We consider the learning curve in an industry with free entry and exit, and price-taking firms. A unique equilibrium exists if the fixed cost is positive. While equilibrium profits are zero, mature firms earn rents on their learning, and, if costs are convex, no firm can profitably enter after...

The effect of trade quotas on firms' incentive to invest in cost-reducing R&D is studied in a two-stage price-setting duopoly game. A domestic and foreign firm first choose R&D levels and then set the prices of their differentiated products in the domestic market. With a quota imposed at, or...

We examine information provision as a public policy instrument when products generate damages to consumers as well as environmental externalities. We show that information provision dominates taxation in terms of welfare, if information can be provided at low cost. This is because a uniform tax...

This Paper studies the inter-temporal problem of a monopolistic firm that engages in productivity-enhancing innovations to reduce its labour costs. If the level of wages is sufficiently low, the firm's rate of productivity growth approaches the rate of wage growth and eventually the firm reaches...

This paper studies sales promotions through coupons in an oligopoly under imperfect price information. Sellers can distribute either ordinary coupons, or coupon (price) advertising, or both types of coupons, at distant locations to attract consumers from their rivals' markets. A unique symmetric...

This paper studies the intertemporal problem of a monopolistic firm that engages in productivity enhancing innovations to reduce its labor costs. If the level of wages is sufficiently low, the firm's rate of productivity growth approaches the rate of wage growth and eventually the firm reaches a...

We describe the evolution of productivity growth in a competitive industry. The exogenous wage rate determines the firms' engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally stable. In the steady state, the...

We demonstrate the possibility of shake-out of firms and emergence of interfirm heterogeneity along the (socially optimal) dynamic equilibrium path of a competitive industry with free entry and exit, even when there is no uncertainty and all firms are ex ante identical with perfect foresight....