estimating elasticities with pims data methodological issues and substantive implications though the pims data have been used extensively to relate profitability both to specific firm marketing actions and to market conditions no attempt has been made to estimate directly the magnitudes of marketing mix elasticities the authors propose and evaluate a simple cross sectional time series regression method that recovers unbiased estimates of the elasticities despite the presence of firm specific disguise factors in the database though measurement error creates instability for certain variables the recovered elasticities compare favorably with those found in previous research and have predictable relationships with market characteristics

income residential location and mode choice abstract commuters choose a mode defined in terms of trip speed and time to minimize the money and opportunity costs of travel new results the wage rate elasticity of marginal commuting cost may be zero negative greater than one or declining with the wage rate a constant wage rate elasticity is possible only if the marginal money cost of commuting is zero a positive value of the marginal money cost of commuting implicitly assumes mode choice the relationship between income and location seems due largely to technological change in intraurban transportation differences in the money cost of commuting by alternative modes and differences in real wages

environment market share and market power in this paper we develop a process model relating market share to firm profits in particular we specify average price and average cost equations as a function of previous year market share position changes in market share environmental conditions and interactions of environmental conditions with the lagged market position and market share change variables we estimate these equations using pims data after controlling for unobservable factors our results suggest that firms with high market shares derive no extra market power benefits except if they operate in environments with little buyer power instead environmental factors and changes in market share most strongly influence price and cost an analysis of the market share associated with maximal firm profits indicates that for the majority of firms in our sample steadily increasing market share does not always associate with increasing profits giving credence to the proposition that more market share is not always better

upper income renaissance in the city its sources and implications for the city s future abstract recent writings on urban housing markets have cited evidence of renewed upper income demand for central residential locations this paper extends the standard model of residential choice to account for this behavior shows that implications of the analysis are consistent with recent residential patterns in new york city and challenges predictions that upper income demand for city living portends a nationwide reversal of upper income exodus to the suburbs

effects of horizontal consolidation under bilateral imperfect competition between processors and retailers this article considers bilateral imperfect competition between processors and retailers to estimate the trade off between market power and cost efficiency the model is based on pricing rules from a firm s profit maximization and nests both oligopoly and oligopsony models an empirical analysis for us beef processors and retailers suggests that processors tend to exercise oligopsony market power in procuring cattle but they are unlikely to exercise market power on retailers when retailers and processors are considered as one integrated sector efficiency effects from the increased concentration in the us beef packing industry are slightly larger than market power effects when processors market power is considered separately from retailers market power the difference between cost saving and market power effects becomes greater the cost elasticity estimate 0 99 indicates that a further merger would result in little economies of scale in the future therefore although we find that efficiency effect

information technology effects on firm performance as measured by tobin s q despite increasing anecdotal evidence that information technology it assets contribute to firm performance and future growth potential of firms the empirical results relating it investments to firm performance measures have been equivocal however the bulk of the studies have relied exclusively on accounting based measures of firm performance which largely tend to ignore it s contribution to performance dimensions such as strategic flexibility and intangible value in this paper we use tobin s q a financial market based measure of firm performance and examine the association between it investments and firm q values after controlling for a variety of industry factors and firm specific variables the results based on data from 1988 1993 indicate that in all of the five years the inclusion of the it expenditure variable in the model increased the variance explained in q significantly the results also showed that for all five years it investments had a significantly positive association with tobin s q value our results are consistent with the notion that it contributes to a firm s future performance potential which a forward looking measure such as the q is better able to capture

an equilibrium displacement approach to oligopoly market analysis an application to trade in the korean infant formula market this article uses an equilibrium displacement model edm to assess the impact of a change in trade policy in the korean infant formula market that is assumed to be oligopolistic domestic oligopolists compete in a market for a homogenous good with importing firms who enjoy the same level of market power as the domestic producers within an edm framework we investigate how the market adjusts to a new equilibrium in response to an external policy shock that improves access to foreign goods our empirical work consists of two steps we first econometrically estimate the market demand elasticity and market power parameter then using these estimates we simulate our edm model to assess the distributional effects of tariff cuts and other changes in marginal cost simulation results show that with a lower market price and increased consumption the change in consumer surplus resulting from tariff reduction is unambiguously positive but that the change in social welfare can be in either direction depending on who receives market rents associated with imports when importing firms are domestic the domestic welfare change is definitely positive however in the case of foreign importing firms the direction of the welfare change crucially depends on the demand elasticity

