aging and inequality in income and health in our earlier work we used data from the national health interview survey nhis to examine life cycle patterns in health status and in the joint distribution of health status and income deaton and paxson 1998 in this paper we summarize and extend those results and provide new evidence from the panel study of income dynamics psid both surveys contain a measure of household income and collect information on an ordinal measures of self reported health status srhs that ranges from 1 excellent to 5 poor section i concerns problems related to the measurement of inequality in health section ii presents evidence from the two surveys on health and income inequality this abstract was borrowed from another version of this item

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

vertical antitrust policy as a problem of inference the legality of nonprice vertical practices in the u s is determined by their likely competitive effects an optimal enforcement rule combines evidence with theory to update prior beliefs and specifies a decision that minimizes the expected loss because the welfare effects of vertical practices are theoretically ambiguous optimal decisions depend heavily on prior beliefs which should be guided by empirical evidence empirically vertical restraints appear to reduce price and or increase output thus absent a good natural experiment to evaluate a particular restraint s effect an optimal policy places a heavy burden on plaintiffs to show that a restraint is anticompetitive

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 causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

does the per se rule deter vertical price fixing i introduction beginning with the wide scale introduction of branded goods in the late nineteenth century manufacturers have often tried to dictate minimum resale prices to the retail outlets carrying their products and since roughly the same time antitrust experts have debated why they would do so 1 less attention has focused on what manufacturers do when they can not impose minimum prices even though legal obstacles have forced them to look for alternatives so what do manufacturers do when they cannot legally set the prices their outlets charge 2 many antitrust officials believe they go right on setting prices either flaunting the law or finding some means to circumvent it barrett 1991 quotes former new york state antitrust chief lloyd constantine as saying that the practice is ubiquitous but based upon winks and nods rather than written agreements that could be used in court new york attorney general robert abrams 1991 argues that vertical price fixing is endemic claiming that antitrust officers can recount scores of tales of retailers calling our offices too scared to give their names telling of coercion and intimidation by manufacturers representatives and rival dealers because their prices were too low former ftc commissioner terry calvani argues that a manufacturer practicing resale price maintenance would have to have an i q two points lower than a carrot to get caught 3 the prospects for wink and nod resale price maintenance are not hard to appreciate for example suppose a manufacturer wants to impose a 500 sanction on any discount outlet if it cannot do so overtly it may instead impose a lump sum charge of 500 on all outlets and ex post reward non discount outlets with a 500 rebate given this scheme s transparency courts legislators and antitrust officials should not be fooled yet the rebates could be indirect and discreet they could be spread over several periods and parceled out in small quantities as compensation for point of sale services to defray overhead to pay for advertising or training and so forth hence it may be hard for outsiders to prove a link between what the manufacturer pays each retailer and that retailer s price moreover in some instances antitrust officials may want an excuse to loosen the legal restrictions on resale price maintenance and may themselves wink and nod at these practices finally antitrust officials cannot always and perhaps not often distinguish legitimate cost sharing arrangements from maneuvers to influence resale prices as such they must proceed carefully manufacturers can employ two other legal means to fix resale prices first manufacturers can coordinate retailers meet the competition guarantees antitrust experts have long believed that on occasion retailers can independently offer meet the competition guarantees to their customers to discourage price competition 4 here a manufacturer coordinates retailers efforts by financing some or all of the meet the competition related rebates they make so in equilibrium all retailers adopt the suggested price while previous models of meet the competition guarantees focus on tacit horizontal price fixing this paper examines explicit vertical price fixing second the manufacturer can persuade retailers to charge its suggested price by guaranteeing the margins of those victimized by price cutting rivals in equilibrium no outlet wants to cut price first so discounting does not occur at all manufacturers have various other means to influence their dealers resale prices in addition to such well known instruments as consignment sales and exclusive territories manufacturers can agree to buy back dealers unsold inventories or parcel out merchandise only as demand for it materializes they can also use devices such as markdown allowances to influence when and by how much dealers discount if demand turns out low presumably this list does not exhaust the possibilities for innovative manufacturers seeking to subsidize dealers that cooperate and to discriminate against those that do not

dynamic control of a monopolist s product and process innovation with reference quality our main purpose is to investigate the dynamic control problem of a monopolist s product and process innovation under reference quality the main features of this article are i a monopolist deal

