directed matching and monetary exchange we develop a model of monetary exchange where as in the random matching literature agents trade bilaterally and not through centralized markets rather than assuming they match exogenously and at random however we determine who meets whom as part of the equilibrium we show how to formalize this process of directed matching in dynamic models with double coincidence problems and present several examples and applications that illustrate how the approach can be used in monetary theory some of our results are similar to those in the random matching literature others differ significantly

barriers to entry and competitive behavior evidence from reforms of cable franchising regulations between 2005 and 2008 19 of the 50 states of the u s reformed the franchising process for cable television significantly easing entry into local markets using a differencein differences approach that exploits the staggered introduction of reforms we find that prices for basic service declined systematically by about 5 5 to 6 8 percent following the reforms but we find no statistically significant effect on average price for the more popular expanded basic service we also find that the reforms led to increased actual entry in reformed states by about 11 6 relative to non reformed states our analysis shows that the decline in price for basic service holds for markets that did not experience actual entry consistent with limit pricing by incumbents to control for potential state level shocks correlated with the reforms we undertake a sample split test examining changes in local markets which faced a greater threat of entry because they were close to a prominent second entrant we find larger declines in prices for both basic and expanded basic services in these markets our results are consistent with limit pricing models that predict incumbents respond to increased threat of entry and suggest that the reforms facilitated entry and modestly benefitted consumers in reformed states

the impact of the 1992 cable act on household demand and welfare i measure the benefit to households of the 1992 cable act in light of strategic responses by cable systems to the regulations mandated by the act a discrete choice differentiatedproduct model of household demand for all offered cable television services forms the basis of the analysis aggregation over households and service combinations to the level of the data permits estimation on a cross section of cable markets from before and after the act the results indicate that while the regulations mandated price reductions of 10 17 for cable services observed system responses yielded no change in household welfare post act changes in cable prices are responsible for most of the difference

market power of local cable television franchises evidence from the effects of deregulation the 1989 cable act eliminated most price regulation of cable television operators including the right of municipalities to enforce price terms in franchise agreements deregulation was justified at least partially by the contention that competition from other entertainment media eliminated any market power of cable franchises we examine the value at sale of existing cable systems before and after deregulation assuming that this value represents the expected present value of future profits deregulation had the predicted negligible effect on profits in cities with significant broadcast competition however profits appear to have increased in areas where the competition from broadcast television was less severe we explore several explanations for this increase and conclude that significant market power is the most plausible explanation

efficient resource allocation on the basis of priorities many institutions allocate resources by non market mechanisms based on priorities in this paper we introduce a model of resource allocation on the basis of priorities and address the following questions is it possible to allocate resources on the basis of any priority structure if yes when can we do this pareto efficiently without creating incentives for manipulation and consistently across different groups of agents and resource levels we adopt a basic indivisible objects model with a finite number of object types and a finite quota of goods of each type some interesting examples are the determination of access to education allocation of graduate houses offices or tasks agents are assumed to have strict preferences over object types and remaining unassigned an assignment is an allocation of the objects to the agents such that every agent receives at most one object a rule associates an assignment to each preference profile we formalize a priority structure to be a collection of strict priority rankings of individuals indexed by the object types where i a j would be read as i has higher priority for object a than j we assume that the priority structure is exogenously fixed and allow the preferences of the agents to vary a rule is said to violate a priority of i for a if there is a preference profile under which i envies j who is assigned a and publication information econometrica 70 6 november 2002 2489 2497 the copyright to this article is held by the econometric society http www econometricsociety org it may be downloaded printed and reproduced only for personal or classroom use absolutely no downloading or copying may be done for or on behalf of any for profit commercial firm or other commercial purpose without the explicit permission of the econometric society for this purpose contact julie p gordon executive director of the society at jpg northwestern edu i would like to thank faruk gul wolfgang pesendorfer the co editor the four anonymous referees and the participants of the micro theory lunch seminar in princeton university for their comments and suggestions

strategic buyers and exclusionary contracts this paper characterizes equilibrium exclusionary contracts between buyers an incumbent firm and a potential entrant when buyers can either vertically integrate or contract with the outside entrant in this setting exclusionary contracts are generally shown to be efficient and to deter inefficient entry that would otherwise occur with multiple unorganized buyers equilibrium contracts are shown to take a divide and conquer form and in some cases to deter some efficient entry in such cases efficient contracting can be restored by a policy that prohibits price discrimination and gives agents free reign to sign exclusionary agreements copyright 1994 by american economic association

a qualitative study of managerial challenges facing small business geographic expansion abstract geographic expansion is a common growth strategy used by small entrepreneurial firms yet despite the importance of geographic expansion as a growth strategy it is a neglected area of small business research to date research in the area of small business growth has focused on broad issues such as the common obstacles to firm growth and the relationship between firm growth and firm profitability whereas this literature is suggestive it does not provide specific prescriptive advice to small business managers pursuing geographic expansion as a growth strategy as a first step in generating prescriptive advice in this area this study examined the managerial challenges that faced one small firm during the early stages of its efforts to expand geographically the subject organization referred to as the local advertising company lac operated in a single location from 1968 to 1990 as a means to initiate firm growth the owners of the company opened eight new locations in 1991 and eight more in 1992 however problems ensued this study used a qualitative research methodology to conduct an assessment of the managerial challenges facing the lac during its geographic expansion effort seventeen key employees of lac were interviewed for the study the qualitative case study methodology used provided an opportunity to gather in depth information from informants regarding their individual assessment of the managerial challenges encountered by lac during its geographic expansion collectively the respondents identified a number of specific management issues that became problematic during lac s geographic expansion effort through a content analysis technique these issues were organized into 15 thematic categories including training recruitment and selection the relationship between the field staff and the original owners and 12 others each of these categories represents the separate managerial challenges faced by the company during its geographic expansion the study provides a descriptive analysis of each of the 15 categories of managerial challenges that emerged the research results suggest that the successful management of a geographic expansion growth strategy requires managers to deal with a unique set of issues for example the training of new employees may become problematic when the most experienced personnel in the firm reside in the home office and the new trainees are located in widely dispersed geographic locations in addition the results of the study provide an extension to both practical and theoretical knowledge in three distinct areas planning for growth managing growth and the reasons for growth first the results of the study support the importance of planning for growth but suggest that planning must be complemented by learning and a willingness to evolve one s plan as growth progresses in terms of the management of growth the case shows that running a small business and growing a small business do not include the same skill set the owners of lac had been quite successful managing their single location for 22 years however this ability to run a business did not complement the need to anticipate start up problems in new remote sites which is inherent in a strategy of geographic expansion in addition the case demonstrated that the management of growth requires a cognizance on the part of the original owners of a firm to delegate control finally with regard to the reasons for growth researchers generally characterize firm growth as being motivated by either economic e g economies of scale or emotional reasons e g employing family members the owners of lac initiated firm growth for the purpose of wealth creation to fund their retirements this illustrates that firm growth can be motivated by a combination of both economic e g wealth creation and personal e g retirement security reasons

regulatory fog the role of information in regulatory persistence abstract regulation is very persistent even when inefficient we propose an explanation for regulatory persistence based on regulatory fog the phenomenon by which regulation obscures information regarding the value of counterfactual policies we construct a dynamic model of regulation in which the underlying need for regulation varies stochastically and regulation undermines the social planner s ability to observe the state of the world compared to a full information benchmark regulation is highly persistent often lasting indefinitely regulatory fog is robust to a broad range of partially informative policies and can be quite detrimental to social welfare regulatory experiments modeled as costly and imperfect signals of the underlying state do not eliminate the effects of regulatory fog we characterize their effects and provide a framework for choosing amongst a set of potential regulatory experiments

expert opinion and compensation evidence from a musical competition pianists who achieve high scores in the queen elizabeth musical competition are rewarded by subsequent success this is not surprising in itself but it is not immediately clear whether this is caused by the score or because those who have high scores are better pianists data on eleven consecutive competitions make it possible to distinguish between the two explanations since an unexpected situation allows us to use an instrumental variable the randomly assigned order in which musicians appear at the competition uncorrelated with ability but correlated with the results of the competition

vertical integration market foreclosure and consumer welfare in the cable television industry i examine the effects of vertical integration between programming and distribution in the cable television industry i assess the effects of ownership structure on program offerings prices and subscriptions and i compare consumer welfare across integrated and unintegrated markets the results of this analysis suggest two general conclusions first integrated operators tend to exclude rival program services suggesting that certain program services cannot gain access to the distribution networks of vertically integrated cable system operators second vertical integration does not harm and may actually benefit consumers because of the associated efficiency gains