the impact of economic contractions on the effectiveness of r d and advertising evidence from u s companies spanning three decades the critical role of research and development r d and advertising in the marketing strategy of the firm is well established this paper conceptually and empirically examines why and how much the effectiveness of these two marketing instruments differs between times of economic expansions versus periods of economic contractions and whether these results depend on the cyclicality of the industry in question we consider a key marketing metric market share and a key financial metric firm profit our empirical setting is 1 175 u s firms across a time period spanning over three decades we find that r d and advertising contribute to firm performance but that their effectiveness is not constant across the business cycle increasing advertising share in contractions has a stronger effect on profit and market share than increasing advertising share in expansions likewise investments in r d in contractions lead to higher gains in market share and profit than r d investments in expansions albeit only in subsequent years if in contractions the firm faces tight budget constraints and has to choose between either maintaining r d or advertising our simulation results show that maintaining r d is associated with better company performance we find that advertising effectiveness in general and in contractions in particular is systematically moderated by the degree of cyclicality of the industry in which the firm operates in relatively stable industries advertising effects are small or even nonsignificant and they do not go beyond the year the firm advertises however in highly cyclical industries advertising effects are long lasting its total effect being 50 larger market share and 200 larger profits than in industries of average cyclicality the effect of industry cyclicality on advertising effectiveness is especially pronounced in contractions collectively these findings provide valuable and actionable insights into how firms should respond to contractions in order to grow profits and market share

competitive pricing behavior in the auto market a structural analysis in a competitive marketplace the effectiveness of any element of the marketing mix is determined not only by its absolute value but also by its relative value with respect to the competition for example the effectiveness of a price cut in increasing demand is critically related to competitors reaction to the price change managers therefore need to know the nature of competitive interactions among firms in this paper we take a theory driven empirical approach to gain a deeper understanding of the competitive pricing behavior in the u s auto market the ability motivation paradigm posits that a firm needs both the ability and the motivation to succeed in implementing a strategy boulding and staelin 1995 we use arguments from the game theoretic literature to understand firm motivation and abilities in different segments of the auto market we then combine these insights from the game theoretic literature and the ability motivation paradigm to develop hypotheses about competition in different segments of the u s auto market to test our hypotheses of competitive behavior we estimate a structural model that disentangles the competition effect from the demand and cost effects on prices the theory of repeated games predicts that firms with a long run profitability objective will try to sustain cooperative pricing behavior as a stable equilibrium when conditions permit for example markets with high concentration and stable market environments are favorable for sustaining cooperative behavior and therefore provide firms with the ability to cooperate the theory of switching costs suggests that in markets in which a firm s current customers tend to be loyal firms have a motivation to compete very aggressively for new customers recognizing the positive benefits of loyalty from the customer base in the long run as consumer loyalty in the market increases the gains from increasing market share by means of aggressive competitive behavior are more than offset by losses in profit margins firms therefore have the motivation to price cooperatively empirically we find aggressive behavior in the minicom pact and subcompact segments cooperative behavior in the compact and midsize segments and bertrand behavior in the full size segment these findings are consistent with our theory based hypotheses about competition in different segments in estimating a structural model of the auto market we address several methodological issues a particular difficulty is the large number of car models in the u s auto market existing studies have inferred competitive behavior only in markets with two to four products they also use relatively simple functional forms of demand to facilitate easy estimation functional forms of demand however impose structure on cross elasticities between products such structure when inappropriate can bias the estimates of competitive interaction we therefore use the random coefficients logit demand model to allow flexibility in cross elasticities we also use recent advances in new empirical industrial organization neio to extend structural estimation of competitive behavior to markets with a large number of products we use the simulation based estimation approach developed by berry et al 1995 to estimate our model a frequent criticism of the neio approach is that its focus on industry specific studies limits the generalizability of its findings in this study we retain the advantages of neio methods but partially address the issue of generalizability by analyzing competitive behavior in multiple segments within the auto industry to see whether there is a consistent pattern that can be explained by theory theoretical modelers can use our results to judge the appropriateness of their models in predicting competitive outcomes for the markets that they analyze a by product of our analysis is that we also get estimates of demand and cost apart from competitive interactions for the market managers can use these estimates to perform what if analysis they can answer questions about what prices to charge when a new product is introduced or when an existing product s characteristics are changed

