1,721,016 research outputs found
Cost Padding in Regulated Markets with Demand Uncertainty
No full textThis paper presents a simple model of a non-competitive market with demand uncertainty in which firms can choose their technology of production. Technology is characterised by two parameters: capacity and flexibility. The first has a strong commitment value while flexibility is needed to face uncertainty. Lack of competition requires active regulation to ensure that the price is not set at excessive level. When choosing their technology, firms take into account not only the effects of this choice on the opponent(s) but also the effect on the regulated price. In this framework, and because of regulation, firms have an incentive to manipulate their costs (cost padding). This causes monopoly regulation aiming at improving allocative efficiency to be ineffective. Increasing the number of firms in the market may restore regulation effectiveness. The reason is that if demand is sufficiently volatile, then firms strategically choose flexible techniques and this effect dominates over the incentive to manipulate costs in order to escape regulation. In this case regulation is effective precisely because cost padding is hampered by firms’ non-cooperative behaviour
Capacity and Technology, a two-stage dynamic game. W.P. n.9 Dipartimento di Economia Pubblica, Universita' di Roma 'La Sapienza'.
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The Evolution of Cooperation: Robustness to Mistakes and Mutation. W.P. 94/26 European University Institute, Firenze.
No full textParental care, children's cognitive abilities and growth: the role of fathers
No full textHuman capital is a key determinant of economic growth. Parents’ involvement during childhood is a predictor of educa-tional attainment later in life. Thus, time devoted by parents to childcare is an important productive activity for society. This paper presents a model in which parental childcare is a key factor in determining children’s cognitive abilities. Parents’ must allocate their time between paid job and childcare. Because of diminishing return, the optimal allocation of parents’ time requires both parents to spend some time in childcare. Since a suboptimal allocation of time has impli-cations both for children’s cognitive abilities and for economic growth, our result has important policy implications
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