duopoly supergames with product differentiation abstract when goods are complements or very close substitutes more tacit collusion is supported by trigger strategies in price setting supergames than in quantity setting supergames for moderate or poor substitutes the situation is reversed this contrasts with the static situation where price setting strategies always lead to higher welfare

the effect of supply management on dairy productivity tweeten 1992 argues that the relative rate of productivity growth is a key determinant of the international competitiveness of an industry as a result of the recently negotiated general agreement on tariffs and trade gatt and north american free trade nafta deals the competitiveness of the canadian dairy industry is for the first time of direct concern to producers in particular the effect of supply management or quotas on the amount of fluid milk each producer can sell is of primary importance barichello 1981 veeman 1982 and schmitz 1983 each document the static welfare costs of supply controls but little is known about supply management s impact on productivity growth and hence competitiveness several recent studies compare the competitiveness of canadian and u s dairy production barichello and stennes 1991 jeffrey 1992 and price waterhouse 1992 use measures of financial cost and partial productivity to arrive at conflicting conclusions jeffrey and barichello and stennes finding canadian costs significantly higher than those in the u s with price waterhouse concluding that little or no difference exists partial productivity measures such as milk yield per cow are misleading indicators of competitiveness due to differences in input prices input usage levels and herd sizes among other reasons financial cost comparisons are distorted by input subsidies and the capitalization of policy rents into fixed input prices furthermore these studies provide only a static snapshot of the state of competitiveness of the canadian dairy industry and do not capture the dynamism of genetic and technological change in dairy this study determines the effect of supply management on investment and total factor productivity growth in the alberta dairy industry treating quota licenses as quasi fixed inputs in a multi variate cost of adjustment investment framework an econometric model of investment demand estimates the effect of introducing quotas on the rate of adjusting all other

standardization and the stability of collusion we characterize the interplay between firms decision in terms of product standardization and the nature of their ensuing market behaviour we prove the existence of a nonmonotone relationship between firms decision at the product stage and their intertemporal preferences c 1998 elsevier science s a

spatial price equilibrium with product variety chain stores and integer pricing an empirical analysis a spatial model that incorporates store locations and city topographic features is developed for the edmonton alberta video cassette rental market bertrand nash equi librium prices are computed using a grid search algorithm that maximizes goodness of fit against observed prices the fit is improved by taking into account differences between stores in product variety the tendency of chains to set a common price for all member stores and the tendency of chains to set whole dollar prices implications for further empirical research in spatial pricing are drawn

hedonic cost models and the pricing of milk components to assess likely producer response to milk price reform we examine the technology of protein butterfat and fluid carrier production on 1 924 u s dairy farms a variant of a hedonic cost model is proposed in which the output aggregator is expressed as a function of total output and of the percentage concentrations of its components dairy farmers have responded rationally to artificially low protein prices due to the cow s appetite limit farmers operate in stage i of feed to milk production functions yet protein s marginal cost rises sharply with protein output only modest substitutability is evident among feed inputs or milk component outputs

union membership in the united states 1973 1981 this paper reports estimates of union membership gathered from may current population surveys from 1973 to 1981 the authors present data by occupation industry selected states and smsas race gender and educational attainment the paper both extends and differs from that by freeman and medoff which presents unionism estimates for the private sector for 1968 75 to facilitate longitudinal analysis this paper reports three year moving averages of occupational and industry data and annual estimates of demographic classifications the data include public sector as well as private sector workers and they exclude workers not covered by the national labor relations act also the authors provide only union membership estimates not estimates on workers covered by union contracts this paper suggests that the percentage of all workers that are unionized in the united states remained fairly constant over the 1973 81 period

survival patterns among newcomers to franchising abstract this study examines survival patterns among franchisee and nonfranchise small firms and establishments that entered business during 1986 and 1987 aspiring entrepreneurs purchasing franchises choose this path to small business entry in part because they expect to improve their chances of survival during the turbulent early years of operation evidence to date has been mixed some studies conclude that franchising is a low risk route to small business ownership while others suggest that independent start ups are more likely to remain in operation than franchises this study utilizes two distinct methodological approaches to investigate franchisee survival patterns the first approach demonstrates that franchise units have better survival prospects than independents and the second approach demonstrates that young firms formed without the benefit of a franchisor parent are more likely to remain in operation than franchised start ups reconciliation of these seemingly inconsistent findings is explored survival measurement is heavily influenced by the unit of analysis in franchising firm specific data show different patterns than establishment specific data when young franchise units are tracked through time analysis of establishments owned by corporations is undertaken for restaurants opened nationwide in 1986 and 1987 using census bureau data describing corporate owned restaurant establishments that reported payroll to the irs in 1987 52 088 young establishments were identified 22 5 were franchises comparison of the franchisee and independent restaurant units indicated that independents were more likely to cease operations by 1988 than franchises the fact that franchisee establishments had a better survival track record than independent restaurants does not however demonstrate that aspiring entrepreneurs improve their survival prospects by purchasing a franchise in fact 84 of the new franchise establishments under consideration were units of multi establishment corporations and few of these corporate parents were new businesses envision a corporation in operation for 15 years that owns 20 mcdonalds restaurants in 1987 they opened their twenty first unit the findings of this study indicate that this twenty first unit has excellent survival prospects more so than either an independent start up or a franchisee opening a restaurant for the first time new franchised restaurant units overall may be a safe investment although simultaneously the newcomer opening a franchise may face a high risk situation the analysis then shifts from establishments owned by franchisees to young firms not establishments started in 1986 and 1987 as proprietorships partnerships or s corporations among these young firms franchisees are found to have lower survival rates than independent start ups and these differences persist when various firm and owner traits are controlled for statistically retailing is found to be a particularly difficult field for young franchised firms risk of firm closure is high and mean profits are negative the most common route into retailing entailed purchasing an operating franchise unit from its previous owner that is an ongoing franchise over 53 of the young franchised retailing firms started in 1986 and 1987 were ongoing operations by 1991 only 52 4 of these firms were still operating with the owner of record present in 1987 the findings of this study indicate on balance that purchase of a franchise is unlikely to reduce the risks facing a new business start up this does not imply that the multi establishment franchisee adding another new franchise unit to its existing chain of operations faces a high risk situation rather the high risk facing the franchisee newcomer is partially rooted in the fact that so many of the newly opened units in mature franchising niches are owned by multi unit franchisees that have greater experience and resources than newcomers who are attempting to enter the industry