panel attrition from the panel study of income dynamics household income marital status and mortality this analysis is concerned with the determinants of panel attrition from the panel study of income dynamics and with its consequences for estimation of dynamic behavioral models which exploit the panel or longitudinal information household income dynamics marriage formation and dissolution and adult mortality risk we develop and estimate joint models of attrition and one or more of these substantive processes and allow for correlation across the equations through random effects although we find evidence of significant selectivity in attrition behavior the biases that are introduced by ignoring selective attrition are very mild

stochastic diffusion models with advertising and word of mouth effects abstract this paper presents a stochastic diffusion model which incorporates advertising word of mouth effects the model defines a 3 variate stochastic process based on explicit assumptions regarding consumer behavior and consumers response to advertising the model generalizes a wide variety of advertising models and in addition includes several classes of consumers interaction effects between these consumers and of course a stochastic framework that may be used for assessing the risk implications of advertising policies and for empirical analyses purposes

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

socio economic status health and lifestyle abstract the role of lifestyle in mediating the relationship between socio economic characteristics and health has been discussed extensively in the epidemiological and economic literatures previous analyses have not considered a formal framework incorporating unobservable heterogeneity in this paper we develop a simple economic model in which health is determined partially by lifestyle which depends on preferences budget and time constraints and unobservable characteristics we estimate a recursive empirical specification consisting of a health production function and reduced forms for the lifestyle equations using maximum simulated likelihood msl for a multivariate probit mvp model with discrete indicators of lifestyle choices and self assessed health sah on british panel data from the 1984 and 1991 health and lifestyle survey hals we find that sleeping well exercising and not smoking in 1984 have dramatic positive effects on the probability of reporting excellent or good sah in 1991 and that these effects are much larger having accounted for endogeneity the failure of epidemiological analyses to account for unobserved heterogeneity can explain their low estimates of the relevance of lifestyle in the socio economic status health relationship indicators for prudent alcohol consumption and eating breakfast in 1984 are not found to be statistically significant determinants of sah in 1991

state dependence and heterogeneity in health using a bias corrected fixed effects estimator this paper considers the estimation of a dynamic ordered probit of self assessed health status with two fixed effects one in the linear index equation and one in the cut points the two fixed effects allow us to robustly control for heterogeneity in unobserved health status and in reporting behaviour even though we can not separate both sources of heterogeneity the contributions of this paper are twofold first it contributes to the literature that studies the determinants and dynamics of self assessed health measures second this paper contributes to the recent literature on bias correction in nonlinear panel data models with fixed effects by applying and studying the finite sample properties of two of the existing proposals to our model the most direct and easily applicable correction to our model is not the best one and has important biases in our sample sizes

rebound effects of new irrigation technologies the role of water rights we study how institutions such as water rights can complement new irrigation technologies in promoting the sustainability of u s agriculture using data from the ogallala high plains aquifer region of kansas we find that water extraction moderately increases after adopting low energy precise application lepa irrigation and this rebound effect is in general higher for farmers with larger water rights about half of the lepa s rebound effects arise because adopters tend to irrigate more land and grow more water intensive crops with the remaining half attributable to more intensive irrigation farmers with greater water rights use more water with two thirds of the effects arising from irrigating larger land areas and one third of the effects attributable to more intensive irrigation a 10 reduction of water rights will reduce water use by 5 in the long run and if the reduction targets the majority of the water rights which lie between 100 and 500 af lepa s rebound effect decreases by 15 4 finally we find that farmers have an incentive to apply a small amount of water in order to preserve their water rights but the associated water waste is insignificant

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

longitudinal methods to investigate the role of health determinants in the dynamics of income related health inequality the usual starting point for understanding changes in income related health inequality irhi over time has been regression based decomposition procedures for the health concentration index however the reliance on repeated cross sectional analysis for this purpose prevents both the appropriate specification of the health function as a dynamic model and the identification of important determinants of the transition processes underlying irhi changes such as those relating to mortality this paper overcomes these limitations by developing alternative longitudinal procedures to analyse the role of health determinants in driving changes in irhi through both morbidity changes and mortality with our dynamic modelling framework also serving to identify their contribution to long run or structural irhi the approach is illustrated by an empirical analysis of the causes of the increase in irhi in great britain between 1999 and 2004

measuring state dependence in individual poverty histories when there is feedback to employment status and household composition this paper argues that the assumption of strict exogeneity which is usually invoked in estimating models of state dependence with unobserved heterogeneity is violated in the poverty context as important variables determining contemporaneous poverty status in particular employment status and household composition are likely to be influenced by past poverty outcomes therefore a model of state dependence is developed that explicitly allows for possible feedback effects from past poverty to future employment and household composition outcomes empirical results based on data from the german socio economic panel gsoep suggest that there are indeed such feedback effects and that failure to take them into account may lead to biased estimates of the state dependence effect copyright 2009 john wiley sons ltd

simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity i study a simple widely applicable approach to handling the initial conditions problem in dynamic nonlinear unobserved effects models rather than attempting to obtain the joint distribution of all outcomes of the endogenous variables i propose finding the distribution conditional on the initial value and the observed history of strictly exogenous explanatory variables the approach is flexible and results in simple estimation strategies for at least three leading dynamic nonlinear models probit tobit and poisson regression i treat the general problem of estimating average partial effects and show that simple estimators exist for important special cases copyright 2005 john wiley sons ltd

resale price maintenance an empirical analysis of uk firms compliance empirical evidence on resale price maintenance rpm is scarce this paper provides novel empirical evidence based on a unique database of rpm complaints lodged in the uk to the office of fair trading oft between 2007 and 2009 we describe the characteristics of the commodity being traded and of the relevant upstream and downstream firms and their sectors we then present an econometric analysis to assess how the probability of compliance to the oft request to withdraw the rpm can be affected by the specific features of the relevant economic context in which this restraint has taken place

for love or money the impact of income taxes on marriage higher sometimes lower than their combined single income tax obligations in this paper we explore the impact of the federal individual income tax as well as other economic and demograplhic variables on the marriage decisionis of individuals using longitudinal data from the panel study on income dynamics for the period 1968 92 we estimate a discrete time hazard model of the time to first marriage we find that the probability of marriage is significantly affected by a range of economic and demographic variables importantly we find that an increase in total income taxes paid by married versus single women has a negative effect on the likelihood of marriage and that the change in the marginal tax rate is also a significant determinant of marriage in some cases in contrast the tax effects are rarely significant in determining marriage probabilities among men although there are some differential responses by race in general the impacts of the income tax variables even when statistically significant are small

the dynamics of health in the british household panel survey this paper considers the dynamics of a categorical indicator of self assessed health using eight waves 1991 1998 of the british household panel survey bhps our analysis has three focal points the relative contributions of state dependence and heterogeneity in explaining the dynamics of health the existence and consequences of health related sample attrition and the investigation of the effects of measures of socioeconomic status with a particular focus on educational attainment and income to investigate these issues we use dynamic panel ordered probit models there is clear evidence of health related attrition in the data but this does not distort the estimates of state dependence and of the socioeconomic gradient in health the models show strong positive state dependence and heterogeneity accounts for around 30 of the unexplained variation in health copyright 2004 john wiley sons ltd

dynamic optimal control of process product innovation with learning by doing abstract in this paper we present a dynamic optimal control model of process product innovation with learning by doing and extend the model of chenavaz 2012 to an even more general model in which the firm s cost functions of product and process innovation depend on both the innovation investments and the knowledge accumulations of product and process innovation furthermore in our paper the product price the investments of product and process innovation are decision variables the product quality production cost the change rates of knowledge accumulations of product and process innovation are state variables the main objective of this paper is to analyze the relationships between these variables and investigate the model s optimal conditions and characteristics further we solve the model with some numerical examples and sensitivity analysis is conducted to study the effect of changing the parameters and coefficients on the objective function value

the importance of sample attrition in life cycle labor supply estimation we examine the importance of possible nonrandom attrition to an econometric model of life cycle labor supply using both a wald test comparing attriters to nonattriters and variable addition tests based on formal models of attrition estimates using the panel study of income dynamics show that nonrandom attrition is of little concern when estimating prime age male labor supply because the effect of attrition is absorbed into fixed effects in labor supply the wage measure and instrument set have much larger effects on the estimated labor supply function of prime age men than how one adjusts for panel attrition

socio economic inequality in ill health amongst the elderly should one use current or permanent income in belgium income related inequality in ill health among the 65 is present but reduces significantly as soon as one restricts the analysis to the 65 the main goal of this paper is to check whether these findings based on current income are robust to the income concept used the analysis is repeated using estimates of permanent income measured inequality among the 65 remains very limited suggesting that the observed findings are not heavily dependent upon the income concept finally i suggest an explanation for the observed difference in inequality between the 65 and the 65 i argue that this difference is likely to be correlated with differences across income groups of 1 sample attrition and 2 mortality

