adapting contract theory to fit contract farming this article discusses the current state of contract theory and its usefulness for conceptualizing issues related to agricultural contracting i will discuss the limitations of existing theory for applied work and what methodological improvements are needed to enhance the usefulness of the theory to agricultural economists one pervasive problem is that the canonical economic literature on contracts is rather fragmented and the various methodological strands are narrow in their focus as such there is a need for agricultural economists to engage in methodological research to develop applied contracting models that can capture higher order features of real world agricultural contracts while delivering generalizable comparative statics predictions the need for such research is obvious as contracting continues to expand along the entire modern food marketing channel in the latter part of this article i develop a simple model to illustrate how classic methodological approaches can be combined with recent developments in contract and game theory to construct applied theory models that are useful for capturing some important features of agricultural contracts

liquidity constraints and housing prices theory and evidence from the va mortgage program abstract this paper employs a simple intertemporal model to show that presence of liquidity constraints can depress the price of a durable good below its net present rental value regardless of the overall supply elasticity the existence of price effects implies that the relaxation of liquidity constraints is not pareto improving and may in fact be regressive historical evidence which exploits the fact that a clearly identifiable group war veterans enjoyed the most favored access to mortgage credit after world war ii supports the model the results suggest that more recent mortgage market innovations have served primarily to increase prices rather than home ownership rates and that such innovations have the potential to exacerbate socioeconomic disparities in ownership rates

defining the rebound effect abstract this paper gives rigorous definitions of the rebound effect not only in the well described single commodity case khazzoom 1980 the energy journal 1 4 21 40 but also for a multiple commodity case it is shown that the familiar laws for the single case do not hold for the multiple case the paper describes the state of the art of empirical estimation of the rebound effect with special focus on the estimates done for the netherlands we conclude that according to every definition empirical evidence shows that the re is probably small between 0 and 15

can capital scarcity help agency theory explain franchising revisiting the capital scarcity hypothesis we offer a rationale for a link between capital scarcity and franchising predictions respectively based on agency theory and the capital scarcity hypothesis were tested among 91 restaurant chains

environmental regulation technological innovation and energy consumption a cross region analysis in china abstract china has encountered the environmental issues and energy pressures in the middle income stage strengthening environmental regulation is a crucial measure to prevent environment deterioration and energy dilemma this paper investigates the three types of environmental regulations on energy consumption using feasible generalized least squares method during 1997 2015 in direct and indirect path the main conclusions are as follows in the direct path the economical and supervised types of environmental regulations have inhibited energy consumption whilst legal environmental regulation has no significant impact as for indirect path the rebound effect of energy is greater than the energy conservation generated by technological innovation which is embodied as an inhibitory effect the effects of environmental regulation display regional difference the legal and supervised types of environmental regulations have significant cost effect and rebound effect on energy consumption in the entire samples on the contrary the economical environmental regulation shows the opposite sigh in eastern regions the counterfactual simulation results show that the net effects of environmental regulations on energy consumption are negative which is beneficial for relieving energy pressures based on the findings this paper provides pertinent policy implications

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

the effects of energy related policies on energy consumption in china abstract this paper examines the effects of different types of energy related policies on different types of energy consumption in china we collect and construct a novel comprehensive and detailed data set on province level energy related policies that includes specific types of energy related command and control policies financial incentives awards intellectual property rights and education and information policies our econometric method employs instruments to address the potential endogeneity of the policies according to our results some types of energy related policies have been effective in reducing energy consumption however many other policies have the possibly unintended or even perverse consequence of increasing rather than decreasing energy consumption our results on the mixed effectiveness of energy related policies in china in reducing energy consumption have important implications for the design of energy related policies in china and elsewhere

the future price of houses mortgage market conditions and the returns to homeownership the purpose of this paper is to provide a simple framework in which to analyze the impact of a perfectly anticipated increase in the future selling price of houses on current house purchase decisions in the presence of capital market imperfections since implicitly it is the after tax selling price of houses that is considered this analysis is equivalent to one of a decrease in the capital gains tax on houses at retirement in this paper assumptions about homeownership mortgage markets and liquidity constraints are added to a life cycle model of asset accumulation taking the date of house purchase as exogenous it is shown that the impact of an exogenous increase in the expected future price of houses depends on current mortgage market conditions the future price of houses relative to the current price and the ratio of liquid assets to future labor income as well as preferences also a simple model of a market for houses is presented to analyze the impact of an increase in the expected future price of houses on the current market clearing price the mortgage market and the redistribution of the housing stock to consumers according to their wealth and liquidity characteristics in the life cycle model as exposited by franco modigliani and robert brumberg an increase in consumption in one period requires a decrease in consumption in another period when owner occupied housing is added to the model the tradeoff between consumption in different periods becomes more complex purchasing a larger house entails an increase in the consumption of housing services and an increase in assets held in the form of a house but a decrease in either nonhousing consumption or the holdings of an alternative asset or both the response of the consumer to price or income changes is also limited by financial market constraints capital market imperfections have been introduced into the life cycle model by a number of authors see for example lester thurow thayer watkins thomas russell clark wiseman and christopher pissarides and several authors have explicitly considered the impact of capital market imperfections on the house purchase decision see william dolde and james tobin william poole donald lessard and modigliani and dolde most similar to this study although developed independently roland artle and p varaiya s paper includes the theoretical incorporation of the house purchase decision into a life cycle model they consider the problem of choosing the date of house purchase while treating the level of consumption of housing services as exogenous in the life cycle model in this paper the consumer chooses the size of house to purchase at an exogenous date to use the life cycle model in the framework of a market of houses it is assumed that the stock of houses and the prices of all other goods including the rate of return on the alternative asset are fixed all consumers are identical except perhaps for initial wealth as noted by irving fisher p 325 in a world of perfect foresight and perfect markets the rates of return on all assets are equated in equilibrium if markets are perfect with the stock of houses and other prices fixed the present price of houses will rise by an amount equal to the present value of an exogenous increase in a future price of houses when mortgage market imperfections are introduced this relationship no longer holds and a future price increase may result in a redistribution of the current stock assistant professor of economics university of michigan this paper is an extension of a chapter of my doctoral thesis at the university of wisconsin madison the helpful comments of donald d hester charles a wilson hal varian and george borts are gratefully acknowledged