china s food economy to the twenty first century supply demand and trade this paper accounts for the structural changes now taking place in china and suggests that china is not likely to become either an enormous importer or exporter of grain ultimately though china s grain balances will depend on decisions made by chinese policymakers rather than natural resource constraints p v this abstract was borrowed from another version of this item

optimal cartel trigger price strategies abstract a dynamical model of industry equilibrium is described in which a cartel deters deviations from collusive output levels by threatening to produce at cournot quantities for a period of fixed duration whenever the market price falls below some trigger price in this model firms can observe only their own production level and a common market price the market demand curve is assumed to have a stochastic component so that an unexpectedly low price may signal either deviations from collusive output levels or a downward demand shock

an adjustment cost rationalization of asset fixity theory this article integrates a classic concept in production economics g l johnson s asset fixity theory with the dynamic adjustment cost model until now the literature has considered these two to be incompatible by relaxing the smoothness assumption of the adjustment cost function at the origin the theory of costs of adjustment can provide a rigorous endogenization of asset fixity g l johnson and edwards results are then obtained when the linearity assumption of the adjustment cost function is imposed the work reported here also indicates that both smoothness at the origin and symmetry of adjustment cost function should be subject to empirical tests

scale economies and consolidation in hog slaughter comment in a recent article macdonald and ollinger mo estimate cost functions of hog slaughtering plants while the estimates they obtain provide useful information about scale economies and consolidation in hog slaughter incorrect inferences are drawn about substitutability and lack thereof between hogs and other inputs in processing pork the purpose of this comment is to derive the correct measures of input substitutability and to show that the error in using the allen elasticities of substitution to draw inferences

dynamic adjustment in the u s dairy industry a dual model is used to examine the dynamic structure of the u s dairy industry properties implied by the theory of the competitive firm and independent adjustment of two quasi fixed inputs labor and herd size are tested and not rejected instantaneous adjustment however is soundly rejected for each quasi fixed input input adjustment to optimal levels is estimated to take about two years for labor and ten for cows quality adjustments of the labor and cow series do not fully embody the technological change that has occurred in this industry over the study period

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

short and long run adjustments in dairy production a profit function analysis a dual profit model is developed to analyse the structure of dairy technology using farm level data for vermont potential short and long run effects of milk price reductions on output supply input demand farm size and profitability are studied the observed levels of the quasi fixed inputs family labour and herd size are found to be significantly lower than their optimal or long run equilibrium values which is consistent with a continuing shift towards fewer and larger dairy farms the analysis suggests that lower milk prices threaten the short run survival of small and medium size farms and reduce the optimal farm size in the long run

the effect of supply management on herd size in alberta dairy a supply management program limits the aggregate supply of a commodity often through the use of marketable quota licenses the static aggregate welfare effects of supply controls are well known but the farm level dynamic effects on dairy investment are not a theoretical cost of adjustment model is used to show that supply management reduces the rate of quasi fixed input adjustment at the farm level in fact when a quasi fixed input is complementary to quota licenses investment or disinvestment can be impaired to such an extent that the input moves away from the long run equilibrium as a result overinvestment in this input can significantly reduce productivity growth

testing asset fixity for u s agriculture two problems which have concerned agricultural economists since the great depression are low farm resource returns and agriculture s tendency to maintain high aggregate production in the face of declining real product prices the latter phenomenon referred to as irreversibility of supply has spawned a significant literature on approaches to estimating and testing irreversible supply curves houck tweeten and quance while there are numerous explanations of these problems it is widely accepted that both are at least partially due to some asset fixity within agriculture that is in the aggregate there are certain productive factors which are trapped in agriculture attempts to explain asset fixity are not new galbraith and black early argued that high fixed costs contribute to a lumpiness of important factors which makes their temporary reduction or reorganization so expensive as to be unprofitable in the short run later g l johnson hypothesized that productive assets are trapped in agriculture because of a divergence between acquisition costs and salvage value formal developments are in edwards hathaway and johnson and quance both explanations have been challenged d g johnson concluded that available empirical evidence did not support galbraith and black s high fixed cost hypothesis he argued instead that the data were consistent with inelastic supply of agricultural inputs johnson and pasour criticized inferring asset fixity from a divergence between acquisition costs and salvage values they argued that the appropriate concept for investigating resource allocation is that of the resource s opportunity cost although they criticized g l johnson s fixed asset theory they still concluded that asset fixity theory can contribute toward an understanding of why the supply function whether firm or industry is not reversible

disentangling nonlinearities in the long and short run price relationships an application to the us hog pork supply chain increased concentration at the retail food processing and farm input manufacturing levels has brought increased attention to patterns in retail to farm price spreads most studies documenting asymmetric price transmission focus on nonlinear error correction processes as opposed to the current study which analyses potential nonlinearities in the long run relationship between the farm and retail prices the null hypothesis of nonlinearity in the long run relationship between farm and retail prices in the us hog pork supply chain is rejected in favour of a smooth transition cointegration stc framework the stc framework predicts downward price stickiness in retail prices the predicted residuals of the nonlinear model are used to investigate whether it is possible to disentangle nonlinearity in the long run price relationship from nonlinearity in the adjustment towards the long run equilibrium the results underline the importance of testing for linearity in the long run price relationship before modelli

economies of scale and scope and the economic efficiency of china s agricultural research system this article investigates economies of scale and scope and other potential sources of improvements in the economic efficiency of china s crop breeding an industry at the heart of the nation s food economy using data covering 46 wheatand maize breeding institutes from 1981 to 2000 we estimate cost functions for the production of new varieties at china s wheat and maize breeding institutes our results indicate strong economies of scale along with small to moderate economies of scope related to the joint production of new wheat and maize varieties cost efficiency increases significantly with increases in the breeders educational status and with increases in access to genetic materials from outside the institute