disentangling pioneering cost advantages and disadvantages existing literature discusses a number of possible pioneering cost advantages and disadvantages in this paper we empirically test three different sources of long term pioneering cost advantage experience curve effects preemption of input factors and preemption of ideal market space and three different sources of pioneering cost disadvantage imitation vintage effects and demand orientation we disentangle these sources by breaking total cost of a business unit into three different components purchasing production and selling general and administrative sg a costs and identifying conditions that intensify or reduce the effect of the proposed source using two samples of business units one for consumer goods and one for industrial goods we find support for five of the six sources of pioneering cost advantage and disadvantage in both samples while the advantage due to preemption of ideal market space is limited to the consumer goods sample the unconditional analysis shows a pioneering purchasing cost advantage but even larger pioneering production and sg a cost disadvantages the complexity of our obtained findings suggests that managers need to think carefully about their particular conditions before making assumptions about the cost and therefore profit implications of a pioneering strategy

first mover advantage through distribution a decomposition approach whereas the extant literature on entry order effects establishes that first entrants often earn higher market shares market share advantage the literature on distribution suggests that increased distribution has a positive effect on sales can distribution help us better understand entry order effects on market shares this paper examines how the first entrant in a geographical market achieves a market share advantage through distribution for this purpose i propose a simple method of decomposing sales into physical distribution and sales performance the data come from a manually collected panel on six major japanese convenience store chains from 47 geographical markets between 1991 and 2007 using an instrumental variable approach to address the potential endogeneity of entry order i find first entrants have a positive market share advantage over later entrants specifically the physical distribution measured by the number of outlets in a market drives most of the advantage meanwhile the pos

preferences estimation without approximation we devise an estimation methodology which allows preferences estimation and comparative statics analysis without a reliance on taylor s approximations and the indirect utility function

a look on the cost side market share and the competitive environment in this paper we develop a model relating market share to average costs we start with a theoretical model of the factors that affect the firm s average cost curve partitioning these factors into a measurable firm and competitive environment characteristics and b unobserved factors that are either fixed random or follow a first order autoregressive process we then link this theoretical model to an empirical model in which we specify three average cost equations for the organizational areas of purchasing production and marketing main effects for initial lagged market share position as well as their interactions with factors characterizing the firm s competitive environment represent the variables of key theoretical interest in our equations we estimate these equations using pims data and control for fixed contemporaneous and autoregressive unobservable factors our results suggest that market share can often lead to market power in the form of lower average costs however the firm s operating environment greatly moderates the effect of market share on average cost in particular we find that market share position only leads to lower average costs when the organizational unit operates in a competitive environment that gives it both motivation and ability to realize power from its market share position

unobservable effects and business performance while unobservable factors such as corporate culture access to scarce resources management skill and luck can be postulated to be principal determinants of business success their effects are all but ignored in studies of business performance this study making use of the pims data base reports empirical evidence indicating that failure to control for unobservable factors influencing profitability both biases and exaggerates the effect of strategic factors indeed the influence of unobservable factors is so pervasive as to invalidate many of the conclusions drawn from studies failing to control for their effects

