pricing variation within dual distribution chains the different implications of externalities and signaling for high and low quality brands within many of the multioutlet branded chains that dominate the retail and services landscape the organizational form e g company management franchising used to manage an outlet varies from site to site as do the prices charged at those sites i propose that organizational form and prices may be systematically related as a result of brand externalities in particular i develop logic that the relevant form of externality should differ for upper quality tier brands and lower tier brands using panel data on price and organizational form from more than 6 700 branded u s hotels affiliated with 40 dual distribution brands those brands that simultaneously company manage and franchise individual outlets i find that consistent with the brand externality arguments company managed locations have higher prices within high quality chains whereas franchisees price higher in the lower tiers this paper was accepted by bruno cassiman business strategy

the effects of different contractual arrangements the case of retail gasoline markets the change in the contractual arrangement at a gasoline station from a refiner controlled to a franchise operation implies different incentives for the individual who sets prices and determines hours but reflects no change in the product nor the market environment the outcome can lead to higher prices and reduced hours at the station affected the divorcement experience in maryland illustrates how change can be imposed by the legal system average self service and full serve prices rose and hours of operation fell relative to those of competitors even though refiner operations that were forced to franchise had previously had prices below the competition the evidence of an effect on the prices and hours of competitors is less convincing 16 references 2 tables

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

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

is devolution democratization abstract recent attempts at introducing new forms of governance in forest management in india have focused on devolution to user groups or village level participatory committees success or failure is attributed to the presence or absence of social capital among these groups these groups have never existed outside the state however and social relations including social capital are continually being transformed by administrative and market forces this paper argues that what matters is not the degree of government intervention i e more or less devolution or the degree of social capital among local communities but state accountability this can only be ensured through addressing questions of political reform

targeted transfers and the fiscal response to the great recession abstract between 2007 and 2009 government expenditures increased rapidly across the oecd countries while economic research on the impact of government purchases has flourished in the data most of the increase in expenditures was in government transfers after documenting this fact we argue that future research should focus on the positive impact of transfers towards this we present a model in which there is no representative agent and ricardian equivalence does not hold because of uncertainty imperfect credit markets and nominal rigidities targeted lump sum transfers are expansionary both because of a neoclassical wealth effect and because of a keynesian aggregate demand effect

on the identity of social capital and the social capital of identity in contemporary economics social capital is identified by some with norms and networks that enhance trust reciprocity and cooperation for the production of public goods but critics claim that social capital is principally of individualist origin and provides solid ground for the subordination of labour by capital we argue that despite neoclassical mis treatments more socialised conceptions of social capital address individuals capacities to share a sense of social obligation and common identity and pursue joint strategies for public welfare we attempt to reinstate the social in social capital via the concept of social embeddedness where individuals freely engage in processes of reflection social mobilisation and political debate to assess different and often conflicting values and objectives across multiple collective agencies choices thus depend not only on personal utility but also on personal identity i e what kind of person one wants to be and what kind of society one wishes to have copyright oxford university press

the optimum quantity of debt abstract we find that the welfare gains to being at the optimum quantity of debt rather than the current us level are small and therefore concerns regarding the high level of debt in the us economy may be misplaced this finding is based on a model of a large number of infinitely lived households whose saving behavior is influenced by precautionary saving motives and borrowing constraints this model incorporates a different role for government debt than is found in standard models and it captures different cost benefit trade offs on the benefit side government debt enhances the liquidity of households by providing an additional means of smoothing consumption and by effectively loosening borrowing constraints on the cost side the implied taxes have adverse wealth distribution and incentive effects in addition government debt crowds out capital via higher interest rates and lowers per capita consumption

strategic transfer pricing most research into cost systems has focused on their motivational implications this paper takes a different approach by developing a model where two oligopolistic firms strategically select their cost based transfer prices duopoly models frequently assume that firms game on their choice of prices product prices however are ultimately based on the firms transfer prices that communicate manufacturing costs to marketing departments it is for this reason that transfer prices will have a strategic component to them we derive implications for cost system choice and transfer pricing including showing that firms may cross subsidize their products a result consistent with the empirical evidence

