technology and transaction cost economics a reply abstract i argue here as i have previously that technology is neither fully determinative of nor irrelevant to economic organization transaction cost economizing occupies a prominent position in any effort to assess the efficacy of alternative forms of economic organization

advanced supply chain planning with mixtures of backorders lost sales and lost contract abstract this paper investigates a supply chain system in which a supplier prepares for the selling season by building stock levels prior to the beginning of the season and shortages realized at the beginning of the season are represented as mixtures of backorders and lost sales backlogged items are replenished as soon as possible through an emergency procurement as opposed to waiting until the next scheduled delivery as in many continuous review scenarios and the backorder rate is modeled as a piecewise linear function of the magnitude of the shortage the often intangible cost associated with lost sales and customer goodwill is also quantified in particular the buyer and supplier are engaged in a contractual agreement and the loss of customer goodwill from the supplier s perspective is represented as the expected cost associated with violating the conditions of the contract the likelihood of contract cancellation is also represented as a function of the magnitude of shortage the optimal solution is derived in closed form for the case of exponential demand distribution and an example problem is illustrated with numerical data in order to demonstrate calculation of the optimal solution and corresponding sensitivity analysis for demand distributions in which the solution cannot be expressed in closed form

the environment and emerging development issues development economics for the most part has failed to recognize renewable environmental resources as economic goods yet the lives of the poor in developing countries are intimately tied to the fate of their local common property resources soil fuel wood water and so on ignoring the loss of common property renewable resources via degradation centralization or privatization in calculations of net national product can mask the destruction of resources available to a country s poor behind the false appearance of a growing national economy this paper describes the difference between the problem of managing local common property resources in developing countries and the problem of protecting the global commons such as the atmosphere and oceans it outlines the calculations that would include the local commons in the national income accounting of capital assets and argues that the interests of those most dependent on the increasingly scarce local commons will be best served by placing control in their hands while the central government provides infrastructure and educational support to control the pollution of the global commons on the other hand the paper sketches a plan in which most countries would have a high incentive to participate a global allocation of limited tradable permits to discharge defined pollutants

inequality and rules in the governance of water resources this paper considers two types of farmer with unequal land endowments who voluntarily contribute to a joint project for the maintenance of an irrigation network the collective output water is distributed according to some allocation rule and used by each farmer in combination with land to produce a final good the analysis shows that the initial degree of inequality affects the allocation rule that maximises the amount of water collectively provided specifically two forces act in opposite directions the first effort augmenting force pushes the distribution of water towards the agent with the higher return to water in the attempt to maximise the aggregate level of effort this is the prominent force when efforts are highly substitute if efforts display some degree of complementarity the effort mix alongside with aggregate effort becomes important a second effort mix force then emerges that favours more egalitarian or even progressive water allocation rules

on the effects of monetary policy in vietnam evidence from a trilemma analysis during and after the 2008 2009 global financial crisis the growth cycle of vietnam s economy has shifted from an average annual growth rate of 7 8 to an average annual growth rate of 5 6 with a high level of macroeconomic instability and uncertainty from 2009 till 2016 related studies have speculated that the operations of monetary policies during this period were not effective in recovering the economic growth and stabilizing the overall price level and total output level this paper provides the first empirical examination of this speculation using the trilemma framework our empirical results show that the state bank of vietnam has had adopted a set of policies aiming at maintaining exchange rate stability and interest rate independence while easing the restrictions on capital inflows the combination of these three monetary policy approaches is found to violate the rule of trilemma consequently exchange rate and interest rate policies became less effective and failed to stabilize the economy in response to the global economic recession

cost sharing arrangements under sharecropping moral hazard incentive flexibility and risk this paper explains the rationale and describes the characteristics of cost sharing arrangements in rural developing economies focusing on the risk and incentive properties of alternative cost contracts and on their flexibility their ability to adapt to environmental changes it is shown that where labor inputs are difficult to monitor the rule that cost shares and output shares be equalized will not hold and is not constrained pareto efficient and that cost sharing contracts have a decided advantage over contracts which specify the level of inputs whenever there are asymmetries of information regarding production technology between the landlord and the tenant

resource allocation and use under collective rights and labour management in peruvian coastal agriculture a critical issue in the evaluation of labour management as a development policy is its impact on production in an effort to contribute to that evaluation and to the economics of labour management this study analyses production data collected from cooperative firms established by the peruvian agrarian reform the data present an unusual opportunity for careful microeconomic analysis of the reform itself as well as an opportunity to confront and refine existing propositions about the effects of the collective property rights of labour management on production property rights may affect production because of their effort on incentives for conventional resource allocation decisions they may also affect intrafirm principal agent decisions which determine the intensity with which given resources are utilised beginning with ward s i 958 paper a number of theoretical studies have compared labour managed and capitalist resource allocation and an approximate consensus has emerged about conditions under which differences occur in this study measures of the allocative behaviour of peruvian firms are estimated and compared with the theoretically expected behaviour of both capitalist and peasant agricultural producers the impact of collective ownership on the intensity of resource utilisation i e technical efficiency of the observable production function arouses greater theoretical dispute than the resource allocation question a collective assignment of property rights may weaken supervisory authority which can control free rider externality problems within the production process on the other hand participation of labour in management may foster cooperative attitudes and other social control devices which can fulfill the same functions as hierarchical supervision existing literature offers the competing hypotheses that labour management leads either to a breakdown in intrafirm coordination and the observable technical efficiency of production as jensen and meckling i 979 claim or to an improvement as vanek i 969 claims the results of the present paper do not unequivocably support either view instead they portray a diversity in labour managed production performance and suggest the importance of policy and institutional factors which condition the impact of labour management on production the results also provide a

asset specificity and economic organization abstract this paper examines the optimization problem of firm and market organization in which both production cost and transaction cost differences are expressed as a function of asset specificity in general markets enjoy advantages by aggregating the demands of many buyers thereby realizing economies of scale or scope such production cost savings need to be assessed in relation to the transaction cost advantages that internal organization sometimes enjoys over markets in adapting to changed circumstances as it turns out both production cost economies and the transaction cost differences between firm and market organization vary systematically with the characteristics of the investments this paper employs a unified framework to assess the choice of organization form the condition of asset specificity is featured