customer satisfaction productivity and profitability differences between goods and services there is widespread belief that firms should pursue superiority in both customer satisfaction and productivity however there is reason to believe these two goals are not always compatible if a firm improves productivity by downsizing it may achieve an increase in productivity in the short term but future profitability may be threatened if customer satisfaction is highly dependent on the efforts of personnel if so there are potential tradeoffs between customer satisfaction and productivity for industries as diverse as airlines banking education hotels and restaurants managers in these types of service industries as well as goods industries in which the service component is increasing need to understand whether or not this is the case for example if efforts to improve productivity can actually harm customer satisfaction and vice versa the downsizing of u s and european companies should be viewed with concern it follows that developing a better understanding of how customer satisfaction and productivity relate to one another is of substantial and growing importance especially in light of expected continued growth in services throughout the world economy the objective of this paper is to investigate whether there are conditions under which there are tradeoffs between customer satisfaction and productivity a review of the literature reveals two conflicting viewpoints one school of thought argues that customer satisfaction and productivity are compatible as improvements in customer satisfaction can decrease the time andeffort devoted to handling returns rework warranties and complaint management while at the same time lowering the cost of making future transactions the second argues that increasing customer satisfaction should increase costs as doing so often requires efforts to improve product attributes or overall product design a conceptual framework useful in resolving these contradictory viewpoints is developed the framework serves in turn as a basis for developing a theoretical model relating customer satisfaction and productivity the model predicts that customer satisfaction and productivity are less likely to be compatible when 1 customer satisfaction is relatively more dependent on customization the degree to which the firm s offering is customized to meet heterogeneous customers needs as opposed to standardization the degree to which the firm s offering is reliable standardized and free from deficiencies and 2 when it is difficult costly to provide high levels of both customization and standardization simultaneously to move forward from the model s propositions to the development of testable hypotheses we argue that services are more likely than goods to have the preceding characteristics hence tradeoffs between customer satisfaction and productivity should be more prevalent for services than for goods although this classification is not precise many services are standardizable and many goods have a service component it has the advantage of allowing an initial test of the propositions the empirical work employs a database matching customer based measures of firm performance with traditional measures of business performance such as productivity and return on investment roi the central feature of this database is the set of customer satisfaction indices provided by the swedish customer satisfaction barometer scsb the scsb provides a uniform set of comparable customer based firm performance measures and offers a unique opportunity to test the study s hypotheses the findings indicate that the association between changes in customer satisfaction and changes in productivity is positive for goods but negative for services in addition while both customer satisfaction and productivity are positively associated with roi for goods and services the interaction between the two is positive for goods but significantly less so for services taken together the findings suggest support for the contention that tradeoffs are more likely for services hence simultaneous attempts to increase both customer satisfaction and productivity are likely to be more challenging in such industries of course this does not imply that such firms should not seek improvements in both productivity and customer satisfaction for example appropriate applications of information technology may improve both customer satisfaction and productivity simultaneously the findings should provide motivation for future research concerning the nature of customer satisfaction and productivity as well as appropriate strategy and tactics for each one it is worth emphasizing that this is an issue that is not only important today but certainly will become even more important in the future as the growth of services continues and world markets become increasingly competitive the importance of customer satisfaction will also increase to compete in such a world firms must strike the right balance between their efforts to compete efficiently and their efforts to compete effectively

hedging with price and output uncertainty abstract this paper extends mckinnon s analysis of hedging with price and output uncertainty to the general case where preferences are not necessarily quadratic and probability distribution not necessarily normal

comparative statics effects independent of the utility function when do we act the same way under risk abstract to date comparative statics effects analyzed in the context of expected utility depend on the decision maker s utility function this paper presents a methodology that allows comparative statics effects to be obtained independent of the utility function for a general family of problems in other words we provide a set of conditions under which all decision makers act the same way such a methodology can be applied to relevant problems in the related literature such as the portfolio choice and the competitive firm under price uncertainty with or without the existence of a forward futures market with regards to such specific cases we show and analyze the most relevant effects produced by the variation of two or more parameters regardless of the decision maker s preferences and attitude towards risk some of these effects are illustrated numerically