on measuring competitive viability and monopoly power in cable an empirical cost approach this study provides empirical evidence concerning the economic feasibility of competition in the local market for video delivery services using responses from the fcc s 1995 cost survey we jointly estimate a translog cost function with factor share equations to evaluate subadditivity the fitted total cost of each firm is compared with the cost of two firms providing the same total output in eleven different market scenarios although costs were mildly superadditive in the vast majority of cases they were lower when one firm provided the output average cost savings with respect to a monopoly were fairly small ranging from 1 37 with a 10 market overlap to 5 05 with a complete overbuild we also calculated marginal cost from the fitted total cost equation and a price for cable services derived from the fcc survey data using these results and rubinovitz s price elasticity of 1 46 we estimated that reregulation had a regulatory effectiveness of 0 3251 and held prices to 40 5 of the monopoly level

competitive outcomes in product differentiated oligopoly structure firms anticipate the competitive effects of market structure when making their entry and product type decisions the market structure variables used to explain the observed outcomes therefore derive from the related entry and product choice stage of the game as a result it is crucial to allow for correlation between unobserved factors that affect the entry and product type decisions of firms and unobservables in the outcome regressions to correct for the potential bias caused by this correlation an econometric model of equilibrium market structure is employed as a selection equation in a two step estimation procedure the second step outcome regressions are modified to reflect the market structure selection this alternative approach emphasizes the logical relationship among firms entry and product choice behavior market structure and price competition following this introduction i provide some background for the analysis of competitive outcomes in motel oligopolies section iii presents the two step estimation procedure developed to measure the effects of concentration and differentiation on outcomes this procedure is used to analyze the observed outcomes of motels located along interstate highways the data are outlined in section iv in section v i present the estimation results evidence from the analysis of these outcomes help demonstrate why motel firms find differentiation a profitable product choice strategy section vi provides some concluding remarks

concentration and public policies in the broadcasting industry the future of television tv regulation concentration and public policies in the broadcasting industry new technologies are deeply transforming the broadcasting industry what we have seen so far is only the beginning of a long story inevitably industry regulations must adapt which means that a wide ranging rethink of current practices is required in order to assess the likely evolution of the industry this article decomposes it into a number of components from conception of programmes to their broadcasting including distribution storage and licensing contrary to popular expectations the analysis suggests that the current high degree of concentration will if anything increase the policy implication is that regulation so far driven by now obsolete technological constraints should increasingly emphasize promoting competition massimo motta and michele polo

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

estimating the efficiency of the system of healthcare financing in achieving better health this paper contributes to the effort to model and measure how the method of financing of health expenditure affects the efficiency with which better health can be achieved the focus is on the health system efficiency at the country level which provides an alternative to the work done in the who in this regard the approach uses frontier techniques as in the who studies however the paper appeals to the economic index number theory of quantity and productivity indexes which have well established axiomatic properties and provides a means for aggregating multiple health output proxies without having to attach arbitrary weights this allows the proposal of a specification that embeds health sector performance in a broader index of economic inputs and outputs and allows for comparisons across countries and time

matching markets with mixed ownership the case for a real life assignment mechanism we consider a common indivisible good allocation problem whose popular applications include on campus housing kidney exchange and school choice we show that the so called new house 4 nh4 mechanism which has been in use at mit since the 1980s is equivalent to a natural adaptation of the well known gale shapley gs mechanism we run two experiments comparing nh4 with the prominently advocated top trading cycles ttc mechanism and nh4 with gs we find that under nh4 the participation rate is significantly higher than under ttc based on a new ordinal test of efficiency nh4 is more likely to pareto dominate ttc

a graphical exposition of the economic theory of regulation i introduction historically many if not most economic theories have advanced in three fairly distinct stages progressing from descriptive to graphical to mathematical formulations generally in that sequence the economic theory of regulation however has been an exception to this normal order of progression the fundamental corpus of this theory was laid out initially in the descriptive discussions provided by stigler 1971 posner 1974 and others from these early presentations however the theory was subsequently formalized mathematically by peltzman 1976 and becker 1983 without passing through the graphical stage of its development 1 regardless of the chronological order of the progression of this theory however we believe that a fully developed graphical exposition is likely to be of considerable value even now at least two considerations support this view specifically by making this theory more accessible to a wider audience and by better illustrating the basic underlying mechanics behind it the likelihood of significant future advancement we believe is enhanced indeed currently there remain a number of observed regulatory phenomena that have yet to be satisfactorily explained by the existing theory e g the deregulation movement and the specific pattern of observed cross subsidies 2 an improved understanding of the fundamental components of the theory should facilitate its further advancement and lead to an expanded ability to explain a broader range of regulatory practices we illustrate this point through a variety of applications to provide an improved understanding of inter alia the markets likely to be chosen for regulation the propensity of regulatory benefits to be spread across interest groups the symbiotic nature of regulation and cross subsidization and the economics of deregulation we also are able to depict graphically the relationship between the economic theory of regulation and the traditional normative model of regulation which assumes that regulators maximize social welfare the article is organized as follows in section ii we briefly describe the regulator s general optimization problem viz what precisely is being maximized and what constraints apply to that maximization problem the latter topic the constraints will be of primary interest here section iii presents the formal graphical analysis of these constraints by deriving what we label the regulator s benefits budget constraint as its name suggests the benefits budget constraint defines the locus of maximum benefits the regulator is able to deliver to the affected interest groups importantly that constraint is determined by the prior unregulated market equilibrium price and output and by general market parameters such as demand elasticity costs and so on section iv describes the resulting regulatory equilibrium section v then applies the graphical tools developed in sections ii iv to explain a number of commonly observed regulatory phenomena here both the ability to provide new insights and the pedagogical value of the graphical approach are illustrated finally section vi concludes ii the regulator s general optimization problem the economic theory of regulation postulates that regulators will attempt to maximize some objective function most generally the regulator s utility by implementing regulatory policies that benefit and by necessity harm particular interest groups 3 the benefits provided to these groups are then used to purchase from them the objects that are directly valued by the regulator that is the direct arguments contained in the regulator s objective function the distribution of these benefits and harms across the affected groups which is determined by the regulator s choice of a particular regulatory policy is selected to maximize the value of the regulator s objective function the ability of any specific interest group to curry regulatory favor then will depend on the capacity of that group to deliver the objects of value to the regulator in exchange for the benefits provided by the regulatory process

market incentives for safe commercial airline operation using a sample of nearly all fatal u s airline accidents between 1960 and 1985 this paper attempts to quantify the costs that airlines incur due to crashes the potential costs include those due to loss of life and equipment tort liability increased regulatory oversight and loss of demand as consumers turn away from products perceived to be unsafe examination of the deviations from expected demand following accidents reveals little or no effect prior to airline deregulation and weak indication of a response to recent crashes these results are consistent with the changes in an airline s equity value following an accident which are statistically significant but quite small relative to the total social cost of the accident

estimation of technical inefficiency in panel data models with firm and time specific effects abstract this paper uses a panel data model and develops methods to estimate production function parameters and technical inefficiency the model distinguishes technical inefficiency from firm and time specific effects determinants of technical inefficiency is introduced by allowing its mean to be a function of exogenous variables both random and fixed effects treatment of firm and time specific effects are considered in estimation

elicitation of honest preferences for the assignment of individuals to positions the problem of eliciting honest preferences from individuals who must be assigned to a set of positions is considered individuals know that they will be charged for the positions to which they are assigned a set of prices that provide no incentive for the individual to misrepresent his preferences is suggested it is shown that these prices constitute an element of the optimal solution to the dual of a linear programming assignment problem both the optimal allocation and the prices to be charged can be derived by solving two linear programming problems once preferences have been elicited the procedure can usefully be viewed as a simulation of a competitive market under conditions where such a market cannot be expected to function well it results in an efficient allocation where all resources are valued at their opportunity costs and consumer surplus is maximized its outcome thus has the desirable properties of competitive market equilibria

measuring the social value of local public goods an empirical analysis within paris metropolitan area a non linear hedonic model is used to estimate the implicit marginal prices of 17 local public goods in a paris suburban area on an original data set of some 8200 housing units the results reveal a robust effect of local public school quality measured both by the fraction of junior high school students that are at least two years behind grade level and the student teacher ratio on house prices it is observed that housing owners marginal willingness to pay for reducing commuting time is roughly similar for public transportation than for car transportation another noticeable result is the complete capitalization of local taxes at a discount rate of 3 5 an illustration of the potential usefulness of the results for cost benefit analysis is also provided