the organization of work a historical dimension abstract an evaluation of the organizational efficiencies of various modes of production by o e williamson has led him to conclude that given identical technologies the factory was more efficient than the putting out system the superior organizational efficiency of the former he maintains was one reason for the transition to factory production during the nineteenth century this paper challenges that view it is argued that the way in which williamson evaluates efficiency is open to methodological and other objections and that there is limited empirical support for his hypothesis given an identical technology the evidence suggests that the putting out system was usually able to compete with the factory

the efficiency of alternative policies for the ec s common agricultural policy comment in a recent article in this journal de gorter and meilke dgm compare the redistributive efficiency of agricultural price support policies under alternative assumptions about accompanying supply control measures using a long run supply curve which is assumed invariant with respect to policy choice dgm assess the consumer taxpayer cost per ecu of total producer surplus under different policies and conclude that individual production quotas followed closely by a two tier price policy are preferable to price reductions or a coresponsibility levy the main substance of this note is that dgm s failure to recognize the underlying structural problems of ec agriculture and to identify the true political target of income support measures renders their approach incapable of yielding a determinate ranking of these measures in terms of their medium term efficiency and invalidates their policy recommenda

privatizing the commons an improvement recent years have seen political economists turning to an institutional paradigm wherein the extent to which property rights are defined and enforced is an important determinant of human action furubotn 1972 the institutional or property rights approach has become an important component of explanations of both economic growth and economic inefficiency the institutional environment now holds a prominent place in explanations of differential growth rates among political units and over time 1 the property rights approach has also become commonplace in the analysis of the environmental crisis where the lack of well defined property rights is seen as the cause of environmental problems and movement toward a more complete specification of those rights as the solution even bureaucratic inefficiencies have been analyzed in the context of property rights mckean 1965

resources transactions and rents managing value through interfirm collaborative relationships this paper offers a theoretical explanation for why interfirm collaborations form yet fail and further suggests how firms might manage them for a more positive outcome based on a perspective of value we explain how a more inclusive and integrative perspective one which combines elements from transaction costs and resource based theory provides more robust insight into collaboration formation management and instability in doing so we differentiate rent yielding firm specific assets at the core of the resource based view from the transaction specific assets at the core of transaction cost theory the paper makes a crucial distinction between the potential value attainable through collaborations and its actual realization the crux of our argument is that firms enter into collaborative relationships because these are expected to yield superior value relative to alternate organizational forms in certain situations offering potentially synergistic combinations of complementary resources and capabilities yet such relationships are frequently prone to failure because the partner firms tend not to recognize ex ante the nature and extent of transaction specific investment that is required in the collaborative relationship to attain these synergies in our argument critically the relationship between organizations is seen not simply as a governance structure of a hybrid nature but more importantly as a productive resource for value creation and realization in this light transaction specific investment in what we term relational specificity becomes imperative in the search for value we explain why the transaction costs incurred in the exchange of resources are not independent of the nature of resources to be transacted and similarly why the returns realized from these resources are not independent of the relationship and transaction specific expenditures incurred in effectively combining them and maintaining the combination the interdependence between the two mediated by the quality of the relationship has direct implications for the earning of rents through collaborations these relationship specific expenditures can be of an internally generated nature endogenous to the alliance form itself and need not exceed alternative forms while the associated benefits have the capacity to potentially exceed the alternatives this translates into potentially superior value the paper contributes in three key related ways a the explicit recognition of the relationship as a value bearing asset embedded in a larger and endogenous institutional context namely a system of resource relationships both intraorganizational and inter organizational among partner firms and the collaboration b the recognition of the evolving relationship between production and exchange which at the level of the collaboration is directly dependent on the nature evolution and dynamics of the relationship among the parties to the transaction and c the provision of a nontrust explanation for why firms might knowingly forego opportunities to take advantage of their partners drawing from this the paper occasions a a shift in focus from the form to the process of governance which has direct implications for value creation and realization and b a shift in the primary identity of transaction specific and relationship specific expenditures from cost to investment in future value

agrarian reform in the dominican republic an associative solution to the collective individual dilemma abstract the dilemma of appropriate organizational structure for agrarian reform projects is pervasive in all of latin america collectives or production cooperatives provide superior vehicles for necessary credit and technical assistance but unlikely family plots they are wrought with administrative problems and low worker incentive this case study of land reform projects in the dominican republic presents the limitations of collective and individual farming structures and characterizes an intermediate associative preferred by the dominican reform beneficiaries empirical evidence shows higher productivity as the reform projects adopt the associative structure

household contributions to community development in indonesia summary critical to the success of community development is the degree to which citizens contribute their resources the paper develops regression models to examine the effects of household and community characteristics on household contributions of time and money to three types of participatory community development efforts governance social welfare and environmental infrastructure households with indicators of lower socio economic status generally contributed less time and money to community development integration into social networks was also a strong predictor of the amount of time a household contributed because most of the community development efforts analyzed rely on reciprocity where participants contribute resources in order to receive benefits the findings raise doubts about the extent to which these efforts help the poor and socially excluded

common property institutions and sustainable governance of resources abstract the literature on common property based resource management comprises many important studies that seek to specify the conditions under which groups of users will self organize and sustainably govern resources upon which they depend using three of the more comprehensive such studies and with an extensive review of writings on the commons this paper demonstrates that the enterprise of generating lists of conditions under which commons are governed sustainably is a flawed and impossibly costly research task for a way out the paper examines the relative merits of statistical comparative and case study approaches to studying the commons it ends with a plea for careful research design and sample selection construction of causal mechanisms and a shift toward comparative and statistical rather than single case analyses such steps are necessary for a coherent empirically relevant theory of the commons

the firm size farm size and transaction costs the case of hazelnut farms in turkey this study analyzes the effects of transaction costs on the size of hazelnut farms in turkey the study finds that higher land slope and higher variance of rain as transaction cost increasing natural effects lead to smaller hazelnut land holdings high slope and weather variation can increase the costs of monitoring the laborers make moving inputs or output up and down harder limit the use of machinery and reduce contractual performance of labor contracts for farm production functions land is a complex input with measurable interactions with nature contrary to common production theory approaches that take natural properties of land as given the study develops a production function that incorporates natural properties such as slope and rain variance the study utilizes two separate data sets for the estimations the first data set explores the characteristics of hazelnut farmers while the second one analyzes the regional characteristics of hazelnut farms