adaptation and vertical integration in the airline industry we explore patterns of vertical integration in the us airline industry major air lines subcontract portions of their network to regional partners which may or may not be owned we investigate if ownership economizes on ex post renego tiation costs we estimate whether airlines are more likely to use owned region als on city pairs with adverse weather which makes adaptation decisions more frequent and on city pairs that are more integrated into the major s network which raises the costs of having adaptation decisions resolved suboptimally our results suggest a robust empirical relationship between adaptation and vertical integration in this setting jel l14 l22 l24 l93 how do firms decide which transactions to carry out in house and which to procure through the market in response to this question a large theoretical literature has developed one branch of this literature transaction cost economics argues that integration may be a more efficient way to organize when contracts are incomplete and parties cannot easily switch trading partners oliver williamson 1975 1985 j under these conditions ex post renegotiation will be both nec essary and costly and as a result the transaction costs of market exchange may be substantial empirical studies testing this hypothesis have focused primarily on the effect of asset specific ity on vertical integration and have generally found a positive relationship 2 however as steven tadelis 2002 emphasizes holding asset specificity constant variation in transaction costs will also result from differences in transaction complexity complex transactions are associated with greater contractual incompleteness and in turn more costly haggling over ex post adaptation decisions yet relative to asset specificity the frequency of adaptation decisions as a determinant of vertical integration has received considerably less attention in the empirical literature 3

high and declining prices signal product quality high and declining prices signal a high quality product high prices are the efficient means of signaling because the consequent loss of sales volume is most damaging for lower cost lower quality products as time passes and the number of informed consumers increases the signaling distortion lessens resulting in a declining price profile the prediction of high and declining prices is robust across a variety of dynamic models and is consistent with recent empirical findings copyright 1991 by american economic association

the cyclical behavior of the price cost markup countercyclical markups constitute the key transmission mechanism for monetary and other demand shocks in new keynesian models this paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost the first part of the paper studies markups in the aggregate economy and the manufacturing sector we use bils s 1987 insights for converting average cost to marginal cost but do so with richer data we find that all measures of markups are either procyclical or acyclical moreover we show that monetary shocks lead markups to fall with output the second part of the paper merges input output information on shipments to the government with detailed industry data to study the effect of demand changes on industry level markups industry level markups are found to be acyclical in response to demand changes

diversification diseconomies of scope and vertical contracting evidence from the taxicab industry this paper studies how firms reorganize following diversification proposing that firms use outsourcing or vertical disintegration to manage diseconomies of scope we also consider the origins of scope diseconomies showing how different underlying mechanisms generate contrasting predictions about the link between within firm task heterogeneity and the incentive to outsource following diversification we test these propositions using microdata on taxicab and limousine fleets from the economic census the results show that taxicab firms outsource by shifting the composition of their fleets toward owner operator drivers when they diversify into the limousine business the magnitude of the shift toward driver ownership is larger in less urban markets where the tasks performed by taxicab and limousine drivers are more similar these findings suggest that 1 firms use outsourcing to manage diseconomies of scope at a particular point in the value chain and 2 interagent conflicts can be an important source of scope diseconomies

vertical integration and firm boundaries the evidence since ronald h coase s 1937 seminal paper a rich set of theories has been developed that deal with firm boundaries in vertical or input output structures in the last twenty five years empirical evidence that can shed light on those theories also has been accumulating we review the findings of empirical studies that have addressed two main interrelated questions first what types of transactions are best brought within the firm and second what are the consequences of vertical integration decisions for economic outcomes such as prices quantities investment and profits throughout we highlight areas of potential cross fertilization and promising areas for future work

