D21 - Firm Behavior: TheoryReturn

This paper analyses the monopolist's production and pricing decisions on two vertically diffe-rentiated versions of a product in the presence of network externality. We show that offering only the higher-quality version of the product is the optimal strategy when negative externality exists and the utility from joint purchase is not large. If both versions are provided, the monopolist will charge a monopoly price for each version to induce separate purchases if these two versions are too close substitutes. Moreover, in the equilibrium with joint purchases, with an increase in externality or the utility from a joint purchase, the prices of both versions increase. In addition, with an in-crease in network externality, the equilibrium region for separate purchases first increases and then decreases.

Much has been written on the distinction between vertical and horizontal foreign direct investment. However, most of the empirical literature relies on indirect and aggregated measures only. The aim of this paper is to help fill this gap by examining the differences between German affiliates in the Czech Republic and their mother companies in Germany on the basis of direct evidence on factor requirements. Using a cluster analysis on firm-level data from the unique ReLOC survey, we identify four main groups of firms that partition the sample by broad sectoral lines and by technological, educational and skill intensity of their operations within each of them. More detailed analysis of the clustering reveals that the vertical model dominates in manufacturing, while the horizontal model of investment prevails in the service sector.

Traditionally, enforcement of consumer protection laws meant to provide quality assurance of goods and services was considered a responsibility of the state in its various guises. Unfortunately, enforcement is an expensive, and hence particularly problematic proposition in transition economies that have many competing demands on their very scarce resources. An alternative mode of enforcement is through reputation. Yet for reputation to be able to fulfill this disciplining role, a high degree of information flow, or transparency, is imperative. Transparency, of course, is not something that transition economies typically excel in. In this article we discuss a third form of enforcement that relies much less, or not at all, on the state, and that relies on the market only indirectly: Certification agencies force their members to reveal their (good) type through costly signals that can be ""engineered"" to induce a separating equilibrium. We discuss the viability of this system of enforcement in an environment (namely, fundraising) where state and market have failed to deliver a satisfying degree of quality assurance.

This paper works with a broad data sample of Czech voucher-privatized firms. The period of 1996 - 1999 enables to capture true post-privatization effects. It analyzes the effect of ownership structure on corporate performance and firm's characteristics. Results show that overall ownership concentration cannot be associated with improving corporate performance. Further, particular types of domestic owners do not affect firm's performance but they do affect firm's characteristics. Effect of foreign owners is limited. No clear or unambiguous effect of changes in ownership structure on corporate performance emerged.

This paper discusses the determinants of export propensity of foreign firms in the Slovenian manufacturing sector relative to domestic firms. Using panel framework we show that superior export propensity of foreign firms is significant due to the foreign ownership and that differences in fundamental operational characteristics between domestic and foreign firms significantly affect their export propensity.