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

state dependence serial correlation and heterogeneity in intertemporal labor force participation of married women a dynamic search framework is developed to analyze the intertemporal labor force participation behavior of married women using longitudinal data to allow for a rich dynamic structure the sensitivity to alternative distributional assumptions is evaluated using linear probability and probit models the dynamic probit models are estimated using maximum simulated likelihood msl estimation to overcome the computational difficulties inherent in maximum likelihood estimation of models with nontrivial error structures the results find that participation decisions are characterized by significant state dependence unobserved heterogeneity and negative serial correlation in the error component the hypothesis that fertility decisions are exogenous to women s participation decisions is rejected when dynamics are ignored however there is no evidence against this hypothesis in dynamic model specifications women s participation response is stronger to permanent than current nonlabor income reflecting unobserved taste factors

quality and the diffusion of innovations in this paper we solve the problem of optimal control of products diffusion by quality in a context of monopolistic competition to do so we introduce a dynamic demand function leaning on two hypotheses first price acts a signal of quality second demand is more sensitive to quality than to price using the maximum principle of pontryagin we then characterize the optimal dynamic trajectory of quality and its qualitative properties

timing and quality decisions for entrepreneurial product development abstract an entrepreneur is developing a new product and each period must decide whether to enter the market or to continue development we formulate a model of this decision for ventures facing diminishing returns to product quality and for which funding availability product development success and market competition growth are uncertain we characterize the profit maximizing time to stop product development and enter the market and then show how this stopping time is affected by changes in the business environment by further focussing our modeling assumptions we are able to translate our time based criteria into product quality terms we propose that management set a target quality level that the product must meet in order for the venture to maximize profit we also demonstrate that management should decrease this target and hence the quality of the final product over time and adjust it to respond to changes in the business context

dynamic optimal control models in advertising recent developments this paper presents a review of recent developments that have taken place in the area of dynamic optimal control models in advertising subsequent to the comprehensive survey of the literature by sethi in 1977 the basic problem underlying these models is that of determining optimal advertising expenditures and possibly other variables of interest over time for a firm or a group of competing firms under consideration this optimization is done subject to some dynamics that define how these variables translate into sales and in turn into profits the purpose of this update is twofold on the one hand new contributions in the areas already treated in the earlier survey are reviewed on the other hand new trends in the advertising literature since 1977 such as quality as an additional marketing instrument cumulative sales models pulsing advertising and advertising as a part of corporate models of the firm are discussed the models covered in this update are organized under six headings models with ca

deterring fraud the role of resale price maintenance the economics of fraud like the economics of information itself enjoys a limited but growing literature while economists since alfred marshall have recognized the importance of brand name capital and reputation in protecting consumers against fraud marshall 1949 4 xi only recently has the profession been able to build rigorous models for analyzing market transactions in which the quality of traded goods is subject to uncertainty and deception in a pioneering paper george akerlof 1970 presented a model in which buyer skepticism about the quality of privately offered used cars becomes so intense that all potential sellers of nonlemon used cars are driven from the market leaving it entirely populated with lemons as analyzed by michael spence 1973 this phenomenon may occur because nonlemon owners lack adequate signaling mechanisms specifically an effective signal would be an activity or characterusing a model like that of klein and leffler s we demonstrate theoretically that a manufacturer s desire to signal relative quality differences by relative retail price differences may be thwarted by the misleading markups of independent retailers resale price maintenance is one instrument that a manufacturer can use to avoid this problem we present empirical evidence from a recent antitrust case in which forcing a manufacturer to drop resale price maintenance did lead to misleading and also higher markups

the effects of resale price maintenance on shareholder wealth the consequences of schwegmann event study methodology is used to assess the effects of the 1951 u s supreme court schwegmann decision which severely weakened the enforcement of resale price maintenance contracts in the united states overall upstream industries with heavy resale price maintenance usage apparently were not adversely affected by the decision among large retailing groups a positive effect of the decision was found for department stores cross section tests of the motives for the adoption of resale price maintenance provide support for hypotheses based on free ridership dealer cartels and to a lesser extent protection of product reputation copyright 1994 by blackwell publishing ltd