the power of forward guidance revisited in recent years central banks have increasingly turned to forward guidance as a central tool of monetary policy especially as interest rates around the world have hit the zero lower bound standard monetary models imply that far future forward guidance is extremely powerful promises about far future interest rates have huge effects on current economic outcomes and these effects grow with the horizon of the forward guidance we show that the power of forward guidance is highly sensitive to the assumption of complete markets if agents face uninsurable income risk and borrowing constraints a precautionary savings effect tempers their responses to changes in future interest rates as a consequence forward guidance has substantially less power to stimulate the economy in addition we show that the business cycle dynamics of our incomplete markets model differ substantially from its complete market counterpart this contrasts with the well known results of krusell and smith 1998 we present approximate representations that can easily be incorporated into standard business cycle models

beer and the tie did divestiture of brewer owned public houses lead to higher beer prices in 1989 the united kingdom monopolies and mergers commission mmc recommended measures that eventually led brewers to divest themselves of 14 000 public houses the mmc claimed that their recommendations would lower retail prices and increase consumer choice since that time however retail prices have risen this paper contains an econometric analysis of the transition period the analysis is based on a model of the relationship between retail price and retail organisational form that emphasises how exclusive dealing clauses and strategic factors interact in 1989 in an important decision the united kingdom monopolies and mergers commission mmc recommended measures that eventually led brewers to divest themselves of 14 000 public houses the mmc claimed that their recommendations would lower retail prices and increase consumer choice there is considerable doubt however that their objectives were achieved indeed since the time that the recommendations were implemented retail prices have risen it is not clear however if prices would have increased in the absence of divestiture one goal of my research is to provide an answer to this question the mmc s recommendations created an exceptional opportunity to assess the effects that different contractual arrangements have on retail prices indeed one would like to investigate this relationship ceteris paribus unfortunately however the choice of vertical market structure is normally endogenous and it is impossible to condition on all of the factors that affect the contracting decision in the uk beer industry in contrast the government ordered changes in the type and terms of the contracts under which national brewers could operate their licensed premises increased separation between brewer and publican therefore was not due to changes in economic conditions moreover some premises the free houses that were not owned by a brewer were not affected by the beer orders the existence of a control group facilitates the analysis by strengthening the conclusions that one can draw in recent years economists have moved away from simple theories of vertical

social capital as a product of class mobilization and state intervention industrial workers in kerala india abstract this paper argues that state intervention and class mobilization in the state of kerala india have produced two forms of social capital kerala s high level of social development and successful redistributive reforms are a direct result of mutually reinforcing interactions between a programmatic labor movement and a democratic state this synergy between state and labor has also created the institutional forms and political processes required for negotiating the class compromises through which redistribution and growth can be reconciled these dynamics are explored through a close examination of both the organized factory sector and the unorganized informal sector

the method of endogenous gridpoints with occasionally binding constraints among endogenous variables we show how the method of endogenous gridpoints can be extended to solve models with occasionally binding constraints among endogenous variables very efficiently we present the method for a consumer problem with occasionally binding collateral constraints and non separable utility in durable and non durable consumption this problem allows for a joint analysis of durable and non durable consumption in models with uninsurable income risk which is important to understand patterns of consumption saving and collateralized debt we illustrate the algorithm and its efficiency by calibrating the model to us data

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

accounting for endogeneity when assessing strategy performance does entry mode choice affect fdi survival firms choose strategies based on their attributes and industry conditions therefore strategy choice is endogenous and self selected empirical models that do not account for this and regress performance measures on strategy choice variables are potentially misspecified and their conclusions incorrect i highlight how self selection on hard to measure or unobservable characteristics can bias strategy performance estimates and recommend an econometric technique that has been developed to account for this effect although this concern applies to a wide range of strategy questions to demonstrate its effect i empirically examine if entry mode choice acquisition versus greenfield influences foreign direct investment survival in specifications that do not account for self selection i find that greenfield entries have survival advantages compared to acquisitions this confirms previous findings however the significance of this effect disappears once i account for self selection of entry mode in the empirical estimates the results confirm that estimates from models that do not account for self selection of strategy choice can lead to incorrect or misleading conclusions

