how does advertising depend on competition evidence from u s brewing the relationship between market structure and advertising has been extensively studied but has generated sharply opposing theoretical predictions as well as inconclusive empirical findings likely because of severe endogeneity concerns we exploit the 2008 merger of miller and coors in the u s brewing industry to examine how changes in local concentration affect firms advertising behavior well established regional preferences over beer brands and the sharp increase in concentration from the merger make this an excellent setting to analyze this question we find a significant positive effect of local market concentration on advertising expenditures a 100 point increase in the herfindahl hirschmann index measure of concentration increases advertising per capita by about 5 our findings shed light on how and when firms choose to deploy advertising the online appendix is available at https doi org 10 1287 mnsc 2017 2889 this paper was accepted by eric anderson marketing

markets for pollution control when firms are noncompliant the problem of noncompliance and enforcement in transferable discharge permit tdp markets has not received much attention this paper examines the consequences of noncompliance for a tdp market given fairly general assumptions about the characteristics of the enforcement policy in place the analysis reveals that when firms are noncompliant tdp markets retain their efficiency property only under some fairly stringent conditions the effect of noncompliance on the equilibrium permit price raises some important questions about the ability of a tdp market to achieve and remain in equilibrium when firms are noncompliant

does an endogenous relationship exist between environmental and economic performance a resource based view on the horticultural sector the aim of this paper is to analyse the relationship between environmental and economic performance from the resource based theory within firms of the fresh fruit and vegetables sector this study considers that the adoption of environment friendly practices has a greater influence on firms opportunities and abilities in the agricultural sector than in manufacturing sectors and leads to closer links between performance variables the reference for this empirical analysis is a panel data of horticultural farming marketing firms in spain the voluntary environmental programmes and the heterogeneity of their application lead us to regard acquiring a competitive advantage as a relevant driver to improve environmental performance in this sector a simultaneous equations model is suggested reflecting the differential environmental effect and the assumption of endogeneity among variables the results show a positive impact of environmental differentiation on profitability and market share also suggesting that the perception of this positive experience implies greater environmental performance

bankable permits for the control of environmental pollution abstract intertemporal trading of emission permits banking is often identified as one of three promising market mechanisms for controlling pollution along with averaging and trading surprisingly the efficiency properties of permit banking systems have not been investigated using a simple optimal control model this paper investigates firms incentives for banking or borrowing emission permits and compares the emission and output streams firms would choose with the socially optimal solution we find that in many cases firms will suboptimally choose excessive damage and output levels in early periods and correspondingly too few in later periods if given the opportunity to freely move emissions between time periods we propose a simple alternative trading scheme we term modified banking that counters this problem and should be no more difficult for an environmental authority to implement than a straigth banking system

market structure and performance in european banking it is a peculiar feature of european banking markets that in almost every country a handful of large banks tend to emerge over time whether through government encouragement or the workings of the market mechanism from a general perpec tive however it is difficult to evaluate the competitive implications of increased concentration the traditional structure conduct performance scp paradigm would suggest that increased concentration fosters collusion and anti competitive practices whereas the efficiency hypothesis suggests otherwise this paper presents tests of the two hypotheses with respect to the european banking industry using pooled and annual date for the period 1986 to 1989 the results generally support the traditional scp paradigm as an explanation for the market behaviour of european banks

a re examination of the relationship between industry structure and economic performance the objective of this study is to develop a simultaneous equations model of profitability concentration advertising expenditures and research and development outlays the data used in the estimation are subjected to regression diagnostics in an effort to determine the importance to the estimation results of a subset of the data that can have a disproportionate influence the estimation results especially for the advertising expenditures relationship and the research and development outlays equation do change when a truncated data sample based on the omission of the outliers is used this serves partly to explain why there is some disagreement in the literature on market structure and economic performance with regard to the impact of several economic factors

attitudes toward risk and compliance in emission permit markets we investigate the effects of uncertainty and concomitant risk aversion as they impact the incentive structure and subsequent operation of an emissions permit market modeled after the u s s02 market our theoretical results suggest that uncertainty dulls incentives to achieve cost savings through permit trading and inhibits efficient allocation of abatement efforts by firms we test hypotheses in an experimental laboratory setting and find that the irreversibility of investment in abatement technology may present countervailing incentives for potential sellers of permits resulting in a wait and see attitude toward adoption of efficient levels of abatement technology

experimental comparison of impact of auction format on carbon allowance market abstract carbon allowances auctions are a good way to achieve the carbon allowance allocations under international agreements to address global climate change based on an economic experiment this paper compares three possible carbon allowance auction formats uniform price auction discriminatory price auction and english clock auction with heterogeneous bidders coal power plants and gas power plants from four perspectives carbon price auction efficiency demand withholding and fluctuations in power supplies possibilities of collusion among bidders and impacts of allowance banking and penalty price on bidders behaviors under different auction formats are also examined the results show that 1 when there are relatively more bidders and there are no obvious communications between them despite there being some tacit collusion efficiency of english clock auction is greater than the other two formats 2 when there are relatively fewer bidders and there are obvious communications between them explicit collusions are observed under english clock auction in this case discriminatory price auction helps prevent collusion to some extents 3 in the banking scenario more speculations are observed while penalty price exacerbates price volatility