tracking the stepwise effects of regulatory reforms over time a back door approach most of the literature on the efficiency effects of regulatory reforms ignores the gradual nature of the implementation of these reforms this article describes a new simple data manipulation that minimizes data requirements to measure econometrically the impact on efficiency of each stage of multi stages regulatory reforms the approach can easily be implemented using standard stochastic frontier software programs it is illustrated with data on the spanish port system which went through a two stage reform during the 1990s

the impact of the regulation of the cable television industry the effect on quality adjusted cable television prices between the mid 1980s and early 1990s cable television rates increased substantially simple price comparisons over the regulated and deregulated eras are difficult as the programming changed simultaneously using a modified hedonic framework to allow for the lack of competition on the supply side of the industry this paper imputes the price for regulation era cable packages using consumers estimated willingness to pay for individual satellite networks during the unregulated period then a quality adjusted price for the cable package offered in 1985 is estimated on average regulation benefited consumers by keeping prices below monopolist s profit maximizing price

employment change in independent owner managed high technology firms in great britain there is a growing volume of literature that points to the potential for small technology based firms to achieve substantial employment growth as a direct consequence of such work this sector of any economy has attracted increasing attention from national and local governments concerned with finding ways of revitalising economically deprived localities and creating employment opportunities this paper provides up to date empirical evidence surrounding the ability of small high technology firms to create additional jobs in great britain in addition key founder and business characteristics are isolated which are significantly associated with employment change in growing high technology firms over the 1986 to 1992 period with respect to factors influencing these high levels of employment growth a high firm size in 1986 was found to act positively on employment growth as was a graduate level education for the key founder on the finance side firms which had access to and used a multiplicity of sources of start up finance tended to grow faster futher on the basis of our results we would suggest and recommend a government policy which at the firm level actively encourages high technology firm start ups who record higher rates of survival than firms in more conventional sectors as well as providing support for existing high technology firms who have already demonstrated the inclination and ability to grow in employment size

cable franchise renewals do incumbent firms behave opportunistically systematic empirical evidence has heretofore been lacking on the extent to which supplier opportunism at the time of contract renewal is a fundamental problem associated with franchise bidding schemes at least for the case of local cable television distribution this article suggests several theoretical reasons why bad behavior by an incumbent supplier may be the exception rather than the rule and a simple test for supplier opportunism at the time of franchise renewal the simple test is employed to empirically analyze the terms of trade in a cross sectional sample of recent cable franchise renewal contracts

a dynamic school choice model this paper inspires from a real life assignment problem faced by the mexican ministry of public education we introduce a dynamic school choice problem that consists in assigning positions to overlapping generations of teachers from one period to another teachers can either retain their current positions or choose a preferred one in this framework a solution concept that conciliates the fairness criteria with the individual rationality condition is introduced it is then proved that a solution always exists and that it can be reached by a modified version of the deferred acceptance algorithm of gale and shapley we also show that the mechanism is dynamically strategy proof and respects improvements whenever the set of orders is lexicographic by tenure

discontinuance among new firms in retail the influence of initial resources strategy and gender abstract women owned businesses represent one of the fastest growing segments of the u s economy their rate has increased more than six fold since 1970 despite this growth rate the number of firms owned by women still lags behind that of men and the sales and income of women owned firms are significantly lower than those of men owned firms the discrepancy between the number of businesses owned by women and men and their economic success has been a popular theme among researchers some have suggested that performance differentials result from disparate structural positions women and men occupy in work and society whereas others attribute the differences to deep rooted interpersonal orientations this study examines whether the performance differences can be explained by variations in initial resources and founding strategy we test whether women have fewer start up resources and if they do whether they can compensate for these deficiencies through their founding strategy recent work in social psychology argues that strategic choice is shaped by experiences to which individuals have been subjected and that women and men have fundamentally different socialization experiences we test the assumption that if the strategy that women owners adopt exploits the unique capabilities they derive from their socialization they can improve the performance of their firms and ward off discontinuance we examine the discontinuance pattern of 203 new firms in the retail industry this industry was selected because women entrepreneurs often choose to operate in this industry giving us a basis for comparing women owned and men owned firms we classify the firms into six strategy archetypes the arche types range from a broad focus where founders emphasize multiple strategic foci simultaneously to narrowly targeted differentiation strategies we assume that the experiential base of women entrepreneurs limits their successfully executing pricing strategies we hypothesize that women led firms decrease the odds of discontinuing by adopting one of two strategy types 1 narrow differentiation strategies that seek to satisfy a narrow segment of the market and that do not rely on pricing or 2 broad generalists strategies that emphasize service and quality but not pricing and take advantage of women s capability for handling multiple stakeholders simultaneously the results offer support for using an integrative model to explain the performance of women owned firms women owned firms have higher odds of discontinuing than men owned firms and women appear to have fewer resources to start their businesses women owners were less likely to have instrumental experience from working in the retail industry and start their businesses on a smaller scale then men but were no less likely then their male counterparts to have access to credit from formal financial institutions or to be disadvantaged by starting fewer other new businesses despite some apparent situational disadvantage resource deficiencies do not appear to affect the odds of women owned businesses discontinuing as much as they do men owned initiatives the findings indicate support for the supposition that women owners can use founding strategy to decrease the odds of discontinuing business a broad generalists strategy that represents a multi focused approach was found to benefit women owned businesses most overall the results suggest that men use prior business experience and human capital to affect the survival status of their businesses women appear to find strategic choice more beneficial future research is recommended to further elaborate the integrative model special attention should be given to developing alternatives to measures traditionally used in gender research many researchers charge that those typically used reflect male derived measures similarly greater attention should be given to understanding why the scale of women owned businesses at start up is substantially smaller than that of men since scale has been shown to be related to subsequent growth and survival

discrimination in matchmaking evidence from the price policy of a french marriage bureau this article shows how a matchmaking agency may improve the quality of serious meetings between individuals seeking long term relationship thanks to a price discrimination policy its filtering is based on objective and official characteristics sex age and contract s environment and on implicit criteria the few asked characteristics by its clients

testing static oligopoly models conduct and cost in the sugar industry 1890 1914 we explore the widespread methodology of using demand information to infer market conduct and unobserved cost components under the hypothesis of static oligopoly behavior direct measures of marginal cost and conduct indicating small market power serve as benchmarks the more competitive models yield better cost estimates the best cost estimates occur when conduct is estimated as a free parameter which in turn only slightly underestimates our direct measure it also tracks the decline in market power accompanying the industry s structural changes the methodology is largely validated although partial cost information can improve its predictive power conclusions are robust to demand function

the effect of organizational form on quality the case of franchising abstract the organizational form of franchising has been shown to yield higher profits and faster growth through reducing agency costs why then does anyone not franchise in this paper i argue that the diffuse residual claims of the franchise system reduce overall system quality and that this problem is inherent in the nature of franchising the theory is tested by examining evidence from both the restaurant and the hotel industries including chains that franchise and ones that own all of their units in both industries quality is negatively related to the percent franchising in the chain controlling for size growth in units monitoring costs market segment ownership structure multi chain operation and price the results suggest that the franchise contract increases free riding and decreases quality in decentralized service chains and that quality is not contractible in this setting

the effect of local competition on admission prices in the u s motion picture exhibition market abstract this paper provides empirical evidence on the relationship between local market structure and the prices charged to consumers in the u s motion picture exhibition market i find that there is a statistically significant relationship between the geographic distribution of movie theaters in a market and the admission prices that they are able to charge however the magnitude of the price reducing effect of local competition appears to be economically modest moreover i find no evidence that increases in geographic concentration lead to increased adult admission prices the findings are directly relevant to merger policy in the industry and pertinent because of the dramatic changes in industry structure resulting from mergers that occurred during 2002 i conclude that the available evidence suggests that popular and governmental concerns about horizontal mergers in the industry leading to dramatically increased admission prices are likely misplaced