markets the u s lodging industry the u s lodging industry appears highly competitive ownership concentration appears to be low fixed costs are high relative to variable costs and unused rooms cannot be stored for future sale so price cutting should be attractive however this paper argues that unexpectedly oligopolistic market structures in many local lodging markets combined with behavioral norms of cooperation sustain profits in what might otherwise be an industry of cutthroat competition i describe the patterns of competition and cooperation in the u s lodging industry summarizing theoretical arguments empirical research descriptive statistics from industry and government sources and anecdotal evidence from the trade press and from interviews conducted with managers of over 200 properties nationwide

strategic implications of darwinian economics for selling efficiency and choice of integrated or independent sales forces most managers when confronted with a difficult strategic decision would like to know what is the prevailing practice in their industry prevailing practice interests managers in part because it may indicate which decisions are good even best the rationale is darwinian economics which proposes that competitive markets operate to force at least an approximation of optimal behavior because wrong decisions are extinguished by the market mechanism if so the bulk of survivors make good business decisions and their collective practice is worth knowing meaning it should be difficult to improve upon this paper tests whether prevailing practice represents good decisions the context is the decision whether to fill a sales district with a company integrated sales force or with outside agents independents the outcome of the choice is the ratio of sales to the cost of running the sales force i e selling efficiency a model is described which summarizes industry decisions and two propositions are developed proposition 1 a simple version states that efficiency declines as firms depart from the industry rule as to when they should integrate proposition 2 a contingent version states that efficiency declines as firms depart from the industry rule in unpredictable selling environments but that conforming to the rule has no impact in predictable environments the rationale is that firms learn the environment well enough to know when to depart from the rule in predictable settings but not otherwise the relationship between efficiency and conformity to prevailing practice is examined for 93 sales districts of 11 recognized electronic component manufacturers the results support proposition 2 the most efficient sales forces conform to prevailing practice and the least efficient deviate but only in uncertain environments in more certain environments conformity and efficiency are unrelated implications such as when it pays to be different and suggestions for future research are discussed

control modes in international service operations the propensity to franchise what determines a service firm s organizational choice between equity based control and franchising this question which has elicited some theoretical answers and a few empirical tests in a domestic setting has never been addressed in an international context before this study explains the mode of control chosen in terms of a theoretical framework which borrows from agency theory and transaction cost analysis the propensity to franchise internationally was found to be directly related to i monitoring costs associated with geographical and cultural distance between the principal franchisor and its foreign agents franchisees ii the principal s international experience and iii the degree of host countries contextual uncertainty but inversely related to the service firm level of brand name asset specificity

a macroeconomic model with a financial sector this paper studies a macroeconomic model in which financial experts borrow from less productive agents we pursue four sets of results i the economy is prone to instability and occasionally enters volatile episodes as volatility spikes agents precautionary motive increases depressing prices even further log linear approximations fail to capture these non linear effects that can cause economies to be significantly depressed for long periods of time ii endogenous risk during volatile episodes increases asset price correlations iii financial experts impose a negative externality on each other and on the labor sector by not maintaining adequate capital cushion and funding structure iv while risk sharing within the financial sector through securitization and derivatives contracts reduces many inefficiencies it can also amlify systemic risks

expenditure on durable goods a case for slow adjustment for more than a half a decade the fact that expenditure on durables can be well approximated by a random walk has remained a hidden puzzle challenging almost any theory in which agents smooth the use of their wealth this paper shows that once a nonparsimonious approach is used or lower frequencies of the data are examined the fact itself disappears changes in expenditures on durables reveal a degree of reversion consistent with the permanent income hypothesis pih although this reversion occurs at a rate significantly slower than what is suggested by a frictionless pih model

franchising and risk management franchising is an important and controversial form of vertical integration allegations of opportunistic behavior by franchisors have led to calls for public regulation and in some states fairness in franchising laws the advisability of such regulation depends on the long run incentives to franchise if franchising is a temporary step on the path to complete ownership integration regulation may be called for alternatively if complete or partial franchising is a permanen t market solution regulation is at least contestable this paper offer s new evidence on the incentives to franchise copyright 1988 by american economic association