simulating the impacts of contract supplies in a spot market contract market equilibrium setting this article embeds a principal agent model within a market equilibrium model of contract and cash markets to analyze the impact of contracting on the spot market for hogs the equilibrium model incorporates both quality differentiation in the contract market and an endogenously determined cash market price for three types of contracting scenarios market equilibrium conditions are derived and results are presented for a numerical example contrary to some empirical results our model shows that the increased supply of hogs under typical formula price contracts can increase or decrease the cash market price depending on the relative size of overall contract supplies

measuring the rebound effect with micro data a first difference approach abstract we provide estimates of the rebound effect for car transport in denmark using a rich data set with individual household data on car use fuel efficiency and car as well as household characteristics a demand model is estimated in first differences the availability of households in the sample that replaced their car during the period of observation combined with information on their driving behaviour before and after the car switch allows us to identify the rebound effect endogeneity is taken into account by using appropriate instruments results include the following first we reject the conventional formulation in which only fuel cost per kilometre matters second the selection equation confirms that higher fuel prices induce households to switch car third the results suggest the presence of a rebound effect that is on the lower end of the estimates available in the literature specifically our best estimate of the rebound effect is some 7 5 10 fourth the fuel price sensitivity of the demand for kilometres appears to be declining with household income but we do not find a significant impact of income on the rebound effect finally simulation results indicate that the small rebound effect and changes in car characteristics in response to higher fuel prices imply that compared to the reference scenario higher fuel prices lead to a substantial reduction in both the demand for kilometres and in demand for fuel

efficiency gains from organizational innovation comparing ordinal and cardinal tournament games in broiler contracts abstract we analyze the contract settlement data of a poultry company who contracts the production of broiler chickens with a group of independent growers the company originally used rank order ordinal tournaments to compensate their contract growers and later switched to cardinal tournaments based on the observed payment mechanism we construct an empirical model of a rank order tournament game and estimate structural parameters of the symmetric nash equilibrium and then simulate growers performance under the observed cardinal tournament contract we found that the model with risk averse agents fits the data better than the model with risk neutral agents and that switching from a rank order tournament to a cardinal tournament while keeping the growers ex ante expected utility constant improved efficiency the principal company gains from the switch whereas some of the agents growers gain and others lose depending on their realized productivity shocks

agricultural markets as relative performance evaluation relative performance schemes such as tournaments are commonly used in markets for a variety of livestock and processing commodities while explicit versions of these schemes are rarely used in markets for fresh fruits and vegetables and specialty grains we show how contracts for these latter commodities do in fact provide relative performance incentives albeit indirectly via a payment mechanism that depends on market prices in such contracts compensation is often an increasing function of revenue this implements a relative performance scheme by making each grower s payment an increasing function of his own output but a decreasing function of other s output in an important 1982 article holmstr om models the problem facing a group of agents each of whom produces an observable quantity of some good by taking an unobservable action a rather robust conclusion from this line of inquiry is that when the production of one agent is not independent of the production of another then the compensation awarded to the first agent should depend not only on his own production but also on the output of others in particular if agents production is positively correlated because of some common shock for example then an agent s compensation should be larger when other agents output is smaller a phenomenon which holmstr om terms relative performance evaluation relative performance evaluation ought to be particularly important for agricultural producers and the various intermediaries who purchase their output these producers face considerable common risk from aggregate production shocks and so one would expect that relative performance evaluation could improve efficiency in fact certain types of agricultural intermediaries do use explicit relative performance schemes as predicted by

integrator contracts with many agents and bankruptcy this article analyzes optimal livestock production contracts between an integrator company and many independent growers in three similar industries broiler turkey and swine the analysis provides an explanation for the simultaneous existence of distinct incentive schemes in these industries by examining the effects of bankruptcy the key factors are shown to be the output price volatility and the firm size with large companies dominating the broiler industry a small price volatility facilitates the use of two part piece rate tournaments by contrast given the prevalence of smaller companies in the swine industry a larger price volatility generates a bankruptcy risk which renders the use of tournaments infeasible given the combination of medium size companies in the turkey industry an intermediate price volatility produces a mixed result where tournaments and fixed performance standards exist simultaneously

energy rebound effect in china s industry an aggregate and disaggregate analysis abstract considering the crucial role of industrial sectors in energy conservation this paper investigates the impact of output growth on energy consumption in china s industrial sectors with an index decomposition model and the energy rebound effect in the industrial sectors with a panel data model using the annual data during 1994 2012 the empirical results indicate that first industrial output growth is proved to be the major factor in promoting industrial energy consumption while energy intensity reduction and structure shifts across industrial sub sectors play the dominant roles in slowing down industrial energy consumption second there does exist energy rebound effect in china s aggregate industry which ranges from 20 to 76 during 1995 2012 or 39 on average in particular the energy rebound effect in manufacturing is relatively smaller during the sample period i e 28 on average finally the energy rebound effect in both china s aggregate industry and manufacturing exhibit an overall decreasing trend over time

investments to create bargaining power the case of franchising hybrid organizational forms such as franchise systems join two or more independent parties under a contract the ability of each party to achieve its goals depend upon the relative bargaining power in the relationship established by the contract using transaction cost economics and porter s 1980 characterization of sources of bargaining power this paper argues that the franchisor can make investments in activities such as tapered integration and buyer selection to increase its bargaining power and decrease conflict and litigation in a franchise system specifically tapered integration owning some units while franchising others selecting inexperienced franchisees and employing a long training program are predicted to increase the franchisor s bargaining power and the franchisee s compliance with franchisor standards an empirical analysis of litigation in restaurant franchise systems supports the theoretical hypotheses copyright 2000 john wiley sons ltd

