spatial competition monopolistic competition and optimum product diversity abstract this is a republication of a passage from william vickrey s 1964 book microstatics which presents important results in spatial competition and monopolistic competition

incentives productivity and labor contracts the relationship between age earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self employed it is argued that the steepness of wage and salary workers age earnings profiles reflects the desire to provide work incentives to those workers since self employed workers do not face this agency problem they are used as a benchmark to gauge productivity empirical support of the proposition is provided and the effects of human capital accumulation are separated empirically from incentive effects the most important conclusion is that under some strong assumptions most of the slope in age earnings profiles is accounted for by the desire to provide incentives rather than by on the job training

spatial competition and vertical integration cement and concrete revisited reply in this review 1983 mark mcbride reconsiders the federal trade commission s ftc enforcement policy toward vertical mergers between cement and ready mix concrete firms in response to a significant increase in acquisitions of ready mix concrete firms by cement manufacturers during the 1960 s the ftc undertook a series of legal actions to block or dissolve the mergers the actions of the ftc constituted one of the most intensive efforts undertaken to date to challenge vertical mergers in a single industry mcbride p 1012 notes that the actions of the ftc provoked considerable debate concerning the motivation for the mergers both in the industry and in academe a significant number of articles were published advancing various reasons for the mergers in addition to the ftc s main contention that the mergers were motivated by a desire for captive markets it has been suggested that there were economies of integration or that the mergers were the outcome of an erroneous view of the potential benefits to foreclosure held by executives in the beleaguered cement industry 2 mcbride s 1983 paper offers another explanation for the mergers his argument is that vertical integration was undertaken to avoid rigid oligopolistic pricing in the cement industry 3 the empirical results presented by mcbride suggest that vertical integration was a significant factor in the decline of cement prices in the 1960 s the purpose of this comment is to point out some of the problems with mcbride s analysis in particular we show that the experimental design of his testing equation is faulty and does not offer a test of his hypothesis as a result mcbride s analysis does not provide convincing evidence on whether cement firms vertically integrated to avoid rigid oligopolistic pricing or if cement firms were merely reacting to prices that had already begun to decline our intent however is not to challenge mcbride s contention that vertical integration can provide lower prices to consumers rather we would argue that the evidence presented at the ftc hearings involving cement and ready mix concrete firms as well as mcbride s and others analyses illustrate the problems in discerning the motives for mergers 4

spatial competition among multi store firms abstract the paper analyzes spatial cournot competition among multi store firms it demonstrates that the complex problem of determining equilibrium store locations for competing multi store firms can be approximated by a simple one in which each firm behaves as a multi store monopolist in choosing its store locations a firm s equilibrium store locations often coincide with its monopoly locations and in general converge to its monopoly locations as the demand grows larger when the firms have an equal number of stores the stores belonging to competing firms agglomerate at discrete points that coincide with each firm s monopoly store locations

sophisticated entry in a model of spatial competition we analyze free entry equilibrium in a model of spatial competition in which locations of established firms are fixed and entrants profit expectations are rational our most interesting results concern large economies economies in which the number of firms is arbitrarily large when the average cost function is u shaped free entry equilibrium is unique socially optimal and characterized by zero profit in contract when there are no diseconomies of scale even large economies are stubbornly imperfect firms can earn substantial pure profit and free entry equilibrium is neither unique nor socially optimal

are those paid more really more productive the case of experience this study uses computerized personnel microdata on the white male managerial and professional employees at a major u s corporation to address the following question can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time our answer to this question based on both cross sectional and longitudinal information is that performance plays a substantially smaller role in explaining cross sectional experience earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience earnings profile this response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates relative productivity in the year of assessment we present a great deal of evidence which strongly supports this assumption

the principle of minimum differentiation holds under sufficient heterogeneity the so called principle of minimum differentiation stated by hotelling has been challenged by many authors this paper restores the principle by showing that n firms locate at the center of the market and charge prices higher than the marginal cost of production when heterogeneity in consumers tastes is large enough

imperfect competition in the international energy market a computerized nash cournot model this paper describes the conceptual structure properties and solution approach of a computerized model of the international energy market the model treats energy producers as players in a multistage noncooperative game the goal of each player or cartel of players is assumed to be maximization of discounted profit subject to technical political and resource constraints the model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss the open loop nash equilibrium the model integrates the theory of exhaustible resources due to hotelling and the theory of oligopoly due to nash and cournot although useful as a teaching device to illustrate theoretical results its main function is to facilitate analysis of real world resource problems the model is flexible allowing the user to specify not only cost demand and reserve information but also assumptions about who belongs to what coalition two shortcomings deserve note t

do stronger age discrimination laws make social security reforms more effective supply side social security reforms to increase employment and delay benefit claiming among older individuals may be frustrated by age discrimination we test for policy complementarities between supply side social security reforms and demand side efforts to deter age discrimination specifically studying whether stronger state level age discrimination protections enhanced the impact of the increases in the social security full retirement age fra that occurred in the past decade the evidence indicates that for older individuals who were caught by the increase in the fra benefit claiming reductions and employment increases were sharper in states with stronger age discrimination protections