the demand to regulate franchise monopoly evidence from catv rate deregulation in california the demand to regulate franchise monopoly evidence from catv rate deregulation in california the motivation to price control a franchise monopoly is examined in the context of three distinct economic views of regulatory behavior these views are tested against data from the california cable television market over the years 1980 85 during which a subset of monopoly firms converted from regulated to unregulated pricing for basic cable service as the price constraints of regulation appear to be insignificant in a welfare analysis the demand for such controls by municipalities is derived from their utility in enforcing vote maximizing transfer schemes a peltzmanian political outcome with a stiglerian economic welfare result i introduction since the pathbreaking inquiry by stigler and friedland 1962 it has been fair game for economists to investigate how the publicly stated goals of regulation square with the observed economic results whereas empirical research has often revealed a surprisingly low correlation theoretical models of political behavior have been developed to explain how regulators would rationally attempt to maximize political strength and hence personal utility by pursuing a support maximizing transfer scheme how far such incentive structures for regulators go toward enhancing consumer welfare is the primary concern of public policy analysis by economists indeed the study of regulatory results has yielded new insights into the antecedent demand for regulation when publicly announced goals are not achieved economists are often tempted to attribute the discrepancy not to random error but to a strategic desire to mask intended transfer schemes hence results of regulation can shed light on the motives for regulation this paper inquires into the motivations for municipal regulation of the cable television market part ii sets three previously developed views of regulatory behavior into a unified framework and reviews previous research on price regulation in the electric utility industry part iii describes an efficiency test for cable rate regulation in california in a sector dominated by municipally assigned franchise monopolies price and output effects of regulation are likely to be most dramatic and hence most informative moreover cable s changing regulatory regime offers grist for analysis in part iv i examine evidence from the 1979 partial deregulation of catv in california and draw inferences regarding the demand to regulate cable franchises in part v my conclusions appear in part vi ii regulatory behavior at least three alternative models of regulatory behavior have been advanced in the literature looking at the world in the peltzman 1976 sense politicians regulators are seen as engaging in two dimensional support maximization in that redistributing income by whatever institutional method necessarily involves losers as well as winners some competitive equilibrium of transfers will be achieved by maximizing political actors see figure 1 panel a as a rule regulators will transfer wealth from consumers and towards the regulated industry just up to the point at which the marginal industry support gained is equal to the marginal consumer support lost fortuitously peltzman s paradigmatic political regulatory decision focuses upon the correlation between output price and profits of a regulated public utility seen in the profit hill in panel a of figure 1 and the trade off faced specifically by the regulatory agent in gaining support from one constituency at the cost of support from another as in the u sup p indifference curve in figure 1 this framework dovetails with the discussion of price regulation in cable to follow peltzman saw the regulator as a public policy auctioneer garnering maximum political support from both consumers and producers in establishing an optimal regulated price

demand pricing and regulation evidence from the cable tv industry subsequent to the nationwide deregulation of the cable tv industry a number of questions have been raised concerning the conduct of cable firms answers to these questions turn upon a fundamental set of issues regarding the economic relationships of demand pricing and regulation in this article we empirically examine these relationships for the period prior to deregulation a number of basic findings emerge among these we find that the demand for basic cable service ranges from being generally inelastic in rural areas to elastic in large urban markets the elasticity of demand for pay cable services is typically well in excess of unity also while regulation did not lead to economically efficient marginal cost prices for basic cable service it did act to keep prices below monopoly levels moreover our examination reveals some significant differences in the effectiveness of the various types of regulation practiced in the pre deregulation period

efficiency gains from port reform and the potential for yardstick competition lessons from mexico abstract this paper shows how measures of relative efficiency performance could promote yardstick competition between port infrastructure operators the illustration is based on a study of the efficiency effects of the mexican 1993 port reform it covers 1996 99 and relies on a stochastic production frontier to show that mexico s ports achieved 2 8 3 3 average annual efficiency gains since reform the port specific measures point to consistent leaders and laggards which would not all be identified by common partial productivity indicators this information could be built into an explicit incentive based regulatory regime aiming at promoting catch up by laggards

the package assignment model we study assignment problems where individuals trade packages consisting of several rather than single objects although buyers reservations values are non additive efficient assignments can be formulated as a linear programming problem in which the pricing functions expressing duality may be non linear in the objects constituting the packages the interconnections among the linear programming formulation walrasian equilibrium and the core are established in the single seller auction version a necessary and sufficient condition is given for the vickrey payoff point to be implementable by a pricing equilibrium journal of economic literature classification numbers c62 d44 d51

time horizons lattice structures and welfare in multi period matching markets abstract we analyze a t period two sided one to one matching market without monetary transfers under natural restrictions on agents preferences which accommodate switching costs status quo bias and other forms of inter temporal complementarity dynamically stable matchings exist we propose a new ordering of the stable set ensuring that it forms a lattice we investigate the robustness of dynamically stable matchings with respect to the market s time horizon and frequency of rematching opportunities

hedonic price functions and the measurement of preferences the case of swedish wine consumers abstract a hedonic price function for wine is estimated using swedish data 1989 1991 implicit prices for quality attributes are determined not from a regression of variety price on a vector of quality attributes but rather from a regression of quantity sold adjusted for weeks of availability on price and quality attributes such a reduced form is justified by the assumption that prices and attribute contents can be taken as exogenous to the swedish consumer price elasticity is estimated to be about 1 65 holding quality constant showing that swedish consumers are highly sensitive to price estimates of the implicit valuations of quality attributes are shown to differ greatly from those obtained from the more usual hedonic regression with price as the dependent variable

gray marketing as an alternative market penetration strategy for entrepreneurs conceptual model and case evidence abstract gray marketing is said to occur when authentic branded products reach the consumer through marketing channels other than that of the authorized distributor weigand 1991 free riding was first offered by tan et al 1995 tan et al 1997 as an alternative explanation for the occurrence of gray marketing we extend the authors work to show that free riding can be an alternative strategy to niching for entrepreneurs contemplating entry into established markets almost exclusively the existing literature on gray marketing treats the phenomenon as a pricing problem and fails to recognize it as a market entry opportunity for start up entrepreneurs the gray marketing strategy is appropriate for start up entrepreneurs in view of their resource limitations and the risk of being a first mover in market development we show in this paper that an entrepreneur can successfully penetrate an established market by following a gray marketing strategy this is because it can be optimal for the incumbent supplier to accommodate the entrepreneur gray marketer even if the former could force the latter out of the market through aggressive counter actions we developed a conceptual model using game theoretic concepts to aid entrepreneurs in understanding the strategic interactions amongst parties involved in gray marketing and to identify the conditions under which entrepreneurs can successfully penetrate a market via gray marketing the deductive or game theoretic approach we feel is most appropriate because gray marketing involves multiple party interactions and conflicts of interests as moorthy 1985 showed the game theoretic methodology is most suited to analyzing the behavior of market participants in such a situation this paper identifies the conditions under which gray marketing would be profitable and sustainable for entrepreneurs first by targeting markets that are already well established by the larger firms the entrepreneurs risk of failure due to demand uncertainty is reduced in addition they need not incur substantial costs for market developmental efforts furthermore the free riding strategy provides entrepreneurs with the opportunity to enter profitable markets that are currently supplied by larger firms instead of being restricted to markets ignored or disdained by the latter second entrepreneurs are able to benefit from the second mover advantages in following the free riding strategy as late entrants into the market entrepreneurs could learn from the experiences of the larger firms and avoid costly mistakes by imitating the product strategy of the larger firm entrepreneurs could also achieve cost savings in r d and product development costs all these effectively reduce the entrepreneur s cost of entry into the market hence even with limited resource at their disposal entrepreneurs could still enter the market successfully finally by following the free riding strategy entrepreneurs are able to nibble at the market shares of the larger firms this is possible because of the difficulties and costs faced by the larger firms in countering entries made by the entrepreneurs thus the larger firms are left with little choice but to accommodate the entry of the entrepreneurs into the market when the costs of countering the entrepreneurs entry are sufficiently large the free riding strategy becomes feasible for entrepreneurs even if they do not posses competitive advantages over the larger firms our paper thus demonstrates that entrepreneurs do have an alternative market entry strategy besides the commonly prescribed niching strategy it also shows them when such a free riding strategy would be most beneficial and most likely to succeed these are further illustrated and supported through two real life cases involving companies in the luxury cars and cosmetics industries in singapore

efficiency in new zealand sheep and beef farming the impacts of regulatory reform in this study we consider the impacts of dramatic regulatory reform during the 1980s on the efficiency of farms in new zealand using unbalanced panel data a translog distance function representing the multiple output and input technology and incorporating nonneutral regulatory impacts is used for the analysis determinants of technical inefficiency including a regulatory variable a time term and a debt equity ratio are also incorporated in a one step model estimated by maximum likelihood stochastic production frontier methods we find evidence of regulatory induced changes in output composition toward beef and deer and away from wool and especially lamb but little associated technical inefficiency these patterns motivated investment in complementary capital land and beef deer livestock inputs firms that were more flexible in their adaptation toward these new mixes adjusted to regulatory changes with less upheaval so any existing inefficiency appears linked to debt equity levels