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

does predicted rebound depend on distinguishing between energy and energy services pour analyser le role des services energetiques et des combustibles dans l effet de relance de la consommation d energie liee a des actions d amelioration de l efficacite energetique plusieurs approches sont utilisees et comparees celle de cobb douglas celle de leontief et celle de la croissance equilibree

economy wide estimates of energy rebound effect evidence from china s provinces abstract the ongoing debate on the magnitude of china s economy wide energy rebound effect re entails further investigations not only with more details but also with more credible methods in this study a modified two stage approach which could avoid methodological issues regarding re estimation is applied to estimate macroeconomic re with a data panel of 30 provinces in china during the period 1997 2015 in particular in order to comprehensively measure energy efficiency we construct a dynamic energy efficiency indicator which considers not only the static efficiency of energy use but also the technical change regarding energy usage using dynamic panel data models we estimate the elasticity of energy consumption with respect to energy efficiency which directly links to the measurement of re the short run and long run estimates of re are reported and the 95 confidence interval was computed for each sample based on the nonparametric bootstrap method to further analyze the macroeconomic re of different regions results indicate that the average re of all provinces is 88 55 in the short run and the average long run re is 77 50 the re in the developed eastern region continuously decreased while re in the western region increased to be the largest during the research period

a primer on cardinal versus ordinal tournaments i introduction the tournament literature has considered primarily two relative performance evaluation schemes that are consistent with what we observe in practice the rationale behind each of these incentive schemes is that relative performance evaluation is useful when agent performance is subject to common shocks in which case individual performance is not a sufficient statistic for individual effort that is the performance of other agents can enhance the inference of the effort exerted by an individual agent one important difference between these schemes is that under rank order or ordinal tournaments the prizes are prespecified and agents compete for rank by contrast under two part piece rate or cardinal tournaments the total prize is fixed and agents compete for a share of the pie 1 each agent receives a base payment and a bonus depending on the difference of his performance from the average performance of his peers 2 average performance provides an informative signal about the value of common shocks inflicted on agents ordinal tournaments are prevalent in contests where rank is more important than individual performance for instance sports contests where contestants compete for medals or fixed prizes or when individual performance data are not readily available for instance promotion contests where the individual contribution of contestants cannot easily be separated from that of their co workers or subordinates by contrast cardinal tournaments are popular in several occupations or industries where cardinal performance data are readily available e g salesmen contracts physician contracts with hmos and agricultural contracts 3 both ordinal and cardinal tournaments are relatively simple to design even though they are only proxies of theoretically optimal schemes 4 prior literature has contrasted the efficiency properties of either ordinal or cardinal tournaments against those of piece rates under piece rates each agent is evaluated according to his absolute performance thus agents receive a base payment and a bonus which is based typically linearly on their individual output 5 piece rates are sometimes expressed as fixed performance standards when an agent s performance is evaluated against a fixed standard instead of the average output obtained lazear and rosen 1981 green and stokey 1983 and nalebuff and stiglitz 1983 have shown that ordinal tournaments are superior to piece rates when agent activities are subject to common shocks that affect performance 6 more recently marinakis and tsoulouhas 2012 2013 investigated and verified this result for cardinal tournaments relative performance evaluation via tournaments constitutes a pareto superior move by removing common uncertainty from the responsibility of agents and by charging a premium for this insurance the principal increases his profit without hurting the agents moreover by providing this type of insurance tournaments enable the principal to implement higher power incentives than under piece rates what is still an open question in the literature above is a comparison of ordinal to cardinal tournaments the consensus among tournament theorists is that even though ordinal tournaments are informationally wasteful as in holmstrom 1982 by ignoring the agents cardinal performance data if available they are however more general because they are less restrictive on the functional form of the contract i e they are step functions with a linear or non linear trend part of the appeal is that the founders of tournament theory focused on ordinal tournaments nevertheless a significant part of the current tournament literature has analyzed cardinal tournaments instead 7 this paper fills in this gap in theory by developing a framework that can be used to analyze both cardinal and ordinal tournaments as well as piece rates and in doing so it provides a primer on tournaments and piece rates

the macro economic rebound effect and the uk economy abstract this paper examines the macroeconomic rebound effect for the uk economy arising from energy efficiency policies 2000 2010 using the macroeconomic model mdm e3 the literature distinguishes between three types of rebound effect direct indirect and economy wide the macroeconomic rebound effect considered here is the combination of the indirect and economy wide effects policies for the domestic business commercial and public and transport sectors of the economy are analysed for 2000 2010 overall the policies lead to a saving of about 8 of the energy which would otherwise have been used and a reduction in co2 emissions of 10 or 14 mtc by 2010 there are also favourable macroeconomic effects lower inflation and higher growth we find that the macroeconomic rebound effect arising from uk energy efficiency policies for the period 2000 2010 is around 11 by 2010 averaged across sectors of the economy when this is added to the assumed direct rebound effect of around 15 this gives a total rebound effect of around 26 arising from these policies thus the findings of the study support the argument that energy efficiency improvements for both consumers and producers stimulated by policy incentives will lead to significant reductions in energy demand and hence in greenhouse gas emissions

contract production of peas abstract this article analyzes a contract between farmers and the processor danisco foods production of peas for consumption requires highly accurate coordination obtained through centralized decision making the contract is based on a tournament system providing risk sharing between the farmers general problems known from contract theory such as hold up moral hazard risk sharing and discrimination are analyzed the article illustrates trade offs between these problems in the design of contracts by negotiating the contract through the pea growers association the farmers gain some bargaining power thereby the farmers ensure that danisco foods uses only one contract for all farmers this article analyzes the consequences of the farmers strategy throughout the analysis several modifications of the contract are suggested in order to improve the incentives

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

impact of energy efficiency gains on output and energy use with cobb douglas production function abstract a special issue of energy policy 28 2000 was devoted to a collection of papers edited by dr lee schipper the collection included a paper entitled a view from the macro side rebound backfire and khazzoom brookes in which it was argued that the impact of fuel efficiency gains on output roughly gdp is likely to be relatively small by cobb douglas production function however an error in the analysis leads to under estimation of the long term impact this paper first provides a partial equilibrium analysis by an alternative method for the same case and then proceeds to an analysis on the issue in a two sector general equilibrium system in the latter analysis energy price is internalized both energy use efficiency and energy production efficiency are involved