investment in u s agriculture resource adjustment problems in u s agriculture are motivated against the background of the farm problem the adjustment cost hypothesis is invoked to specify and estimate consistently a system of dynamic investment demand and output supply equations by utilizing recent advances in dynamic duality theory the investment demand equations assume the form of a multivariate flexible accelerator results indicate that labor capital services and land exhibited quasi fixity while intermediate materials were a variable factor this can be construed as a form of asset fixity within aggregate u s agriculture the univariate flexible accelerator hypothesis is rejected

cartel stability and product differentiation abstract this paper employs a supergame theoretic model of collusion to analyze the effects of different levels of product differentiation on cartel stability in contrast to earlier work the ability of the parties to reach an agreement is assumed here the focus is on how greater product homogeneity increases both the gain to cheating on a collusive agreement and the magnitude of the punishments that follow a defection the total effect on the likelihood a cartel is stable is therefore unclear two particular differentiated products models are then used to demonstrate that contrary to the conventional view greater homogeneity can reduce cartel stability

measuring excess capital capacity in agricultural production we introduce the concept excess capital capacity and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production we also propose a two step estimation method that allows endogenous regressors in stochastic frontier models the first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors the second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it the empirical application to dutch cash crop farms found varying degrees of excess capital capacity the policy implications of excess capital capacity are discussed

farmers investment behavior an empirical assessment of two specifications of expectations the capital investment decision is modeled and two different assumptions about expectations are compared and tested using panel data for dutch dairy farms the utilization of panel data allowed to account for the possibility that the intercept in the function for capital varies over the farms the models are estimated using the generalized method of moments gmm for dynamic panel data the model based on static expectations fits the data well the results obtained from the rational expectations model are not consistent with the theory

scale economies and consolidation in hog slaughter we use establishment based panel data to estimate a cost function which identifies the role of scale economies in hog slaughter consolidation we find modest but extensive technological scale economies in the 1990s and they became more important over time but wages rose sharply with plant size through the 1970s and those wage premiums generated a pecuniary scale diseconomy that largely offset the effects of technological scale economies the size wage relation disappeared in the 1980s with growing technological scale economies and disappearing pecuniary diseconomies large plants realized growing cost advantages over smaller plants and production shifted to larger plants copyright 2000 oxford university press

output input and productivity measurement in u s agriculture 1948 79 tornqvist theil indexes of outputs and inputs are constructed these data are used to construct indexes of productivity growth over the postwar period the productivity indexes can be derived from a flexible multioutput multifactor representation of the structure of production constrained to constant returns to scale total factor productivity grew at an average annual rate of 1 75 compared with 1 70 per year estimated by the u s department of agriculture the similar estimates of productivity growth overshadow some important differences in measurement of individual inputs the major effort in measuring agricultural productivity is undertaken by the u s department of agriculture usda an american agricultural economics association task force on measuring productivity has examined the sources and procedures used in constructing the official statistics see loomis and barton lambert barton and durost the task force recommended that the usda adopt a series of specific improvements for constructing certain inputs and use an indexing procedure that does not impose a priori restrictions on the structure of production 1 this paper presents revised indexes of outputs and inputs the data are used to construct indexes of productivity growth over the postwar period the productivity indexes can be derived from a flexible multioutput multifactor representation of the structure of production the translog transformation function constrained to constant returns to scale 2 the indexes of outputs and inputs have the same form and their ratio coincides with the estimate of productivity growth

acreage decisions under risk the case of corn and soybeans an acreage supply response model is developed under expected utility maximization the resulting framework is used to specify and estimate a system of risk responsive acreage equations for corn and soybeans in the united states particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices also a wealth variable is included in the acreage equations the empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions the analysis also shows that cross commodity risk reduction is important in acreage allocation decisions

dynamic efficiency estimation the shadow cost approach is developed in the context of the dynamic duality model of intertemporal decision making to formulate theoretical and econometric models of dynamic efficiency the dynamic efficiency model is applied to a panel of 72 u s major investor owned electric utilities using fossil fuel fired steam electric power generation over the period 1986 1999 the major results show that most electric utilities underutilized fuel relative to the aggregated labor and the maintenance input and overutilized capital in production states adopting a deregulation plan improve the performance of utilities in terms of the technical efficiency of variable inputs

cartel sustainability in retail markets evidence from a health service sector abstract this paper studies the role of cost asymmetries and product differentiation on cartel sustainability by drawing data from a failed retail cartel unlike the extensive theoretical literature little empirical evidence exists on these relationships first we analyze cartel compliance and find that players are more likely to comply when cost is symmetric and own cost is high next based on a structural model and counterfactual experiments we show that a cartel price that satisfies all cartel members does not exist this result indicates an inherent difficulty of sustaining collusion in retail markets with heterogeneous players we also show that firm heterogeneities especially product differentiation rather than cost asymmetries hinder collusion more finally we derive the level of patience or the discount factor required for cartel sustainability when firms split profits based on the shapley value

a soil quality index and its relationship to efficiency and productivity growth measures two decompositions this article reconciles two notions of soil quality indexes with the economic concepts of technical efficiency and productivity growth an example uses data from the u s department of agriculture s experimental fields in maryland and data envelopment analysis techniques to estimate a soil quality index consistent with the notion of technical efficiency common regression techniques shed additional light on the role of individual soil quality properties in a very restricted linear approximation of the estimated soil quality index

regional and temporal impacts of technical change in the u s dairy sector the regional and temporal impacts of technical change in the u s dairy industry are assessed in terms of production and income distribution through a dynamic equilibrium model dynamic duality is used to obtain the production equations the traditional milk producing regions of the northeast and lake states will maintain their base of national output while the pacific region increases its base at the expense of the remaining regions regional dairy income varies temporally advancements in technology are likely to accelerate the treadmill process in agriculture the most dramatic impacts may initially occur in the dairy sector where growth hormones may soon be approved commercially given the anticipated productivity gains and adjustment problems an ex ante assessment of the distributional impacts of new technologies in the dairy sector