a simultaneous equation analysis of advertising concentration and profitability nearly two decades of econometric research have been completed in testing relationships between industrial market structure and performance recently a number of authors have reexamined these studies and cautioned on a number of conceptual difficulties which subject the results and interpretation of previous empirical work to question one primary criticism of previous research has been the failure to account for the simultaneous nature of the interrelation among elements of industry structure conduct and performance 2 4 5 11 22 25 30 while the determinants of variables such as profits advertising and concentration have been examined separately within the context of single equation models the underlying theory suggests that these variables are more properly considered as jointly determined within a system of simultaneous equations estimation of single equation models when a simultaneous system is appropriate leads to parameter estimates that are both biased and inconsistent previous empirical studies of the structure performance relationship have also suffered due to the omission of certain critical variables first the role of international trade as an element of market structure has yet to be generally incorporated into empirical studies in spite of recent theoretical work that has demonstrated its potential importance 3 20 21 second interindustry differentials in the price elasticity of demand have been neglected even though theoretical analysis clearly underscores the necessity of explicity accounting for

specifying the dynamics of industry concentration previous studies generally explain changes in concentration by its initial determinants or by changes in its determinants little attention is paid to the dynamic structure of the model this study provides a framework to sort out adjustment effects in a systematic manner the empirical model distinguishes long term from short term effects and estimates the rate of adjustment when concentration deviates from its long term equilibrium level considerable attention has focused on industry concentration as a key element of market structure while earlier empirical studies examined determinants of the level of industry concentration a more recent literature focuses on changes in concentration these more recent papers typically explain intertemporal changes in concentration by the past levels of industry growth concentration advertising intensity and minimum efficient plant size however the dynamic relationship between changes in concentration and the levels of the independent variables has not been explicitly specified caves and porter 1980 have argued that explaining changes in concentration by past levels of market structure variables is tantamount to assuming that the sampled industries are in the process of adjusting to a disequilibrium situation as an alternative they adopt a long term equilibrium approach whereby changes in concentration are explained by lagged changes in the relevant market conditions they find that this approach as a whole was unsuccessful exhibiting low levels of significance and a lack of robustness when the cross section regressions were shifted to different time periods

an investigation of the determinants of profitability in new zealand manufacturing industries in 1986 87 the empirical investigation of the structure condust performance relationship has had to grapple with the problem that higher than usual profitability might arise from superior production efficiency or alternatively from markets subject to lower competitive pressures as such the nature of investigation has evolved over time to include the market power efficiency debate and the new industrial organisation emphasis on the joint determination of profitability and market structure the purpose of this paper is to present some new zealand evidence with a unique feature being to include a measure of firm level efficiency in a disaggregated model estimated using firm level data the results suggest both market power and efficiency play a role in determining profitability although efficiency dominates

incentive based policy design for pollution control and biodiversity conservation a review this paper provides a succinct review of the main developments in the literature on incentive based policy mechanisms in the contexts of pollution control and biodiversity conservation dating from the early beginnings of the science in the 1960s a focal point in the review is on the design features of these policy mechanisms key developments in policy design were originally established in controlling externalities arising from pollution and have since been extended to policy design tailored towards biodiversity conservation special emphasis is given to the spatial characteristics of the environmental problems underlying both pollution control and biodiversity conservation the paper concludes by drawing some lessons and setting out elements of a future research agenda in both policy domains

fees and the efficiency of tradable permit systems an experimental approach the paper presents the results of an economic experiment in which the effects of fees on allocative efficiency of tradable utilization permits e g pollution permits are explored laboratory subjects university students play the roles of firms whose generic product requires a specific input or permits scarcity is exogenously introduced by a fixed supply of tradable production permits three treatments are compared no fee imposed n a fixed tax per permit t and partial retraction of permits and subsequent redistribution by auction a treatments t and a represent two different ways of imposing fees which are designed to be revenue equivalent our results indicate that after controlling for deviation of permit prices from a prediction based on fundamentals fees have an impact on distribution of permits interestingly a fixed tax enhances efficiency compared to the case of no fees while retraction and reallocation by auction tends to reduce efficiency apparently subjects decision making is affected by the imposition of fees but how and to what extent depends on the method used

profitability and product differentiation in greek food industries this paper explains the increasing difference between the profit margins of differentiated and undifferentiated greek food manufacturing industries between 1988 and 1994 using panel data the 2sls results for the fixed effects model show important differences across the high medium and low differentiated industry groups the increasing difference between the margins of the highly differentiated group which includes the most profitable industries and the other groups can be mainly attributed to the greater sensitivity of margins in differentiated industries to advertising and demand changes

