimates the average duration of unemployment.
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    Vertical integration in the presence of upstream competition
    de Fontenay, CC ; Gans, JS (WILEY, 2005-09-01)
    We analyze vertical integration in the case of upstream competition andcompare outcomes to the case where upstream assets are owned by a single agent(i.e., upstream monopoly). In so doing, we make two contributions to themodelling of strategic vertical integration. First, we base industry structure –namely, the ownership of assets – firmly within the property rights approach tofirm boundaries. Second, we model the potential multilateral negotiations using afully specified, non-cooperative bargaining model designed to easily compareoutcomes achieved under upstream competition and monopoly. Given this, wedemonstrate that vertical integration can alter the joint payoff of integratingparties in ex post bargaining; however, this bargaining effect is stronger for firmsintegrating under upstream competition than upstream monopoly. We alsoconsider the potential for integration to internalize competitive externalities in amanner that cannot be achieved under non-integration; i.e., by favouring internalover external supply. We demonstrate that ex post monopolization is more likelyto occur when there is an upstream monopoly than when there is upstreamcompetition. Our general conclusion is that the simple intuition that the presenceof upstream competition can mitigate and reduce the incentives for sociallyundesirable vertical integration is misplaced and, depending upon the strength ofdownstream competition (i.e., product differentiation), the opposite could easilybe the case.
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