delivered pricing and the impact of spatial differentiation on cartel stability abstract this paper analyzes the impact of spatial differentiation on the sustainability of collusion on delivered prices it shows that the choice of the punishment mechanism that enforces collusion is crucial for determining whether differentiation facilitates cartel pricing or not if punishments are optimal then differentiation tends to facilitate collusion optimal punishments impose minmax profits on deviators independently of the degree of differentiation a high degree of differentiation then renders deviations less profitable since it makes business stealing more costly but does not affect the deviator s punishment profits depending on the transport cost technology excessive differentiation may have a countervailing effect however because it also implies high transport costs for the cartel if collusion is sustained by standard grim trigger punishments instead then collusion may be easiest for minimal differentiation the reason is that competitive and thus grim trigger punishment profits are higher the higher the degree of differentiation

credit constraints their existence determinants and implications for u s farm and nonfarm sole proprietorships the objective of this study is to determine the effect of credit constraints on production for farm and nonfarm sole proprietorships a propensity score matching estimator is employed to provide unbiased estimates of the production impacts of being denied credit the empirical results demonstrate that the value of production is significantly lower for credit constrained sole proprietorships if this drop in the value of production is aggregated to a national level it constitutes only 3 and 13 of total value of production for farm and nonfarm sole proprietorships respectively copyright 2009 oxford university press

quantifying the coordinated effects of partial horizontal acquisitions abstract recent years have witnessed an increased interest by competition agencies in assessing the competitive effects of partial acquisitions we propose an empirical structural methodology which can deal with settings involving all types of owners and ownership rights to quantify the coordinated effects of partial horizontal acquisitions on differentiated products industries by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained we also provide an empirical application of the methodology to several acquisitions in the wet shaving industry that give rise to cross and common ownership structures the results are as follows i the incentives to coordinate of the firms that the acquiring party is pre acquisition able to influence are non decreasing with any acquisition ii the incentives to coordinate of the acquired firm are non decreasing with acquisitions involving full or partial both financial and corporate control rights but non increasing with acquisitions involving full or partial solely financial rights and iii the incentives to coordinate of the remaining firms in the industry are non increasing with any acquisition this implies that the coordinated effects of partial horizontal acquisitions are in general ambiguous which illustrates the importance of an empirical structural methodology

common agricultural policy effects on dynamic labour use in agriculture abstract the aim of this study is to investigate the effects of direct payments and rural development measures of the eu s common agricultural policy cap on employment in agriculture we work with a dynamic labour demand equation augmented by the full set of policy instruments of the cap which is estimated on a panel dataset of 69 east german regions we present results for four estimators which differ in how they eliminate the fixed effects and how they address the endogeneity of the lagged dependent variable the results suggest that there were few desirable effects on job maintenance in agriculture while there is some indication that investment subsidies have halted labour shedding on farms a rise in the general wage level reduced labour use in agriculture changes in direct payments had no employment effects generally labour adjustment exhibits a strong path dependency

production economics worthwhile investment abstract agricultural production economics research is examined within a broad framework of scientific development and utilization recent findings in selected areas of the subdiscipline are examined and opportunities for further fruitful inquiry are identified a few stylized facts emerge from recent work and suggest the need for much careful hypothesis testing model exploration and empirical sensitivity analysis in the future

asymmetric adjustment of dynamic factors at the firm level presents a study which addressed the deficiencies of previous studies the specification and estimation in the modeling of asymmetry and zero gross investment in the agricultural industry reference to previous studies on asymmetry information on the standard dual model results of the study

estimating investment rigidity within a threshold regression framework the case of u s hog production sector this article addresses the issues of investment disinvestment asymmetry and a possible existence of a sluggish regime in the demand for a quasi fixed input in the u s hog production sector adopting a new threshold estimation procedure quarterly data from 1970 through 2002 are used to estimate a regimedependent investment demand equation for a quasi fixed input taking sows as a proxy the results support the existence of three regimes over alternative specifications precluding the sluggish regime confirming the existence of asset fixity in hog production the results also highlight the importance of accounting for investment rigidity when estimating hog supply and variable input demands the importance of the u s swine industry is far reaching and can be highlighted by its economic contribution to different sectors along the supply chain involving hog producers pork processors and consumers according to the national pork producers council nppc 2002 the industry supported an estimated 800 000 domestic jobs in 2002 and generated more than 72 billion in total domestic economic activities furthermore the united stated is a leading pork exporter with its exports valued at 1 5 billion in 2002 of the 72 billion worth of domestic economic activities receipts from hog sales account for more than 11 billion per year the hog sector also contributes an additional 27 billion from the utilization of corn soybean and other inputs nppc the structure of the hog production sector has changed dramatically during the past decade with large hog operations becoming increasingly dominant between 1994 and 2004 the proportion of hog operations with more than 2 000 hogs has doubled from 38 to 79 of all hogs

implications of nash bargaining for horizontal industry integration this article shows how horizontal industry integration can arise from transferable asymmetry of technologies and endowments the nash bargaining solution suggests that greater technological diversity among coordinating parties yields greater gains from horizontal integration the framework fits the case where a firm with a superior technology franchises the technology by horizontal integration the results appear to fit hog production where integration has been primarily horizontal and in part broiler production where integration has been both vertical and horizontal specifically technology has been shared through uniform genetic traits fine tuned feed rations and veterinary services specified in grower contracts

net investment in farm tractors an econometric analysis a wide range of assumptions about the capital deterioration and marginal factor cost of tractors has been made in previous studies this study develops a measure of the implicit rental price of tractors which accounts for the capital structure used by farmers the capacity depreciation of tractors and income tax considerations estimates of net investment models for alternative capacity depreciation patterns are compared to those suggested by engineering considerations the results show that the frequently used geometric decay pattern does the poorest job of explaining annual real net investment in farm tractors