pricing and market concentration in oligopoly markets this paper investigates the relationship between prices and market concentration in the auto rental industry we assemble an original database that includes the number of auto rental operators and other exogenous demand and cost conditions at every commercial airport in the country the data are interesting because we observe a large variation in market structure ranging from more than 100 monopoly and duopoly markets to several competitive airports with more than eight firms in addition we collect daily rental prices in each market that are regressed against the number of operating firms and other control factors due to potential biases in treating market participants as exogenously assigned we employ a two stage estimation procedure in which an equilibrium model of endogenous market structure provides correction terms for the second stage price regression results show that ignoring the endogeneity of market structure severely underestimates the impact of additional competitors on prices with the

non price concessions and the effect of franchise bidding schemes on cable company costs among the potentially important problems with franchise bidding schemes is the possibility that franchisers may extract non price concessions merit goods from competing bidders at the expense of lower prices for plain vanilla service the systematic evidence presented in this paper suggests that the pursuit of such non price concessions in the case of cable franchise competitions is substantial expenditures on non price concessions account for 26 of cable construction costs and 11 of operating costs the pursuit of non price concessions by local franchising authorities appears to have two negative economic efficiency consequences first expenditures on such concessions appear to provide only a limited amount of economic benefits second by raising costs spending on non price concessions inhibits the ultimate level to which prices can be held by franchise bidding schemes

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

dynamic kidney exchange we study how barter exchanges should be conducted through a centralized mechanism in a dynamically evolving agent pool with time and compatibility based preferences we derive the dynamically efficient two way and multi way exchange mechanisms that maximize total discounted exchange surplus recently several live donor kidney exchange programs were established to swap incompatible donors of end stage kidney disease patients since kidney exchange can be modeled as a special instance of our more general model dynamically efficient kidney exchange mechanisms are derived as corollaries we make policy recommendations using simulations

the use of expert opinion quality and reputation indicators by consumers evidence from the french vaulting stallion semen market we build a model inspired by the standard hedonic approach developed by rosen 1974 and completed by landon and smith 1997 1998 to analyse the price of french vaulting stallion semen in 2004 we show that reputation modelled as an endogenous factor plays a less important role than information on true quality for the explanation of price dispersion this result is explained by the fact that information on studhorses is not only available but also reliable insofar as the quality of a stallion is stable over time contrary to nondurable products like wine or cigars this explains also why consumers on this market do not use expert opinions to make their choices

the effects of market structure and ownership on prices and service offerings in the cable television industry this article provides empirical evidence on the effects of alternative market structures and ownership modes on prices and service offerings in the cable television industry we analyze the underlying characteristics and behavior of competing versus monopoly operators on the one hand and privately versus nonprivately owned operators on the other we find that competition and nonprivate ownership are associated with lower prices for basic cable television service we also find that cable television price and quality differentials vary with certain characteristics of competing operators and that market structure and ownership status influence changes in price and quality over time

on the proper modelling of multioutput port cargo handling costs cargo handling activities involve various heterogeneous outputs e g general cargo containers dry and liquid bulk and so on these activities in ports however have been usually analysed using aggregate descriptions of output such as total tons moved the main purpose of this article is to show that ignoring this heterogeneity may lead to two types of problems i the underestimation of the relevance of key dimensions i e marginal costs per product and economies of scope and ii a bias in the estimates of the relevance of other dimensions economies of scale to do so we rely on a unique new dataset on three cargo handling firms operating in a spanish port between 1991 and 1999 we use it to estimate both a multi output cost for these three operators as well as an aggregate cost function the policy conclusions are derived from an explicit and detailed comparison of these two sets of estimates

the importance of focus to market entrants abstract one of the most difficult questions facing entrepreneurs is how broadly to serve a heterogeneous market that is whether it is better to serve a narrow segment of the market hoping to flourish by gaining a relatively high and increasing market share within that segment or whether it is better to attempt to appeal to a broader cross section of the market thereby allowing the firm to succeed with a lower market share among the customers whom it is targeting a narrower focus permits more concentrated use of fixed resources facilitates the building of customer loyalty and lowers the threat of retaliation from generalist incumbents but requires a much higher market share within the firms target market to succeed porter 1980 has identified three generic strategies available to firms low cost differentiation and focus by focus he means that the firm should develop the ability to serve a particular target customer group very well often at the expense of other potential customer groups implicit in the firm s choice to adopt a focus strategy is that it must address the question of how broadly to focus in terms of any given product attribute given its resources and opportunities a fundamental element of the firm s choice of focus is that it is affected by and in turn affects that of its rivals that is focus is a strategic variable in the sense of the word strategic meant by game theorists each firm s optimal choice of action depends on the actions taken by other firms the literature on the optimal degree of focus for new ventures has reached very mixed conclusions the early authors looking at the question were fairly consistent in their recommendation that a highly focused or niche strategy was generally most appropriate later authors recommended that new ventures should enter markets aggressively facing larger incumbents head on the latest studies develop what we describe as a contingency approach arguing that the best approach depends on industry conditions we think that this literature is now at a point where we can advance our understanding by looking at specific industries in some detail as our understanding expands broader empirical work is becoming increasingly difficult because of the number of factors that must be built into any cross sectional model of new venture performance we hope then to develop an understanding of one industry that is generally similar in nature to many other industries from this understanding conclusions of interest to both researchers and practitioners can be drawn future studies of other industries with different fundamental structures will provide similar benefits more specifically this paper is an empirical inquiry into the microbrewery segment of the u s brewing industry designed to investigate the relative merits of specialist firms different degrees of focus the question addressed is whether focus affects specialist firms short run performance in an industry where there are entrenched generalists as well as many new entrpreneurial specialist entrants the analysis confirms several widely held beliefs of industry participants and observers that microbreweries are far more likely to attempt to serve too broad a market segment than to focus too narrowly that microbreweries are in direct competition with imports and that microbreweries benefit from having many microbrewery rivals within the same state furthermore there appear to be some small learning and or reputation effects in the operation of microbreweries as well as a minor novelty factor that benefits recently opened establishments we must note however that the majority of the variation in the performance of microbreweries stems from differences in the management organization or market of individual breweries not captured explicitly by other variables included in the study this finding perhaps should not be surprising given the huge variation in the backgrounds skills and outlooks of microbrewery owners during the segment s early days the lessons learned from this research are of obvious importance to entrepreneurs in many industries it is a very common situation for an entrepreneur to enter a stable industry in which established firms are already in place serving a broad cross section of the market our findings show that in such circumstances a narrowly focused approach to the market is best we can think of numerous examples of where entrepreneurs have either succeeded by focussing on a particular segment of the market or failed by not doing so in fact there are many cases in which firms have done first one and then the other for example and people express airlines at first flourished by focussing on the needs of budget conscious leisure travellers and then collapsed in part because it began to try to serve business travelers and others who are less price sensitive on certain routes one of the hallmarks of an entrepreneurial business is that it suffers severe resource constraints because the entrepreneur s choice of breadth of focus will have profound effects on the resource requirements of the business it is clear that the choice of which segment or segments of the market on which to focus is a fundamental decision made by all entrepreneurs this paper serves to illustrate the importance of this focus decision and to provide some guidance for entrepreneurs concerning the appropriate degree of focus to adopt in entering an established market

market power and price increases for basic cable service since deregulation since the deregulation of rates for basic cable television service increases in price have outpaced the rate of inflation this article examines whether or not cable systems increased market power or their increased exercise of market power explains these price increases an estimated quasi supply function for cable systems before and after deregulation implies that real basic cable prices increased 18 since deregulation holding quality and other costs constant accounting for 43 of the total real price increase a demand equation is also estimated and the estimated demand elasticity of basic cable does not change after deregulation implying that this 18 real price increase is due to greater exercise of existing market power made possible by the elimination ofprice regulation rather than to an increase in market power caused by a change in the demand elasticity for cable