the risk averse and prudent newsboy the effects of risk and risk aversion in the single period inventory newsboy problem are examined comparative static effects of changes in the various price and cost parameters are determined and related to the newsboy s risk aversion the addition of a random background wealth and of an increase in the riskiness of newspaper demand are also examined although many of the comparative effects generally are ambiguous some fairly simple restrictions on preferences and or risk increases are shown to lead to qualitatively deterministic results

symmetry restrictions in the analysis of the competitive firm under price uncertainty this paper shows that if the production function is appropriately restricted some symmetry reciprocity results that hold for a competitive firm under certainty continue to hold under price uncertainty for any strictly concave utility function in contrast earlier analyses have established these symmetry relations by imposing restrictions on the utility function the present analysis uses the envelope theorem the indirect utility function and the duality between production and cost copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

an alternative test of the hedonic theory of housing markets abstract in this paper the hedonic theory of housing markets is used to generate a multinomial logit model of household behavior in an urban housing market application of hedonic theory to housing markets is by now fairly familiar and a link to multinomial logit has also been established however by emphasizing more heavily the bid price interpretation of hedonic theory this paper develops a new connection to econometric estimation that essentially involves running the usual logit equations in reverse one advantage of this approach is that the link between the logit equations and hedonic theory involves bid price rather than utility functions and this in turn permits the empirical results to be given an extremely clear interpretation furthermore in contrast to the standard logit model the extreme value distribution required to justify the estimation technique emerges endogenously as part of the analysis

the role of retailer s performance in optimal wholesale price discount policies abstract the main goal of this paper is to model the effects of wholesale price control on manufacturer s profit taking explicitly into account the retailer s sales motivation and performance we consider a stylized distribution channel where a manufacturer sells a single kind of good to a single retailer wholesale price discounts are assumed to increase the retailer s motivation thus improving sales we study the manufacturer s profit maximization problem as an optimal control model where the manufacturer s control is the discount on wholesale price and retailer s motivation is one of the state variables in particular in the paper we prove that an increasing discount policy is optimal for the manufacturer when the retailer is not efficient while efficient retailers may require to decrease the trade discounts at the end of the selling period computational experiments point out how the discount on wholesale price passed by the retailer to the market pass through influences the optimal profit of the manufacturer

measuring market power in food processing industries discussion focuses on the measurement of market power in the beef processing industry in the united states causal linkage between concentrated industrial structure and antisocial economic performance structure conduct performance paradigm basic model for fed cattle studies

contractual union firm agreements and the theory of the firm under uncertainty abstract this article analyzes the consequence of introducing union firm contractual agreements in the theory of the firm under uncertainty generalizing the works on the labor managed firm it is shown that the risk averse firm produces more than the risk neutral firm or the firm operating under certainty as long as equilibrium employment is negatively related to union wages that is when union power over wages is higher than that over employment

the newsvendor problem under multiplicative background risk this note studies the single period newsvendor problem when the newsvendor faces a multiplicative neutral independent background risk in an expected utility framework it is shown that multiplicative risk vulnerability is a sufficient condition to guarantee a decrease in the optimal order a weaker sufficient condition which has more interpretability is also provided and discussed this result sheds light on situations where exchange tax or inflation rates risks which apply multiplicatively to the final wealth are at work

investigating dynamic multifirm market interactions in price and advertising diagnosing the nature and magnitu de of competitive interactions among firms is important for developing effective marketing strategies in this paper we formulate a game theoretic model of firm interaction to analyze the dynamic price and advertising competition among firms in a given p roduct market firm or brand level demand functions account for the contemporaneous and carry over effects of these marketing activities and also allow for the effects of competitor actions firms take into consideration the actions of their rivals as well as their own demand and cost functions both production and advertising when determining the profit maximizing price and advertising levels our formulation enables us to quantify not only the direction and magnitude of competitive reactions but also to identify the underlying form of market conduct that generates the particular pattern of interaction we specify and estimate a fully structural econometric model for three firms constituting a distinct sub market within a personal care product category we estimate the demand and competitive interaction parameters as well as the production and advertising cost functions for each firm we then derive implications for competitive interactions and market structure interestingly we find that while firms seem to compete on advertising they price cooperatively thereby enhancing their price cost margins