prices technology and farm size in this paper we construct and empirically test a theory of the agricultural firm which explains the long term growth in farm size in the united states typically the u s farm unit is a family enterprise consequently the ratio of the opportunity cost of farm labor to the price of machinery services determines the size of the farm operation by influencing the machine labor ratio applying the model to u s data we explain virtually all of the growth in the machine labor ratio and in farm size over the 1930 70 period by changes in relative factor prices without reference to technological change or economies of scale

erratum to environmental determinants of cost sharing multiple cost sharing rules often coexist in seemingly identical environments we use shared irrigation costs as a context for examining the extent to which the structural environment explains cost sharing rule selection we find that environmental factors affecting irrigation costs and benefits as well as those determining irrigator distribution along the ditch have impressive explanatory power these results present some of the first formal empirical analysis of the manner in which structural features influence the actual cost sharing choices of economic agents moreover our results also suggest that previous axiomatic studies are reflective of real world cost sharing behavior

diseconomies of size with fixed managerial ability managerial ability has important implications for farm growth in this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits next we discuss the effect that managerial ability has on economies of size in the empirical part economies of size are estimated for a sample of dairy farms using a proxy for managerial ability which is calculated as a technical efficiency index the results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size copyright 2003 oxford university press

common property equality and development the appeal of common property ideas may be traced in large measure to the fact that they seem to embody widely held values of equality on the other hand empirical examination of common property institutions reveals that they can coexist with significant inequality in this paper the relationship between common property and equality is examined it is argued that the role of common property can only be understood in the context of the associated private property institutions common property in agriculture is interpreted as part of a system based on small scale peasant proprietorship of arable land common property institutions provide a method of capturing scale economies and thereby increasing the efficiency of small scale proprietorship in competition with large scale production based on wage labor

quality variations and the choice between foreign and indigenous goods or technology abstract in this paper different production techniques are distinguished by both their resource requirements and the quality of their outputs the optimal choice of production methods depends upon demand conditions as well as the economy s capital labor endowment and the technical characteristics of the alternatives when product quality improvement is possible through the adoption of a foreign advanced capital intensive technique at most two techniques should be employed and the more closely matched are the capital labor requirement of the advanced method and the aggregate capital labor ratio the greater the extent of adoption the presence of a competing quality improving activity using the indigenous technology reduces the range of aggregate capital labor endowments for which the advanced technique should be employed we consider quality inspection of units which reduces the amount of tradable output produced by given inputs as its market value increases economies of scale in that the per unit cost of a given quality improvement falls with increasing sectoral output are included

wealth based trust and the development of collective action interpersonal trust is one possible mechanism by which wealth inequality affects the success of efforts in cooperation specifically the presence of perceived economic differences between members of small agricultural cooperatives in northwest ecuador s agricultural frontier encourages trust in the wealthy thus facilitating co op development during the initial stage of cooperative formation but such inequality and exclusive trust may later negatively affect co op success these generalizations are only possible through refinement of frameworks currently used in the study of heterogeneity and common pool resource management this refinement is made possible by paying closer attention to the operationalization of variables and by synthesizing already existing hypotheses

mundell s trilemma policy trade offs within the middle ground abstract mundells s trilemma makes strong categorial predictions on monetary policy trade offs where a small economy either has to adopt floating exchange rates or a closed capital account to establish interest rate autonomy however the trilemma is silent about a functional description of respective trade offs for intermediate middle ground policies accounting for the entire space of such policies we study monetary autonomy in an unrestricted and continuous manner for 20 mostly developed economies evidence suggests that interest rate dependence almost linearly increases with the fx stability indicator under financial openness thereby full independence would require an intensity of fx volatility which policymakers might hardly accept however this strong trade off can be relaxed efficiently by a moderate reduction of financial openness hence such a policy might offer some protection against the global financial cycle and leaves a considerable scope to combine a domestic monetary policy with a reduced fx rate variability

agency costs and the agricultural firm in the last decade there has been a major rekindling of interest among economists in the form of institutions used to organize resources for production and distribution jensen 1983 distinguishes two agency literatures that share the comparative institutions perspective introduced by coase 1937 1960 principal agency theory e g stiglitz 1975 harris and raviv 1978 shavell 1979 h61mstrom 1979 lewis 1980 provides a mathematical formulation of contractual choice and has been primarily directed to the trade off between risksharing and incentives against labor shirking positive agency theory pioneered by coase 1937 resurrected by alchian and demsetz 1972 and currently represented for example by fama and jensen 1983a is nonmathematical and places relatively more emphasis on explaining actual patterns that characterize industrial organization in agriculture the theory of organizational form has centered largely around tenure choice the theory of tenure choice has an illustrious history in the economics literature e g smith 1922 marshall 1920 heady 1955 day 1967 cheung 1969 rao 1971 stiglitz 1974 reid 1976 newbery and stiglitz 1979 binswanger and rosenzweig 1984 in recent years alternative tenancy arrangements are commonly viewed as types of employment contracts e g newbery and stiglitz 1979 braverman and stiglitz 1975 harris and raviv 1978 shavell 1979 hw1mstrom 1979 lewis 1980 in an innovative departure from the view of tenancy as an employment contract eswaran and kotwal 1985 have modelled share tenancy as a partnership between a landowner who specializes in decision making and a tenant who specializes in labor supervision more generally questions of tenure choice employment contracts manag ment systems and farm size can all be usefully viewed as aspects of agricultural organization the purpose of the present paper i to elucidate this view and to investigate tenure choice as a part of the general study of the nature and causes of the agricultural firm the paper is organized to highlight the inductive approach employed section 2 classiies agricultural firms according to the degree of specialization and who gets the residual payment the classification is combined with previously documented patterns of tenure choice in order to posit a preliminary hypothesi about the relationship between the econo ic environment and the nature of the agricultural firm section 3 uses a principalagency framework to construct a theory of the hypothesized relationship between the degree of separation between labor and management nd l nd quality section 4 provides an illustrative statistical verification of the hypothesis based on a sample of philippine sugarcane f rms section 5 summarizes the paper and discusses two implications of the transaction cost approach for institutional design