capital market myopia abstract the purpose in writing this article is to focus attention on a phenomenon we call capital market myopia a situation in which participants in the capital markets ignore the logical implications of their individual investment decisions viewed in isolation each decision seems to make sense when taken together however they are a prescription for disaster capital market myopia leads to overfunding of industries and unsustainable levels of valuation in the stock market we use the winchester disk drive industry to elucidate the phenomenon we argue that capital market participants should have seen the problem coming they should have known that valuation levels were absurd based in large part on the greater fool theory the data necessary to anticipate the problem were readily available before the industry shakeout began and stock prices collapsed there are several lessons which we believe can be learned by careful examination of the disk drive experience in the period under study these include taking the broad view of the industry is the key to profitable investment the investment mania visited on the hard disk industry contained inherent assumptions about long run industry size and profitability and about the future growth profitability and access to capital for each individual company these assumptions had they been stated explicitly would not have been acceptable to the rational investor certainly there are valuations which arise which cannot be justified under any circumstance these are the times for the manager to raise money from the public capital markets those managers who took advantage of unsustainable valuation levels now have a chance to survive the shakeout growth is not equivalent to profitability the high growth rate in the industry made it the focus of considerable managerial investor and technological attention the industry attracted so many resources that the growth had high probability of being unprofitable excesses in the capital market turned an opportunity into a disaster profits for some are not equivalent to a good business many players made high profits by investing in the hard disk drive business including the investment bankers and certain of the venture capital groups which invested early enough to catch the wave of euphoria in the stock market and still sell under rule 144 many others rode the cycle up and down without liquidity for many buyers of disk drive stocks in 1983 losses were massive short term successes of some gave the illusion of long term profitability for all investors should not be fooled by such invevitably ephemeral successes market instability can be all bad news very rapid change often creates entrepreneurial opportunity it also creates risk analysis of the hard disk drive industry reveals the dark side of rapid technological evolution and of customer instability early players are often preempted by changes in technology and in customer needs early birds are not always winners in product markets but late comers are almost always losers recognizing the chain one of the more important lessons to be learned from the tale of the disk drive industry is that all players entreprenuers venture capitalists investment bankers industry analysts and investors must recognize the chains involved in such a process first there was a technological chain a series of bets on technological advances in disk drive components disk drive designs and end user designs then there was a financial chain a series of related bets on the internal financial health of each player in the technological chain and on the nature of access to capital in the private and public markets the likelihood that any player in the disk drive industry would prosper without a serious setback due to a weak link was effectively zero indeed weaknesses in the chain were created by exactly the same people whose financial success depended on an unbroken series of favorable outcomes during this same period the public capital markets were also a large supplier of funds to the disk drive industry the total amount of money raised in public offerings of common stocks for participants in the industry was over 800 million during the middle part of 1983 the capital markets assigned a value in excess of 5 billion to 12 publicly traded venture capital backed hard disk drive manufacturers the strong market valuation of these companies paralleled the boom in other high technology stocks and rising valuation levels in the stock market in general table 2 contains data on stock prices and valuation levels for some disk drive manufacturers and table 3 provides general data on the economy and capital markets

corporate versus independent new ventures resource strategy and performance differences abstract this study examines differences between independent ventures ivs which are established by individual entrepreneurs and corporate ventures cvs which are controlled by larger companies it focuses on differences between these ventures related to the resources strategies and performance of firms in the computer and communications equipment manufacturing industries thus the findings increase the understanding of the different challenges faced by each venture type and provide insight into how each venture type should be managed the study finds that managers of cvs and ivs emphasized different resources and strategies specifically cvs emphasized the following resources internal capital sources proprietary knowledge and marketing expertise ivs emphasized external capital sources technical expertise and development of brand identification they also differed in their strategies ivs pursued greater strategic breadth more customer service and focused more on specialty products the findings that cvs had less strategic breadth was surprising in that cvs emphasized resources such as internal capital sources which could make pursuing broad strategies more feasible for cvs it is possible that some cvs do not pursue broad strategies because they may be infringing upon someone else s turf within the corporation and thus may be discouraged in spite of finding significant strategy and resource differences the study found that ivs and cvs did not differ in performance and that resources were not directly related to performance based on the concept of equifinality it follows that both venture types can be equally successful even if they follow different roads to success success may be less a function of the different resources ivs and cvs have and more a function of what strategies the firms choose based upon their resources strategy variables did relate to performance a low cost strategy lowered performance regardless of venture type and the influence of an aggressive strategy i e wide strategic breadth on performance depended upon venture origin managers pursuing a low cost strategy may have had lower performance if they became penny wise and pound foolish missing opportunities in their efforts to lower costs this suggests that regardless of venture type managers of new ventures in these industries and perhaps in other volatile industries may need to be opportunistic this study indicates that pursuing broad strategies increased the performance of ivs and decreased the performance of cvs this finding was surprising in that cvs had greater resources which one might think would lead to successful implementation of aggressive strategies in securing enough resources to pursue aggressive strategies from their parents cvs may lose the freedom of action they need to cope with the dynamism of high technology industries this suggests that managers of cvs within the computer and communications equipment manufacturing industries should either not pursue broad strategies or if pursuing broad strategy they should maintain their flexibility in contrast ivs that pursued broad strategies achieved higher performance indicating that perhaps ivs unencumbered by the bureaucracy that characterizes cvs may be able to pursue aggressive strategies while simultaneously maintaining flexibility thus this study offers iv and cv managers several valuable insights first it argues that managers of each type of venture may need to pursue different strategies to increase venture performance and make optimal use of their unique resources furthermore it suggests that cv managers encounter difficulties in applying resources to strategies and not in accessing resources whereas political obstacles may occur cv managers may primarily encounter these difficulties when trying to implement strategies rather than when accumulating resources from the parent suggesting a pitfall that managers of cvs and their parents need to avoid although this study has indicated that both venture types can be equally successful it suggests that they may face different obstacles and follow different roads to success

fragmented duopoly a conceptual and empirical investigation where wireline distribution networks compete each network typically has some customers over which it competes and others for which it is the sole provider this paper conceptually and empirically assesses the effects of such competition on market prices demand and service quality for cable television service the results suggest that the effectiveness of competition in lowering prices is contingent on the degree of system overlap in particular in equilibrium an increase in overlap substantially reduces prices the conceptual model of fragmented duopoly developed in the paper may be useful in analyzing emerging competition in other network distribution industries

dealing with resource disadvantage generic strategies for smes this paper identifies three generic strategies for smes taking into account explicitly their resource disadvantage in addition to the much advocated niching strategy we show that smes can free ride on the bigger firm s market development efforts and or they can form strategic alliances to force accommodation by the bigger rivals contrary to conventional arguments we show that success in niching is not conditional upon the continued ignorance of the niche by the bigger firms it is also not true that the smes must have a cost advantage vis a vis the bigger firms in order to niche or to free ride successfully the bigger firms faced with entry into their markets by smes encounter the classical chain store paradox the three generic strategies proposed here are designed to force accommodation by the bigger firms

sequential auctions of interdependent objects israeli cable television licenses in israel area cable television catv licenses were auctioned sequentially this paper provides evidence that i there were interdependencies among many of the franchises and that ii subscriber fees for the interdependent franchises decreased over time in this auction

matching with contracts we develop a model of matching with contracts which incorporates as special cases the college admissions problem the kelso crawford labor market matching model and ascending package auctions we introduce a new law of aggregate demand for the case of discrete heterogeneous workers and show that when workers are substitutes this law is satisfied by profit maximizing firms when workers are substitutes and the law is satisfied truthful reporting is a dominant strategy for workers in a worker offering auction matching algorithm we also parameterize a large class of preferences satisfying the two conditions

mergers and technical efficiency in spanish savings banks a stochastic distance function approach abstract the aim of this paper is to test the temporal variation of technical efficiency of spanish savings banks during the period 1985 1998 furthermore we test whether merged and non merged firms have different levels and temporal patterns of technical efficiency a stochastic output distance function r w shephard theory of cost and production functions princeton university press princeton nj is employed to accommodate multiple output technology the distance function provides the advantage that it does not need information about prices so it can accommodate the multi product nature of the financial sector only using the quantities as data an important point when the assumptions about perfectly competitive markets are unlikely to be met the temporal variation of efficiency is modeled extending the battese and coelli journal of productivity analysis 3 1992 153 169 approach in two ways relaxing the monotonicity of the temporal variation pattern of the efficiency term and allowing for different patterns of efficiency change between merged and non merged firms

fighting city hall entry deterrence and technology upgrades in cable tv markets this article investigates how private firms respond to potential entry from public firms this paper uses a data set of over 3 000 u s cable tv systems to present evidence consistent with entry deterrence incumbent cable tv firms upgrade faster when located in markets with a potential municipal entrant however the same systems are then slower to offer new products enabled by the upgrade suggesting upgrades in these markets occur for strategic reasons incumbent cable systems also upgrade faster in response to municipal entry threats than to private entry threats understanding how private firms respond to potential entry from public firms is especially important in light of recent u s government entry into several industries this paper was accepted by bruno cassiman business strategy