the effects of product differentiation on collusive pricing abstract using the spatial competition framework of hotelling 1929 this paper explores the relationship between the degree of product differentiation and the ability of firms to collude with respect to price we show that the minimum discount factor required to support the joint profit maximum as an equilibrium outcome monotonically increases as products become better substitutes when the joint profit maximum cannot be supported the optimal collusive price is shown to decline as products become more substitutable these findings suggest that firms producing stronger substitutes tend to find it tougher to collude in terms of their product price

delegation and firms ability to collude abstract in a model of repeated cournot competition under complete information we show that delegation has no effect on cartel stability if managers collude while it may hinder cartel stability when owners collude in setting the incentive schemes if owners can choose whether to delegate or keep control of their respective firms and both groups of individuals collude or play non cooperatively in their respective variables according to the level of intertemporal discount factor then if managers are not able to collude in output levels owners delegation decision is non monotone in the discount factor

sustaining collusion when the choice of strategic variable is endogenous abstract this paper addresses the problem of maintaining collusion in a differentiated duopoly when both the prospective deviant and punisher are free to choose between price and output as their strategic variables we show that the traditional formulation of the supergame in which firms commit for the duration to either price or output as their single common strategic variable overlooks the possibility of an asymmetric equilibrium in the punishment phase the results obtained here have obvious parallels with those found in the comparative statics literature

imperfect price deflation in production systems numeraire prices that are measured with error create challenges for econometric estimation a straightforward approach for a model with linear input demands such as generated from a quadratic normalized profit function is proposed where the numeraire price is measured with error numeraire measurement error is likely because expected output price is measured imperfectly by actual output price an approach using generalized method of moments is developed to estimate such errors in variables systems that avoids use of extra sample data or additional structural specifications monte carlo examination of small sample properties shows promise measurement error is statistically significant using aggregate u s agricultural data

dynamic input demand functions and resource adjustment for us agriculture state evidence abstract the paper presents an econometric model of dynamic agricultural input demand functions that include research based technical change and autoregressive disturbances and fits the model to annual data for a set of state aggregates pooled over 1950 1982 the methodological approach is one of developing a theoretical foundation for a dynamic input demand system and accepting state aggreage behavior as approximated by nonlinear adjustment costs and long term profit maximization although other studies have largely ignored autocorrelation in dynamic input demand systems the results show shorter adjustment lags with autocorrelation than without dynamic input demand own price elasticities for the six input groups are inelastic and the demand functions possess significant cross price and research effects

a supergame theoretic model with consumer loyalty abstract the paper shows in a supergame theoretic framework how the relative market power firms achieve by having loyal consumers hinders collusion furthermore increasing concentration decreases the sustainability of the agreement

technical change and applications of dynamic duality to agriculture reply larson has made three basic points in his comment on the incorporation of technical change in dynamic duality models a appending a time trend onto the empirical model to account for technical change is inconsistent with an autonomous theoretical model b a current value function v discounted to time to 0 to t should not be confused with a value function j discounted to time t 0 and c the firm s expectations of embodied technical change should be explicitly formulated in the theoretical model the first issue focused on the vasavada and chambers paper and the last two issues were addressed to the howard and shumway paper we will respond to each of these points in order first larson is correct that vasavada and chambers and several other dynamic duality studies have maintained an autonomous theoretical model but estimated a nonautonomous empirical model the bridge between the two models is the assumption of static ex ante technology expectations on the part of producers with ex post awareness of technical change on the part of the analyst while this assumption has seldom been made explicit in research reports and may appear inconsistent its practical importance is often minor for example although we reported results in our ajae article only for the nonautonomous theoretical and empirical model we also estimated the parameters for the autonomous theoretical nonautonomous empirical model there were no differences between the two models in any of the test conclusions and only minor differences in the estimated rateof adjustment parameters second larson s equation 11 is essentially the same as our equation 3 except that he defines a current value function v discounted to time to o to 0 while we define an initial value function j discounted to time t 0 larson alleges that the discounting period alters the interpretation of the parameter estimates however the output supply variable input demand and investment equations are all unaffected by the discounting period thus the interpretation of the estimated output supply and variable input demand equations the rate ofadjustment parameters and associated marginal values of investment in quasi fixed inputs are the same whether one assumes the decision maker acts at time t 0 or t to o to oo finally larson correctly notes that we did not explicitly discuss how embodied technical change was included in our theoretical model the implicitly maintained assumption was larson s third alternative i e that firms have static embodied technology expectations although this assumption may seem counterintuitive given our maintained hypothesis of nonstatic disembodied technology expectations larson s other alternatives also carry their own dilemmas his first alternative was that firms could forecast future embodied technical change with perfect accuracy an impossibility and his second was that firms expect disembodied technical change but actually experience embodied technical change each alternative maintains some conceptual baggage the implications and empirical seriousness of which have not been fully explored we are appreciative of larson s identification of these issues and for the opportunity to enter into a dialogue on some of their theoretical and practical aspects we would also note a printing error of some consequence near the bottom of the second column of p 838 of our paper it should read f4 0

productivity growth in u s agriculture under dynamic adjustment a dynamic measure of productivity growth adjusted for deviations from the long run equilibrium is established within an adjustment cost framework an empirical application to u s agriculture is presented which permits identifying the dynamic linkages between technical change and productivity growth in u s agriculture total factor productivity as dynamically measured grew at 1 50 per annum the combined effect of scale quality adjusted input growth and long run disequilibrium input use contributes only 3 44 of the growth while technical change dominates the growth of total factor productivity

