Under what circumstances would Adam Smith's statement "the division of labour is limited by the extent of the market" be valid. This paper shows the validity of Smith's law depends not on increasing returns to scale, but on the effect of scale on economies of scope (i.e. cost complementarities...

This paper examines an industry where output is determined collusively, with output shares allocated on the basis of relative capacity. Capacity is chosen non-cooperatively, providing an apparently clear incentive for firms to install excess capacity. Although excess capacity equilibria (ECE)...

Efficient second best pricing is examined for a public enterprise facing two distortions: a profit constraint and imperfect competition. We suggest a measure of downstream industry distortion for efficient pricing. The pricing rule constrains two elements: the shadow value of public profit and...

This paper examines the incentives for using tariffs to extract monopoly rents from imperfectly competitive foreign firms. Using a simple Stackelberg entry deterrence model, the rent-extracting policy is attractive if the foreign firm faces a threat of domestic entry. Despite transportation...

This paper presents a theory of government intervention which provides an explanation for "industrial strategy" policies such as R&D or export subsidies in imperfectly competitive international markets. Domestic net welfare improves by capturing a greater share of the output of rent earning...

When R&D takes place before the associated output is produced, imperfectly competitive firms may use R&D for strategic purposes rather than to simply minimize costs. Using a symmetric two-stage Nash duopoly model we show that such strategic use of R&D increases total R&D undertaken, increases...

We provide a theoretical framework to address the historical debate about the role of banks in industrialisation. We introduce banks into a model of the big push to examine under what circumstances profit-motivated banks would engage in coordination of investments. We show that banks may act as...