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

costs of control the source of economic rents for mcdonald s franchisees the main purpose of this article is to establish empirically using financial data that there are both ex ante and ex post rents left downstream at mcdonald s we find that the present value of the ex ante rents is around 300k 455k 1982 dollars ex post rents are of course even larger we argue that the ex post rents represent an incentive mechanism that complements the use of profit sharing rights at mcdonald s we also argue that ex ante rents arise here because franchisees wealth constraints prevent the up front extraction of the full present value of the ex post rents finally we note that mcdonald s desire for a particular type of individual to operate its franchises namely owner operators whose livelihoods are tied to the success of their outlets increases the likelihood that downstream operators face liquidity constraints this in turn contributes to the need for mcdonald s to leave ex ante rents downstream

a general equilibrium assessment of rebound effects in this paper we use a general equilibrium model applied to a national economy norway to explore the potential for energy efficiency improvements to trigger economic forces that offset potential savings from using more efficient technologies rebound effects two types of energy efficiency improvements electricity and oil are introduced into various sectors of the economy our results suggest significant and surprising differences across sectors concerning both energy use and consequences for the build up of greenhouse gases rebound effects are found to be quite significant for manufacturing sectors since long term consumption of energy undergoes minor reductions or increases in response to efficiency improvements in other sectors rebound effects appear to be weak or almost absent

testing the theory of tournaments an empirical analysis of broiler production broiler chickens are raised by contract growers whose rewards depend explicitly upon relative performance we use data on the performance of broiler producers facing both tournament and linear performance evaluation compensation structures to test three predictions from the theory of tournaments that changes in the level of prizes that leave prize differentials unchanged will not affect performance that in mixed tournaments more able players will choose less risky strategies and that tournament organizers will attempt to handicap players of unequal ability or reduce mixing to avoid the disincentive effects of mixed tournaments our evidence is consistent with each prediction

jevons paradox revisited the evidence for backfire from improved energy efficiency beginning with william stanley jevons in 1865 a number of authors have claimed that economically justified energy efficiency improvements will increase rather than reduce energy consumption jevons paradox is extremely difficult to test empirically but could have profound implications for energy and climate policy this paper summarises and critiques the arguments and evidence that have been cited in support of jevons paradox focusing in particular on the work of len brookes and harry saunders it identifies some empirical and theoretical weaknesses in these arguments highlights the questions they raise for economic orthodoxy and points to some interesting parallels between these arguments and those used by the biophysical school of ecological economics while the evidence in favour of jevons paradox is far from conclusive it does suggest that economy wide rebound effects are larger than is conventionally assumed and that energy plays a more important role in driving productivity improvements and economic growth than is conventionally assumed

macroeconomic effects of efficiency policies for energy intensive industries the case of the uk climate change agreements 2000 2010 abstract this paper reports a study modeling the uk climate change agreements ccas and related energy efficiency policies for energy intensive industrial sectors bottom up estimates of the effects of these policies are introduced into the energy demand equations of a top down dynamic econometric model of the uk economy with fifty industrial sectors mdm e3 this allowed estimation of the effects of the reduced energy use for the outputs from the sectors i e the reductions in unit costs of the energy intensive industries on the demand for their outputs both in the uk and in the export markets the model is solved as a counterfactual 2000 2005 and as a projection 2005 2010 in a series of scenarios to allow estimation of the effects of the policies on inflation and growth as well as on overall energy demand and co 2 emissions the system wide final energy reductions is estimated to be 4 2 mtoe or 2 6 of total final demand for energy by 2010 including a rebound effect of 19 with negligible effects on inflation and a slight increase in economic growth through improved international competitiveness

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

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 franchise life cycle and the penrose effect abstract the paper suggests that the received economic analyses of franchising give insufficient consideration to its apparent role in facilitating the rapid development of networks of outlets a characteristic which receives much attention in the industry s own periodicals the paper argues that franchising based upon standardization and replication with contractual policing rather than the direct monitoring of branches assists a rapidly growing chain to circumvent the penrose constraint on organizational development this gives rise to a life cycle effect evidence from a large sample of us franchises appears to confirm our growth facilitation hypothesis

are tournaments optimal over piece rates under limited liability for the principal a highly acclaimed result is that tournaments are superior to piece rates when the agents are risk averse and their production activities are subject to a relatively large common shock the reason is that tournaments allow the principal to trade insurance for lower income to the agents our analysis shows that this celebrated result does not carry over to the case when a limited liability bankruptcy constraint limits the payments the principal can make provided that the liquidation value of the firm is sufficiently small this finding has important implications for the vast number of limited liability firms even though limited liability becomes an issue for different ranges of liquidation values under the two schemes tournaments are still superior when the liquidation value of the firm is intermediate or large even though the limited liability constraint is still binding for intermediate values surprisingly uncertainty in the price of output strengthens the need for tournaments by expanding the range of liquidation values over which tournaments are dominant because price uncertainty introduces additional bankruptcy risk these findings provide insight into policy implications in the contracting out of services by state and local governments in procurement in rent seeking contests and in tournaments used by hmos

investment tax incentives prices and the supply of capital goods using data on the prices of capital goods this paper shows that much of the benefit of investment tax incentives does not go to investing firms but rather to capital suppliers through higher prices the reduction in the cost of capital from a 10 percent investment tax credit increases equipment prices 3 5 7 0 percent this lasts several years and is largest for assets with large order backlogs low import competition or with a large fraction of buyers able to use investment subsidies capital goods workers wages rise too instrumental variables estimates of the short run supply elasticity are around 1 and can explain the traditionally small estimates of investment demand elasticities in absolute value the demand elasticity implied here exceeds 1

contract duration evidence from franchising abstract economists generally view standard franchise contracts as efficient while franchisee advocates view them as exploitive consistent with the economic view we find that contract duration is positively and significantly related to the franchisee s physical and human capital investments which are often firm specific in contrast to assertions by franchisee advocates we find that these relations exist in subsamples containing only the most established franchisors as measured by size and experience and that larger more experienced franchisors tend to offer longer term contracts than do newer franchisors our evidence also suggests that there is learning across firms about optimal contract terms