wages seniority and the demand for rising consumption profiles abstract in many occupations wages rise faster than productivity over the life cycle other authors have suggested a variety of explanations for this pattern we argue that these explanations fail for at least two occupations commercial airline pilots and intercity bus drivers we then explore an alternative explanation based on the assumption that satisfaction depends on not only the level of consumption but also its rate of change we argue that upward sloping wage profiles are an expedient substitute for personal savings as a means for achieving upward sloping consumpion profiles

estimating a firm s age productivity profile using the present value of workers earnings in hiring new workers risk neutral employers equate the present expected value of each worker s compensation to the present expected value of his her productivity data detailing how present expected compensation varies with the age of hire embed therefore information about how productivity varies with age this paper infers age productivity profiles using data on the present expected value of earnings of new hires of a fortune 1000 firm for each of the five occupation sex groups considered productivity falls with age with productivity exceeding earnings for young workers and vice versa for older workers

are earnings profiles steeper than productivity profiles we test competing explanations of rising age earnings profiles by obtaining direct estimates of marginal productivity differentials between workers in different age groups and comparing these to associated earnings differentials using contemporary data from israeli manufacturing firms the results indicate that controlling for other productive inputs and firm characteristics for the unskilled or less skilled workers who represent most of the workers in our sample both earnings and productivity profiles are upward sloping moreover these profiles mirror each other closely and are statistically indistinguishable however the estimates of the profiles are sufficiently imprecise that even sizable deviations between point estimates of earnings growth and productivity growth would not be statistically significant while we view the results as most consistent with a general human capital model of rising earnings profiles over the life cycle there is not strong evidence with which to reject alternative models

spatial preemption with finitely lived equipments abstract this paper proposes a dynamic approach to potential competition in a spatial framework where productive investments are location specific and have finite duration we define a notion of strategic sustainability against multiple entries in which spatial preemption comes from anticipated renewal policies of plants we show that in an infinite horizon model with no discounting potential competition leads to average cost renewal but a positive value can be attached to incumbency the conditions for the existence of such strategically sustainable structures are determined in the model of the circular city under mill or discriminatory pricing rules our results are finally related to the usual two stage notion of free entry equilibrium in spatial models

cournot competition yields spatial agglomeration most theoretical models of spatial competition show a strong tendency toward spatial dispersion of firms yet common observations suggest that firms tend to agglomerate in this paper the authors show that competition between cournot type oligopolists that discriminate over space leads to spatial agglomeration one implication is that firms do not necessarily earn supernormal profits at the free entry equilibrium copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

workers trust funds and the logic of wage profiles this paper defines a concept a worker s trust fund which is useful in analyzing optimal age earnings profiles the trust fund represents what a worker loses if dismissed from a job for shirking in considering whether to work or shirk a worker weighs the potential loss due to forfeiture of the trust fund if caught shirking against the benefits from reduced effort this concept is used to show that the implicit bonding in upward sloping age earnings profiles is not a perfect substitute for an explicit up front performance bond or employment fee it is also shown that the second best optimal earnings profile in the absence of an up front employment fee pays total compensation in excess of market clearing in a variety of stylized cases

spatial price discrimination with heterogeneous products product heterogeneity is introduced into the context of spatial price discrimination many of the strong properties of the standard homogeneous goods case which are attained as a limit case here are shown to be no longer valid in particular the social optimum is no longer sustainable as a market equilibrium unless products are either identical or else very different

reference effects of price and promotion on brand choice behavior when consumers are exposed to pricing and promotional activity by frequently purchased packaged goods they may develop expectations that are used as points of reference in evaluating future activi

spatial cournot competition among multi plant firms in a circular city we characterize equilibrium plant locations for a spatial multi plant cournot oligopoly in a circular city previous work demonstrates that for a two plant duopoly all four plants are equally spaced we establish that the equilibrium location pattern is unique if there are two firms with an equal number of plants in most other scenarios multiple equilibria arise next we endogenously determine both the number of plants per firm and plant locations for a duopoly it is shown that the subgame perfect nash equilibrium may not be unique and for identical set up costs the firms may choose different numbers of plants

do workers prefer increasing wage profiles we present survey data challenging the assumption implicit in analyses of labor supply that all else being equal workers prefer declining over increasing wage profiles we test several explanations for our results including that a there is something special about wages e g their association with productivity as opposed to other types of payments that induces the preference for increasing wages b utility depends not only on absolute levels of consumption but also on changes in consumption over time and c respondents who prefer increasing wage profiles are irrational and would change their behavior if the rationale for preferring declining wages were explained