a diffusion model incorporating product benefits price income and information we start by assuming that a major benefit of many new durable products such as dishwashers and microwave ovens is time savings others such as vcrs also enhance the value of our leisure time using a household production framework we demonstrate that a utility maximizing individual will have a reservation price for the product which is a function of the product benefits and his wage rate by assuming that the wage rate has an extreme value distribution across the population we are able to derive for the aggregate process an income price dependent logistic adoption equation we then allow for the possibility that certain eligible consumers may delay their purchase of the product because they are unaware that it exists are suspicious of its quality or expect its price to fall unawareness uncertainty and hope for further price declines are assumed to decrease with the increase in the number of previous adopters the resulting diffusion model has the property that the product life cycle phenomenon can be explained jointly or separately by the income price process and the awareness uncertainty expectations process using data on household income on durable penetration within different income classes and on first purchase sales the aggregate diffusion model and its premises are tested and supported it is found that both the income price and awareness uncertainty expectations processes are at work however the dependence of the awareness uncertainty expectations delay process on the number of previous adopters e g word of mouth type effect exists only in certain product categories and is usually relatively weak it is demonstrated that if the word of mouth type effects are weak a price skimming strategy is optimal for a monopolist and also is likely to be implemented by oligopolists the sales forecasting implications of the model also are pursued

the economic incidence of the interstate commerce act of 1887 a theoretical and empirical analysis of the short haul pricing constraint the public and private interest hypotheses permeate contemporary regulatory analyses both theories are used to explain the inception of the first major federal regulatory agency the interstate commerce commission icc according to the public and private interest hypotheses the regulations promulgated by the icc benefited either railroads or shippers this paper presents an alternative view consistent with the multiple interest theory of regulation it is demonstrated that the major regulatory instrument of the icc the short haul pricing constraint shpc altered the equilibria of railroad markets in a way which benefitted the class of shippers short haul shippers facing monopolistic railroad markets the shpc also benefitted some railroads by increasing the correspondence between unregulated cooperative and regulated noncooperative levels of long haul shipments the proposition that the icc benefited short haul shippers and railroads is supported by an empirical analysis of the effects of the inception of federal regulation and implementation of the shpc on stock prices the results of the paper indicate that the public and private interest interpretations of the icc are neither contradictory nor complete but instead are complementary a theoretical and empirical analysis of the chief regulatory mechanism of the icc provides this synthesis

health income and relative deprivation evidence from the bhps it is believed that income affects health directly but it is argued that indirect income effects due to relative deprivation may be equally important this paper investigates these relationships using parametric and semiparametric panel data models which ameliorate problems of misspecification and unobservable heterogeneity by allowing for a flexible functional form of income we ensure that coefficients on relative deprivation variables are not an artefact of a highly non linear relationship between health and income the results provide strong evidence for the impact of income on self reported measures of health for men and women these results are robust across a range of techniques and are resilient to the inclusion of measures of relative deprivation the parametric results for relative deprivation largely reject its influence on health although there is some evidence of an effect in the semiparametric models

the effect of income growth and inequality on health inequality theory and empirical evidence from the european panel governments of eu countries have declared that they would like to couple income growth with reductions in social inequalities in income and health we show that theoretically both aims can be reconciled only under very specific conditions concerning the type of growth and the income responsiveness of health we investigate whether these conditions were met in europe in the 1990s using panel data from the european community household panel we demonstrate that i in most countries the income elasticity of health was positive and increases with income and ii that income growth was not pro rich in most eu countries resulting in small or negligible reductions in income inequality the combination of both findings explains the modest increases we observe in income related health inequality in the majority of countries

efficiencies without economists the early years of resale price maintenance resale price maintenance rpm continues to be a contentious topic both in economics and in antitrust during the 1980s economists derived new efficiency motivations for rpm while the supreme court reaffirmed the decades old per se ban on its use and congress threatened to extend that ban in the 1990s after several years of federal inactivity during the reagan administration the federal trade commission ftc has once again begun bringing rpm cases while economists have proposed a number of different efficiency explanations for rpm such theorizing has been performed largely without the help of businesses that actually use rpm with little practical evidence such hypotheses have been subject to substantial criticism of course since rpm has been per se illegal businesses may be reluctant to admit that they are engaged in the practice which would appear to be a necessary condition for generating an efficiency defense this article seeks to find out why businesses may believe that they benefit from rpm it does so by examining which efficiency rationales were advanced by firms during a critical time for rpm in the united states 1915 to 1917 these rationales drawn largely from previously unexplored materials are then examined in the light of current economic theory there are two basic sources for these rationales the first is three hearings on rpm held in 1915 1916 and 1917 in the u s house of representatives on a bill to legalize certain forms of rpm the second is the transcript of seven days of hearings the ftc held in 1917 to discuss efficiency motivations for rpm section ii explains several economic theories that have been posited for rpm and briefly discusses the critiques of these theories that have arisen in the legal and economic communities section iii examines federal rpm case law prior to 1918 and posits efficiency rationales from section ii to match the products involved in the case law section iii also discusses the uncertainty in the case law during the period 1908 to 1917 and the concepts behind the various judicial decisions section iv presents the efficiency arguments made during this period of legal uncertainty