dynamic factor demand equations in u s and canadian agriculture abstract this research provides one of the first empirical estimates of a data based dynamic factor demand model for american and canadian agriculture models such as these deserve more widespread use in the empirical analysis of agriculture these models have the advantage that they do not impose inappropriate dynamics on the data rather they permit the data to select the appropriate dynamics we use a model originally developed by anderson and blundell this model is a general first order dynamic model which contains as testable hypothesis several simpler models this model permits us to estimate the long run agricultural production structure as a subset of the dynamic parameter estimates we will test this long run structure for symmetry homotheticity and neutral technical change the estimated models may be used to test for three alternative dynamic structures in the limit dynamics may not be needed and we can test for the static long run equilibrium model two intermediate cases are the autoregressive and the partial adjustment models which are simpler than the general model but still include dynamics our results suggest that the long run equilibrium model is unsatisfactory in both countries a dynamic model is needed in both countries the two more restricted dynamic models are rejected the general dynamic model is required in canada the long run equilibrium structure is homothetic with neutral technical change in the united states homotheticity is also accepted but neutral technical change is rejected

price vs quantity competition in oligopoly supergames abstract in a repeated oligopoly with differentiated products and firms following trigger strategies quantity competition leads to a less efficient outcome than price competition this result contrasts with the repeated duopoly result where price competition is less efficient under certain conditions

principles of stochastic dynamic optimization in resource management the continuous time case abstract a wide range of problems in economics agriculture and natural resource management have been analyzed using continuous time optimal control models where the state variables change over time in a stochastic manner using a firm level investment model and a model of environmental degradation this paper provides a concise introduction to continuous time stochastic control techniques the process used to derive the differential of a stochastic process is stressed and in turn is used to explain ito s lemma bellman s equation the hamilton jacobi equation the maximum principle and the expected dynamics of choice variables a basic extension of the dynamic duality literature is also provided where the hamilton jacobi equation is used to derive a stochastic and dynamic analogue of hotelling s lemma

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

technology labor wars and producer dynamics explaining consolidation in beefpacking beefpacking underwent a dramatic transformation in the 1970s and 1980s as plants got much larger and industry concentration rose dramatically we use individual census bureau plant records to analyze the sources of the transformation we find that there were modest but extensive scale economies in packing plants covering the full range of plant sizes and that such economies became more important throughout the period of the study as production shifted to larger plants we estimate that the industry s aggregate processing costs fell by 35 3 by 2002 compared to what they would have been without consolidation

transparency on the consumer side and tacit collusion abstract this paper investigates the effects on tacit collusion of increased market transparency on the consumer side of a market in a differentiated hotelling duopoly increasing market transparency increases the benefits to a firm from undercutting the collusive price it also decreases the punishment profit the net effect is that collusion becomes harder to sustain in the limiting homogeneous market the effect vanishes here market transparency does not affect the possibilities for tacit collusion

beef and pork packing costs and input demands effects of unionization and technology the effects of unionization technology and structural considerations on value added beef and pork packing costs and the demand for labor capital packaging and other inputs are analyzed by econometric methods for the period 1963 88 although unions do not appear to have had significant wage effects over this period relative to broader u s wage rates significant nonwage cost effects are observed these nonwage effects help explain the technological structural and geographic changes that have occurred in meat packing in recent years which in turn help explain the erosion of union strength in meat packing observed over the study period

testing short run factor demand models in canadian and u s agriculture equilibrium factor demand models are being replaced by a variety of short run and dynamic models in empirical production research in this paper the authors provide evidence on the usefulness of short run production models in aggregate canadian and american agriculture from 1961 to 1982 they offer an alternative data based dynamic model which encompasses the short run model this permits them to test for the short run models and for two simple dynamic models in favor of their most general dynamic model

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

expenditure constraints and profit maximization in u s agriculture the u s agricultural sector is undergoing some of its most severe financial problems since the great depression numerous reports have emerged of large numbers of farmers being unable to obtain short term oper

an opportunity cost view of fixed asset theory and the overproduction trap in fixed asset and exit barrier theories durable asset valuation is based upon acquisition prices yielding downwardly biased rate of return estimates and erroneous implications that excess resources become trapped in production when product price expectations fall conventional asset valuation based on opportunity cost shows that excess resource applications are incompatible with rational producer behavior market failure conclusions of overproduction trap models are shown to be unfounded a review of recently published agricultural economics texts illustrates how use of fixed asset theory in the college classroom obscures the concept of choice influencing cost and the rule of resource allocative efficiency

aggregate investment and consistent intertemporal technologies it is frequent practice to model an industry or economy as if it were a single agent solving a single optimization problem a model of firm behavior which has had extensive use as an aggregative model is the adjustment cost model of investment we assume there are a number of competitive firms in an industry that choose investment paths to maximize their present value the technologies of the firms exhibit capital stock adjustment costs for general concave technologies of the firms there is no aggregate concave technology that can represent the technological possibilities available to the industry we find conditions on the technologies of the firms that are necessary and sufficient for the existence of an aggregate technology that can consistently model the industry s behavior and discuss their empirical implications

the dynamics of individuals fat consumption consumers are increasingly aware of the link between their lifestyle choices and the risk of noncommunicable diseases a dynamic approach incorporating this linkage in food demand is developed where consumers maximize utility over time by choosing fat intake to control their cumulative fat level the resulting dynamic indirect utility function and household data on meat fish and dairy consumption are used to estimate a censored demand system results show that consumers consciously adjust but not instantaneously their cumulative fat level highly educated households have a faster rate of adjustment of cumulative fat when cumulative fat level increases consumers shift to dairy or white meat from red meat products

dynamic adjustment in the us beef market with imports abstract this paper hypothesizes that while there are important qualitative differences in domestic beef and imported beef beef and cattle imports also represent attempts by the us beef processing and wholesale sector to adjust to short run changes in supply and demand dynamic production theory is applied to the problem to test for this adjustment process and presents a production theory approach to meat trade that has previously been included in demand functions the results of this analysis suggest that the method used provides a reasonable and appropriate representation of the import behavior of the us processing and wholesale beef sector

combining cartel penalties and private damage actions the impact on cartel prices abstract in many countries antitrust enforcement by competition authorities through prosecution and the imposition of penalties is complemented in price fixing cases by private damage actions which should affect both cartel deterrence and the prices set by those cartels that do form we show that the impact of combining penalties and damages on cartel prices is not clearcut and depends on both the nature of the penalty regime and the way that damages are calculated we demonstrate this by focusing on two ways of calculating damages that have been advocated in practice and two different forms of the widely used revenue based penalty regime when the simple form of revenue based penalties is in force the standard method of calculating damages worsens its harmful pricing effects whereas the proposed alternative method of calculating damages can overturn them when a more sophisticated form of revenue based penalties is in operation imposing damages will improve its beneficial pricing effects under both methods of damage calculation but the alternative method is more effective in all cases combining penalties and damages improves deterrence