strategies of high performing new and small firms a reexamination of the niche concept abstract entrepreneurs seeking to position new or small firms in industries populated by well established competitors are frequently advised to seek the protection of a market niche there shielded by market characteristics which render the niche uninteresting to larger rivals small firms are urged to compete at the fringe of the market this article challenges this conventional wisdom citing industry and firm characteristics which under certain conditions create opportunities for successful direct competition by some small or new firms against much larger and established competitors however the authors caution that the conditions which created the opportunity may erode in time rendering the successful challenger vulnerable either to retaliation by the larger firm or challenge from subsequent entrants examples of successful direct confrontation by relatively small competitors are drawn from mature low tech industries a rapidly growing high tech industry and the service sector

a simultaneous equations model of coffee brand pricing and advertising this paper explores the relationship between a differentiated brand s market share and its price in the con text of a model that recognizes the endogeneity of the brand s advertising behavior and pricing decisions the empirical analysis suggests that general foods charged higher prices for its regular grind maxwell house coffee in geographic areas where the brand s market share was relatively large available cross sectional time series data and company documents sug gest that this empirical relationship is attributable to the preference grocery retailers have for putting dominant coffee brands on special rather than cross sectional variations in costs market concentration or consumer tastes i introduction r his paper explores the relationship between a differentiated brand s market share and its price in the context of a model that recognizes the endogeneity of the brand s advertising behav ior and pricing decisions by using price as the measure of economic performance rather than accounting profits and by recognizing that adver tising is determined simultaneously with price the empirical tests reported here avoid some of the more serious problems of structure perfor mance studies moreover by focusing on the rela tionship between a single brand s market share and price this study analyzes the unilateral mar ket power of a differentiated brand as well as the effect of market wide concentration on a brand s prices the empirical analysis focuses on the hypothe sis that the general foods corporation charged higher prices for its regular grind maxwell house coffee in geographic areas where the brand s market share was large during the 1970s we identify a statistically significant positive relation ship between maxwell house s wholesale price

quality adjusted price indexes for portable computers constructing an accurate price index requires controlling for changes in quality the potential for bias is especially problemaic for rapidly changing goods such as computers this study extends previous research on quality adjusted or hedonic price indexes for computers by investigating price and quality changes in portable models in particular recent research by nelson et al 1994 and berndt et al 1995 on desktop and portable computers is extended after adjusting for quality changes price indexes in this tudy exhibit average declines of 26 to 33 per year the magnitude of quality adjusted price changes is consistent with these auhors and with the extensive line of research on quality adjusted price indexes for computers of various types the results emphasize the extent of potential bias in estimating price level changes if technological advancement is ignored significant potential for bias implies the need to account properly for changes in quality in consructing indexes for both individual

on the operation of multiple matching markets abstract we provide a new perspective on how to operate matching markets when there are many types of markets our finding is that the market wise adaptation of strategy proof and non wasteful rules yields a strategy proof rule with the following efficiency property no strategy proof rule pareto dominates the rule such rules are abundant as they include the market wise use of the well known priority based rules of the top trading cycles and the deferred acceptance this result gives theoretical support to the independent operation of markets observed in real life markets as well as our practice in market design that separately treats each market for its design

broadcasting and sport the broadcasting of sport is heavily regulated our main finding is that common trends and differences in the quality quantity and price of televised sport across europe and usa cannot be adequately explained without reference to policy interventions by national and supranational government and by competition and regulatory authorities these interventions have a significant impact on the organization and governance of sports as well as the structure of broadcasting markets and the conduct of broadcasting companies foreclosure of broadcasting markets through exclusive long term contracts bundling and vertical integration access of viewers to major sporting events and collective selling stand out as the most significant policy issues we conclude by noting a number of policy implications copyright 2003 oxford university press

the strategy structure of two sided matching markets we study two sided markets in which agents are buyers and sellers or firms and workers or men and women the agents are to form partnerships which provide them with satisfaction and at the same time make monetary transfers e g salaries or dowries the core of this market game is shown to have a particularly nice structure so that precise answers can be given to questions concerning comparative statics and manipulability the idea of using walrasian equilibrium as a mechanism for making allocations with desirable properties of fairness and efficiency has been studied extensively the scheme involves having agents specify their supply and demand functions the competitive equilibria are then calculated and allocations are made accordingly in general this procedure may run into two difficulties first nonuniqueness if there are several equilibria there may be no fair way to decide which one should be implemented and second manipulability if there is only one equilibrium an informed agent may be able to influence it by suitably falsifying his demand data however as we will show here using the walrasian mechanism does work remarkably well for a certain class of important markets these are the matching markets of our title and they include markets for single items like houses where it is assumed that traders do not wish to acquire more than one item they also include labor markets in which it is desired to match workers with jobs at suitable salaries academic markets in which students are to be assigned to educational institutions marriage markets where men and women are matched through negotiating of dowries it turns out that in these markets both the problems of nonuniqueness and manipulability can be resolved in a

firm behavior in franchise monopoly markets this article presents empirical evidence concerning the value offranchise bidding competition as a means of controlling natural monopoly behavior the analysis focuses on the cable television industry using data collected in a survey of local government officials in cabled communities throughout the continental united states one important potential problem raised by critics offranchise bidding is the ability offranchise winners to engage in ex post opportunistic behavior by reneging on the promises that they made in order to win the franchise contract the results of my analysis suggest that although franchise competition does leadfirms to engage in some degree of opportunistic behavior the extent of opportunism is not severe furthermore reputation effects appear to play a role in constraining firm behavior while rate regulation actually seems to exacerbate ex post behavioral problems

the internationalization of new and small firms a resource based view abstract this paper seeks to enhance understanding of the internationalization of small and medium sized enterprises smes the study focuses upon the following issues can the characteristics of principal founders businesses and the external environment at one point in time be used to explain at a later date whether a firm is still an exporter or a nonexporter whether exporting firms are larger in size than nonexporting firms whether exporting firms report superior performance than nonexporting firms and whether exporting firms are more likely to survive than nonexporting firms to address these questions this study draws upon a sample of 621 manufacturing construction and services businesses located in twelve contrasting environments in great britain surveyed first in 1990 91 and then re interviewed in 1997 a resource based view is reviewed to identify the range of factors encouraging some owner managed smes to enter export markets four categories of human and financial capital are examined general human capital resources the principal founder s management know how the principal founder s specific industry know how and a principal founder s ability to obtain financial resources that can act as a buffer against random shocks variables relating to resource availability in the external environment were also collected and considered control variables previous studies have highlighted substantial industry differences in the propensity for businesses to enter export markets as well as to survive the principal industrial activity of each business in 1990 91 was therefore considered a control variable variables collected during the 1990 91 survey were selected to explain variations in the propensity to export reported by surviving independent firms in 1997 after elimination of missing values the working sample was reduced to 116 independent firms for this study 86 nonexporters and 30 exporters in 1997 in addition the 21 variables were selected to explain variations in business size in 1997 profit performance relative to competitors reported in 1997 changes in employment over the 1990 91 to 1997 period and business survival over the 1990 91 to 1997 period 213 survivors and 395 nonsurvivors multivariate statistical analysis confirmed that previous experience of selling goods or services abroad is a key influence encouraging firms to export businesses with older principal founders with more resources denser information and contact networks and considerable management know how are significantly more likely to be exporters further businesses with principal founders that had considerable industry specific knowledge are markedly more likely to be exporters businesses principally engaged in the service sectors and those located in urban areas are significantly less likely to be exporters a key finding of this study is that the explanatory variables significantly associated with the propensity to export sales abroad are not the same as those significantly associated with selected size and performance measures the resource based explanatory variables selected fail to significantly detect employment growing firms over the 1990 91 to 1997 period they also fail to significantly distinguish surviving independent firms from nonsurviving firms results from this study will provide policy makers and practitioners with additional insights into the key resource based factors associated with the decision by new and small independent firms to export sales abroad practitioners and policy makers can focus upon the characteristics of principal founders businesses and the external environment to predict the subsequent propensity of an independent firm to be an exporter policy makers and practitioners who want more new and small firms to export outside their local areas may prefer to target their resources and assistance to the relatively smaller proportion of firms that have the business and principal founder profiles that are significantly associated with a firm being an exporter