antitrust economic analysis in food marketing channels a global perspective antitrust enforcement concerning monopolies mergers and cartels is converging across all market oriented economies in the world this convergence is based upon neoclassical economic analysis of industrial organization the role of empirical economic analysis however has not converged as rapidly as the conceptual model because different countries have different enforcement institutions and strategies this article explains how antitrust enforcement has evolved over time from public agencies to a market for enforcement that admits private parties private party law suits and especially class action law suits on behalf of groups such as farmers and consumers is a mechanism for redressing the often superior legal and economic resources that defendant corporations have and public agencies do not have enforcement and the role of empirical analysis are compared in the united states and other countries examples of enforcement from different countries illustrate the strengths and weaknesses of different approaches finally some insights explain how economists function in enforcement and the attributes required for success

the seed and agricultural biotechnology industries in india an analysis of industry structure competition and policy options since the late 1980s technological advances and policy reforms have created new opportunities for private sector investment in india s seed and agricultural biotechnology industries these changes have had a significant impact on cotton yields and output in india but less so for rice and wheat the country s main cereal staples for which yield growth rates are tending toward stagnation this analysis examines the structures of these industries their potential effects on competition and innovation and the policies that may improve both industry performance and the delivery of new productivity enhancing technologies to india s cereal production systems our findings suggest that more substantive policy reforms are needed to encourage further innovation reduce regulatory uncertainty and encourage firm and industry level growth while continued public spending on agricultural research is needed to support technological change

production decisions under joint price and production uncertainty abstract while production decisions in the presence of price uncertainty have been extensively studied this is not so for the case in which the level of production is itself uncertain in this paper we provide a decision analysis under multiplicative production uncertainty both with and without price uncertainty we depict equilibrium and obtain comparative statics results with the aid of a diagram based on the difference between expected price and marginal cost comparative statics results are obtained for the model with production uncertainty alone and also for simultaneous price and production uncertainty including two special cases we first derive results based on the arrow pratt coefficients of risk aversion and then supplement these with the ross measure of relative risk aversion since this proves useful in the presence of multiple sources of uncertainty we find that increases in risk both price and production or input prices reduce expected output however expected output supply is an increasing function of expected price only for low levels of risk aversion and in general the relationship is ambiguous

measuring market power and cost efficiency effects of industrial concentration in this paper i show how appelbaum s framework for testing price taking behavior in a single industry can be formally extended to consider concentration explicitly in so doing i separate the market power effect of concentration from its cost efficiency effect data from the us beef packing industry are used to illustrate an empirical application of the model the findings support oligopsonistic market power and slaughter cost efficiency in the industry however the cost efficiency effect outweighs the market power effect

labour supply and commuting abstract we examine the effect of commuting distance on workers labour supply patterns distinguishing between weekly labour supply number of workdays per week and daily labour supply we account for endogeneity of distance by using employer induced changes in distance in germany distance has a slight positive effect on daily and weekly labour supply but no effect on the number of workdays the effect of distance on labour supply patterns is stronger for female workers but it is still small

multiple regime bid rent function estimation abstract this paper reviews estimators for multiple regime selection models which include the standard urban bid rent model as a special case 4 probabilistic bid rent model imposes a restrictive selection process while existing two stage multiple regime estimators assume an error structure that is inconsistent with bid rent theory monte carlo experiments demonstrate that two stage estimators are accurate and robust to distributional misspecification the practical usefulness of the estimators is illustrated using data on 1920s chicago land values