asset fixity and investment asymmetry in agriculture fixed asset theory implies that it is more difficult to dispose of capital specific to agricultural production than to add to the stock of specialized capital this theory is tested by determining whether transitions between states of disinvestment are as likely as transitions between states of investment of the twenty four annual capital stock series analyzed evidence of asymmetry between investment and disinvestment is strong in eight cases weak in four and insignificant in twelve there is considerable although mixed evidence of asymmetry for tractors farm and nonfarm and other specialized vehicles since world war ii and for agricultural machinery

the intertemporal dimension of neoclassical production theory abstract the aim of this survey paper is to provide a guide to the literature on optimal dynamic factor demands to the non specialist reader interested in applied work we start with the distinction between variable and quasi fixed factors of production and use these to characterize the firm s temporary equilibrium we then review the optimal intertemporal behaviour of the firm using the notion of adjustment costs as a means to solve the firm s optimization problem this process gives rise to a system of interrelated dynamic factor demands in a flexible accelerator format theoretical difficulties and empirical limitations of this model are discussed this fact leads us to review the theory of intertemporal duality we next analyze the issue of expectations in this class of dynamic models a section reviewing the empirical work on dynamic factor demands follows after which we offer some concluding remarks

technological change and economies of scale in u s poultry processing this article uses a unique data set provided by the census bureau and a translog cost function to empirically examine technological change in the u s poultry industry results reveal substantial scale economies that show no evidence of diminishing with plant size and that are much greater than those realized in cattle and hog slaughter findings suggest that consolidation is likely to continue particularly if demand growth diminishes and that controlling for plant product mix is critical to accurate cost estimates

dynamic model of fresh fruit promotion a household production approach many studies consider the dynamic effects of commodity promotion on demand but few derive the theoretical basis for these effects in a model of optimal consumer behavior this study develops a dynamic household production model of u s fresh fruit consumption which it uses to evaluate the effectiveness of advertising and promotion expenditures by the washington apple commission estimates from a dynamic dual generalized leontief system show direct advertising to be marginally more effective than retail promotion in increasing apple sales but advertising has positive spillover effects to sales of other fruits whereas promotion reduces sales of competing products

on the incidence and duration of price wars the purpose of this paper is to test some theoretical predictions about the incidence and duration of price wars when these price wars are viewed as an enforcement device to maintain a cooperative or tacitly collusive agreement in an uncertain environment the theoretical model of green and porter i984 and porter i983a predicts that price wars should be triggered by unanticipated demand fluctuations and that they will be more frequent the greater the number of firms in the industry or the greater the degree of market concentration correspondingly the optimal duration of price wars is also affected by the number of firms the tests employ weekly time series data on the joint executive committee railroad cartel henceforth referred to as the jec from i88o to i886 porter i 983b and lee and porter i 984 previously used this data in order to identify periods in which price wars occurred and to test whether pricing behavior in cooperative periods was consistent with predictions of the theoretical model the present paper will look more closely at the price wars themselves in order to test another set of predictions about their incidence and duration section 2 summarizes the theoretical model in more detail with emphasis on markets with price setting firms the models in green and porter i984 and porter i 983a consider quantity setting firms but the railroads in the jec chose prices not quantities the distinction has some bearing on the econometric work but the basic ideas from the theory still apply there is a brief description of thejec and the data set in section 3 empirical results are covered in section 4 and section 5 contains some concluding comments

supply demand and technology in a multiproduct industry texas field crops the purpose of this paper is to examine the structure of agricultural production for six texas field crops cotton grain sorghum wheat corn rice and hay which account for nearly 95 of recent field crop value specific objectives are to a test the structure of technology to determine i if output and input utilization choices for individual products are independent of production decisions about other outputs and ii if products and or inputs can be consistently aggregated b estimate a coherent set of interrelated supply functions for the six commodities and input demand functions for fertilizer and hired labor because the empirical focus of this paper is specific to one state the results will be of limited value for interpreting specific production relationships elsewhere however the problem is of common interest in production agriculture and the techniques used demonstrate an important application of dual modeling

dynamic and static behaviour with respect to energy use and investment of dutch greenhouse firms dutch greenhouse horticulture firms are energy intensive and major emitters of greenhouse gases this paper develops a theoretically consistent model that is able to describe the greenhouse firms behaviour regarding energy use and investments in energy technology the behaviour of the firm is modelled using a combination of a dynamic cost function and a static profit function framework the optimal quantity of energy is derived from the link between these two functions the model is applied to a panel of 97 dutch greenhouse firms over the period 2001 2008 the results show that most dutch greenhouse firms shift from being net electricity users to net electricity producers in the long term investing in energy capital contributes to reducing net energy use however it increases the quantity of carbon dioxide emissions due to an increase in electricity production a 1 increase of the price of gas reduces carbon dioxide emissions by 1 6

on the stability of multimarket collusion in price setting supergames abstract in this paper we examine how trade liberalization affects collusive stability in the context of multimarket interactions the model we consider is a segmented markets duopoly with differentiated goods in which price setting firms pool their incentive constraints across markets to sustain their most collusive outcome we find that when goods are very close substitutes and trade costs are sufficiently high a marginal reduction in trade costs facilitates collusion exactly the opposite is true if for any given degree of product substitutability trade costs are sufficiently low we also study the dependence of multimarket collusion on product differentiation

a dynamic adjustment model for u s agriculture 1948 79 abstract a multioutput model is developed within the adjustment cost framework to analyze the structure of dynamic adjustments in u s agriculture during the post war period an important feature of this model is that the econometric model is consistent with dynamic economic theory fluctuations in capital stocks variable inputs and outputs are explained by changing opportunity costs empirical results indicated that durable equipment farm produced durables and family labor exhibited significant rigidity in adjustment as a response to exogenous shocks surprisingly the hypothesis that real estate was a variable input could not be rejected the univariate flexible accelerator hypothesis which is widely maintained in most agricultural adjustment studies is inconsistent with the data