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

mapping india s regional subcultures implications for international management as india continues to emerge as a global economic player scholars and practitioners increasingly need to understand the cultural heterogeneity within this large and populous nation based on lenartowicz and roth s framework of culture assessment we have identified nine distinct subcultural regions of india and used explanations grounded in functional and neo institutional theories to account for the origin and maintenance of cultural distinctiveness of these regions further we developed seven cultural value dimensions for the indian society and used these to hypothesize and empirically test the existence of cultural differences within india results supported our hypothesized arguments this study advances our knowledge of how global functional and institutional forces have combined with national forces to shape india s overall culture and how more local forces have shaped its regions methodologically it identifies and develops measures that specifically reflect the values of individuals living in india and uses these to assess intra national cultural differences within this nation further it suggests how use of multiple methods can enable us to understand the simultaneous presence of somewhat contradictory values within a society the study also provides applications of the proposed cultural value dimensions and advises implications of regional subcultures for various social and organizational phenomena

insurance and opportunities a welfare analysis of labor market risk abstract using a model with constant relative risk aversion preferences endogenous labor supply and partial insurance against idiosyncratic wage risk this paper provides an analytical characterization of three welfare effects a the welfare effect of a rise in wage dispersion b the welfare gain from completing markets and c the welfare effect from eliminating risk the analysis reveals an important trade off for these welfare calculations on the one hand higher wage uncertainty increases the cost associated with missing insurance markets on the other hand greater wage dispersion presents opportunities to raise aggregate productivity by concentrating market work among more productive workers welfare effects can be expressed in terms of the underlying parameters defining preferences and wage risk or alternatively in terms of changes in observable second moments of the joint distribution over individual wages consumption and hours

measuring public sector capacity abstract this paper explores the possibility of creating an index of public sector capacity which is policy neutral and relies on information already available it defines public sector capacity in terms of three elements policy capacity implementation authority and operational efficiency the paper also proposes a parallel index of enabling conditions environmental factors which lie beyond the control of the public sector but which profoundly influence its capacity construction of the index is feasible provided it is considered acceptable to rely on subjective ratings as well as hard statistics the index would need to be used with caution on account of the inevitable data limitations

consumption dynamics during recessions when will durable expenditures respond strongly to economic stimulus we build from micro evidence and show that in a heterogeneous agent business cycle model with xed costs of durable adjustment responsiveness is substantially dampened during recessions our model estimates imply that during the great recession durable expenditures were half as responsive to additional stimulus as during the boom in the 1990s this procyclical responsiveness is driven by changes in the distribution of households desired durable holdings over the cycle we directly test our model by estimating this distribution empirically using psid micro data and nd that the distribution in the data moves cyclically as predicted in addition to this micro evidence we also provide support for our model s procyclical responsiveness using aggregate time series data and we show this time series evidence is inconsistent with simpler models featuring smooth adjustment costs

search market equilibrium bilateral heterogeneity and repeat purchases abstract we develop a general model of search market equilibrium with heterogeneous buyers and sellers this framework unifies previous models with one sided heterogeneity and clarifies many of their special properties it easily accounts for price dispersion active search and the matching of buyer and seller types it also extends to repeat purchases once we embed it into a dynamic game with incomplete information we formalize the inferences and strategies underlying equilibria where firms charge constant prices and customers patronize them loyally we establish a general correspondence between such equilibria and single purchase markets journal of economic literature classification numbers d83 l13