the impact of burden sharing rules on the voluntary provision of public goods abstract we investigate how burden sharing rules impact the voluntary provision of a public good which generates heterogeneous benefits to agents we compare different rule based contribution schemes where agents can first suggest a minimum provision level of the public good before the smallest common denominator is implemented we find that rule based contribution schemes significantly increase payoff levels relative to the vcm while significant differences exist between the rules importantly the equal payoff rule maximizes payoffs for all player types this also holds relative to a scheme where different types of players separately can determine their minimum contribution levels our results lend insights into the efficient institutional design for voluntary private provision of public goods and how burden sharing rules interact with efficiency when agents are heterogeneous

household resources transaction costs and adjustment through land tenancy this paper examines the role of household endowments of imperfectly tradeable factors of production e g male female child labor and draft animals on land leasing an explicit attempt is made to account and test for the role of transaction costs on the incidence and extent of adjustment taking place through the land lease market the econometric model is implemented using pooled data from six villages in the semiarid region of india the results confirm the significant role of nontradeable family endowments and indicate the presence of frictions in the land tenancy market

the ideology of efficiency searching for a theory of policy analysis the potential pareto improvement criterion and other measures of economic efficiency do not pass the test of consistency and coherence within economic theory nor do such measures accord with what public decision makers seek in policy advice from economists such efficiency measures are nonetheless durable components of the ideology of economics in general and benefit cost analysis in particular the objectivity of the policy scientist has been confused with the objectivity of the science while economic efficiency has no claim to objectivity the policy scientist can be an objective analyst of policy choices

a modified collective agriculture in rural growth with equity reconsidering the private unimodal solution abstract this paper identifies limitations of an agricultural structure of small private farms as a basis for rural growth with distributive equity and points out potential advantages of democratically managed collectives characterized by flexibility with respect to production scale group checks on inequality in land use and avoidance of the underemployment generating tendencies of large scale non collective agriculture after a critique of recent literature on scale economies and a discussion of stratification tendencies in private agriculture a model of democratic rural collectives incorporating features of chinese and tanzanian precedents is introduced and evaluated political feasibility is considered in a concluding discussion

pre season stocking and pricing decisions for fashion retailers with multiple information updating abstract motivated by the industrial practice we investigate in this paper the pre season inventory and pricing decisions for fashion retailers before the selling season a retailer can place orders for a seasonal fashion product from her supplier at two distinct stages via two different delivery modes market information from the sales of a pre seasonal product is collected and used to update the demand forecast of the seasonal product at the succeeding stages by using bayesian approach we formulate a dynamic optimization problem and obtain the optimal stocking policy after the ordered seasonal product has arrived and just before the start of the selling season the retailer can determine the optimal selling price of the product with respect to the latest demand information and the amount of product on hand we study the pricing policy under different objectives sensitivity analysis is carried out and the features of the policies are revealed managerial insights are generated

incumbents use of pre entry alliances before expansion into new technical subfields of an industry industry incumbents frequently delay entry into emerging technical subfields fearing product cannibalization and uncertain investment and enter only after technical and market uncertainties have subsided we predict that many incumbents particularly stronger firms will participate in alliances with other firms before their standalone entry the alliances will be used to realize part of the value of specialized assets and to gain information about the emerging products and markets we support the predictions with evidence from the us market of the medical diagnostic imaging industry

communal property and land markets agricultural development policy in st lucia abstract communal land tenure in st lucia was targeted for privatization in 1986 on the premise that its undercapitalization and low productivity could be corrected by establishing an efficient land market this article takes the neoclassical analysis which was used to support this policy to task with empirical evidence from st lucia it argues that the inefficiencies attributed to communal land only are not justified many of these inefficiencies are in fact also shared with freehold tenure in addition family land performs socioeconomic functions that cannot be achieved with freehold tenure and fulfills a critical function in the development process

the newsboy problem under progressive multiple discounts abstract previous research on the newsboy problem is based on the assumption that excess inventory is either discounted once and sold or disposed of real world settings especially in the apparel industry involve many cases where multiple discounts are used under multiple discounts a retailer has a series of discounts that are progressively used as the product remains on the shelf in this paper we formulate and solve a newsboy problem with multiple e discounts the new problem is solved with the objectives of 1 maximizing the expected profit and 2 maximizing the probability of achieving a target profit we show that multiple discounts when possible provide higher expected profit than using a single discount we verify the analytical results using numerical integration and illustrate the results with numerical examples

scattered landholdings in common property systems abstract concepts of common property have received increasing attention in recent years this has been associated with a re evaluation of historical common property institutions such as the medieval commons one of the major problems raised in the process has been the need to explain the phenomenon of scattering of a farmer s landholdings into a number of separate strips an explanation is sought in the need for a smoothly operating collective decision process scattering is seen as a means by which intra group conflict can be minimized other aspects of the problem such as externalities are also examined

coping with the tragedy of the commons game structure and design of rules the paper provides an assessment of some recent results of the large amount of new institutional economics analyses investigating a common pool resource setting with a specific focus on game theory models most of the studies have used a non cooperative approach in order to explain how under provision for the resource or its over use the so called tragedy of the commons can be avoided within given management rules they show how the characteristics of the game payoff matrix repetition or of the users group size wealth heterogeneity and moral norms may give incentives for the latter to play in a way that benefits all users by contrast much fewer articles have used a formalized approach to assess the possibility for players to design new rules to overcome the initial tragedy of the commons the article ends with some proposals of directions for future research

the nature of the agricultural firm abstract models explaining the choice between rent wage and share contracts in agriculture abstract from the large variations within the classes of rent share and owner managed forms of organization regarding the extent to which a specific form accommodates specialization between labor and management as a result modern explanations of agricultural organizations are misleadingly dependent on risk aversion or the assumption that landowners have an absolute advantage in production decisions viewing the agricultural firm as a constitution instead of as a nexus of contracts facilitates an agency explanation of alternative organizational forms and their amenability to specialization