the rebound effect microeconomic definitions limitations and extensions abstract the rebound effect results in part from an increased consumption of energy services following an improvement in the technical efficiency of delivering those services this increased consumption offsets the energy savings that may otherwise be achieved if the rebound effect is sufficiently large it may undermine the rationale for policy measures to encourage energy efficiency the nature and magnitude of the rebound effect is the focus of long running dispute with energy economics this paper brings together previous theoretical work to provide a rigorous definition of the rebound effect to clarify key conceptual issues and to highlight the potential consequences of various assumptions for empirical estimates of the effect the focus is on the direct rebound effect for a single energy service indirect and economy wide rebound effects are not discussed beginning with khazzoom s original definition of the rebound effect we expose the limitations of three simplifying assumptions on which this definition is based first we argue that capital costs form an important part of the total cost of providing energy services and that empirical studies that estimate rebound effects from variations in energy prices are prone to bias second we argue that energy efficiency should be treated as an endogenous variable and that empirical estimates of the rebound effect may need to apply a simultaneous equation model to capture the joint determination of key variables third we explore the implications of the opportunity costs of time in the production of energy services and highlight the consequences for energy use of improved time efficiency the influence of time costs on the rebound effect and the existence of a parallel rebound effect with respect to time each of these considerations serves to highlight the difficulties in obtaining reliable estimates of the rebound effect and the different factors that need to be controlled for we discuss the implications of these findings for econometric studies and argue that several existing studies may overestimate the magnitude of the effect

how large is the economy wide rebound effect abstract the size of the economy wide rebound effect is crucial for estimating the contribution that energy efficiency improvements can make to reducing greenhouse gas emissions and for understanding the drivers of energy use economy wide rebound from an energy efficiency improvement includes changes in the use of energy to produce complementary and substitute goods or inputs and other flow on effects that affect energy use across the economy as well as the direct rebound due to energy users using more of an energy service that has become less costly as result of improved energy efficiency jevons first argued in 1865 that improvements in energy efficiency increase total energy use and in recent decades researchers have argued for and against this backfire hypothesis theory provides some guidance on the factors affecting rebound but does not impose much constraint on the range of possible responses historical evidence suggests that the improved energy efficiency of recent technology has not reduced energy use because consumption has shifted to more energy intensive goods and services simulations and econometric research have produced mixed results some recent general equilibrium studies find large rebound around 100 but more research is needed to confirm or refute these findings

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

housing investment in the united states a supply determined model of housing investment is estimated from quarterly data over the 1963 83 period the model is built on dynamic marginal cost pricing considerations and allows short and long run supply elasticities to differ these are estimated as 1 0 and 3 0 respectively but most of the long run response occurs within 1 year rapid adjustment speed and the sizable long run elasticity of supply are important factors in understanding the volatility of housing investment the data also suggest some anomalies in the expected present value theory of asset pricing for housing capital

transaction costs and the design of cropshare contracts modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth it is shown that the farmer either bears the entire cost of inputs or shares the costs with the landowner in the same proportion as the output the incentives of altering the cropshare percentage are examined and are used to derive implications about the portion of the crop that will be owned by the farmer the model is tested and supported using data from a 1986 survey offarmers and landowners in nebraska and south dakota

negative rebound and disinvestment effects in response to an improvement in energy efficiency in the uk economy this paper uses a computable general equilibrium cge framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the uk national economy previous work for the uk has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero the research reported in this paper involves carrying out a systematic sensitivity analysis where relative price sensitivity is gradually introduced into the system focusing specifically on elasticities of substitution in production and trade parameters in order to determine conditions under which rebound effects become a likely outcome the main result is that while there is positive pressure for rebound effects even where direct and indirect demands for energy are very price inelastic this may be partially or wholly offset by negative income competitiveness and disinvestment effects which also occur in response to falling energy prices the occurrence of disinvestment effects is of particular interest these occur where falling energy prices reduce profitability in domestic energy supply sectors leading to a contraction in capital stock in these sectors which may in turn lead to rebound effects that are smaller in the long run than in the short run a result that runs contrary to the predictions of previous theoretical work in this area

behavioral and welfare effects of tournaments and fixed performance contracts some experimental evidence using experimental economics we compare the efficiency and welfare effects of tournaments and fixed performance contracts our subjects agents were generally better off under fixed performance contracts but the advantage of the fixed performance contract disappears if the relative magnitude of the standard deviation of the common shock exceeds a critical value efficiency wise agents tend to exert higher effort under fixed performance contracts on average additionally an increase in the common shock standard deviation appeared to be associated with lower effort under tournaments our results shed light on the potential impact of legislative proposals to ban tournament contracts

rebound effect of improved energy efficiency for different energy types a general equilibrium analysis for china abstract this paper explores the rebound effect of different energy types in china based on a static computable general equilibrium model a one off 5 energy efficiency improvement is imposed on five different types of energy respectively in all the 135 production sectors in china the rebound effect is measured both on the production level and on the economy wide level for each type of energy the results show that improving energy efficiency of using electricity has the largest positive impact on gdp among the five energy types inter fuel substitutability does not affect the macroeconomic results significantly but long run impact is usually greater than the short run impact for the exports oriented sectors those that are capital intensive get big negative shock in the short run while those that are labour intensive get hurt in the long run there is no backfire effect however improving efficiency of using electricity can cause negative rebound which implies that improving the energy efficiency of using electricity might be a good policy choice under china s current energy structure in general macro level rebound is larger than production level rebound primary energy goods show larger rebound effect than secondary energy goods in addition the paper points out that the policy makers in china should look at the rebound effect in the long term rather than in the short term the energy efficiency policy would be a good and effective policy choice for energy conservation in china when it still has small inter fuel substitution

a view from the macro side rebound backfire and khazzoom brookes abstract this paper attempts to delineate a few key insights extracted from theoretical macroeconomic considerations of the rebound issue the goal has been to reduce these thoughts to a clear set of assertions that if true would be useful points of reference in the ongoing discussion despite their non empirical nature

oligopsony power asset specificity and hold up evidence from the broiler industry in this article we look for empirical evidence of hold up in broiler industry production contracts by using the cross sectional national survey of broiler growers first we focus on the problem of under investment and hypothesize that the degree of agent s grower s under investment systematically depends on the principal s integrator s market power and the level of asset specificity second we provide an indirect test of hold up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal s market power the results show moderate empirical support for the presence of hold up

homogenous and heterogenous contestants in piece rate tournaments theory and empirical analysis in this article we show that sorting different ability contestants in piece rate tournaments into more homogenous groups alters agents incentives to exert effort we propose a method for structurally estimating the piece rate tournament game with heterogenous players and apply it to the payroll data from a broiler production contract our counterfactual analysis shows that under reasonable assumptions both the principal and the growers can gain when the tournament groups are heterogenized this business strategy could be difficult to implement in real life settings however this article has supplementary material online

regulating broiler contracts tournaments versus fixed performance standards grower discontent with tournaments as mechanisms for settling poultry contracts can largely be attributed to the group composition risk that tournaments impose on growers this article focuses on the welfare effects of a widely advocated regulatory proposal to prevent integrator companies from using tournaments and replace them with schemes that compare performance to a fixed standard the analysis shows that the mandatory replacement of tournaments with fixed performance standards absent any rules that regulate the magnitude of the piece rate can decrease grower income insurance without raising welfare however replacing tournaments with fixed performance standards can simultaneously increase income insurance and welfare provided that the magnitude of the piece rate is also regulated

technological progress and sustainable development what about the rebound effect abstract sustainability concepts that rest on the idea of resource or energy efficiency improvements due to technological progress tend to overestimate the potential saving effects because they frequently ignore the behavioral responses evoked by technological improvements efficiency improvements also affect the demand for resources and energy and often an increase in efficiency by 1 will cause a reduction in resource use that is far below 1 or sometimes it can even cause an increase in resource use this phenomenon is commonly labeled the rebound effect which is well known among energy economists but never attracted much attention in ecological economics the paper starts with the traditional neoclassical analysis of the rebound effect in a partial equilibrium framework that concentrates on the demand of one particular energy service such as mobility or room temperature it also provides an overview of some of the main empirical studies based on this model that mostly confirm the existence of the rebound effect but are controversial about its actual importance however we have to go beyond the neoclassical single service model in order to take care of the variety of possible feedback affecting energy use the paper presents two important expansions of the single service model in order to show the potential relevance of the rebound effect to ecological economics first it is shown that in a multi services model it proves to be difficult to make general statements about the relevance of the rebound effect in this case the overall effect of an increase in energy efficiency on total energy use depends on the on the assumptions about the substitutability between the services considered and the direction of the income effect second the paper also tries to take care of the fact that changes in resource use or energy use are frequently just side effects of other forms of technological progress especially technological change of a time saving nature can have a large influence on energy use as many time saving devices for example faster modes of transport require an increase in energy consumption that is frequently reinforced by a rebound effect with respect to time this effect will be especially strong when wages are high and at the same time energy prices are low as is currently the case in most industrialized countries consequently the paper also provides a strong argument for the introduction of energy taxes

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

the law and economics of franchise tying contracts this paper analyzes from an economic perspective current antitrust law with regard to franchising requirements contracts where a franchisee must purchase an input from the franchisor or from a particular supplier designated by the franchisor the law takes an extremely hostile view toward such tie in contracts at least on the surface by stating that tying is a per se offense the court has said that such contractual arrangements generally serve hardly any purpose beyond the suppression of competition 2 and has held it not necessary to demonstrate anticompetitive effect before declaring them illegal the per se standard under which tying arrangements are analyzed is unusual because of the essential role of economic analysis to prove the existence of a per se illegal tying arrangement one must demonstrate economically that three conditions are met first that two separate products exist second that there is sufficient market power in the tying good and third that a not insubstantial amount of commerce in the tied good market is affected 3 in addition the per se standard permits affirmative defenses such as the use of tying for quality control and these also often entail sophisticated economic analysis as justice o connor correctly

fuel conserving and using production functions abstract this article compares eight production cost functions used or potentially useful for exploring how energy efficiency gains affect energy consumption we show the practitioner s choice of function can inadvertently pre determine results and make recommendations as to which functions are flexible enough to prevent this we also show pre selected factor substitution elasticities can similarly pre determine results to aid the comparison we decompose the energy consumption rebound effect into intensity and output income effects which also delivers insight into the mechanisms of rebound we conclude by recommending practitioners restrict themselves to either the gallant fourier or the generalized leontief symmetric generalized barnett cost functions as being sufficiently rebound flexible the translog cost function may be suitable given certain conditions and a particular form of the ces solow function is a possible but problematic candidate along the way the article provides a general methodology for similarly examining any arbitrarily defined constant returns to scale production or cost function

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

rethinking economy wide rebound measures an unbiased proposal in spite of having been first introduced in the last half of the ninetieth century the debate about the possible rebound effects from energy efficiency improvements is still an open question in the economic literature this paper contributes to the existing research on this issue proposing an unbiased measure for economy wide rebound effects the novelty of this economy wide rebound measure stems from the fact that not only actual energy savings but also potential energy savings are quantified under general equilibrium conditions our findings indicate that the use of engineering savings instead of general equilibrium potential savings downward biases economy wide rebound effects and upward biases backfire effects the discrepancies between the traditional indicator and our proposed measure are analysed in the context of the spanish economy

do tournaments solve the two sided moral hazard problem abstract the paper analyzes the optimality of relative performance evaluation via two part piece rate tournaments in incentive contracting with multiple agents and two sided moral hazard if the agents are risk averse it is shown that a tournament is optimal only when the following conditions hold i there is common uncertainty inflicted on the activities of the agents that is not contingent on their actions but can be contingent on the principal s action ii the principal sufficiently saves in transaction costs by employing a tournament iii the number of agents is sufficiently large then the feedback effect of using a tournament to monitor the agents is that the principal s moral hazard problem is relaxed when the principal takes a single action it can also be relaxed when the principal can vary her actions with the agents but there are economies of scale in her activity absent common uncertainty the optimum scheme is shown to be a fixed performance standard rather than a tournament but if the agents are risk neutral a tournament can still be optimal provided that ii and iii hold