a note on the theory of the firm under multiple uncertainties abstract we develop a dynamic continuous time theory of the competitive firm under multiple correlated uncertainties output price uncertainty and output uncertainty as an example in doing so we completely generalize and extend the previous one period comparative statics results the marginal impact of each parameter on optimal output particularly we relax the assumption of the statistical independence between the risks and the restrictions on the coefficient of absolute relative risk aversion furthermore we generally show the impact of one risk on the aversion to another moreover we show the role of the factor of correlation between risks on the decisions of the firm

estimating the degree of market power in the beef packing industry a technique for assessing the degree of monopoly power developed by appelbaum 1979 1982 is extended here to permit measurement of monopsony power as well data from the u s beef packing industry are examined the results reveal small but statistically significant monopoly monopsony price distortions in slaughter cattle and wholesale beef markets but in spite of a recent trend toward heightened concentration in the industry give no indication that performance has become appreciably less competitive of late this abstract was borrowed from another version of this item

brand loyalty and market equilibrium two concepts of brand loyalty are defined inertial brand loyalty resulting from time lags in awareness and cost based brand loyalty resulting from intertemporal utility effects their market level implications are formally derived in a continuous time model it is found that inertial brand loyalty leads to equilibria with price dispersion while cost based brand loyalty also may allow single price equilibria in all cases as brand loyalty vanishes so does the difference between the average trading price and the price which obtains with no brand loyalty consistent with empirical results the theory predicts that the relationship between market share and performance is positive in cross sectional studies but flat in time series studies the theory is also consistent with the view that market share is an asset in itself after developing the theory several strategic implications are drawn in the end some questions for further theoretical and empirical research are raised

identifying generalizable effects of strategic actions on firm performance the case of demand side returns to r d spending this paper provides an approach for assessing generalizable effects of strategic actions on firm performance we identify five key issues that need to be addressed before one can have confidence in the obtained strategic generalization in addition we suggest a methodology for attacking each of these five issues we then illustrate this framework using the example of demand side returns to r d spending we document two empirical generalizations in this research first and foremost we show that demand returns to r d spending depend on whether the firm has ability and motivation to take advantage of the r d investment thus only firms with high ability and motivation leverage the r d investment into monopoly rents in the form of subsequent price increases second we show that the concept of a firm needing both ability and motivation to sustain returns from a strategic action generalizes across strategic actions we make two other conclusions about empirical approaches to strategy research first to pro

correcting for measurement error in food demand estimation use of disappearance data as proxies for actual consumption causes inconsistent estimates of own price retail demand elasticities a system of equations describing consumer processor and producer behavior is used to consistently estimate the retail demand elasticity for beef using available data while avoiding the restrictive assumption of fixed input proportions implicit in disappearance data this approach yields an estimate of the own price retail demand elasticity for beef of 0 45 which is more inelastic than the estimate 0 66 obtained using a traditional approach the methodology is applicable to other food commodities for which disappearance data serve as proxies for actual consumption copyright 1993 by mit press

imperfect competition in multiproduct food industries with application to pear processing agricultural product markets often involve relatively few firms processing a farm product into multiple processed products this market structure prompts concern that processing firms may exercise both oligopsony and oligopoly power the present paper develops and applies a methodology to test simultaneously for market power in both the raw input market and multiple processed output markets application of the methodology to california pear processing indicates the industry has exerted power in both its farm input market and the markets for canned pears and fruit cocktail

production uncertainty and the input decision of the competitive firm facing the futures market abstract production uncertainty is introduced into the model of the competitive firm facing the futures market the firm s input decision is shown to be highly sensitive to the nature of the production uncertainty

sustainable pioneering advantage profit implications of market entry order there is strong theoretical and empirical evidence supporting the idea that first to market leads to an enduring market share advantage in sharp contrast to these findings we find that at the business unit level being first to market leads on average to a long termprofit disadvantage this result holds for a sample of consumer goods as well as a sample of industrial goods and leads to questions about the validity of first mover advantage in and of itself as a strategy to achieve superior performance we replicate the typical demand side pioneering advantage but find an evengreater average cost disadvantage which is the source of the pioneering profit disadvantage in an extended analysis we show that first to market leads to aninitial profit advantage which depending on the sample or profit measure lasts for about 12 to 14 years before turning into a disadvantage moreover we show that pioneers differentially benefit from a lack of consumer learning a strong market position and patent protection these three moderating factors together can actually help pioneers achieve a sustainable profit advantage over later entrants finally we find strong support for the theoretical argument that the entry order decision should be treated as endogenous in empirical estimation