contractual structure in agriculture abstract this paper develops a generalized double sided moral hazard model of contract choice in agricultural production with mutual monitoring of each other by the landlord and the tiller who generally have different levels of farming efficiency and are risk averse using this model we formally prove that the optimal contract maximizes the output net of the risk bearing and agency costs of both the parties and carry out a simulation exercise which helps explain many of the tenancy related issues the difference in the farming efficiency of the two sides often ignored in previous analysis turns out to be the principal determinant of the contract offered to a tiller

revenue neutral tax policies under price uncertainty reply in their comment on my 1990 article yeh suwanakul and mai extend my analysis which focused attention exclusively on firm output to allow for simultaneous endogeneity of price aggregate output and numbers of firms they show that with downward sloping demand industry output adjusts positively to revenue neutral changes in the marginal rate of taxation this result is significant for two reasons first we are more often interested in predictions about aggregate phenomena than we are in predictions about individual firms indeed firm level predictions are frequently irrefutable since firm data are often unavailable second the authors derive their result under a set of conditions that appear to be more general than those invoked in my 1990 article in particular they circumvent the need to invoke specific assumptions about the nature of firms aversions toward risk i consider this a useful extension and i appreciate the careful scrutiny of my paper

social heterogeneity and wasteful lobbying using a general equilibrium model with endogenous policy we explore how heterogeneity affects wasteful lobbying by sectoral interest groups with the help of a simulation approach we first investigate the impact of information heterogeneity on how lobbies react to a shift from a soft to a strict government budget constraint next we examine how lobbying is influenced by heterogenous perception of the general equilibrium implications of lobbying effort finally we explore the consequences of heterogenous specialization in households asset portfolios we conclude that social heterogeneity in information perceptions and portfolio compositions increases incentives to lobby

central banks and macroeconomic policy choices relaxing the trilemma abstract macroeconomic policy choices in open economies are constrained by the trilemma according to which the objectives of exchange rate stability monetary independence and capital mobility cannot be attained jointly this paper shows that foreign exchange interventions provide an effective instrument to relax the trilemma an active reserve policy allows central banks to pursue independent monetary and exchange rate policies when the capital account is liberalised we use the framework of the portfolio balance model to show that exchange market interventions may substitute for capital controls both allow a country to achieve the other two objectives of the trilemma our empirical analysis of a large country panel data set covering the period 1970 2010 confirms this theoretical insight the weighted sum of the three trilemma objectives increases in the degree of foreign exchange market intervention the capacity to relax the trilemma constraint has increased over time and has been most effective in emerging markets

addressing global environmental externalities transaction costs considerations is there a way to understand why some global environmental externalities are addressed effectively whereas others are not the transaction costs of defining the property rights to mitigation benefits and costs is a useful framework for such analysis this approach views international cooperation as a contractual process among country leaders to assign those property rights leaders cooperate when it serves domestic interests to do so the demand for property rights comes from those who value and stand to gain from multilateral action property rights are supplied by international agreements that specify resource access and use assign costs and benefits including outlining the size and duration of compensating transfer payments and determining who will pay and who will receive them four factors raise the transaction costs of assigning property rights i scientific uncertainty regarding mitigation benefits and costs ii varying preferences and perceptions across heterogeneous populations iii asymmetric information and iv the extent of compliance and new entry these factors are used to examine the role of transaction costs in the establishment and allocation of property rights to provide globally valued national parks implement the convention on the international trade in endangered species of wild fauna and flora execute the montreal protocol to manage emissions that damage the stratospheric ozone layer set limits on harvest of highly migratory ocean fish stocks and control greenhouse gas emissions jel d23 p14 q22 q51 q54 q58

effects of constrained supply and price contracts on agricultural cooperatives planning strategies depend in part on the supply flow structure of a supply chain in food supply chains many firms are constrained by raw material supply e g vegetables and milk this paper first examines the economic consequences of constrained supply in agricultural cooperatives secondly it deals with the effects of adding price contracts to the current cooperative contract this model combines an inventory policy approach and a monte carlo simulation to take into account price uncertainty we illustrate our results using the case of a dairy cooperative c 2008 elsevier b v all rights reserved

returns to scale generated from uncertainty and complementarity abstract a choice theoretic model of capital production which generates u shaped long run average cost curves is presented increasing returns to scale are not caused by indivisibilities and decreasing returns to scale by a fixed factor uncertainty and complementarity lead to increasing returns in durability which leads to the decline in long run average costs production generates an integrated capital system comprising capital components each component is complementarity with the others and uncertainty with respect to component durability exists diminishing returns occur because capital services must be extracted through time and the time cost of deferred consumption eventually dominates the increasing returns

r d cooperation between firms a perceived transaction cost perspective transaction cost is considered as an explanatory variable for the choice between markets and various organizational arrangements for performing some predefined tasks such as engaging in private r d with respect to r d cooperation between firms we show that the perception of high transaction cost is related to certain characteristics of the firm and to the type of r d task we also show a relationship between the perception of transaction cost and the perceived success of the cooperation the analysis sheds light on various determinants of transaction costs

community versus market a note on corporate villages we return to the literature on collective villages and reexamine its central arguments in doing so we focus on an institution for allocating land that we call the rule as claimed by its advocates the rule secures land allocations that result in outcomes differing from those that would be achieved by markets the outcomes are not constrained to be efficient but the economic costs paid fail to secure the attainment of guarantees of subsistence greater equality or a greater sense of community resulting from the elimination of envy however in the face of high levels of risk the form of collective property rights embodied in the rule may create what we call communities of mis fortune in which no one can envy others gains or losses resulting from the random shocks of nature

environmental determinants of cost sharing abstract multiple cost sharing rules often coexist in seemingly identical environments we use shared irrigation costs as a context for examining the extent to which the structural environment explains cost sharing rule selection we find that environmental factors affecting irrigation costs and benefits as well as those determining irrigator distribution along the ditch have impressive explanatory power these results present some of the first formal empirical analysis of the manner in which structural features influence the actual cost sharing choices of economic agents moreover our results also suggest that previous axiomatic studies are reflective of real world cost sharing behavior

can good projects succeed in bad communities abstract the lack of social capital is frequently given as an explanation for why communities perform poorly yet to what extent can project design compensate for these community specific constraints i address this question by examining determinants of collective success in a costly problem for developing economies the upkeep of local public goods it is often difficult to obtain reliable outcome measures for comparable collective tasks across well defined communities in order to address this i conducted detailed surveys of community maintained infrastructure projects in northern pakistan the findings show that while community specific constraints do matter their impact can be mitigated by better project design inequality social fragmentation and lack of leadership in the community do have adverse consequences but these can be overcome by changes in project complexity community participation and return distribution moreover the evidence suggests that better design matters even more for communities with poorer attributes the use of community fixed effects and instrumental variables offers a significant improvement in empirical identification over previous studies these results provide evidence that appropriate design can enable projects to succeed even in bad communities

economic implications of inalienable and communal native title the case of wik forestry in australia abstract wik people on cape york peninsula in queensland australia have been granted native title over 18 500 km2 of customary land this was seen as a coup by wik people and it appears that they have a relatively unencumbered right to manage a large proportion of this land including for commercial timber production however economists of the private property rights tradition are of the view that the inalienable and communal nature of native title presents an obstacle to economic development in remote indigenous communities that will prevent the land from being managed in an economically and ecologically efficient manner and preclude the land from realising its full market value this negative view has risen to prominence in australia and privatisation of the indigenous land estate is being debated in this paper it is argued that privatising australian native title land will not suddenly provide conditions where indigenous enterprise will flourish nor will it necessarily maximise resource use efficiency where cultural and ecological values are important for the wik and other indigenous australians factors such as their low western education and skill levels poor health limited financial resources complex social environment the remoteness and low productive capacity of their land and the high importance of non pecuniary land management objectives are more important impediments to economic development than the broad type of property right held over natural resources

product selection for newsboy type products with normal demands and unequal costs abstract in this paper we consider two newsboy type products with unequal prices and costs both demands are independent and follow normal distributions with unknown parameters and we study the product selection problem which deals with comparing two products and selecting the one that has a significantly higher profitability in which the profitability is defined to the probability of achieving a target profit under the optimal ordering policy the statistical hypothesis testing methodology is performed to tackle this selection problem critical value of the test is calculated to determine the selection decision sample size required for a designated power and confidence level is also investigated an application example on comparing english teaching magazines is presented to illustrate the practicality of our approach

inventory control with an exponential utility criterion a base stock policy is shown to be optimal when a dynamic version of the news vendor model is optimized with respect to an exponential utility criterion

estimating economies of scope and scale under price risk and risk aversion this study uses duality to examine the effects of excluding output price risk and risk aversion on cost structures using data for kansas wheat and beef cow operations a dual risk model was used to determine multi product and product specific scale economies and economies of scope estimates for these measures were compared with those obtained from a deterministic model the results show that product specific scale economies are over estimated and economies of scope and multi product scale economies are under estimated for the deterministic model compared to the risk model

strategic integration of hospitals and physicians a striking development in the healthcare market place has been the formation of strategic relationships between hospitals and physicians hospital physician integration appears to be a response to rapidly expanding managed care health insurance we examine whether integration lead to efficiency gains from transaction cost economies thereby allowing providers to offer managed care insurance plans lower prices or whether integration is really a strategy to improve bargaining power and thereby increase prices we find that integration has little effect on efficiency but is associated with an increase in prices especially when the integrated organization is exclusive and occurs in less competitive markets

common property in agricultural production the determination of the property rights structure in agriculture and particularly the role of common property may be viewed as a problem in industrial organization the analysis will focus on the determination of the efficient property rights structure in a multi output technology characterized by economies of scale and scope but also including outputs for which technology is essentially linear given an appropriate analysis of transactions costs common property may be shown to be an efficient alternative to systems based purely on small scale or large scale private property

governance and uncertainty the trade off between administrative control and commitment this study elaborates upon the motives for initiating equity based collaborations vs acquisition of another firm already having a desired technology we characterize both minority direct investments and joint ventures as options to defer either internal development or acquisition of a target firm in domains where learning about growth opportunities dominates investment activity this incremental mode of governance economizes on the cost of committing resources to a technology with an uncertain value using a sample of 402 transactions in the biotechnology industry we find strong support for the theoretical model the findings suggest that the cost of commitment in the face of technological uncertainty may offset the administrative benefits of hierarchical governance 1998 john wiley sons ltd

trilemma dilemma and global players abstract this paper investigates the debate between the mundellian trilemma and the dilemma overall the global financial cycle magnifies the binding effect of financial openness on monetary policy autonomy and reduces the effectiveness of the floating exchange rate regime in isolating the domestic economy against financial pressures i provide empirical evidence that the trilemma does not morph into a dilemma furthermore the sensitivity to the global financial cycle depends more on the presence of global investors and global players than on the fluctuations of these financial forces

linking advertising and quantity decisions in the single period inventory model abstract the single period problem spp also known as the newsboy or news vendor problem is to find the order quantity which maximizes the expected profit in a single period probabilistic demand framework interest in the spp remains unabated and many extensions to it have been proposed in the last decade an important aspect of the spp is the effect of advertising on sales in this paper we extend the spp to a case in which advertising leads to increases in sales we assume that the mean demand is increasing and concave in advertising expenditure and address three cases of demand variance as a function of advertising expenditure 1 demand has constant variance 2 demand has constant coefficient of variation and 3 demand has an increasing coefficient of variation we deal with two objectives a maximizing the expected profit and b maximizing the probability of achieving a target profit we provide closed or near closed form solutions to the problem under uniform exponential and normal demand distributions we illustrate the results using numerical examples and provide some insights into the effect of advertising

choosing rules to govern the commons a model with evidence from mexico abstract i develop a model to assess distributive rules observed in field data on 48 mexican farmer managed irrigation systems households decide whether to contribute maintenance effort the aggregate amount of which affects the level of output distributive rules with congruence between the sharing of collective costs and benefits elicit the highest level of effort empirically however incongruent rules dominate the surveyed systems i argue that transaction costs offset some efficiency benefits of congruent rules i estimate a model of rule choice inequality and the age of the water users association strongly increase the likelihood that a system chooses proportional water allocation

egalitarianism subsistence provision and work incentives in china s agricultural collectives abstract collective agriculture in china failed because its reward system was too egalitarian to provide sufficient work incentives to the peasants a popular view attributes egalitarianism to the difficulties of monitoring work effort in a team an alternative view presented here argues that a the egalitarian provision of basic foodgrains to peasant households reflected more generally the consumption problem of the peasantry who were impoverished by the state s policy of extracting agriculture and b as a remuneration system time rates better served the work and income sharing purpose than piece rates and therefore better protected households with high dependency ratios egalitarianism survives under the household farming system

supply response under proportional profits taxation a striking result in the theory of the competitive firm under certainty is the proposition that a proportional profits tax with full offsets for losses will have no impact on optimal output this result does not apply under uncertainty it is shown that under constant or increasing returns to scale a proportional profits tax will yield an unambiguous expansion in output the same result is shown to hold for the more general rank dependent expected utility rdeu model

reordering strategies for a newsboy type product abstract this paper considers the very common situation in which a single period newsboy type product may be ordered or produced twice during a season period we show that the explicit consideration of this reorder opportunity makes the newsboy problem very much richer the specific version considered in this paper allows a reorder during mid season after the early season demand has been observed and this reorder arrives after a given lead time the demand distributions during the various portions of the season may have very general distribution forms also the late season and early season demands may be dependent solution procedures are developed to find the best way to exploit this reorder opportunity and our numerical solutions indicate that this reorder opportunity can improve profits considerably as long as the product s profit margin is not very high other real world variations of this two order newsboy problem are briefly discussed

technology and oliver williamson s transaction cost economics abstract oliver williamson has greatly contributed to refining neoclassical economics by incorporating transaction costs and internal organization yet his new institutional economics too easily dismisses the role of technology in doing so he has replaced the determinism of technological production efficiencies with the determinism of transaction cost efficiencies a review shows that williamson s new institutionalism has evolved through three stages in terms of the focus of his analysis and his views of transactions throughout this evolution however his proposed solutions to organizational failures have actually continued to rely heavily upon technology

transaction costs risk aversion and the choice of contractual arrangements publisher summary this chapter discusses transaction costs risk aversion and the choice of contractual arrangements every transaction involves a contract and the transactions conducted in the marketplace entail outright or partial transfers of property rights among individual contracting parties the contractual arrangements through which these transfers are negotiated are several and varied the chapter presents a theory that states that economic efficiency is the same under various land tenure arrangements subject to the constraint of private property rights although transaction costs exist in the real world the theory enables the understanding of much of the farming behavior however the presence of a variety of contractual arrangements under the same constraint of competition poses the question of the choice of these arrangements if a firm can increase efficiency in production by employing productive resources of more than one resource owner a contract to combine the resources will be obtained the formation of the contract involves partial transfers of property rights in one form or another such as leasing hiring or mortgaging

cost functions under production uncertainty we characterize the cost functions which would be consistent with expected utility maximization when production is uncertain it is not generally possible assuming risk aversion to use only expected output as the constraint in a cost minimization problem in some leading cases cost functions consistent with expected utility maximization are particularly useful because they are devoid of risk preferences

is farming a constant cost industry measurement of cost size relationships for farming has long been an important area of research in agricultural economics much of this research has had a farm management and production economics orientation and firm industry interdependencies have often been ignored research results stemming from such an orientation should be interpreted with care when used for policy purposes pecuniary externalities may be of greater importance than indicated by research to this time a suggestion is made for treating induced technical change as comparable to a pecuniary externality questions are raised on both theoretical and empirical grounds whether farming in the united states should be considered a constant cost industry for policy purposes

manufacturer buyer coordination for newsvendor type products with two ordering opportunities and partial backorders abstract in a recent paper weng z k 2004 coordinating order quantities between the manufacturer and the buyer a generalized newsvendor model european journal of operational research 156 148 161 a newsvendor type coordination model was developed for a single manufacturer single buyer channel with two ordering opportunities this paper further extends the model to the case where the excess demand after the first order is partially backlogged and both parties share the manufacturing setup cost of the second order if happened we show that the decentralized system would perform best if the manufacturer covers utterly the second production setup cost which is opposite to that obtained in weng 2004 another extension in the present paper is that in the centralized system the second order decision is made by the buyer based on the channel s benefit rather than based on the buyer s benefit as in weng 2004 it is proved that the expected profit of the system in our paper is always larger than that in weng 2004 in order to maximize the expected profit of the channel two coordinated policies are proposed to achieve perfect coordination a two part tariff policy for the special case that the buyer pays all the manufacturing setup cost and a revised revenue sharing contract for the case that two parties share the manufacturing setup cost

determinants of collective action on the local commons a model with evidence from mexico i develop a model of cooperation in small irrigation systems i give conditions under which an equalizing redistribution of wealth increases the level of equilibrium cooperation but also show that some redistributions that increase inequality can also increase cooperation the distributive rule a combination of arrangements for maintenance cost sharing and water allocation also affects the cooperation level i estimate statistical models of cooperation for three maintenance indicators using field data from a study of mexican irrigation societies social heterogeneity and landholding inequality are significantly associated with lower maintenance distributive rules that allocate water proportionally to landholding size likewise reduce maintenance