why do wages increase with tenure on the job training and life cycle wage growth observed within firms empirical results in this paper indicate that firm specific wage growth occurs almost exclusively during periods of on the job training this finding suggests that within firm wage growth is mainly determined by contemporaneous productivity growth the results provide no evidence that contractual considerations are an important source of firm specific wage growth copyright 1989 by american economic association

product differentiation in spatial cournot markets abstract we introduce to the spatial cournot markets model the inverse demand function of deneckere economics letters 11 1983 37 that allows product differentiation the circular model s outcome alters depending on if goods are complements or substitutes while the linear model results in central agglomeration

why do wage profiles slope upwards tests of the general human capital model this article tests the implications of the general human capital that i at the individual level there is a negative relationship between the initial wage level and wage growth of inexperienced workers and ii at the market level the ratio of the present values of wage profiles of investors and otherwise identical noninvestors equals one we find a negative relationship between initial wage levels and wage growth even after correcting for negative biases in existing estimates of this relationship we also find that the ratio of the present values of rising wage profiles to flat wage profiles is generally close to one

does cournot competition yield spatial agglomeration abstract locations and quantities are chosen sequentially in spatial markets strikingly different location patterns emerge depending on the shape of the market in a circular city firms locate equidistant from each other in a linear city firms agglomerate at the center

where to locate in a circular city abstract we study the location choices by cournot oligopolists in a circular market where consumers are located uniformly along the circumference we analyze the subgame perfect nash equilibria spne of a two stage location quantity game we demonstrate that the equidistant location pattern is only one of the many equilibrium location patterns that arise in a circular market nonequidistant multiple or a continuum of location equilibria may also arise both spatial agglomeration and dispersion or a combination of agglomeration and dispersion may occur in equilibrium in the case of infinitely many location equilibria we establish the welfare equivalence of the equilibrium location patterns

omitted ability bias and the increase in the return to schooling over the 1980s there were sharp increases in the return to schooling estimated with conventional wage regressions we explore whether the relationship between ability and schooling changed over this period in ways that would have increased the schooling coefficient in these regressions our empirical results reject the hypothesis that an increase in the bias of the schooling coefficient due to a change in the relationship between ability and schooling has contributed to observed increases in the return to schooling we also find that the increase in the schooling return has occurred for workers with relatively high levels of academic ability

cournot competition and spatial agglomeration revisited abstract in a letter previously published in this journal pal economics letters 60 1998 49 show that firms locate equidistant from each other in a circular city however we show that the following location pattern is also an equilibrium outcome firms agglomerate at two points in a circular city

easy come easy go moral hazard in the context of return to education this empirical study advances the understanding of the theory of investment in human capital by outlining limitations to its applicability in the context of return to education the study uses the concept of moral hazard to examine circumstances when financial support for education purpose generates less desirable post graduation incomes this study explores the relationship between financial support and post graduation incomes using data from the survey of income and program participation that is designed to measure the economic situation of individuals results suggest that students are less likely to engage in moral hazardous behavior to the degree to which they are older and to the degree to which they receive costlier financial assistance

competition of firms discriminatory pricing and location1 two costlessly mobile firms are to be located in a market region a subset of the plane the firms compete by setting locations and delivered price schedules to study this competitive stiuation an appropriate extensive form game is defined along with an appropri ate noncooperative solution concept existence and general properties of the equilibrium are demonstrated among the results are each firm increases its profit by locating so as to decrease total cost to both firms of serving the market firms will never locate coinciden tally if they have identical production costs and transport cost rates or if these are different and the firms are located in a circular market region having a uniform demand distribution this paper studies competition between two profit maximizing firms in space who are costlessly mobile and may discriminate in price we will allow the firms to set locations and delivered price schedules and we will be concerned with the existence and properties of equilibria in location and price starting with hotelling 9 the spatial competition literature has focused on location on bounded linear markets by two or more firms hotelling assumed identical firms that produced a single good with constant cost of production and considered consumers to be uniformly distributed and to have inelastic demand he also assumed that the consumers pay transport cost and purchase the good from the cheapest source hotelling claimed that a nash equilibrium in locations for the two firm market existed and yielded back to back locations at the center of the market many authors most recently d aspremont gabszewicz and thisse 2 have noted that an equilbrium in prices and location does not exist for hotelling s model however if the firms employ identical exogeneously specified prices hotelling s conclusions hold subsequent work by smithies 14 hartwick and hartwick 7 and eaton 3 claimed to show that a nash equi librium in f o b prices and locations can exist in markets with a uniform distribu tion of consumers each of whom have identical elastic demand functions for the two and three firm problems the work of d aspremont et al casts doubt on these conclusions without the adoption of restrictive conditions our work contrasts with these works and related research which has dealt with linear markets with uniform distributions of customers and with identical firms our work will involve markets that are subsets of the plane having nonuniform distributions of customers our firms will be allowed to be different that is have differences in production and transport costs however the fundamental difference in our approach is that our firms will set discriminatory prices and not price f o b in many ways our work will represent the discriminatory pricing

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