new firm survival institutional explanations for new franchisor mortality why do some new firms succeed and others fail economists argue that new firms fail because entrepreneurs inefficiently manage production and organizational design williamson 1985 sociologists e g granovetter 1985 have typically viewed this explanation as undersocialized and argue that institutional legitimacy must also be considered to explain the survival of new firms this paper examines the survival of 1292 new franchisors established in the united states from 1979 1996 the results show that institutional legitimacy adds to economic explanations for the survival of new franchisors and suggests the importance of a properly socialized explanation

retail contracting theory and practice we summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers we do this using studies of traditional and business format franchise relationships as well as studies of salesforce integration decisions some of the patterns that we uncover are consistent with a standard incentive cum insurance theory of organization while others are not we brie y review some theoretical extensions that seem promising in terms of reconciling seeming con icts between theory and practice i introduction manufacturers of retail products must decide whether to sell their products to consumers themselves vertical integration or to sell via independent retailers vertical separation when manufacturers do not perform the sales function internally but want exclusive retailers they usually choose some form of franchising 1 many theories attempt to explain the choice of retail organizational form moreover a considerable body of empirical evidence concerning this choice is accumulating we attempt to evaluate this econometric evidence and relate it to the theories to accomplish this task we assess studies of franchising arrangements as well as studies of sales force organization in industrial settings the paper is organized as follows in the next section we highlight a number of regularities that arise in the empirical literature on retail contracting in particular we nd that i risk is positively related to the use of high powered incentives vertical separation ii the importance of the agent s eiort in production is positively related to the use of high powered incentives

political economy of regulation of broiler contracts in this paper we present a brief history of regulation of broiler contracts whose main characteristic has been that virtually all regulatory attempts on either federal or state levels have failed we identify two possible sources of market failure that may justify regulation asymmetric bargaining power between integrators and contract growers and imperfect information we search for the explanation for this outcome by comparing the public interest theory of regulation with the interest group theory posner 1974 based on the existing literature on possible market failures in broiler contracts we found that empirical evidence in support of those is rather weak this may or may not explain the existing lax regulatory environment in which poultry processors operate from the public interest theory s point of view however we can build a more compelling case for the lack of regulation resorting to the interest group theory s main arguments as formulated by becker 1983

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

vertical restraints and the law evidence from automobile franchising abstract after a 2002 european commission regulation prohibited the use of dealer exclusive territories automobile franchise contracts in italy introduced price ceilings and standards on verifiable marketing and service inputs such as advertising and salespeople the contracts also imposed quantity floors a practice already in use before the regulatory change the introduction of standards suggests that consistent with a view of vertical restraints as coordination mechanisms manufacturers used exclusive territories to induce desired dealer services and once the use of exclusive territories was prohibited they switched to alternative contractual devices to achieve this goal the introduction of price ceilings despite free intrabrand competition also suggests that car manufacturers tried to prevent some dealers from gaming the quantity floors by selling to other dealers customers while charging monopolistic prices at their own locations

supply elasticity matters for the rebound effect and its impact on policy comparisons abstract we develop a model of the rebound effect which explicitly accounts for both the demand and supply sides of the energy sources we consider a transportation sector originally using a dirty fossil fuel and examine the relative effectiveness of alternative policies efficiency improvements in the dirty fuel technology sector e g cafe standards and technology shifts by partial adoption of a new clean technology e g low carbon fuel standards the model generates endogenous equilibrium quantities and prices for the dirty and clean fuels we characterize the magnitude of the rebound effect as a function of demand and supply elasticities and use the equilibrium values to compare policy options when the supply of the dirty fuel is inelastic we find that introducing a new technology with non zero emissions may actually increase the total level of emissions similar to the leakage effect a technology shift policy can perform better than an efficiency improvement policy in the dirty fuel sector only when the dirty fuel supply is sufficiently elastic the emission intensity of the new technology very low and the technology shift is greater than a threshold value using data for gasoline as a proxy for the dirty technology and several other cleaner technologies we show that these conditions are satisfied by a hypothetical zero emission technology but not by electric vehicles using the average us generation mix or the current us corn based e85 our results demonstrate the importance of accounting for the supply side in estimating the magnitude of the rebound effect and its impact on fuel consumption in a large scale policy implementation

the economic effects of franchise termination laws we would like to thank blake rhodes and pam schommer for excellent research assistance participants in workshops at arizona state university university of california berkeley the university of chicago dartmouth college iowa state university the justice department the university of rochester and the university of utah as well as jeff coles arnold cowan jim dana franklin m fisher stuart gilson ben hermalin cliff holderness gregg jarrell alan krueger wayne mikkelson walter oi jim poterba ajai singh cliff smith kathy spier david weisbach jamie zender jerry zimmerman and especially kevin j murphy and an anonymous referee for comments on an earlier draft brickley and weisbach thank the managerial economics research center of the university of rochester and the john m olin foundation and dark thanks the college of business at iowa state university for financial support brickley also thanks the garn institute of finance at the university of utah for financial assistance 1 see mark robichaut franchise rules are back off drawing board wall st j july 6 1990 at bl note that in this article we focus on laws that apply to business format franchises for an analysis of state laws in automobile franchising see richard l smith ii franchise regulation an economic analysis of state restrictions on automobile distribution 25 j law econ 125 1982 richard a epstein unconscionability a critical appraisal 18 j law econ 293 314 15 1975 and paul h rubin the theory of the firm and the structure of the franchise contract 21 j law econ 223 1978 other work on the economics of franchising includes james a brickley frederick h dark the choice of organizational form the case of franchising 18 j fin econ 401 1987 james a brickley frederick h dark michael s weisbach an agency perspective on franchising 20 fin mgmt 1991 in

organizational incentives and organizational mortality despite a long tradition of research on organizational mortality organizational theorists have not examined the effect of incentive contracting on firm survival this paper fills this gap by examining the effect of incentive contracting on the survival of u s business format franchise systems over the period 1984 1996 the paper finds empirical support for several hypotheses derived from efficient contracting theory in general large firms that adopt policies which screen agents signal quality and control agents free riding are more likely to survive than large firms which do not adopt these policies