trial awareness advertising decisions a control problem with phase diagrams with non stationary boundaries abstract the paper presents a solution to a diffusion process in which advertising has two goals awareness creation and trial inducement it is shown that the advertising time paths can be either monotonic or single peaked the solution technique involves phase diagrams where the boundaries are non stationary general discussion of such techniques is provided the paper proves the existence of a stationary equilibrium to which the paths converge furthermore this two state variables two control variables equilibrium point is conditionally stable

diffusion of innovations under supply constraints in this paper we present a canonical setting that illustrates the need for explicitly modeling interactions between manufacturing and marketing sales decisions in a firm we consider a firm that sells an innovative product with a given market potential the firm may not be able to meet demand due to capacity constraints for such firms we present a new model of demand modified from the original model of bass to capture the effect of unmet past demand on future demand we use this model to find production and sales plans that maximize profit during the lifetime of the product in a firm with a fixed production capacity we conduct an extensive numerical study to establish that the trivial myopic sales plan that sells the maximal amount possible at each time instant is not necessarily optimal we show that a heuristic build up policy in which the firm does not sell at all for a period of time and builds up enough inventory to never lose sales once it begins selling is a robust approximation to the optimal policy specializing to a lost sales setting we prove that the optimal sales plan is indeed of the build up type we explicitly characterize the optimal build up period and analytically derive the optimal initial inventory and roll out delay finally we show that the insights obtained in the fixed capacity case continue to hold when the firm is able to dynamically change capacity

market forces and commercial aircraft safety this paper investigates the wealth impact on aircraft manufacturers of crashes involving their aircraft the author attempts to separate out the regulatory tort law and endogenous market components of these costs using stock market data the results indicate that on average the manufacturer suffers a wealth loss of 21 3 million as the result of a fatal crash in which the structural integrity of the aircraft is at issue the analysis suggests that not all of this amount can be attributed to regulatory or tort law mechanisms and that market forces play a role in providing air travel safety copyright 1987 by blackwell publishing ltd

health status and health dynamics in an empirical model of expected longevity expected longevity is an important factor influencing older individuals decisions such as consumption savings purchase of life insurance and annuities claiming of social security benefits and labor supply it has also been shown to be a good predictor of actual longevity which in turn is highly correlated with health status a relatively new literature on health investments under uncertainty which builds upon the seminal work by grossman grossman m 1972 on the concept of health capital and demand for health journal of political economy 80 223 255 has directly linked longevity with characteristics behaviors and decisions by utility maximizing agents our empirical model can be understood within that theoretical framework as estimating a production function of longevity using longitudinal data from the health and retirement study we directly incorporate health dynamics in explaining the variation in expected longevities and compare two alternative measures of health dynamics the self reported health change and the computed health change based on self reports of health status in 38 of the reports in our sample computed health changes are inconsistent with the direct report on health changes over time and another 15 of the sample can suffer from information losses if computed changes are used to assess changes in actual health these potentially serious problems raise doubts regarding the use and interpretation of the computed health changes and even the lagged measures of self reported health as controls for health dynamics in a variety of empirical settings our empirical results controlling for both subjective and objective measures of health status and unobserved heterogeneity in reporting suggest that self reported health changes are a preferred measure of health dynamics

prices product qualities and asymmetric information the competitive case recent developments in the economics of information emphasize the informational content of prices we examine the degree to which prices convey information on product quality to uninformed agents under perfect competition we show that a rational expectations equilibrium may not exist when an equilibrium does exist the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents

a model of vertical restriction and equilibrium in retailing one sort of economic behavior that continues to engage the attention of economists is the imposition by some manufacturers of restrictions on their wholesalers and retailers why would manufacturers want to impose minimum retail prices and why would they want to control the locations at which their goods are distributed to consumers an application of simple economic principles suggests that manufacturers with a monopoly in a product this could be a monopoly achieved through patents for exampleshould charge the profit maximizing wholesale price and let retailers fend for themselves and if more stores want to carry the product so much the better because this increases the likelihood that consumers will run across it a widely accepted explanation for the desire of manufacturers to be able to stipulate resale prices is based on the possibility that manufacturers of branded goods often want retailers to provide some joint service that cannot easily be charged for the clearest example is sales or promotional effort the effect of a minimum retail price in these cases is to establish an incentive to provide jointly supplied services that no individual retailer would otherwise provide this model of distribution provides a rationale for restrictions placed on retailers by manufacturers the manufacturer s customers are located uniformly along a road and retailing operations are subject to increasing returns three difficulties arise first retailers acting in concert can earn positive profits at the expense of the manufacturer and consumers second costless relocation free entry and competition will not result in the store density and retail price favored by the manufacturer third store locations fixed in the short run imply that price cutting would undermine the density of stores preferred by the manufacturer

the effect of relationship status on health with dynamic health and persistent relationships the dynamic evolution of health and persistent relationship status pose econometric challenges to disentangling the causal effect of relationships on health from the selection effect of health on relationship choice using a new econometric strategy we find that marriage is not universally better for health rather cohabitation benefits the health of men and women over 45 being never married is no worse for health and only divorce marginally harms the health of younger men we find strong evidence that unobservable health related factors can confound estimates our method can be applied to other research questions with dynamic dependent and multivariate endogenous variables

healthy bodies and thick wallets the dual relation between health and economic status there is abundant evidence of a quantitatively large association between many measures of economic status including income and wealth and a variety of health outcomes such as mortality or morbidity however considerable and often heated debate remains especially across disciplines about the direction of causation and about why the association arises although medical scientists are often convinced that the dominant if not exclusive pathway is that variation in socioeconomic status produces health disparities they are increasingly debating among themselves about why low economic status might lead to poor health at least for modern industrial countries 1 the old standby arguments the less well to do have access to less or lower quality medical care or a stronger pattern of deleterious personal behaviors have been rejected as insufficient instead a series of intriguing competing theories have arisen that emphasize long term impacts of early childhood or even inter uterine environmental factors the cumulative effects of prolonged exposures to individual stressful events or reactions to macro societal factors such as rising levels of income inequality a common link is that each theory attempts to document the physiological processes through which low economic status leads to poorer health while these scientific questions are extremely important this research has taken place with little input from economists economists are now making contributions about the alternative pathway the impact poor health may have on economic resources poor health may restrict a family s capacity to earn income or to accumulate assets by limiting work or by raising medical expenses at a minimum this work should provide a caution against exaggerating the magnitude of causation from economic status to health outcomes but the potential contribution runs deeper as people age the evolving variation in individual health outcomes may offer additional statistical information to estimate parameters of household savings and consumption behavior that so far have proven to be somewhat elusive thus incorporating health uncertainty and risk into economic models should eventually enrich our understanding of basic tenets of household behavior the first section of this paper documents the size of the association between health and one prominent economic status measure household wealth section two deals with how health influences economic status by sketching out reasons why health may alter household savings and eventually wealth and then providing estimates of the empirical magnitude of these effects section three shifts attention to the alternative pathway the links between economic status and health and summarizes 2major controversies and evidence surrounding these issues

two separated effects of employer provided health insurance on job mobility we estimate the effect of employer provided health insurance ephi on job mobility via a dynamic model of joint employment and health insurance decision in the presence of uncertainty about wage rate and health status transitions the model is based on a markov decision process in which a hedonic wage approach provides an economic rationale for the different choices and health insurance serves as an input to the health production process including health transitions in the model helps us to understand how the availability of ephi positive job characteristic and holding ephi the wage health insurance trade off enter into the individuals decisions the model is estimated using the 1999 2000 medical expenditure panel survey panel 4 and the results show that the pure effects of holding ephi are negligible the full effects of ephi are significant and the degrees of the inefficiency vary between 14 and 25 across different states

reference health and the demand for medical care we propose that health in prior periods termed reference health is theoretically and empirically relevant to the demand for medical care to address non normality in the distributions of medical care spending consumption and health we use a conditional density estimator nested in a finite mixture framework we find that reference health can help explain the variation in spending among individuals with the same contemporaneous health particularly in the top tail of the spending distribution we demonstrate that omitting reference health understates the potential cost savings of healthy aging initiatives by 50 percent this article is protected by copyright all rights reserved

