Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp .pdf Non-Technical SummaryNumerous empirical studies at different levels of aggregation demonstrate the important role of information and communication technologies (ICT) for economic performance. As general purpose technologies ICT enable firms to reshape their business processes and to improve their products and services. Firms' innovation activity in turn increases labour productivity thereby entailing growth and competitiveness. Policy makers and industry representatives denote the availability of an efficient broadband Internet infrastructure to be essential in order to reap the potential benefits of ICT.This paper provides empirical evidence on the causal impact of broadband Internet on firm performance using a sample of German manufacturing and services firms. Firm performance is measured in terms of labour productivity and realised product and process innovation. The analysis refers to the early phase of DSL expansion in Germany from 2001 to 2003, when roughly 60 percent of the German firms already used broadband Internet. Identification relies on instrumental variable estimation taking advantage of information on the availability of DSL broadband at the postal code level. The results show that broadband Internet has no impact on firms' labour productivity whereas it exhibits a positive and significant impact on their innovation activity. Thus, firms that used broadband Internet in the early phase of DSL expansion where more likely to reshape their business processes and to bring new or improved products and services to the market. Das Wichtigste in Kürze

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp .pdf Non-Technical SummaryNumerous empirical studies at different levels of aggregation demonstrate the important role of information and communication technologies (ICT) for economic performance. As general purpose technologies ICT enable firms to reshape their business processes and to improve their products and services. Firms' innovation activity in turn increases labour productivity thereby entailing growth and competitiveness. Policy makers and industry representatives denote the availability of an efficient broadband Internet infrastructure to be essential in order to reap the potential benefits of ICT.This paper provides empirical evidence on the causal impact of broadband Internet on firm performance using a sample of German manufacturing and services firms. Firm performance is measured in terms of labour productivity and realised product and process innovation. The analysis refers to the early phase of DSL expansion in Germany from 2001 to 2003, when roughly 60 percent of the German firms already used broadband Internet. Identification relies on instrumental variable estimation taking advantage of information on the availability of DSL broadband at the postal code level. The results show that broadband Internet has no impact on firms' labour productivity whereas it exhibits a positive and significant impact on their innovation activity. Thus, firms that used broadband Internet in the early phase of DSL expansion where more likely to reshape their business processes and to bring new or improved products and services to the market. Das Wichtigste in Kürze

This paper analyzes several important aspects of price behavior using disaggregated weekly data on prices of supermarket products in Colombia between 1991 and 1994. The analysis shows that despite high and persistent rates of inflation in the economy, price quotations persist on average for two months. The large proportion of observations for which stores opt not to change prices highlight the importance of menu costs, even in an economy accustomed to persistent double-digit inflation. Despite the seemingly high levels of rigidity, the degree of real price erosion found before prices change are lower than those found in other inflationary economies. Price declines are not uncommon, and downward rigidity does not seem to be an issue in the Colombian inflationary environment. Aggregate price changes are also found to exert an important effect on relative price variation at the aggregate and commodity level. _______________________________ * We benefited from comments received at presentations in Banco de la República and at the 1999 Western Economic Association meetings in San Diego. We are grateful for excellent research assistance from 1 Studies that look at micro-level data to test the relation between inflation and the variability of relative prices across different goods include Lach and Tsiddon (1992), Tommasi (1993), Domberger (1987 and Van Hoomisen (1988). Studies that look at micro pricing setting behavior include Warner and Barsky

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp06093.pdf Non-technical summaryAn industry exhibits network externalities when the benefit that consumers enjoy from purchasing one or several of its goods depends on the number of other consumers that use the same and/or compatible products. For the firms in those sectors (e.g. telecommunications, consumer electronics, operating systems, etc.), the presence of network externalities implies that the attractiveness of their products is a function of their quality-adjusted prices and the potential benefit attached to their expected network sizes.Several studies have shown how pricing considerations, as well as compatibility, entry and investment decisions are affected by the presence of network externalities. Moreover, due to the presence of these externalities, firms in network industries might even follow very different rules from those observed in traditional industries. While the producer of a new product in a conventional industry tends to place it on the market early, to differentiate the good as much as possible, to protect it from imitation and to charge high prices, successful producers of network goods have often done the opposite.This paper analyzes how network externalities influence industry Research and Development (R&D) incentives when two network technologies compete. The paper focuses on the levels of R&D investments, the social efficiency of those efforts and the role of networks' compatibility.The paper presents four main results. First, for low cost of innovation entry does not occur at all and for high cost of innovation, entry occurs with positive probability. Low cost of innovation implies that through investments the incumbent firm is able to preempt the entrant. Second, when entry is possible, the incumbent invests always more than the entrant and, therefore, there is a high probability that the incumbent maintains its monopoly position. This result implies that, even though the incumbent has an advantage to keep monopolizing the market, he is forced to innovate given the threat of entry. Third, from a welfare perspective, the incumbent invests too little and the entrant invests too much given the existence of locked-in consumers. These results are solely due to the presence of network externalities. Fourth, by choosing to produce compatible products, firms do not necessarily reduce the R&D competition intensity as has been suggested in the literature....