a multi product risk averse newsvendor with exponential utility function abstract we consider a multi product newsvendor using an exponential utility function we first establish a few basic properties for the newsvendor regarding the convexity of the model and monotonicity of the impact of risk aversion on the solution when the product demands are independent and the ratio of the degree of risk aversion to the number of products is sufficiently small we obtain closed form approximations of the optimal order quantities the approximations are as easy to compute as the risk neutral solution we prove that when this ratio approaches zero the risk averse solution converges to the corresponding risk neutral solution when the product demands are positively negatively correlated we show that risk aversion leads to lower higher optimal order quantities than the solution with independent demands using a numerical study we examine convergence rates of the approximations and thoroughly study the interplay of demand correlation and risk aversion the numerical study confirms our analytical results and further shows that an increased risk aversion does not always lead to lower order quantities when demands are strongly negatively correlated

on the hedging and output behavior of the competitive cooperative firm under price and production uncertainty abstract we show that a separation of hedging and production decisions does not hold for a cooperative firm under price and output uncertainty and that its production decision is not sensitive to the functional form of the production function

marketing margins market power and price uncertainty this paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food processing industry facing output price uncertainty the framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry oligopoly oligopsony price distortions and an output price risk component the empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs the principal finding is that while farm wholesale margins are more consistent with competitive performance now than they were fifteen years ago the output price risk component persisted throughout the sample period

competition in the us meatpacking industry is it history the us meatpacking industry has become concentrated to a degree not experienced since the days of the beef trust a century ago a number of mainstream studies have investigated if such concentration has been detrimental to competition just as earlier studies may have helped shape competition policy towards meatpacking a century ago contemporary studies have made their way into current discussions and may shape competition policy at the turn of this century this paper asks whether or not contemporary studies are useful in informing competition policy after comparing how competition looks from the econometric vantage point with how it looks from the vantage point of the industry s 300 yr history this article concludes that mainstream studies are more useful for a competition policy targeting conduct rather than structure

do alternative marketing arrangements increase pork packers market power in this article we use structural econometrics to formally test whether the use of the alternative marketing arrangements amas by pork packers is the source of their market power on the spot cash market for live hogs we specify the pork packers conjectures of the change in the industry total market procurement of live hogs through the spot market with respect to their amas stocks the test is carried out using the mandatory price reporting data our results show that pork packers have statistically significant market power on the spot market for live hogs but the source of that market power cannot be narrowed down to the existence of amas stocks copyright 2009 oxford university press

the streetcar and residential location in nineteenth century philadelphia the alonso muth model predicts how a worker s income affects his residential location within an urban area workers choose a residential location balancing the lower rent at locations distant from the city center against the higher commuting cost that such locations entail if the income elasticity of housing demand is greater than that of marginal commuting cost the bid rent function of a high wage worker is flatter than that of a low wage worker and thus the high wage worker lives farther from the city center this theory which was first articulated in the 1960s was consistent with empirical evidence from that period the model did not fare so well in the 1970s and 198os however on one hand were new studies of housing demand polinsky and ellwood 20 pointed out biases in earlier studies and found income elasticities less than unity when these biases were corrected these results indicate that the income elasticity of housing demand is less than that of marginal commuting cost since the latter is typically close to unity which in turn implies that the bid rent function of a high wage worker is steeper than that of a low wage worker wheaton 25 provided more direct evidence on this point he estimated bid rent functions of different income groups and found no significant difference between those of higher and lower income households these studies suggested that the alonso muth model could not explain the residential pattern observed in the 1950s and 1960s on the other hand was the change in that pattern in the 197os upper income households began to return to the cities the so called