advertising concentration and profitability in manufacturing advertising concentration and profitability in manufacturing i introduction economists have devoted much effort to empirically testing the hypothesized relationships between industrial concentration profits and advertising twenty years ago lester telser concluded that there is little empirical support for an inverse association between advertising and competition 1964 later other economists studying the relationship between advertising and concentration discovered a positive correlation between the four firm concentration ratio a measure of industry concentration and advertising intensity 1 strickland and weiss 1976 went further to show that there is a causal relationship between these elements increases in concentration cause advertising to intensify and conversely a rise in advertising intensity causes an increase in the level of concentration in recent years the empirical literature on advertising concentration and profitability has atrophied because of dissatisfaction with its theoretical basis as a new approach i adopt the theory of advertising developed by stigler and becker 1977 and extend it to incorporate the relationships among advertising concentration and profitability i then test its most important implications using data from the 1977 census of manufactures and the detailed input output structure of the u s economy 2 section ii examines the relationship between concentration and advertising intensity conventional theory known as the inverted u hypothesis asserts that advertising is expected to increase with concentration at first but to decrease at very high levels of concentration because collusion to avoid advertising costs becomes easier extending the stigler and becker theory i hypothesize that when concentration increases even if the large firms do not collude and continue to act independently they will eventually decrease their advertising intensity at high levels of concentration provided that the demand curve for the industry s products is relatively inelastic if the industry s demand curve is relatively elastic advertising intensity increases monotonically with concentration at all levels of concentration this hypothesis is supported by the 1977 data taken from the census and the input output structure of the u s economy section iii focuses on the relationship between advertising and profitability according to conventional theories advertising intensity promotes product differentiation leading to higher barriers to entry and higher profit margins in the past researchers e g strickland and weiss 1976 realized that contrary to the implications of barriers to entry theory the coefficient of advertising in a profit margin equation was longer for a sample of industries producing producer goods than for industries producing consumer goods they viewed this result as an anomaly inconsistent with both their theoretical reasoning and with other important empirical results already published i obtain a similar result which i am able to link to a theoretical structure thus contributing to the refutation of the barriers to entry hypothesis i begin by extending the stigler and becker theory to treat advertising and research and development r d as two complementary intangible capital goods the sample is divided into two groups producers of homogeneous goods who spend relatively more on r d and producers of heterogeneous goods who spend relatively more on advertising since we are unable to measure r d costs at the appropriate industry level it is not included among the regression variables if r d and advertising intensity are correlated we should expect the coefficient of advertising in the profitability equation in the homogeneous goods subsample to exceed the coefficient of advertising in the profitability equation in the heterogeneous goods subsample in this case the omission of the r d variable provides an implication for testing the new hypothesis

pooling of uncertainty enforcing tradable permits regulation when emissions are stochastic an under appreciated advantage of tradable permits regulation is its ability to create better decision making when emissions are stochastic in general the distribution of stochastic actual emissions around intended emissions results in over or under compliance permit tradability reduces the extent to which actual aggregate emissions deviate from regulatory targets by giving firms an additional mechanism for responding to uncertainty we construct a two period model of permit regulation with ex post enforcement to demonstrate how the permit market distributes uncertainty and to illustrate the importance of expectations toward permit market outcomes

enforcement leverage when penalties are restricted a reconsideration under asymmetric information abstract harrington harrington w 1988 enforcement leverage when penalties are restricted journal of public economics 37 29 53 offers an explanation for how relatively high compliance rates might co exist with low expected fines his results are highly dependent on the assumptions that all firms are identical and their compliance costs are known this paper shows that harrington s results are not necessarily robust in a more general model where asymmetric information and uncertainty are present

experimental tests of water quality trading markets abstract many watersheds in the u s have established water quality trading programs to help realize cost effective reductions in water pollution however the success of these programs has been limited this study highlights some of the unique features of water based credit trading markets that may explain the lack of success and uses laboratory experiments to isolate their effects in particular we compare two forms of a baseline and credit institution a pigouvian tax subsidy regulation and characteristic of air quality programs a textbook cap and trade regulation across these institutions we examine the effects of abatement technology adoption we find that a baseline and credit program when it requires firms to make upfront investments to generate tradable credits is less efficient than cap and trade and tax subsidy institutions furthermore we find that when efficient trading requires costly technology adoption institutions that involve inter firm trading including cap and trade are less efficient than the tax subsidy

permit price dynamics in the u s so2 trading program a cointegration approach the aim of this paper is to study empirically the determination and the dynamic behavior of the so2 permit prices previous research focused on ex post market price analysis without taking weather conditions into account therefore this study attempts to fill a gap in the literature by providing new empirical evidence on the so2 price evolution and its interactions with macroeconomic variables microeconomic variables and climate variables using monthly data from january 1995 to december 2006 our estimation results indicate the existence of a long term relationship between so2 permit price scrubbing costs industrial production and weather conditions in the short run so2 permit price is affected by scrubbing costs energy prices and weather conditions policy makers and private investors could benefit from the findings of this study that provides useful information on the characteristics of the so2 market and may plan their strategy

stochastic pollution costly sanctions and optimality of emission permit banking abstract this paper identifies a new economic motive for pollution regulations that allow polluting firms to bank and borrow emission permits over time when aggregate pollution is stochastic an intertemporal permit trading regime can provide firms with efficient incentives for pollution abatement without the need for costly government enforcement actions that would otherwise be required

enforcement leverage when penalties are restricted in the united states empirical studies of the enforcement of continuous compliance with environmental regulations especially air and water pollution regulations have repeatedly demonstrated the following i for most sources the frequency of surveillance is quite low ii even when violations are discovered fines or other penalties are rarely assessed in most states iii sources are nonetheless thought to be in compliance a large part of the time the evidence for the apparently low level of enforcement activity is found in a number of case studies of state and local enforcement of air and water quality regulations conducted jointly by the environmental protection agency epa and council on environmental quality ceg together with periodic surveys of implementation of air and water quality legislation conducted by the general accounting office gao these surveys show

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

the convergence of profits in the long run inter firm and inter industry comparisons this paper considers the extent to which the short run dynamic behavior and long run equilibrium levels of profitability differ among firms within the same industry movements in profits are modeled in terms of firm specific deviations from average industry profits and industry specific deviations from economy wide average returns applied to a sample of 217 large u k firms 1951 77 the results suggest that considerable heterogeneities exist within most industries that is most firms profitability experience differs considerably from those of their closest rivals copyright 1987 by blackwell publishing ltd

the profitability concentration relation market power or efficiency industrial economists have been studying the relationship between profitability and concentration using cross industry samples for many years now however as sometimes happens once it appeared that some consensus had been achieved with few exceptions market concentration and industry profitability are positively correlated peltzman i977 p 229 people began to question the interpretation of those results in particular demsetz e g i973 i974 and others suggested that rather than concentration market power leading to higher prices and profits the causal direction in fact ran from greater efficiency to both higher profits and incidentally to higher concentration our purpose here is to subject these conflicting hypotheses to cross industry empirical test using u k data in order to do this we first develop a model which is sufficiently general to allow for both alternative explanations of a positive concentration profitability correlation in the light of this model we then examine the implications for the within industry relation between market share and firm level profitability more specifically we explore demsetz s claim that the empirical form of this relationship should signal which of the alternative hypotheses is consistent with the between industry profitability concentration correlation our model suggests that in certain special circumstances this claim is partly justified in that it should be possible to assess the relative strengths of the market power and efficiency effects from the within industry relation more generally however factors such as product differentiation and scale economies may seriously impair the information content of the relation with at least a strong suspicion that the estimates will tend to exaggerate the evidence in favour of the efficiency hypothesis in the event our results tend to confirm that for most industries the within industry data offer little conclusive support for either hypothesis but for a not insignificant minority of industries the evidence suggests some support for the view that both efficiency and market power are at work simultaneously our model is detailed in section ii and estimated on u k data in section iii after which we offer a few comments in section iv first however we drovide a backcloth to the later analysis

price controls and banking in emissions trading an experimental evaluation we present results from laboratory emissions markets designed to investigate the effects of price controls and permit banking on limiting permit price risk while both instruments reduce between period price volatility and within period price dispersion combining price controls and permit banking yields important benefits banking alone produces high permit prices in earlier periods that fall over time but the combined policy produces lower initial prices and lower volatility however banking price controls and the combination all produce higher between period emissions volatility hence for emissions markets that seek to control flow pollutants with strictly convex damages efforts to limit permit price risk can result in higher expected damage

structure conduct and performance a simultaneous equations investigation for the brazilian manufacturing industry the article investigated structure conduct performance scp relationships in the context of the brazilian manufacturing industry in 1996 for that purpose it considered a system with four equations pertaining concentration advertising r d and profitability that was estimated with simultaneous equation models in addition to the usual explanatory variables proxying barriers to entry and demand conditions the article considered organizational practices and incentive schemes variables the evidence indicated an important role for variables related to barriers to entry in affecting market structure an important and nonlinear effect of concentration on advertising a relevant impact of firm size on the propensity to exert r d effort and finally a significant positive impact of concentration on profitability and were similar to the previous evidence for developed countries additionally no important roles were detected for organizational practices and incentive schemes on the scp relationships

spanish industrial unemployment some explanatory factors the high level of unemployment is probably the worst feature of the recent evolution of the spanish economy in 1970 the overall unemployment rate stood at 1 per cent of the civilian labour force in 1984 it is estimated to have gone over the 20 per cent level this is a substantial increase which has no parallel in any european country between 1970 and 1983 the average unemployment rate in the eec rose by 8 6 percentage points while the increase in spain over the same period was of 17 points there is wide agreement among spanish economists that these figures may be overstating the actual extent of the problem the incidence of the underground economy and of fraudulent practices in unemployment registration may be wider than in most eec countries nevertheless we believe that even taking into account these measurement difficulties there has been a genuine worsening of the employment situation in spain relative to that in other western economies the purpose of this paper is to review the evidence of the last 20 years about the main variables that influence the spanish labour market and to attempt a preliminary explanation of the increase in unemployment for the latter task we use the analytical framework recently developed by layard and nickell 1984a and concentrate on those institutional factors that may have influenced the level of unemployment consistent with non accelerating inflation nairu the next section of the paper describes the key facts that we are trying to explain section ii presents the analytical framework that we use and discusses its theoretical foundations these are dealt with very briefly since they are fully explained in layard and nickell 1984a here we concentrate mostly on the empirical specification and on the description of the variables the econometric results are presented in section iii and the explanation of the unemployment increase is given in section iv the final section summarizes our findings

emissions variability in tradable permit markets with imperfect enforcement and banking abstract in this laboratory experiment on emissions trading subjects face exogenous random emissions shocks after making production and emission control plans in some sessions subjects can bank their unused permits for future use after a reconciliation trading period following the shock realization subjects report their emissions to the regulatory authority and are placed in different inspection groups depending on their compliance history we identify important interactions between banking compliance and enforcement banking smoothes out the price variability arising from imperfect emissions control price stability comes at a cost however since noncompliance and emissions are significantly greater when banking is allowed

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

technological progress and change in market concentration in the u s 1963 77 what effect does r d induced technological progress have on market structure do the concentration ratios the most used indices of market structure increase or decrease in an industry that is faced with a high level of technological opportunity and exploits it through a high rate of r d this paper focusses on a model by nelson and winter as a theoretical starting point to deal with this question in the nelson and winter model concentration increases as a result of dynamic competition in the technologically progressive industries but their model does not allow entry and the effect on concentration may be reversed if the possibility of entry is considered empirically this paper shows that concentration ratios in the high r d industries have decreased in the united states during 1963 77

conservation auctions and compliance theory and evidence from laboratory experiments many agri environmental conservation programs are faced with the problem of imperfect monitoring this provides farmers with an incentive for noncompliance because they can receive subsidies without implementing the conservation scheme in this paper bidding behavior and auction performance are compared for discriminatory price and uniform price auctions in an imperfect monitoring environment our theoretical analysis suggests that auction performances are equalized between the discriminatory price and uniform price auctions however laboratory experiments reveal that although the discriminatory price auction has an advantage in terms of reducing policy costs it is more likely to cause adverse selection as a result the uniform price auction tends to have higher efficiency and cost effectiveness when compliance behavior is taken into account

buyer market structure and r d effort a simultaneous equations model the theoretical and empirical investigations of the relationship between market structure and the firm s incentive to invent and innovate have concentrated on the effects of the structure of the supply side of the market this focus on the supply side originated in schumpeter s controversial hypothesis that current market power provided the necessary conditions and future market power provided the incentive for technical change schumpeter 1950 this hypothesis stimulated a vast number of theoretical refinements and empirical tests of relations between research and development activity r d and supply side characteristics such as concentration firm size and diversification this literature has been well summarized by kamien and schwartz 1975 and scherer 1980 the analysis of the effects of the buyer market structure on the selling industry conduct and performance has been limited both theoretically and empirically stigler 1964 modeled the effects of the size distribution of buyers on price competition in oligopoly telser 1964 devel oped a theory of advertising messages in which he suggested that advertising would increase when buyers were many and small lustgarten 1975 tested the effects of buyer market structure on price cost margins and advertising and found the relations suggested by stigler and telser invention and innovation are forms of competition which like price and advertising will be affected by both buyer market structure and seller market structure however unlike price and advertising competition there have not been explicit attempts to establish theoretical and empirical relations between buyer market structure and inventive and innovative activity the effects of buyer market structure on the selling industry s incentive to invent and innovate is relevant to interpreting the effects of seller market structure on this effort a number of previous studies of the effects of seller market structure on technical change have found that seller concentration may have a slight positive impact on inventive and innovative effort kamien and schwartz 1975 p 20 even this weak relation may be due to not controlling for buyer market structure if galbraith s 1952 countervailing power hypothesis is correct lustgarten 1975 p 128 concentration in the buyer and seller markets may be positively correlated if buyer market concentration is positively related to inventive and innovative effort in the selling industry the empirical estimate of the partial effect of seller concentration will be biased upward this paper investigates the effect of buyer market structure on r d effort section ii draws together the literature that is relevant to the issue of the relation between buyer market structure and seller inventive and innovative activity section iii develops a simultaneous equation model of r d activity where r d advertising and concentration are endogenous variables section iv uses data on scientific and engineering inputs to test this model section v summarizes these results

emissions trading with shares and coupons when control over discharges is uncertain abstract two important decisions in designing markets for tradable emissions permits are whether to allow banking of permits coupons and whether to allow trading in entitlements to future permits shares banking is predicted to reduce price instability when firms trade in a reconciliation market after the quantity of emissions has been determined tradable shares are a common feature in proposals for emissions trading in canada we conduct a laboratory experiment to investigate how bankable coupons and tradable shares affect efficiency and prices under uncertainty cognitive demands on the subjects are reduced by computerized advice on the optimal allocation of coupons across periods and the implied marginal values of coupons and shares banking share trading and uncertainty conditions are introduced in a complete factorial design with three observations per cell high efficiencies are observed across all treatments uncertainty in the control of emissions leads to substantial price instability when banking is not allowed banking virtually eliminates the instability but reduces the efficiency of the market institution share trading reduces trading volumes increases price stability and improves efficiency

a new specification for aggregate employment in the u k this paper derives and estimates a new specification for aggregate employment on u k data which is to be preferred to existing alternatives on grounds of its empirical performance and theoretical consistency it provides new estimates of key parameters both the wage elasticity of labour demand and lags in employment adjustment are found to be significantly lower than existing estimates

aggregate unemployment in italy 1960 1983 when compared with other countries experiences the italian performance on the unemployment front is interesting in many respects as indicated in table 1 the italian unemployment rate has been consistently above that of major western countries since the 1960s the differential in unemployment rates tended to decrease between the second half of the 1960s and the first half of the 1970s because the initial rise in unemployment following the oil shock was less pronounced in italy than in most other countries since that time the rise in unemployment has been pretty universal and steady but italian unemployment has risen somewhat faster than the average thus the differential with the oecd has grown from 1 percentage point to over 2 by the early 1980s though the eec as a whole has performed even worse in assessing these trends one should keep in mind that unemployment as well as many other italian statistics is subject to an unusual margin of error reflecting in part the large role played by the underground economy furthermore as for other countries the aggregate italian unemployment rate hides substantial differences in unemployment rates for different groups of people in society see section i below though extremely important such

renewable energy certificate markets in india a review abstract in india the national action policy on climate change napcc 1 has set a target of 15 of electricity via renewable energy sources by 2020 to reach these ambitious targets in march 2011 the government of india launched the renewable energy certificates rec a market based mechanism to drive renewable energy development and spur further investments however a look into the actual performance of rec market trading during the first year of operation shows that though volume of trading steadily increased the number of accredited certificates issued was less than 2 5 of the technical rec demand potential indicating that the full potential of the rec markets was far from being realized we critically examine the design and implementation of the rec market in india as well as its effectiveness in meeting the desired objectives in the context of international best practices our analysis of rec market best practices reveals that though forward markets banking and price bounds are recommended for stable markets best of class methods for determining the optimal length of banking the level of floor and forbearance prices and the values of credit vintage multipliers are not fully established we then establish that the main issues with the indian rec markets appear to be demand uncertainty resulting from lack of long term targets absence of clarity on compliance and near absence of long term price signals to investors finally we present an analysis of other important features of the indian rec market in the context of well functioning rec markets such as credit multipliers set asides vintage multipliers and voluntary markets 2013 elsevier ltd

an experimental investigation of hard and soft price ceilings in emissions permit markets tradable emissions permits have been implemented to control pollution levels in various markets and represent a major component of legislative efforts to control greenhouse gas emissions because permits are supplied for a fixed level of pollution allowing the market for permits to determine the price price control mechanisms may be needed to protect firms from price spikes caused by fluctuations in the demand for permits we test permit markets in an experimental laboratory setting to determine the effectiveness of several price control mechanisms with special attention on the soft price ceiling we focus on a static setting similar to some of the earliest experimental work focused on price ceilings results indicate that both permit supply adjustments and price ceilings hard ceilings effectively limit elevated prices in this setting by contrast reserve auctions to implement soft ceilings do not consistently control prices especially when a minimum reserve permit price is applied furthermore the grandfathering of permits allows permit sellers to realize significant welfare gains at the expense of buyers under a soft ceiling policy our results thus highlight several advantages of hard ceilings for controlling short term price increases

market structure and research intensity in high technological opportunity industries where the cost and uncertainty of r d are high and conditions favor speedy imitation by competitors concentration has a statistically significant and substantial positive impact on research intensity but its impact is clearly negative when r d cost and uncertainty are low and where high barriers to imitation exist a sample of 160 business unit observations for 1978 was drawn from the pims data base all the sample business units industries recently experienced major technological changes research intensity was measured by non government financed r d expenditures as a percentage of sales

the dynamics of price cost margins in concentrated industries 1989 the dynamics of price cost margins in concentrated industries applied economics vol 21 no 2 pp 261 272

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

price formation in an open economy theory and evidence for the united kingdom 1951 1991 price formation is an increasingly important part of modern macroeconomics however the empirical literature on price setting is diverse and confused this paper uses cointegration techniques to test theories of price setting on uk aggregate data for 1951 91 we find i domestic prices are determined by both domestic costs and world prices and ii at the macroeconomic level prices are related to marginal cost rather than average or normal cost

employment adjustment in uk manufacturing this analysis differs from previous studies of labor demand in its explicit inclusion of the costs to the firm of adju sting its workforce these costs include institutional factors such a s employment protection legislation and unions and market factors su ch as the degree of slack in the labor market two questions are addr essed what is the quantitative impact of these forces and does their inclusion improve the fit of a labor demand function the results sh owed these factors to have a strong influence on the rate of hiring f iring and to improve significantly on conventional labor demand funct ions copyright 1988 by royal economic society

dynamic labour demand using error correction model using a new econometric model this study provides evidence that contradicts previous assertions about the japanese labour market the interrelationship between employment and hours of labour is stressed in this analysis by explicitly dividing labour input into both employment and labour hours this model enables results to be obtained through both simulation and estimation which allow measurement of adjustment speeds and elasticity in both employment and labour hours to wages the results of the simulations are as follows no apparent difference in adjustment speeds between employment and hours of labour was found the adjustment of hours of labour is more cyclical and overshoots whereas that of employment is smoother the adjustment speed of each simulation is slower than that found in most previous studies in the present long run simulation it is not as slow in the short run and policy simulations therefore adjustment speeds strongly depend on the method of simulation

traded goods competitiveness and aggregate fluctuations in the united kingdom this paper presents an investigation of the relations between wage adjustment competitiveness and aggregate fluctuations in the united kingdom it uses a real business cycle model based on the distinction between internationally traded and nontraded goods the traded goods sector is assumed a price taker and the focus is on the supply side the model can account quite well for fluctuations in competitiveness output wages and the terms of trade the results suggest output flexibility and wage price rigidity a combination that produces interesting patterns of macroeconomic adjustment which parallel the predictions of more traditional keynesian models copyright 1990 by royal economic society

profitability concentration imports and exports the case of taiwan s midstream petrochemical industries based on an open economy oligopoly model causalities among domestic firms price cost margin pcm domestic concentration import and export shares are derived and a simultaneous equation system is established by utilizing the 1989 1997 data of taiwan s midstream petrochemical industries three stage least squares is used to estimate the system the empirical results confirm the derived results and demonstrate 1 there exist simultaneous relationships among domestic pcm domestic concentration import and export shares 2 import concentration affects domestic concentration positively but affects domestic pcm import and export shares negatively 3 diversifying international markets improves domestic firms pcm 4 domestic firms seem to be in a situation of collusion

the potential benefits and costs of an increase in us gasoline tax abstract this paper examines the impact that an increase in the tax on gasoline would have on the us economy that is in the context of a general equilibrium model the effect that a 15 gallon increase in the tax on gasoline would have on producing sectors consuming sectors households and the government is estimated the results suggest that there will be a reduction in output by all producing sectors by about 9 4 billion there will be a fall in the consumption of goods and services by about 9 6 billion and there will be a decline in aggregate social welfare measured as utility by about 15 0 billion the government will realize an increase in revenue of about 8 0 billion

tell the truth or not the montero mechanism for emissions control at work abstract we experimentally test the truth telling mechanism proposed by montero 2008 for eliciting firms abatement costs we compare this mechanism with two well known alternative allocation mechanisms free and costly allocation of permits at the pigouvian price controlling for the number of firms and the firms maximal emissions we find that in line with the theoretical predictions firms over report their maximal emissions under free allocation of permits and under report these under costly allocation of permits under montero s mechanism by contrast firms almost always report their maximal emissions truthfully however in terms of efficiency the difference between montero s mechanism and costly allocation disappears with industries including more than one firm

incentive generating state dependent penalty system the case of income tax evasion abstract penalty systems can very often be looked upon as corrective measures established in order to eliminate or reduce costly externalities generated by optimizing economic agents hence penalties can be viewed as regulatory measures and their efficient structure should be of interest to economists we propose a dynamic incentive generating penalty system which if instituted may reduce at a given cost the generation of undesirable externalities the special case to which we refer is income tax evasion although our scheme should be applicable to any kind of externalities such as pollution of the environment violation of antirust laws and others which are created by repititive actions of economic agents

a logistic growth theory of public expenditures a study of five countries over 100 years this paper offers a new theory and empirical testing of long term trends of public expenditures for five countries while wagner s law would imply an exponential growth process of the ratio between public expenditures and national income g y the law should be rejected both on theoretical and empirical grounds because it disregards the role of ever increasing distortionary taxation however under some conditions the combination of wagner s law and the pigou s conjecture that the excess burden of taxation constrains the growth of public expenditures can be captured by a non linear first order differential equation the equation is the verhulst s logistic originally invented to model malthusian predictions on population growth the integration of a verhulst equation generates an s shaped curve this analytical framework combines intuitions from a welfare economics and a public choice perspective and potentially offers a new research strategy on the dynamics of government expenditures we offer preliminary econometric estimates on long run trends around 1870 1990 of g y in u s u k france germany italy these estimates confirm a pattern of similar trajectories in spite of different national parameters and suggest that the logistic view of growth of government is consistent with observed data

avoiding tax avoidance a repeated game theoretic approach abstract we propose an optimal auditing scheme for the tax authorities who face a given tax and penalty functions and a given budget constraint under our proposed strategy individuals can be classified into one of three groups each group is characterized by two parameters i the probability of being audited in that group and ii into which group will an individual move if ii a he reported truthfully ii b he cheated it is then shown that there is a choice of these parameters so that in equilibrium i e when every individual maximizes his payoff given the auditing strategy the percentage of individuals that cheat is arbitrarily small

an experimental study of compliance and leverage in auditing and regulatory enforcement evidence suggests that a large majority of firms and individuals comply with regulations and tax laws even though the frequency of inspections and audits is often low moreover fines for noncompliance are also typically low when regulatory violations are discovered these observations are not consistent with static compliance models harrington 1988 modified these static models by specifying a dynamic game in which some agents have an incentive to comply even when the cost of compliance each period is greater than the expected penalty this paper reports a laboratory experiment based on the harrington model framework in which subjects move between two inspection groups that differ in the probability of inspection and severity of fine subjects decide to comply or not in the presence of low medium or high compliance costs enforcement leverage arises in the harrington model from movement between the inspection groups based on previous observed compliance and noncompliance our results indicate that consistent with the model violation rates increase when compliance costs become higher and as the probability of switching groups becomes lower behavior does not change as sharply as the model predicts however since violation rates do not jump from 0 to 1 as parameters vary across critical thresholds a simple model of bounded rationality explains these deviations from optimal behavior

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

collusion versus differential efficiency testing alternative hypotheses the predictions of collusion and efficiency based static equilibrium explanations of interindustry profitability differences are formally developed and tested using appropriate econometric techniques with intraindustry data on seventy u s internal revenue service minor manufacturing industries in 1963 and 1972 none of the explanations has much explanatory power the 1963 data are consistent with collusion based models while the 1972 data are inconsistent with all non null hypotheses considered patterns of profitability are sharply different in the two years in complex ways apparently unrelated to cyclical forces or the phase ii price controls implications of these results are discussed copyright 1987 by blackwell publishing ltd

sources of concentration related profits the relationship between industry structure and market performance plays a central role in the development and implementation of antitrust laws the overwhelming majority of economic studies reveal a positive though generally weak correlation between concentration a structure index and profitability a performance index however two radically different interpretations as to the causality of this relationship have resulted in diametrically opposite recommendations for antitrust policy the structural view asserts that the positive concentration profits correlation is evidence of collusive behavior by firms in oligopolistic industries it also maintains that larger firms do not have a substantial efficiency advantage over their smaller rivals for example in an exhaustive but limited sample study f m scherer et al 7 found that concentration across industries is considerably greater than required by scale economies 2 such findings have led structuralists to suggest that an antitrust policy which deconcentrates industries will not create a serious loss of productive efficiency the structural view is challenged by a group of economists led by harold demsetz who are skeptical that monopoly power can be sustained without government sanctions demsetz 3 argues that the positive relationship between industry concentration and profitability reflects the superior performance in a welfare sense of large firms a firm captures a large market share and earns above average profits by establishing a cost advantage over its rivals the cost advantage can be due to scale economies and or a downward shift of a positively sloped marginal cost curve consequently economists agreeing with demsetz believe a deconcentration policy will produce more inefficiency than it eliminates resulting in a net welfare loss to society there have been two basic methodologies employed to test the efficiency based explanations of the profits concentration relationship peltzman 4 has found a negative significant correlation between changes in concentration and unit cost changes for 165

simultaneous equations models of the structure performance paradigm abstract this paper is concerned with determining the dimension of the simultaneous equations model surrounding the basic profits concentration relationship a very general model is considered and then simplified using a simple test for exogeneity and it is concluded that the model is nonlinear in concentration and that simultaneous interaction occurs between profits and foreign competition variables

on the specification of structure performance relationships this paper argues that most estimated structure profitability equations in industrial economics have not been derived from a single coherent view of the behaviour of firms the independent variables in such equations have often been derived on the basis of a literature search and by appeal to conflicting approaches e g constrained and unconstrained profit maximisation the use of a coherent approach indicates that structure performance equations are likely to be highly non linear and that simultaneous equation estimation is neither required nor appropriate in some cases single equation estimation is adequate and in other cases reduced form equations are needed