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Strategic
Technology Adoption and Market Dynamics as Option Games
--Flavia
Cortelezzi and Giovanni Villani
The
aim of this paper is to analyze the equilibrium strategies
of two firms investing in a new technology, when the probability
of successful implementation is uncertain and market shares
are asymmetric. In particular, this paper considers three
key features of a new technological adoption. First, it
is, at least partially irreversible. Second, once realized,
there is uncertainty about the probability of a successful
implementation. Third, the profit flow generated by such
an investment is subject to uncertainty according to the
evolution of demand function. Using the method of option
pricing theory, it is shown that two types of equilibria
exist and derive critical levels of parameters, separating
the regions in which they prevail. Moreover, it was found
that the interaction of preemption and uncertainty can actually
hasten, rather than delay investment, contrary to the usual
presumption. Finally, the model is solved for a sequential
monopolist, as a benchmark case to discuss the implications
of optimal exercise strategies and show that, in some cases,
it may be desirable.
©
2008 IUP . All Rights Reserved.
Markup
and Market Power in the Malaysian Manufacturing Industries
--Azman
H, Aznita Samsi, Law Siong Hook and Norashidah Mohamed Noor
This
article examines the market power in 3-digit Malaysian manufacturing
industries, using cross-sectional data. Measure of market
power is one of the primary concerns of industrial organization
economics, because it can provide valuable information for
the design of public policy towards monopoly and anti-competitive
parties. Markup ratio of price over marginal cost is an
indicator for assessing the degree of market power. Hall's
model was applied to document the disparity between price
and marginal cost. The results indicated that the Malaysian
manufacturing industries at 3-digit level have market power,
and are thus in need of a competitive policy to check the
abuse of market power.
©
2008 IUP . All Rights Reserved.
An
Empirical Analysis of Profitability Determinants in Indian
Commercial Banks During Post Reform Period
--Siva
Reddy Kalluru and Sham Bhat K
This
paper examines profitability determinants in Indian commercial
banks by employing fixed and random effects models for an
unbalanced panel data of 87 commercial banks for the period
1992-2006. Two alternative measures of bank profitability
such as Returns on Assets (ROA) and Returns on Capital (ROC)
are used. The empirical results reveal that the profitability
of banks was affected not only by banks' own characteristics
but also by industry structural variables and macroeconomic
variables. Bank ownership and political parties in power
also play a vital role in determining bank profitability
in India. However, the determinants of bank profitability
vary significantly across the banks groups.
©
2008 IUP . All Rights Reserved.
Productivity
Performance of Selected Capital-Intensive and Labor-Intensive
Industries in India During Reform Period: An Empirical Analysis
--Manjappa
D H and Mahesha M
This
paper examines the Total Factor Productivity (TFP) growth
in the Indian manufacturing sector. The TFP growth is estimated
by applying ratio form of Cobb-Douglas (C-D) production
on the panel data of 10 manufacturing industries by classifying
them into capital-intensive and labor-intensive industries
for the period 1994 to 2004. Our investigation reveals that
four out of five industries in capital-intensive segment
have shown productivity growth during the sample period,
while one has recorded no change. A somewhat contrasting
picture is observed for labor-intensive sector, where productivity
decline is statistically significant in three industries
and negative but not significant in two other. The study
also reveals that capital-intensive industries seem to be
doing better than their counterparts during the reform period.
Therefore, the need to adopt new technology and attract
Foreign Direct Investment (FDI) is very essential for productivity
improvement in labor-intensive industries in India.
©
2008 IUP . All Rights Reserved.
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