modeling new venture performance an analysis of new venture strategy industry structure and venture origin abstract this study examined the relative role of strategy industry structure and origin independent vs corporate or parental venture on the profitability and growth of 247 new ventures in two segments of the information processing industry computer related and communications related equipment manufacturing each of the 247 ventures was eight years old or less most previous research examining the role of these three factors in new venture performance has examined them singularly or in limited combinations with very few firms in their sample the theoretical agenda in this study was to advance this research stream by simultaneously examining origin strategy and industry structure as well as the interaction between strategy and industry structure using a large sample of new ventures the applications agenda in the study was to uncover patterns in the interactive role of strategy structure and origin that might provide meaningful insights to aid strategic decisions in new ventures from the theoretical perspective the study found that variability in new venture performance was better accounted for when all three factors were included in a statistical model overall these results suggested that new venture strategy and industry structure and their interaction are essential for understanding new venture performance while origin is secondary more important in explaining market share growth than higher profitability several study findings may be of interest to the practicing new venture strategist the study uncovered eight basic strategy patterns across the 247 firms a detailed description of these eight distinct patterns is provided in appendix a of this article overall performance results suggest that no one strategy is always the best new venture strategy but when we examined the fit of different strategies with different industry structures we were able to distinguish high from low performing new ventures dramatically in other words specific new venture strategies were very effective in some industry settings and ineffective in others for example new venture entrepreneurs were able to successfully enter and compete in high barrier industries by employing strategies emphasizing superior product quality and higher customer service alternatively when entry barriers were low strong marketing skills offered the best advantage the key to the success of these marketing oriented ventures was the establishment of a distribution system in which products were pulled through by their strong brand identification and name recognition these venture managers supported brand identification and name recognition with a high level of advertising and promotion experience and gave constant attention to adding new channels of distribution although earlier studies suggested that parented new ventures are more effective in achieving profitability origin was not a significant explainer of profitability for the new ventures in this study much has been written recently that argues for creating an entrepreneurial climate in a corporation many corporations have wholeheartedly embraced efforts to foster an independent spirit among parented ventures so much so that many corporations have attempted to replicate an independent climate in their corporate sponsored start ups rather than an origin difference between new ventures perhaps it is the difference in the climate or spirit of the venture or more specifically the manner in which the corporation manages the start up that accounts for profitability differences

technical efficiency of european railways a distance function approach this study has two principal objectives the first objective is to measure and compare the performance of european railways the second objective is to illustrate the usefulness of econometric distance functions in the analysis of production in multioutput industries where behavioural assumptions such as cost minimization or profit maximization are unlikely to be applicable using annual data on 17 railways companies during 1988 1993 multioutput distance functions are estimated using corrected ordinary least squares cols the resulting technical efficiency estimates range from 0 980 for the netherlands to 0 784 for italy with a mean of 0 863 the distance function results are also compared with those obtained from single output production functions where aggregate output measures are formed using either total revenue or a tornqvist index the results obtained indicate substantial differences in parameter estimates and technical efficiency rankings casting significant doubt upon the reliability of

filling the institutional void the social behavior and performance of family vs non family technology firms in emerging markets family businesses fbs are said to treat their employees with unusual consideration to form a cohesive internal community they are also claimed to develop deeper more extensive connections or relationships with outside stakeholders both behaviors may increase the viability of a business intended to support an owning family and its later generations such social linkages we believe may compensate for the lack of capital product and labor institutional infrastructures in dynamic emerging economies this survey study of a most challenging emerging market sector namely korean hightechnology businesses argues three major points 1 relationships of community and connection will be more common in fbs than in non fbs 2 these relationships will enhance performance in emerging market hightechnology sectors which because of their competitive complex and everchanging nature rely on significant expert knowledge and social capital within and outside the organizational community 3 the performance of fbs will benefit more from these community and connection relationships than the performance of non fbs because in these personally intimate settings employees and external partners will be especially likely to return the generosity of a visibly active owning family or to penalize its selfishness significant empirical support was found for most of these hypotheses

the incidence of regulatory rents in the motor carrier industry this article focuses on two questions in the debate over motor carrier regulation first did regulation create eliminate or have no effect on monopoly rents in the trucking industry second ifthere were rents what was their incidence were they received by owners oftrucking firms dissipated through higher costs or captured by the teamsters union data on share price responses to deregulation announcements reveal declines in expected profits of 8 19 of totalfirm value this suggests that regulation created monopoly profits and indicates that at least some of these rents accrued to owners of trucking firms firms responses to regulatory change are modelled as functions of company s operating characteristics and measures of unionization operating efficiency and service characteristics are shown to affect the impact of deregulation on share values

estimation of a hedonic price equation for bordeaux wine does quality matter in this paper the hedonic price technique is applied to bordeaux wine in the hedonic price function we include not only the objective characteristics appearing on the label of the bottle but also the sensory characteristics of the wine our data come from an experimental study in which juries have evaluated and graded a sample of bordeaux wines the estimation of the hedonic price equation shows that the market price is essentially determined by the objective characteristics the estimation of a jury grade equation shows that quality unlike the market price is essentially determined by the sensory characteristics

an examination of market power in the intrastate long distance telephone service markets evidence from a natural experiment abstract during the preceding 2 decades state public utility commissions have experimented extensively with regulating telecommunications carriers more recently many states have more or less deregulated long distance service this paper employs a panel data set of states to examine whether the competitive conduct of long distance carriers was affected by these events a methodology is developed to estimate changes in the market conduct parameter following states decisions to price deregulate long distance service this effect is isolated by using a difference in difference estimator that compares the change in market conduct of the treatment group states deregulated during the study period to the change in market conduct of the control group states deregulated throughout the study period my hypothesis is that elimination of price regulation altered the carriers market conduct and that this change in conduct explains in part the price differences in regulated and deregulated markets the result

regulatory effects on electricity prices in hong kong abstract in hong kong electricity is supplied by two investor owned utilities china light and power company limited clp and the hongkong electric company limited hec these two utilities operate under a special regulatory arrangement known as the scheme of control which was proposed by the industry in 1964 the objective of this paper is to evaluate whether the scheme of control has fulfilled its original intention of protecting both the producer s right to serve and the consumer s right to be served our empirical results have indicated that the first scheme of control 1964 1978 had a greater effect on reducing electricity prices than the second one 1979 1992

patterns of growth competitive technology and financial strategies in young ventures abstract young independent technology based ventures have an increasingly complex array of strategic choices about how they can grow while simultaneously competing on the basis of their technological capacity and skills in their markets given the central importance of these choices to the success of the venture there should be a close integral relationship among them similarly financial strategy choices also enter this relationship growth and competition place tremendous resource demands on the young technology based venture and financial strategy choices therefore must also be factored into the choice taking process the choice taking perspective is basic to this inquiry as other researchers have pointed out young entrepreneurial ventures typically do not utilize highly formalized strategic planning processes robinson and pearce 1983 strategy formation in such firms tends to be informal and episodic strategy may be revealed best through the pattern or set of choices taken at a point in time and over time from a choice taking perspective then the critical questions become the following a are there identifiable patterns of growth technology and financial choices b what factors shape or determine which choices are taken and c are these patterns related to venture performance these questions were explored by using data from a survey of 100 ceos of young independent technology based firms across three industries the results generally support the idea that patterns of choices can be identified several of these patterns are related to the ventures demographic characteristics such as form of ownership and scope of sales importantly stage of development was not related to those patterns nor to the performance of the ventures the highest performing ventures were found to be pursuing internal innovation through r d for product breakthroughs this finding is surprising since young ventures at the stage at which most were found in this sample would traditionally be expected to emphasize product extensions and modifications we need to better understand why young ventures would choose to innovate internally for breakthroughs in their growth stages and how well they are able to do so a major implication of this research is that the ceos of young technology based ventures are being presented with a much larger menu or array of choices at many points in time than conventional stage based models of venture development have postulated one explanation of this possibility is that the firm life cycle is being compressed by relatively new conditions such as the availability of more and earlier capital through joint venturing and alliances and shorter product life cycles indeed a follow up survey a year later with 77 ceos from this sample confirmed that joint ventures and alliances were the number one choice being pursued to gain access to distribution channels and new markets what is troubling about this possibility is that the skills and capacities of these young ventures may be limited in comparison with the richness and complexity of the available choices in the follow up survey the sources of information that were by far the most relied upon for strategic decision making were other internal senior managers and board members outsiders such as lawyers ranking distantly behind the leaders of these ventures need to be fully supported in evaluating negotiating and managing these often highly complex relationships