credit crises precautionary savings and the liquidity trap we use a model a la bewly huggett ayagari to explore the eects of a credit crunch on consumer spending households borrow and lend to smooth idiosyncratic income shocks facing an exogenous borrowing constraint we look at the economy response after an unexpected permananent tightening of this constraint the interest rate drops sharply in the short run and then adjusts to a lower steady state level this is due to the fact that after the shock a large fraction of agents is far below their target holdings of precautionary savings and this generates a large temporary positive shock to net lending we then look at the eects on output here two opposing forces are present as households can deleverage in two ways by consuming less and by working more we show that under a reasonable parametrization the eect on consumer spending dominates and precautionary behavior generates a recession if we add nominal rigidities two things happen i supply side responses are muted and ii there is a lower bound on the interest rate adjustment these two elements tend to amplify the recession caused by the credit tightening

tribe or nation nation building and public goods in kenya versus tanzania this article examines how government policies affect ethnic relations by comparing outcomes across two nearby districts one in kenya and one in tanzania using colonial era boundary placement as a natural experiment despite similar geography and historical legacies governments in kenya and tanzania have followed radically different language education and local institutional policies with tanzania consistently pursuing more serious nation building the evidence suggests that nation building has allowed diverse communities in rural tanzania to achieve considerably better local public goods outcomes than diverse communities in kenya to illustrate while kenyan communities at mean levels of diversity have 25 percent less local school funding than homogeneous communities on average the comparable figure in the tanzanian district is near zero the kenya tanzania comparison provides empirical evidence that serious reforms can ameliorate social divisions and suggests that nation building should take a place on policy agendas especially in africa

the difficult transition from clientelism to citizenship lessons from mexico author s fox jonathan a abstract electoral competition is necessary but not sufficient for the consolidation of democratic regimes not all elections are free and fair nor do they necessarily lead to actual civilian rule or respect for human rights if there is more to democracy than elections then there is more to democratization than the transition to elections but in spite of the rich literature on the emergence of electoral competition the dynamics of political transitions toward respect for other fundamental democratic rights is still not well understood political democracy is defined here in classic procedural terms free and fair electoral contestation for governing offices based on universal suffrage guaranteed freedoms of association and expression accountability through the rule of law and civilian control of the military although analyses of democratization typically acknowledge that these are all necessary criteria most examine only electoral competition this study however develops a framework for explaining progress toward another necessary condition for democratization respect for associational autonomy which allows citizens to organize in defense of their own interests and identities without fear of external intervention or punishment

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

shadow prices of social capital in rural india a nonparametric approach this article studies the role of social capital on cotton production efficiency and productivity for a sample of small farms in maharashtra india using data envelopment analysis input shadow prices are computed as an indicator of the importance of social capital relative to other inputs results suggest social capital to be the input with the highest contribution to production efficiency after land the luenberger indicator is used to assess the productivity improvement associated to an investment in social capital which is found to be on the order of 12 undertaking collective production activities is found to play an important role in improving productivity this is especially relevant to agricultural households facing important economic and institutional restrictions that make it difficult to increase conventional expensive inputs

divisionalization franchising and divestiture incentives in oligopoly a two stage game is used to model firms strategic incentives to divide production among autonomous competing units through divisionalization franchising or divestiture firms simultaneously choose their number of competing units which then engage in cournot competition while it is costly to form autonomous units each firm does so in equilibrium thus reducing firm profits and increasing social welfare relative to the case where firms cannot form competing units with linear demand and costs duopolists choose the socially optimal number of competing units oligopolies with larger numbers of firms choose too many the case of nonlinear demand is also examined copyright 1996 by american economic association