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

risk sensitive dynamic market share attraction games we present partial results showing that risk sensitive oligopolists would spend less on advertising than would their risk neutral counterparts the model is an infinite horizon stochastic game in which each firm s goodwill is a random function of both its own and its competitors current and past advertising expenditures single period firm profits have a market share attraction form each firm seeks to maximize its expected exponential utility of the sum of discounted profits we analyze the impact that risk sensitivity and other parameters have on equilibrium advertising strategies by exploiting the special structure of the stochastic game model journal of economic literatureclassification number c73

contracting problems and regulation the case of the fishery the inefficiencies of common property fisheries are of continuing concern to economists the early work by scott gordon 1954 and anthony scott 1955 outlined the problem and later studies by james crutchfield and giulio pontecorvo 1969 and frederick bell 1972 provided empirical estimates of the losses that result those studies were followed by the dynamic models of colin clark 1976 and james quirk and vernon smith 1970 of optimal harvest rates and the use of corrective taxes or quotas to achieve them but in spite of a large and growing literature and the persuasiveness of the outlined efficiency criteria most fisheries retain common property aspects with overcapitalization and excessive labor input why those conditions persist and the failure of the regulatory response to them are the issues addressed in this paper we examine a number of fisheries but focus on the texas shrimp industry which is one of the nation s most valuable fisheries for a single species and which shares the common property characteristics observed elsewhere it is considered overcapitalized and catch per unit of effort is falling 2 examination of the fishery reveals the many margins along which rent dissipation occurs and the nature of the regulations necessary for controlling fishing effort to avoid those losses the regulatory environment in texas is complicated by conflict within the fishery between inshore and offshore fishermen the latter assert that bay shrimping reduces the number of shrimp that successfully migrate to the gulf the inshore fishery is highlighted by another issue the recent resettlement of some 30 45 000 vietnamese refugees including many fishermen along the texas coast marine advisory service paul starr their entry has been met by hostility and violence from existing shrimpers who recognize that they are in an environment characterized by the absence of property rights bay shrimpers have lobbied the texas legislature for broad limits on new entrants yet ironically the sale of additional boats by individual shrimpers to the vietnamese has facilitated entry of the refugees into the fishery regulations in the texas shrimp and other fisheries are incomplete leaving many options for rent dissipation uncontrolled because of high contracting costs among fishermen and political factors that mold government actions contracting costs are high among heterogeneous fishermen who vary principally with regard to fishing skill 3 montana state university and texas a m university respectively we benefitted from comments by terry anderson raymond c battalio gardner brown oscar burt micha gisser wade griffin john r moroney anthony d scott peter temin and participants in workshops at texas a m university and the university of washington research assistance was provided by scott barnhart and phil mizzi funding was provided by sea grant texas a m university throughout this paper we use the terms common property and open access interchangeably here the terms describe a situation where no property rights group or individual exist s for the resource 2catch per unit of effort in the inshore texas gulf and federal gulf waters is presented for 1963 77 by w l griffin c g tydlacka and w e grant they show catch per unit of effort generally falling in inshore and offshore waters while catch per unit of effort fluctuates from year to year it falls from approximately 360 kg shrimp per unit of effort to 220 kg from 1963 to 1977 the common property nature of the fishery is reflected in the following statistics since 1975 the number of vessels has grown by 23 percent nelson swartz for fish houses the record of entry is similar between 1970 a d 1977 the number of firms grew from 259 to 287 though during that period many left the industry as others entered the number of fish houses was calculated from license data supplied by the texas parks and wildlife department the record of entry by fish houses suggests that monopsony as discussed by colin clark and gordon munro is absent in the fishery 3there may be minor differences in labor leisure choices and capital but our statistical evidence and discussions with fishermen indicate that catch variations are largely due to skill government regulations in the texas bays restrict capital and our empirical evidence shows boats to be relatively homogeneous

water allocation by social choice rules the case of sequential rules abstract this paper considers the problem of allocating shares of irrigation water to different agricultural agents with single peaked preferences with respect to their own shares we define two different sequential allocation rules that respect the asymmetry between the agents and maintain the properties of pareto efficiency and strategy proofness and we design a specific algorithm to apply these rules the results of the empirical application of these rules for the case of an irrigated area located in the ebro basin spain show that the designed sequential rules are able to substantially improve the efficiency of the currently applied proportional rule in context of severe scarcity of water and or high administrative water prices

india s trilemma financial liberalisation exchange rates and monetary policy1 a key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates interest rates and capital account openness the trilemma this study calculates a trilemma index for india and investigates its evolution over time we find that financial integration has increased markedly after the mid 2000s with corresponding limitations on monetary independence mi and exchange rate stability es in addition we empirically confirm that a rise in one trilemma variable is traded off with a drop in the weighted sum of the other two i e the trilemma configuration is binding in india finally we consider the implications of changes in the trilemma index for macroeconomic outcomes we find that greater mi systemically contributes to lower inflation so the twin goals of es and capital account openness may create policy dilemmas in particular economic environments es is associated with less inflation volatility suggesting that there may be secondary benefits channelled through import and commodity prices in these relationships however changes in international reserves are not statistically significant suggesting that foreign exchange market intervention has not mitigated the trilemma trade off in india

the evolution of social norms in common property resource use the problem of extracting commonly owned renewable resources is examined within an evolutionary game theoretic framework it is shown that cooperative behavior guided by norms of restraint and punishment may be stable in a well defined sense against invasion by narrowly self interested behavior the resource stock dynamics are integrated with the evolutionary game dynamics effects of changes in prices technology and social cohesion on extraction behavior and the long run stock are analyzed when threshold values of the parameters are crossed social norms can break down leading generally to the lowering of the long run stock and possibly to its extinction copyright 1996 by american economic association

management response to the demands of global fresh fruit markets rewarding harvesters with financial incentives abstract competition in global fresh fruit markets is now much more intense than a decade ago producers and exporters face an increasing number of quality requirements and regulations that are costly and challenge established practices paying harvesters by the amount they harvest and trying to control quality with sanctions based on a field study this article discusses how lemon producers in northern argentina are responding to these challenges why some have responded only by introducing non contractual innovations while others by rewarding harvesters for careful performance to insure fruit quality the findings elucidate arguments about the instrumentality of transaction costs on the choice of both managerial practices and forms of remunerating labourers it also illustrates that added quality demands of foreign markets eased the task of harvesters but had a varying effect on labourers income

theoretical isolation and explanatory progress transaction cost economics and the dynamics of dispute two related goals are pursued first the development of and debates around oliver williamson s version of transaction cost economics are organised in terms of an emerging metatheoretical framework it proposes looking at economic theorising and its changes in terms of rival theoretical isolations which are often responses to challenging explanatory questions as a side product williamson s strategy of theorising is portrayed second using transaction cost economics as an illustration and as a source of inspiration the paper amends and refines the earlier framework of theoretical isolation by incorporating notions of explaining and explained items notions of progress in questions as well as increased causal penetration and increased degree of unification and the notion of the dynamics of dispute copyright 2004 oxford university press