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

does high cost of mortgage debt explain why young adults live with their parents young adults leave their parents homes at a higher rate in northern europe or in the united states than in southern europe with broad implications on labor market mobility and on fertility we assess if differences in household formation are associated to differences in access to credit by estimating the impact of the cost of a mortgage on the probability that a young adult leaves his or her parents home exogenous changes in the cost of credit are identified using the reform in 1998 and the cancellation in 2002 of credito bonificado a portuguese program that provided four different reductions of the interest rate of mortgages signed by low and medium income youth using a unique data set that links administrative records of debt with the 1998 2004 waves of the employment survey we document three findings first borrowing among young adults fell when borrowing costs increased second the elasticity of new household formation with respect to net interest rates lies between 0 8 and 3 3 third young adults responded to the increase in mortgage costs by delaying home purchases or by reducing the quality of housing services purchased but there was only a modest increase of the probability of renting a new accommodation jel d91 h24 j13

liquidity constraints and intertemporal consumer optimization theory and evidence from durable goods this paper develops and tests the implications of optimal consumption behavior with borrowing constraints the theory shows that liquidity constraints imply a distinctive intertemporal relationship between durable and nondurable goods consumption binding liquidity constraints appear as part of an error correction term derived from the long run cointegrating relationship between durables and nondurables when liquidity constraints are binding the error correction term will have predictive power for the future change in nondurable consumption empirical tests of the implications using aggregate data support the hypothesis that liquidity constraints rather than rule of thumb behavior best explain the excess sensitivity of consumption to predictable changes in income copyright 1995 by ohio state university press

the macroeconomic rebound effect in china the rebound effect measures the fraction of an energy efficiency improvement that is offset by increased energy consumption a rebound effect can arise at both the microeconomic level and the macroeconomic level the macroeconomic rebound effect measures the effect of an increase in energy efficiency on overall energy demand after markets adjust and re equilibrate at the macroeconomic level energy efficiency gains can increase energy consumption through two channels the macroeconomic price effect and the macroeconomic growth effect in this paper we econometrically estimate the macroeconomic energy rebound effect in china our results show that there is a statistically significant macroeconomic price rebound effect for china for each province and for the short run intermediate run and the long run we also find some evidence of a macroeconomic growth rebound in the short run and the intermediate run for some years either nation wide or for some provinces in china moreover for some years and some provinces we cannot reject backfire the rebound effect is an important phenomenon that the government of china should not neglect when making energy policy as it affects how improvements in energy efficiency translate into changes in energy consumption

the agent agents problem payment by relative output this paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output the major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers the paper thus joins a growing literature associated with the work of lazear and rosen on rank order tournaments

tournaments fairness and risk we estimate willingness to pay wtp to operate under two types of contracts tournaments ts and fixed performance standard contracts f our results are consistent with the notion that subjects having social preferences for fairness and care about risk that is when subjects experience greater inequity under tournaments relative to fixed performance contracts or experience greater revenue risk under tournaments the gap between wtp for fixed performance and tournament contracts increases ceteris paribus our results provide an explanation for grower dissatisfaction with tournament compensation schemes independent of possible concerns regarding opportunistic behavior by integrators

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

the league composition effect in tournaments with heterogeneous players an empirical analysis of broiler contracts we compare welfare effects of tournaments and piece rates in contracts with heterogeneous ability agents and demonstrate that tournaments that mix players of unequal abilities create a league composition effect when leagues are fixed and the time horizon sufficiently long piece rates improve welfare over tournaments using contract production data for broiler chickens we estimate the variances of growers abilities common production shock and grower s idiosyncratic shock growers abilities are heterogeneous and common production shocks are significant leagues in broiler tournaments disintegrate rapidly over time suggesting that tournament contracts offer more welfare than piece rates

structural estimation of rank order tournament games with private information in this article we propose and solve a game theoretic model of a rank order tournament with private information using the contract settlement data from a poultry company we estimate a fully structural model of a symmetric nash equilibrium of this game we show that growers equilibrium effort depends on four factors the spread in piece rates between the performance brackets the number of players in each tournament the number of performance brackets used and the density of growers private shocks we use estimates to simulate how changes in the tournament characteristics affecting equilibrium effort impact the growers and the integrator s welfare in most sporting events prizes are awarded not on basis of absolute performance but based on relative performance or tournaments be sides sporting events tournaments are also frequently used in labor contracts the name tournament typically suggests a rank order ordinal scheme such as is considered by lazear and rosen 1981 whereas a broader definition applies to any compensation scheme based on relative performance e g nalebuff and stiglitz 1983 tsoulouhas and vukina 1999 despite the sizeable theoretical litera ture on tournaments empirical work related to these models remains rather limited most of the theoretical literature on tournaments see mclaughlin 1988 for a survey has been con cerned primarily with the comparison of tour naments against various independent reward structures under various assumptions about risk preferences the number of participants and prizes specifications of production shocks and the asymmetry of information previous empirical work has largely focused on testing the predictions of the theoretical models this includes articles on executive compensation e g main o reilly and wade 1993 ericksson 1999 gibbons and murphy 1990 profes sional sports e g ehrenberg and bognanno

the economics of franchise contracts as an organizational arrangement the franchise contract lies between anonymous price mediated exchange and centralized intrafirm employment in contrast to conventional market exchange franchise contracts typically impose on franchisees retail quality standards common hours of business price controls and nonlinear payment schedules for example fixed initial royalty fees plus a percentage of gross retail revenues while franchisors typically provide national advertising and training programs monitor and inspect the franchisees performance with varying intensity across industries and hold the residual power to terminate the franchise agreement observations of actual terminations indicate that franchisors sometimes exclude this power franchisors sometimes face persistent queues of potential franchisees in contrast to simple employment contracts franchise agreements provide for sharing of profits through royalties on revenue or output and considerable freedom for independent decisions by local franchisees 1 why do these franchise contracts exist