the salesperson as outside agent or employee a transaction cost analysis this descriptive study explores the reasons for integration of the personal selling function i e the use of employee direct salespeople rather than manufacturers representatives reps a hypothesized model is developed based on both transaction cost analysis and the sales force management literature data from 13 electronic component manufacturers covering 159 u s sales districts are used to estimate a logistic model of the probability of going direct in a given district results are shown to be stable across specification and estimation methods and to fit the data well the transaction cost model is generally supported the principal finding is that the greater the difficulty of evaluating a salesperson s performance the more likely the firm to substitute surveillance for commission as a control mechanism i e to use a direct sales force among other findings direct sales forces are also associated with complex hard to learn product lines and with districts that demand considerable nonselling activities several factors prove unrelated including company size the amount of travel a district requires and the importance of key accounts this article was originally published in marketing science volume 4 issue 3 pages 234 254 in 1985

ownership form managerial incentives and the intensity of rivalry this study investigates how differences in ownership form between franchised and company owned units affect managerial incentives and competitive pricing in different oligopolistic contexts we arg

local capacity village governance and the political economy of rural development in indonesia summary this paper develops a framework for conceptualizing local capacity to address village level livelihood and governance problems the framework is based on an analysis of asset distribution combined with an explicit analysis of the links between processes of state formation state business linkages and local forms of social capital the framework is used to discuss findings from recent research on village capacity in rural indonesia the discussion suggests that it is possible to link a political economic approach to rural development with recent conceptualizations of social capital such an analysis can illuminate the forms taken by and the effectiveness of village level collective action in ways that either purely political economy or social capital approaches do not

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

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

ownership agency and wages an examination of franchising in the fast food industry this paper estimates the difference in compensation between company owned and franchisee owned fast food restaurants the contrast is of interest because contractual arrangements give managers of company owned outlets less of an incentive to monitor and supervise employees estimates based on two data sets suggest that employee compensation is slightly greater at company owned outlets than at franchisee owned outlets the earnings gap is 9 percent for assistant and shift managers and 2 percent for full time crew workers furthermore the tenure earnings profile is steeper at company owned restaurants these findings suggest that monitoring difficulties influence the timing and generosity of compensation

urban labour market structure and job access in india a study of coimbatore develops new approaches to the analysis of labour market structure and segmentation notably stressing differences in labour status and in patterns of job access these ideas are applied in a south indian city showing how they help to analyze labour inequality supply and mobility

social capital as obstacle to development brokering land norms and trust in rural india summary based on a study of how rural land brokers mediate the arrival of a special economic zone in rural rajasthan this paper argues that theories of collective social capital cannot explain how networks norms and trust interact in a process of economic change it then reconstructs bourdieu s distinct theory of individual social capital by showing how better connected farmers are able to broker land and capture profits at the expense of fellow villagers undermining trust norms and collective action it argues that social capital is most plausibly seen as an aspect of social inequality that hinders inclusive development

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

information technology productivity and asset ownership evidence from taxicab fleets we develop a simple model that links the adoption of a productivity enhancing technology to increased vertical integration and a less skilled workforce we test the model s key prediction using novel microdata on vehicle ownership patterns from the economic census during a period when computerized dispatching systems were first adopted by taxicab firms controlling for time invariant firm specific effects firms increase the proportion of taxicabs under fleet ownership by 12 when they adopt new computerized dispatching systems an instrumental variables analysis suggests that the link between dispatching technology and vertical integration is causal these findings suggest that increasing a firm s productivity can lead to increased vertical integration even in the absence of asset specificity

similarities in choice behavior across product categories differences between consumers in sensitivity to marketing mix variables have been extensively documented in the scanner panel data all studies of consumer heterogeneity focus on a specific category of products and ignore the fact that the purchase behavior of panel households is often observed simultaneously in multiple categories if sensitivity to marketing mix variables is a common consumer trait then one should expect to see similarities in sensitivity across multiple categories the goal in this paper is to measure the covariance of both observed linked to measured characteristics of households and unobserved heterogeneity in marketing mix sensitivity across multiple categories measurement of correlation in sensitivities across categories will serve to guide the interpretation of the literature on household heterogeneity if there is a large correlation one can be more confident that sensitivity to marketing variables is a fundamental household pr operty and not simply a category specific anomaly detection of correlation in sensitivities across categories requires an appropriate methodology that can handle the high dimensional covariance structures and properly account for uncertainty in estimatio n for example a simple approach might be to fit a brand choice model to each of the available categories in turn ignoring the data in the other categories for each category household parameter estimates could be obtained for the parameters corresponding to price display and feature sensitivity these parameter estimates could be viewed as data and the correlations across categories could be computed such a procedure could induce a downward bias in the estimation of correlation dueto the independent sampling errors which are present in each parameter estimate we develop a hierarchical model structure that introduces an explicit correlation structure across categories and utilizes the data in multiple categories at the same time to reduce the size of the covariance matrix we use a variance components approach we introduce household specific demographic variables to decompose the correlation across categories into that which can be ascribed to observable and unobservable sources shopping behavior variables such as shopping frequency and market basket size as well as intensity of shopping in a category are also included in the model using data on five categories we find substantial and statistically important correlations ranging from 32 for price sensitivities to 58 for feature sensitivity these correlations are much larger than the correlations obtained with the state of the art techniques available prior to our work we attribute our ability to detect substantial correlations to our method which involves the joint use of multiple category data in a parsimonious and efficient manner unlike previous studies with panel data household demographic variables are found to be strongly related to price sensitivity higher income households are less price sensitive and large families are more price sensitive shopping behavior variables are also important in explaining price sensitivity households that visit the store often are more price sensitive households with larger market baskets are less price sensitive confirming the view of bell and lattin 1998 heavy user households tend to be both less price sensitive and less display sensitive the evidence presented here of substantial correlations validates in part the notion that sensitivity to marketing mix variables is a consumer trait and is not unique to specific product categories it also opens the possibility of using information across categories in making inferences about consumer brand preference and marketing mix sensitivity providing a richer source of information for target marketing

the impact of collective action on economic development empirical evidence from kerala india summary public participation is generally assumed to be a necessary if not fundamental condition for development most studies do not however question the kind and level of collective action that would be desirable this paper provides a novel empirical analysis of the impact of collective action on economic development using data for south india the paper models collective action as endogenous to economic development and distinguishes between its static and dynamic properties the results show that while excessive activism may harm state income collective action in the context of responsible bargaining systems may contribute toward increased economic development

on the concavity of the consumption function at least since keynes 1935 many economists have had the intuition that the marginal propensity to consume out of wealth declines as wealth increases nonetheless standard perfect certainty and certainty equivalent versions of intertemporal optimizing models of consumption imply a marginal propensity to consume that is unrelated to the level of household wealth we show that adding income uncertainty to the standard optimization problem induces a concave consumption function in which as keynes suggested the marginal propensity to consume out of wealth or transitory income declines with the level of wealth

an empirical analysis of territorial encroachment within franchised and company owned branded chains franchisees within large branded chains loudly complain of a form of channel conflict known as encroachment or impact encroachment occurs when franchisors add new units of their brand proximately to their franchisees existing units franchisees claim that their revenues have substantially decreased as a result of encroaching same brand entry the topic of encroachment has not only dominated franchisee association agendas and trade journal headlines but has also become a hot topic for politicians and policymakers yet until now evidence of encroachment has been strictly anecdotal this paper provides the first systematic evidence of encroachment using revenue data from the texas lodging industry in the 1990s i find that when franchisors approve new same brand units in the vicinity of incumbent units these new units cannibalize the incumbents revenues in contrast to the result for franchisors the addition of a new unit by company owned brands in the vicinity of same brand units is associated with an increase in the incumbents revenues this contrast suggests that encroaching behavior is caused by incentives that result from the governance form of franchising and is not simply an outcome that accompanies all expansion this finding informs theory on governance forms and exclusive territories implications for practitioners and policy are also discussed