output response to prices and public investment in agriculture indonesian food crops abstract this paper analyzes dynamic food crop supply response in indonesia the effects of technology prices and investments on output growth for rice corn soybean and cassava are examined the analysis generates crop wise area yield and input demand parameters suitable for the evaluation of price and investment policies and shows the large impact of public investment in agricultural research extension and irrigation on long run output growth in indonesia elimination of the fertilizer subsidy and reinvestment of the resulting fiscal savings in research extension and irrigation would produce large benefits

short run and long run dynamics of farm land allocation panel data evidence from denmark1 this study develops and estimates a dynamic multi output model of farmers land allocation decisions that allows for the gradual adjustment of allocations that can result from crop rotation practices and quasi fixed capital constraints estimation is based on micro panel data from danish farmers that include acreage output and variable input utilization at the crop level results indicate that there are substantial differences between the short run and long run land allocation behaviour of danish farmers and that there are substantial differences in the time lags associated with different crops to our knowledge this is the first dynamic micro model of land allocation estimated on data from the temperate climate zone since similar farming conditions are found in northern europe and parts of the united states and canada this result may be of wider interest

on the sustainability of collusion in differentiated duopolies abstract we consider a rule designed to maintain collusion in a duopoly made up of firms producing differentiated products we analyse both price setting and quantity setting models and show that product differentiation plays a crucial role in determining the effectiveness of this rule our results contrast with those obtained by earlier writers

agricultural production technologies with systematic and stochastic technical change a production system modeling tool is developed that implements recent work on autoregressive and endogenous stochastic production technologies associated with generalized fechner thurstone gft optimizing functions a gft class production system is used to evaluate the empirical support for technology specifications inherent in the neoclassical theoretic structure of an agricultural production region little likelihood support is found for zero serial correlation elimination of systematic technology changers from the production system strict neoclassical production technologies hicks neutral technical change or zero homogenous factor demand functions

dynamic adjustment in us agriculture under climate change we construct a stochastic dynamic dual model to investigate the structural adjustment of two aggregate output and three aggregate input categories in us agriculture under stochastic climatic change more than a century of national annual data 1910 2011 is used in the empirical analysis no constraints on asset fixity are imposed results indicate that with rational expectations both output categories as well as all input categories exhibit quasi fixity in response to market change and stochastic climate change crops adjust more than twice as fast as livestock 49 versus 20 of the way toward their long run equilibrium in one year fertilizer adjusts most rapidly toward equilibrium levels 88 in one year and capital adjusts most slowly 5 in one year labor oscillates rather than converging smoothly toward equilibrium its distance from equilibrium is the same as if it adjusted 59 of the way toward its optimal level in one year failing to anticipate climate change dramatically slows the estimated rate of adjustment for two netputs and modestly speeds the rate for two others thus likely increasing overall adjustment costs failing to account for uncertainty in anticipated climate change has little impact on adjustment rates

a translog cost function analysis of u s agriculture 1939 77 over the past four decades major changes have occurred in u s agriculture a new era in agricultural production in the united states began in 1939 world war ii gave a boost to agriculture still bogged in the depression productivity increases over the period 1939 77 have been quite impressive measured crudely by the ratio of the indices of output and input the productivity index 1967 100 increased from 59 in 1939 to 119 in 1977 to study this phenomenon a multi input translog cost function incorporating hicks neutral technical change hntc was specified annual timeseries data for the united states was used to estimate the model neoclassical duality theory provides an approach for computing the pairwise elasticities of substitution between inputs for each year as well as the annual own and cross price elasticities of demand for inputs

cheating in a duopoly supergame this paper examines an approach to oligopoly theory first proposed in a relatively neglected paper by georgej stigler i 964 suppose that the firms in an oligopoly have achieved tacitly or explicitly a collusive agreement and that open defection in a sense to be made more precise below does not pay given that the other firms observe the agreenient it pays any one of them to cheat that is to make secret price cuts to selected buyers in order to secure sales it may not otherwise have made stigler then sets out to define the likely extent of the gain a cheat can make without detection and to relate this to observable market parameters this would allow prediction of the probable incidence of cheating in a market and hence of the effectiveness of the collusive agreement stigler first argues that in a purely deterministic world there could be no scope for cheating each firm s sales could be fully anticipated and any deviation from the expected level would be immediate evidence of cheating which becomes in effect open defection implicit in this of course is the assumption that firms can observe each others outputs at negligible cost a reasonable assumption which will be maintained throughout the rest of this paper if the world is not in fact deterministic then scope for cheating may arise suppose that in each period any one buyer buys from any one seller with a probability between zero and one then each seller s sales in each period are a random variable and it is possible that a seller may attribute to chance a well above average sales level which in fact was due to cheating in deciding whether to accept this the other sellers are involved in hypothesis testing and the critical level of this test will determine how far a cheat dare go stigler s development of this idea in a formal model is open to a number of specific criticisms mckinnon i 966 criticized the excessively simplistic decision theoretic basis of stigler s model in deciding whether a rival has gained above average sales by cheating or simply by chance a firm is assumed to use a standard significance test with conventional critical levels the choice of which is entirely unexplained in the model there is also an unnecessary separation of tests according to the precise source of the buyers won by cheating previous customers of the cheat other firms customers or newly

supply response and investment in the canadian food processing industry this paper reports on the estimation of a dynamic model of the food manufacturing industry in canada its major objectives are to analyze the determinants of investments and the production structure of the industry an important finding of the study is that the hypothesis of instantaneous capital adjustment to changing market conditions is statistically rejected capital stock adjustment to optimal levels takes approximately two and one third years another result is that although the industry is responsive to price changes a general pattern of inelastic factor demand and output supply prevails in the short run intermediate run and even in the long run