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

split panel jackknife estimation of fixed effect models we propose a jackknife for reducing the order of the bias of maximum likelihood estimates of nonlinear dynamic fixed effect panel models in its simplest form the half panel jackknife the estimator is just 2 hat theta bar theta 1 2 where hat theta is the mle from the full panel and bar theta 1 2 is the average of the two half panel mles each using t 2 time periods and all n cross sectional units this estimator eliminates the first order bias of hat theta the order of the bias is further reduced if two partitions of the panel are used for example two half panels and three 1 3 panels and the corresponding mles on further partitioning the panel any order of bias reduction can be achieved the split panel jackknife estimators are asymptotically normal centered at the true value with variance equal to that of the mle under asymptotics where t is allowed to grow slowly with n in analogous fashion the split panel jackknife reduces the bias of the profile likelihood and the bias of marginal effect estimates simulations in fixed effect dynamic discrete choice models with small t show that the split panel jackknife effectively reduces the bias and mean squared error of the mle and yields confidence intervals with much better coverage

an analysis of sample attrition in panel data the michigan panel study of income dynamics by 1989 the michigan panel study on income dynamics psid had experienced approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership we study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the estimates of several sets of regression coefficients we provide a statistical framework for conducting tests for attrition bias that draws a sharp distinction between selection on unobservables and on observables and that shows that weighted least squares can generate consistent parameter estimates when selection is based on observables even when they are endogenous our empirical analysis shows that attrition is highly selective and is concentrated among lower socioeconomic status individuals we also show that attrition is concentrated among those with more unstable earnings marriage and migration histories nevertheless we find that these variables explain very little of the attrition in the sample and that the selection that occurs is moderated by regression to the mean effects from selection on transitory components that fade over time consequently despite the large amount of attrition we find no strong evidence that attrition has seriously distorted the representativeness of the psid through 1989 and considerable evidence that its cross sectional representativeness has remained roughly intact

persistence in health limitations a european comparative analysis this paper investigates the persistence in health limitations for individuals within the member states of the european union we use the full eight waves of data available in the european community household panel echp to explore the relative contributions of state dependence unobserved heterogeneity and socioeconomic characteristics in particular income education and activity status and how these vary across countries we focus on binary measures of health limitations constructed from the answers to the question are you hampered in your daily activities by any physical or mental health problem illness or disability dynamic non linear panel data models are specified and estimated using both pooled and random effects probit and logit models together with complementary log log models the random effects probit specifications are preferred results reveal high state dependence of health limitations which remains after controlling for measures of socioeconomic status there is heterogeneity in the socioeconomic gradient across countries

resale price maintenance an economic assessment of the federal trade commission s case against the corning glass works this article examines the economic explanations for the use of resale price maintenance rpm by the corning glass works using empirical evidence developed from the federal trade commission s case challenging the practice three classes of rpm theories are tested the supplier and dealer anticompetitive theories and the class of principle agent theories the article uses both ex ante and ex post tests to distinguish the theories including tests based on structural evidence as well as data on sales advertising and stock market reactions for the company and its competitors around critical events in the case the evidence most convincingly rejects the anticompetitive theories and points toward a principle agent explanation in which rpm helped increase sales of corning s products the case is of interest in part because the simple products at issue in the case are not the types of products most often associated with potential efficiency explanations for rpm

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

longitudinal analysis of income related health inequality this paper considers the characterisation and measurement of income related health inequality using longitudinal data the paper elucidates the nature of the jones and lopez nicolas 2004 index of health related income mobility and explains the negative values of the index that have been reported in all the empirical applications to date the paper further presents an alternative approach to the analysis of longitudinal data that brings out complementary aspects of the evolution of income related health inequalities over time in particular we propose a new index of income related health mobility that measures whether the pattern of health changes is biased in favour of those with initially high or low incomes we illustrate our work by investigating mobility in the general health questionnaire measure of psychological well being over the first nine waves of the british household panel survey from 1991 to 1999

the unobserved pattern of material hardship and health among older americans this paper investigates the relationship between self reported health and material hardship among older americans differently from income based measures material hardship provides a more specific description of the concrete adversities faced by the elderly we have used the last six waves of the health and retirement study to explore the relative contributions of state dependence unobserved heterogeneity and time specific shocks on reporting poor health experiencing food insecurity and medication cutbacks we have used a latent markov model to estimate a multivariate non linear system of equations for panel data allowing time varying unobserved heterogeneity our results reveal a high state dependence of both health and material hardship conditions estimated trajectories reveal that pathways of material hardship are associated differently with health material hardship is also spread across its dimensions

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines