the transactions cost approach to vertical integration an empirical examination the transactions cost approach developed by coase and williamson provides a coherent framework for investigating the determinants of vertical integration in different industries empirical implications are developed and then tested using a cross section of firm level data pooled over different time periods the results tend to confirm hypotheses regarding the internal costs of management small numbers bargaining problems and the notion of the firm as suited to adaptive sequential decision making under conditions of uncertainty it rhile there exists an extensive literature on vy theoretical rationales for vertical integration surprisingly little is known about the importance of the different theories the empirical literature includes two types of studies case studies test the applicability of a particular theory to a single firm or industry e g armour and teece 1980 perry 1980 or monteverde and teece 1982a they are susceptible to bias in their choice of industry and the generality of their results cannot be established another category of studies examines a broad base of industries to determine the relationship between vertical integration and such variables as industry concentration average firm size and sales growth e g adelman 1955 gort 1962 and tucker and wilder 1977 the link between these studies and theories of vertical integration is generally left unclear 2 this study will adopt the strategy of investigating a broad base of industries but unlike earlier studies of this type will test empirical implications following from the transactions cost approach 3 this approach as developed by coase 1937 and williamson 1975 1979 provides a coherent framework for investigating determinants of vertical integration over different industries furthermore williamson has persuasively argued that transactions cost considerations underlie such prominent reasons for vertical integration as the elimination of monopoly distortions technical complementarities supply reliability and economies in the acquisition of information the transactions cost approach is summarized and implications are developed in the first section of this paper the implications are tested using firm level data pooled over time the empirical model is presented in the second section and the results are presented in the third section the model incorporates variables not included in previous studies of vertical integration such as measures of market risk and organizational structure the results tend to confirm hypotheses regarding internal costs of management small numbers bargaining problems and the notion of the firm as an institution suited to adaptive sequential decision making a summary of the results and conclusions are contained in the final section i the transactions cost approach arrow 1969 has defined transactions costs as the cost of organizing the economic system in attempting to translate this idea into a framework for explaining the organization of economic activity williamson and others have focused on the role of opportunism and the limited capability of individuals in processing information the choice of institutional alternative depends on minimizing the costs which arise in the presence of transaction specific investments and uncertainty while a wide variety of institutional alternatives exist a simple dichotomy is adopted here for the sake of tractability following coase transactions are classified according to whether they take place in the firm or across markets market alternatives become hazardous in recurring exchanges involving transaction specific capital and efficient information processing the firm then provides a received for publication november 21 1983 revision accepted for publication december 3 1984 rutgers university this paper is based on my dissertation i would like to thank my committee armen alchian harold demsetz david mayers fred weston and my chairman benjamin klein for their helpful comments recent versions of the paper also benefited from comments made by k chung d carlton d kaserman and anonymous referees i would also like to thank participants of the transactions cost workshop at the university of pennsylvania the usual disclaimer applies 1 recent summaries of the theoretical literature on vertical integration are in warren boulton 1978 and kaserman 1978 see levy 1981 1984 for discussion of this problem 3earlier studies by armour and teece 1980 and monteverde and teece 1982 a b have successfully employed the transactions cost approach to examine vertical integration in particular industries this study differs in that it adopts the transactions cost approach to test implications across industries

competitive storage rational expectations and short run food price determination this paper demonstrates that lags between retail and wholesale food prices can be explained by inventory behavior of retailers theoretical considerations indicate that the markup model should be modified to include a jorgenson type user cost variable which depends on expected future wholesale price the rational expectations hypothesis is used to derive price expectations the retail price specification therefore depends on the stochastic process generating expected wholesale price the econometric methodology employing both causality testing and nonlinear estimation is illustrated by estimating monthly price relationships for beef the results are consistent with the theory and indicate rejection of the markup model

the speed of the invisible hand abstract very little attention has been devoted to incorporating dynamic elements into empirical models of market structure and performance consequently there has been little progress in settling the issue of whether the market structure profits relationship is more than just a temporary phenomenon in this study an estimation equation is developed which allows for incomplete adjustment of past profits from expected future profits where expected profits depends on present and expected future changes in market structure the model is estimated pooling panel data across industries the findings indicate that adjustment to abnormal profits is relatively quick market share adjustments are non instantaneous and that inclusion of industry specific effects is important the results suggest that previous studies are susceptible to specification bias from omitted variables

on the relationship between aggregate merger activity and the stock market abstract this paper presents substantial evidence to show that the well documented correlation between aggregate merger activity and indices of share prices is unstable and thus of little predictive value further granger causality testing suggests that such correlations are spurious reflecting other more fundamental forces which jointly determine movements in both series

channel coordination and quantity discounts this paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees both the annual demand rate and the operating cost including the purchase ordering and inventory holding costs depend on the joint decision policy employed this paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination it is shown that the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination furthermore it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization the analyses of the general models are illustrated by specific analytical results obtained for a given demand function

exports foreign market structure and profitability in japanese and u s manufacturing this paper examines the influence of price d ecisions by foreign firms on export price decisions by domestic firms the theor etical analysis develops a general model which hypothesizes a positive relation between export price and foreign price assuming international product differenti ation this model further suggests that export price depends on foreign structur al traits as they determine foreign price the empirical analysis based on a cr oss section of sixty nine four digit manufacturing industries matched between th e united states and japan provided support for the hypothesis that foreign mark et structure and foreign pricing affect export pricing and thus the observed pri ce cost margin copyright 1986 by mit press

an economic analysis of shrimp farm expansion and mangrove conversion in thailand we analyzed the factors determining mangrove conversion by shrimp farmers in the coastal provinces of thailand between 1979 1996 the profit maximizing behavior of a shrimp farmer converting mangrove area under open access conditions is modeled aggregate mangrove clearing by all farmers in coastal areas is empirically estimated through a provincial level panel analysis the price of shrimp minimum wage distance from market ammonium phosphate price used for feed population growth gross provincial product and the density of shrimp farms influence mangrove clearing and shrimp farm expansion based on the analysis various policy options to control mangrove deforestation in thailand are reviewed

daily monetary policy shocks and new home sales abstract the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified the primary news for market participants is not what the fed just did but is instead new information about the fed s future intentions revisions in these anticipations show up instantaneously in long term mortgage rates home sales do not respond until much later this paper attributes this delay and hence much of the hump shaped response of economic activity to monetary policy to cross sectional heterogeneity in search times this framework allows one in principle to measure policy impacts at the daily frequency

compensation and productive efficiency in partnerships evidence from medical groups practice relatively little is known about the behavior and performance of firms organized as partnerships in this paper we attempt to fill that gap by developing and testing a model of the effect of alternative compensation arrangements on productive efficiency in medical group practices the technique employed is maximum likelihood production frontier estimation we provide a simple behavioral model of the determination of productive efficiency and a new interpretation of the economic measure of technical efficiency we derive a behavioral production function that relates production to individual responses to incentives and we indicate the impossibility of recovering the parameters of the production technology from observed behavior overall the empirical results indicate that incentives do affect productivity a larger number of members in a group decreases productivity while greater average experience leads to greater productivity

estimating the degree of market integration existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination this article proposes new measures of market integration defined directly in terms of a well known spatial price determination model and develops an econometric methodology for estimating these measures due to the intractability of the conditional density function of prices we use indirect inference to estimate the model parameters and market integration measures the methodology is illustrated with simulated data and is applied to soybean price data for the united states brazil and the eu copyright 2008 oxford university press

inter vivos transfers and intergenerational exchange the surge of interest in intergenerational transfers in the past decade has sparked a debate over the motivation for them are transfers given out of altruism or part of an exchange while each motive is probably at work to some extent we know little about whether one motive predominates the question is relevant for issues concerning public income redistribution and inequality in the family but despite its importance empirical evidence about motives is scarce because of limited data we investigate a new data set the national survey of families and households which remedies many of the shortcomings of other data sets containing private transfer information we find that empirical patterns for inter vivos transfers i e transfers between living persons are more consistent with exchange than altruism

the effect of financial liberalization on capital flight in african economies summary in this paper we assess the effects of financial liberalization on capital flight in african economies a portfolio model in which capital flight is one of the assets is estimated on a sample of nine african countries for 1970 91 the estimation results suggest that financial liberalization induces a reduction in capital flight after augmenting the model with submodels for the banking sector the government sector and the external sector we conduct simulation experiments involving an interest rate deregulation a decrease in reserve requirements and a change in exchange rate policy the simulation results show that capital flight is reduced by all the three financial liberalization measures the effects however are very small considering both the estimation and simulation results we conclude that financial liberalization policies are useful in attempts to reduce capital flight in african economies but per se the policies may not be the panacea

unobservable industry characteristics and the innovation concentration advertising maze evidence from an econometric study using panel data for manufacturing industries in the frg 1979 1986 in discussing the nexus between innovations and market structure it is often argued that industry characteristics called opportunities might play an important role as determinants of innovation and that simultaneity rather than one way causality prevails we consider a three equation model for innovation advertising and concentration based on pooled cross section time series data for 26 german manufacturing industries we estimate single equation models with and without fixed industry and or time effects to control for unobservable industry or time effects respectively and simultaneous equation systems including fixed effects and controlling for extreme cases outliers or not furthermore we use two different measures for innovations i e the percentage of shipments due to new products and the percentage of firms which classified themselves as innovators our results can be summarized as follows 1 the firm size has no significant effect on innovation one can therefore not conclude from this data set that large firms are more innovative than small ones 2 unobservable industry effects do matter 3 the treatment of outliers does matter 4 simultaneity does matter 5 the way innovations are measured does matter 6 different stories could be told based on the results of the systems of interdependent equations estimated

the interrelationships between u s and foreign equity market yields tests of granger causality this study examines the interrelationships between yields on the u s and several foreign market portfolios over the 1980 89 period tests of granger causality are used to investigate the effects of uni directional causality bi directional causality and contemporaneous adjustment in the determination of market rates of return the results indicate that international equity market returns are largely contemporaneously determined and the significance of contemporaneous effects varied over time uni directional and bi directional causality were found to be relatively weak

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

some two echelon supply chain games improving from deterministic symmetric information to stochastic asymmetric information models abstract many supply chain and inventory models use the following two echelon symmetric information and deterministic gaming structure a manufacturer wholesales a product to a retailer who in turn retails it to the consumer the retail market demand varies with the retail price according to a deterministic demand function that is known to both the manufacturer and the retailer it is then assumed that the players the manufacturer and the retailer arrive at their pricing and batch size decisions through a stackelberg game or a fixed markup percentage game the first part of this paper reveals many implausible effects of demand curve forms on the behavior of these gaming models however we do not merely conclude that two echelon gaming results obtained via assuming one convenient demand curve form can often become invalid under other demand curve forms more importantly we argue in the second part of the paper that the various implausible effects revealed here suggest a different but more fundamental conclusion the assumed non cooperative games are themselves flawed because gaming is meaningless and logically circular in a deterministic and symmetrical information system we then present an introductory illustration on how the introduction of stochasticity and information a symmetry leads to more plausible two echelon supply chain gaming models together the two parts demonstrate the necessity and practicality of using a stochastic and asymmetric information instead of the prevalent deterministic symmetric information approach in many supply chain models

female labor supply in japan implications of the informal sector for labor force participation and hours of work this paper extends previous work on labor supply in japan by treating the simultaneous labor force participation and hours of work decisions for japanese wives both employees and family workers it estimates a trichotomous participation model for a sample from the tokyo metropolitan area and then estimates hours and wage equations and aggregate labor supply elasticities the empirical results generally confirm the economic model s theoretical predictions although the estimated aggregate wage and income elasticities for employees are somewhat higher than previous estimates for the u s they are of the same order of magnitude however the level of the husband s income has an unexpected positive effect on the annual hours that employees work and the elasticities estimated for family workers are usually large

trade integration and business cycle convergence is the relation robust across time and space in this paper we investigate the relationship between trade intensity and the business cycle correlation using a panel data set taken from 24 countries over the period 1959 2003 most previous studies did not account for the possibility that the business cycle correlation may be influenced by unobservable country pair specific effects our estimates using both fixed and random effects methodologies suggest that trade intensity and the business cycle correlation are positively related to one another however detailed investigation shows that this relationship exists mainly for the european countries

structural adjustment policies and productive efficiency of socialist enterprises abstract the paper uses panel data from a five percent stratified random sample of yugoslav industrial enterprises to test several hypotheses about the determinants of productive efficiency the estimating procedure selects the production function best supported by the data and allows for industry specific production function parameters as well as from firm specific fixed or random effects the instrumental variable estimates suggest that productive efficiency is unaffected by the four structural policy variables whose effect we examine the extent of export orientation joint venture status divisionalization of the firm and the firm s market share

government and growth cross sectional evidence economic theory suggests that government contributes to total economic growth in two ways positively through the provision of pigovian public goods and services and negatively through the inefficient provision of such goods and services and the distortionary effects attendant with their provision this paper develops a model that differentiates the two effects and empirically tests the model for a sample of forty eight countries evidence suggests that the net effect of government on growth is positive but that the negative effects are not insignificant though growth in government output contributes to total economic growth at the margin this is approximately offset by distortionary effects attendant with increases in the relative size of government

a time series analysis of unemployment and health the case of birth outcomes in new york city abstract the paper presents an aggregate time series analysis of unemployment and infant health that improves on previous work in several ways first the data is monthly as opposed to annual second the measure of health the percentage of low birthweight births and the health inputs are rare specific third because a pregnancy is limited to at most ten months we can specify a lag length with a greater degree of confidence we find no cyclical variation in the percentage of low birthweight births the results are insensitive to changes in lag length health inputs and functional form

an approach for developing an optimal discount pricing policy this paper addresses the problem of why and how a seller should develop a discount pricing structure even if such a pricing structure does not alter ultimate demand the situation modeled is most appropriate where the seller s product does not represent a major component of the buyer s final product where the demand for the product is derived or where the price is only one of many factors considered in making a purchase decision a model of buyer reaction to any given pricing scheme is developed to show that there exists a unified pricing policy which motivates the buyer to increase its ordering quantity per order thereby reducing the joint buyer and seller ordering and holding costs as a result the seller is able to reduce its costs while leaving the buyer no worse off and often better off the model is extended to handle variable ordering and shipping costs and situations where the seller faces numerous groups of buyers each having different ordering policies finally a case study is presented explicitly showing how the proposed pricing policy can be applied to the situation of a large seller selling to a number of different buyer groups

vertical relationships and competition in retail gasoline markets empirical evidence from contract changes in southern california comment this study examines how much if any of the differences in retail gasoline prices between markets is attributable to differences in the composition of vertical contract types at gasoline stations in each market the purchase of the independent retail gasoline chain thrifty by arco provides a unique opportunity to examine the effects of changes in different vertical contract types on local retail prices this event caused sharp changes in the market share of i fully vertically integrated stations and ii independent stations differentially affecting local markets in the los angeles and san diego metropolitan areas using unique and detailed station level data this study examines how these sharp changes affected local retail prices the detailed data and the research design based on the thrifty station conversions allow for credible estimation of the effects of the market share of independent retailers and vertically integrated retailers on local market prices controlling for any omitted factors at the station level and the city level over time results for the los angeles and san diego metropolitan areas indicate that a decrease in the market share of independent stations has a significant positive impact on local retail price however a change in the market share of refiner owned and operated branded stations does not have a significant impact on local market price these results have important implications as policy makers consider the regulation of vertical contracts as a means to increase competition in gasoline markets the research design and detailed data also allow for inference on the underlying nature of retail gasoline competition

risk crop choice and savings evidence from tanzania rural households engaged in agricultural activities face considerable risks in their income process these income risks are especially important if they result in consumption fluctuations this is likely if insurance and credit markets are absent one possible strategy for household is to take up low risk activities even if they imply lower returns such response cannot be viewed independently from the other options available to households to reduce consumption fluctuations this paper focuses on the importance of liquid asset formation for risk taking behaviour by households an intertemporal model of consumption under liquidity constraints is developed in which households can choose between income activities with different returns and riskiness it shows that if liquid asset holdings are large providing a buffer for consumption shortfalls then households will be more willing to take up high risk activities evidence based on survey data from shinyanga district tanzania is presented consistent with this prediction this abstract was borrowed from another version of this item

sticky prices inventories and market power in wholesale gasoline markets a model with costly adjustment of production and costly inventories implies that wholesale gasoline prices will respond with a lag to crude oil cost shocks unlike explanations that rely upon menu costs imperfect information or long term buyer seller relationships this model predicts that futures prices for gasoline will adjust incompletely to crude oil price shocks that occur close to the expiration date of the futures contract we test and confirm this implication examining wholesale price responses in 188 gasoline markets we also find that firms with market power adjust prices more slowly than do competitive firms consistent with the model

searching for price parity in the european whitefish market the purpose of this paper is to test for price parity across different species of whitefish in the european union price parity is defined by a system of cointegrated prices and would be evidence of a single european market for whitefish whitefish are of interest because eu fishers receive the largest share of their income from these fish species notwithstanding the single market policy of the eu by establishing national and regional associations to stabilize or increase the local price of fish fishers operate as if the european market is made up of separate submarkets with price being determined largely within each submarket if whitefish markets were price cointegrated such associations would be largely ineffective in that case what are required are regulations that encompass the european market

measuring hospital efficiency with frontier cost functions this paper uses a stochastic frontier multiproduct cost function to derive hospital specific measures of inefficiency the cost function includes direct measures of illness severity output quality and patient outcomes to reduce the likelihood that the inefficiency estimates are capturing unmeasured differences in hospital outputs models are estimated using data from the aha annual survey medicare hospital cost reports and medpar we explicitly test the assumption of output endogeneity and reject it in this application we conclude that inefficiency accounts for 13 6 percent of total hospital costs this estimate is robust with respect to model specification and approaches to pooling data across distinct groups of hospitals

productive efficiency of public enterprises a macroeconomic analysis based on cross section estimation of a neoclassical production function over the past decade the role of public enterprise in the economic development process has been a subject of active debate using cross section estimates of a neoclassical production function incorporating vakue addition of the parasatal sector as a variable supplementary to the factors and capital it is shown onthe basis of macroeconomic data for the periods 1970 81and 1970 85 that hypothesis derived fromm the propely rights bureaucracy and x inefficiency cannot be rejected

female labor force participation in developing and developed countries consideration of the informal sector t he steady increase in the labor force participation of married women in the united states over the last few decades has stimulated considerable interest in the economic analysis of a woman s decision to work pioneering work by mincer 1962 and cain 1966 has served as a theoretical and empirical foundation for numerous studies of female labor force participation this research typically treats a woman s current labor force status measured as a dummy variable for the individual and as a rate for the population as a measure of labor supply which depends upon economic and demographic characteristics such as female earnings male earnings non earnings income schooling work experience age number of children and so on notable examples are bowen and finegan 1969 cogan 1975 1978 gronau 1973 heckman 1974 1980 and schultz 1980 while the associated theoretical models and statistical techniques have been refined considerably especially by lewis 1972 ben porath 1973 and heckman 1974 1979 the coefficients estimated using u s data have remained reasonably robust also there is substantial agreement among micro level and aggregate results see cain 1966 and bowen and finegan 1969 for comparisons as this body of literature has grown the economic models developed within it have been implemented to analyze the labor force behavior of women in other countries however there is no consistent international pattern in the behavioral trends of the female labor force perhaps the most notable difference in the economic opportunities available to women in many other countries is that they may work in the informal sector of the labor market women may be considered economically active and may be counted as being in the labor force as they produce goods at home for market sale work on the family farm or work in a small family run business the most convenient means of categorizing workers as being in the informal sector is by their employment status following jaffe and azumi 1960 we assume that women reported as self employed or as family workers are engaged in the informal sector of the labor force almost all women in the u s labor force work as employees only 6 6 worked as self employed or family workers in 1978 given japan s advanced economic development a surprisingly large fraction 38 4 in 1978 of its female labor force comprises self employed and family workers clearly in the united states and countries with a similar distribution of the labor force by employment status the labor force participation decision may be treated as the choice to work or not to work however if individuals regard the decision to enter the labor force as an employee as being distinct from the choice to enter the labor force as a family worker then economic models of labor force participation which treat these choices as identical will incorporate a specification bias the labor force participation decision may differ between these two sectors for several reasons first the wage offers may differ by sector second while entering the informal sector may be virtually frictionless there may be fixed costs among them commuting time and child care associated with working in the formal sector third family workers may face more flexible working schedules than paid employees the latter group may be subject to contractual working hours in order to treat the labor force decisions in coiuntines with significant informal sectors this received for publication march 16 1981 revision accepted for publication september 15 1982 rutgers university this paper is a revision of work begun with my doctoral dissertation i would like to thank h gregg lewis and t dudley wallace for their suggestions and hideo okamoto for providing the data set i would also like to thank david crawford toshiaki tachibanaki two anonymous referees and the participants of the columbia labor workshop the japan economic seminar and the yale labor and population workshop for their comments remaining errors are my own this research was supported by a postdoctoral fellowship from the national institutes of health additional funding was provided by the william and flora hewlett foundation grant to the yale economic demography program i statistical abstract of the u s and japan statistical yearbook

an integrated inventory model for a single vendor and multiple buyers with ordering cost reduction abstract forming strategic alliances and utilizing modern information technologies have been the two most important ways for firms to gain such competitive advantages as lower logistics costs and secure customers loyalty in this paper we consider an integrated inventory system where a single vendor purchases and processes raw materials in order to deliver finished items to multiple buyers the vendor and all buyers are willing to invest in reducing the ordering cost e g establishing an electronic data interchange based inventory control system in order to decrease their joint total cost the amount of investment determines the planned ordering cost and hence affects their replenishment decisions one major managerial implication from this ordering cost reduction is that the efforts to streamline and speedup transactions via the application of information technologies may result in a higher degree of coordination and automation among allied trading parties an analytical model is developed to derive the optimal investment amount and replenishment decisions for both vendor and buyers the exponential ordering cost function is then applied to our general model and a numerical analysis is performed to provide interesting insights of the model numerical results show that the vendor and all the buyers can benefit directly from substantial cost savings by this ordering cost reduction investment

two principles for the next round or how to bring developing countries in from the cold t he november 1999 wto ministerial meeting in seattle was expected to usher in a new round of negotiations the ninth in a series that began in geneva in 1947 although wto members proved unable to launch a round efforts will continue in 2000 to develop a negotiating agenda in this paper i want to reinforce the call of the wto s director general mr moore for the next set of negotiations to be a development round basic notions of equity and a sense of fair play require that the next round reflect developing country interests and concerns more than was the case in earlier rounds seattle demonstrated that without greater balance the success of future negotiations will be imperiled dissatisfaction by developing countries regarding the extent to which their interests were reflected was a factor leading to the failure of the ministerial meeting the stakes are high there is a growing gap between the developed and the less developed countries highlighted in this year s world development report world bank 1999 the international community is doing too little to narrow this gap aid per capita to the developing world has fallen by nearly a third in the 1990s too often cuts in aid budgets are accompanied by the slogan trade not aid exhortations for the developing world to participate fully in the global marketplace and lectures about how government subsidies and protectionism distort prices and impede growth all too often there is a hollow ring to these exhortations as developing countries take steps to open their economies and

foreign aid and domestic savings in less developed countries some tests for causality abstract the negative correlation between foreign aid and domestic savings rates in less developed countries is an accepted fact in the existing literature the direction of causality however remains a subject of dispute in this paper we use time series data to investigate causal relationships we conclude that causal relationships are not universal and it is suggested that in those countries where they do hold the direction of causality may depend upon the proportions of aid from bilateral and multilateral sources

competitive and cooperative inventory policies in a two stage supply chain we investigate a two stage serial supply chain with stationary stochastic demand and fixed transportation times inventory holding costs are charged at each stage and each stage may incur a consumer backorder penalty cost e g the upper stage the supplier may dislike backorders at the lower stage the retailer we consider two games in both the stages independently choose base stock policies to minimize their costs the games differ in how the firms track their inventory levels in one the firms are committed to tracking echelon inventory in the other they track local inventory we compare the policies chosen under this competitive regime to those selected to minimize total supply chain costs i e the optimal solution we show that the games nearly always have a unique nash equilibrium and it differs from the optimal solution hence competition reduces efficiency furthermore the two games equilibria are different so the tracking method influences strategic behavior we show that the system optimal solution can be achieved as a nash equilibrium using simple linear transfer payments the value of cooperation is context specific in some settings competition increases total cost by only a fraction of a percent whereas in other settings the cost increase is enormous we also discuss stackelberg equilibria

discount pricing decisions in distribution channels with price sensitive demand abstract in this paper we evaluate the effectiveness of quantity discounts and volume discounts as coordination mechanisms in distribution channels with demand that is price sensitive we consider a single vendor single retailer distribution channel demand for the product arises only at the retailer the demand faced by the retailer is assumed to be deterministic but price elastic the retailer in turn buys the product from the vendor the vendor and the retailer act independently and rationally each maximizing their own respective profit the equilibrium point that specifies the vendor s and buyer s inventory and pricing policy is determined by the solution to a stackelberg game we consider the cases when quantity discount and volume discount respectively are offered we develop methods to determine the optimal discount policy for these cases we then consider the case where both volume and quantity discounts are offered simultaneously and develop a method to determine the optimal simultaneous discount offer the relative performance of the alternative discount schemes is then evaluated through a numerical study the results of the study demonstrate that the effectiveness of volume discount as a coordination mechanism is higher when the sensitivity of demand to price changes is higher the effectiveness of quantity discount on the other hand is higher with lower price sensitivity of demand finally the results also demonstrate that perfect coordination is achieved when volume and quantity discounts are offered simultaneously

market definition in antitrust analysis a regression based approach alleged violations of either sherman 2 s antimonopoly strictures or clayton 7 s proscriptions against anticompetitive mergers necessarily involve a particular product and must occur in a particular place that is the plaintiff in either a 2 or 7 suit must define a relevant market within which the violation alleged has occurred even in the most mundane antitrust analysis however market definition is rarely readily accomplished and unaccompanied by a series of caveats and the possibility of the opposing parties in an antitrust suit failing to contest each other s proffered definition is virtually nil 2 because economists from

an empirical study of the timing and spacing of childbearing the author presents evidence concerning the economic determinants of the timing and spacing of births in the united states with particular reference to the effects of shifts in a womans wage profile and shifts in her husbands earnings profile the data are from the young womens cohort of the national longitudinal surveys of labor market experience and concern 314 white women whose husbands were present during the period 1968 1978 the author develops an empirical model of the probability that a woman will give birth in a given time period the results suggest that an increase in the womans income tends to lead to a postponement of childbearing and a tendency toward closer spacing of births an upward shift in husbands income involves a shift away from very close or very wide spacing toward intermediate spacing

property rights and deforestation in the brazilian amazon this paper focuses on the impact of property rights insecurity on deforestation in the brazilian legal amazon deforestation is considered as a risk management strategy property rights insecurity reduces the present value of forests and fosters forest conversion into agricultural and pasture lands moreover deforestation is the consequence of strategic interactions between landowners and squatters landowners clear the forest preventively in order to assert the productive use of land and to reduce the expropriation risk squatters invade land plots clear the forest and may afterwards gain official recognition with formal property titles a particular attention is paid to the measure of land property rights insecurity in the brazilian context it is assumed that property rights insecurity has a multidimensional character taken into account by the number of homicides related to land conflicts and expropriation procedures principal component analysis allows synthesising such information an econometric model of deforestation is estimated on a panel dataset on the 1988 2000 period and the nine states of the brazilian legal amazon the hypothesis that insecure land property rights contribute to higher rates of deforestation is not rejected when the simultaneity bias between insecure property rights and deforestation is addressed this result questions the modality of the brazilian land reform that considers forested areas as unproductive and thus open for expropriation procedures

why should trade negotiators negotiate about in recent years there have been growing demands to make trade liberalization contingent on adoption of common labor and environmental standards the straightforward economic answer is that this makes little sense neither the gains from trade nor the gains from appropriate regulation are compromised if other countries impose standards that are weaker than your own it is possible to offer second bet economic rationales for harmonization but these are empirically unconvincing the only serious argument in favor or regulation is political that regulation which is in the national interest may not be politically feasible unless other countries do the same

the labour supply behaviour of self employed solo practice physicians this paper investigates the empirical labour supply behaviour of self employed solo practice physicians the specification of the empirical labour supply equation is based on a model of constrained utility maximizing behaviour that recognizes the physician makes work leisure choices based on an endogenous shadow wage and faces a nonlinear budget constraint the findings suggest that the typical self employed solo practice male physician operates on the upward sloping portion of the labour supply curve and is relatively unresponsive to changes in marginal hourly medical practice earnings and non practice income

wage offers and full time and part time employment by british women strong evidence in support of the hypothesis that women receive lower wage offers in part time jobs than in full time jobs is provided by estimation of wage offer functions for british women which control for self selection into these two types of jobs analysis of married women s employment decisions indicates that the difference in a woman s expected wage offers between full time and part time employment is an important determinant of whether she works full time while husband s income mainly affects the decision of whether to work in addition it appears that women who work despite having observed characteristics that discourage employment are much more likely to work part time

a stackelberg game and its improvement in a vmi system with a manufacturing vendor vendor managed inventory vmi is an inventory management strategy to let a vendor manage his retailers inventories which makes the vendor have the opportunity to obtain some inventory and market related information of his retailers this paper discusses how the vendor can take advantage of this information for increasing his own profit by using a stackelberg game in a vmi system the vendor here is a manufacturer who procures raw materials to produce a finished product and supplies it at the same wholesale price to multiple retailers the retailers then sell the product in independent markets at retail prices solution procedures are developed to find the stackelberg game equilibrium that each enterprise is not willing to deviate from for maximizing his own profit the equilibrium makes the manufacturer benefited and the retailers profits maximized the equilibrium can then be improved for further benefiting the manufacturer and his retailers if the retailers are willing to cooperate with the manufacturer by using a cooperative contract finally a numerical example and the corresponding sensitivity analysis are given to illustrate that 1 the manufacturer can benefit from his leadership and monopolize the added profit of the vmi system in some cases 2 the manufacturer can further improve his own profit and then the retailers profits by the cooperative contract as compared to the stackelberg equilibrium 3 market and raw material related parameters have significant influence on every enterprise s net profit

the effects of product price uncertainty on the owner managed firm theory and evidence in this paper we extend the theory of the owner managed firm to incorporate product price uncertainty and we present an empirical test of the model s predictions under product price uncertainty the trade off between leisure and profit faced by an owner manager is combined with the trade off between surety and risk bearing faced by an entrepreneur the firm s owner bears the uninsurable and undiversifiable risk about profit caused by product price uncertainty and as manager supplies the firm a unique labor factor the model predicts that the substitution effect of an increase in risk on the quantity supplied by the firm is negative the income effect of risk reinforces the substitution effect if the entrepreneur s labor supply has a positive wage elasticity but runs counter to and could dominate the substitution effect if the wage elasticity of labor supply for the entrepreneur is sufficiently negative unlike previous research on price uncertainty and the firm this paper presents an empirical test of the model s predictions using data on physicians in solo practice our empirical analysis indicates that although wage elasticities of labor supply for the physician entrepreneurs are negative greater risk leads to a reduction in output these results suggest that the substitution effect is dominant in determining the response to product price uncertainty for the owner managed firms in our sample frank knight 12 gave prominence to the risk bearing role of the entrepreneur who as residual claimant bears the risk associated with a firm s revenue tibor scitovsky 21 later emphasized a different aspect of entrepreneurial activity the trade off confronted by an ownermanager between consumption of leisure and pursuit of profit both models of the entrepreneur are relevant to predicting the behavior of an owner managed firm operating in a risky environment the entrepreneur in such a firm must choose between consuming leisure and supplying labor which provides an uncertain return the random residual of revenue net of payments to other factors

endogeneity testing in a supply and demand framework the powers of wu hausman endogeneity tests are related to the normalization d ecision in estimating demand equations power is not invariant to the choice bet ween quantity and price as the dependent variable a theoretical result due to n akamura and nakamura 1984 is used to explore the dependence of power on parame ters of the supply and demand system the theoretical result is corroborated wit h a monte carlo experiment the power results are used to analyze the u s deman d for poultry meat wherein price but not quantity is found to be predetermined copyright 1986 by mit press

market integration in us gasoline markets this paper analyses the degree of market integration in the retail gasoline markets in the united states after it was completely deregulated in 1981 the monthly average prices of unleaded regular gasoline excluding taxes from january 1983 to december of 1998 for five us petroleum administration defense districts were considered in the analysis there is evidence of a high degree of market integration in the gasoline markets as evidenced by the engel and granger and johansen cointegration tests but perfect market integration is rejected in all but a few cases

exogeneity tests of market boundaries applied to petroleum products us antitrust law makes market definition and the calculation of marketshare statistics an integral part of the determination of the anticompetitive impact of a merger because markets frequently overlap however market definition is rarely an easy task a statistical test that can be used as an aid in defining markets is proposed here time series techniques are used to test if price in one region is exogenous to the process that determines price in another the rejection of exogeneity can be an indication that the two regions are economically linked and thus may belong to a common geographic market the test is applied to petroleumproduct prices from various regions of the united states time series techniques have long been appreciated by macroeconomists the uses to which they have been put range from testing for the exogeneity of variables used in the construction of macroeconomic models sims 1972 for example to discovering empirical regularities in macroeconomic data without imposing a priori structure on the observations ashenfelter and card 1982 for example in contrast these techniques have not been so

the implications of wto and gats for the banking sector in africa in this paper we assess the implications of the world trade organisation wto and the general agreement on trade in services gats for the banking sector in african signatory countries with emphasis on the free trade element we first review the relevant provisions of the gats for banking services and the main exemptions held by african countries we then analyse the main efficiency indicators for a sample of the top banks in 18 african economies for the period 1997 1998 we also use univariate statistics to analyse the dispersion of the key bank pricing and liquidity indicators in these economies for the period 1994 1998 the main findings imply that although full liberalization implicit in the wto and gats protocols will lead to a substantial shake up of the african banking industry however provided they have an appropriate regulatory framework and allow sufficient lead time most african countries have little to fear from liberalization at least in terms of the continuing existence of a locally owned banking industry and indeed these countries could reasonably expect to be able to restructure and compete at the very least in african wide or regional markets

causality between export growth and industrial development empirial evidence from the nics abstract this paper investigates the causal relationship between export growth and industrial development in eight newly industrializing countries nics results of sims causality test show that for most of the nics there is a strong bidirectional causality between the growth of exports and industrial development these findings support the export led growth strategy in that expansion in exports not only promote the growth of national income but also lead to structural transformation of the developing countries

cooperation between multiple news vendors with transshipments we study a situation with n retailers each of them facing a news vendor problem i e selling to customers over a finite period of time product with a short life cycle such as fashion groups of retailers might improve their expected joint profit by coordinating their orders followed by transshipments after demand realization is known we analyze these situations by defining a cooperative game called a general news vendor game for such a situation with n retailers we concentrate on whether it makes sense to cooperate by studying properties of general news vendor games our main result states that general news vendor games have non empty cores

a stochastic and asymmetric information framework for a dominant manufacturer supply chain abstract consider a dominant manufacturer wholesaling a product to a retailer who in turn retails it to the consumers at p unit the retail market demand volume varies with p according to a given demand curve this basic system is commonly modeled as a manufacturer stackelberg ms game under a deterministic and symmetric information det sym i framework we first explain the logical flaws of this framework which are i the dominant manufacturer leader will have a lower profit than the retailer under an iso elastic demand curve ii in some situations the system s correct solution can be hyper sensitive to minute changes in the demand curve iii applying volume discounting while keeping the original ms profit maximizing objective leads to an implausible degenerate solution in which the manufacturer has dictatorial power over the channel we then present an extension of the stochastic and asymmetric information sto asy i framework proposed in lau and lau lau a lau h s 2005 some two echelon supply chain games improving from deterministic symmetric information to stochastic asymmetric information models european journal of operational research 161 1 203 223 coupled with the notion that a profit maximizing dominant manufacturer may implement not only ms but also pm i e using a manufacturer imposed maximum retail price we show that this new framework resolves all the logical flaws stated above along the way we also present a procedure for the dominant manufacturer to design a profit maximizing volume discount scheme using stochastic and asymmetric demand information using our sto asy i framework to resolve the logical flaws of the det sym i framework also reveals two noteworthy points i the attractiveness of the perfectly legal but overlooked channel coordination mechanism pm and ii volume discounting as a means for the dominant manufacturer to benefit from information known only to the retailer

nash game model for optimizing market strategies configuration of platform products in a vendor managed inventory vmi supply chain for a product family this paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies platform product configuration and inventory policies in a vmi vendor managed inventory supply chain the manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers multiple types of products are substitutable each other to end customers the manufacturer makes its decision on raw materials procurement platform product configuration product replenishment policies to retailers with vmi price discount rate and advertising investment to maximize its profit retailers in turn consider the optimal local advertising investments and retail prices to maximize their profits this problem is modeled as a dual simultaneous non cooperative game as a dual nash game model with two sub games one is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers this paper combines analytical iterative and ga genetic algorithm methods to develop a game solution algorithm to find the nash equilibrium a numerical example is conducted to test the proposed model and algorithm and gain managerial implications

exports growth and causality in ldcs abstract using akaike s optimal lag criterion in a granger causality test the causal relationship between export growth and economic growth and vice versa is re examined for 20 countries it is argued that earlier analyses which ignore optimal lags in granger or sims causality tests suffer from certain shortcomings which are overcome by the present approach the results suggest some support for the export promotion hypothesis especially in the case of well known nics and thus differ from previous applications of granger test which did not adopt an optimum lag criterion and which showed no causality from export growth to economic growth in such cases however they are inconclusive in evaluating competing hypotheses

a one vendor multi buyer integrated inventory model abstract we consider a one vendor multi buyer integrated inventory model the vendor seeks to minimize his total annual cost subject to the maximum costs which buyers are prepared to incur in order to implement this model the vendor only needs to know buyer s annual demand and previous order frequency which can be inferred from buyer s past ordering behavior we find the optimal solution for the one vendor one buyer case and present a heuristic approach for the one vendor multi buyer case

macroeconomic determinants of remittances evidence from romania given the globalization of the labour market and the promotion of free movement for work young people are looking for employment opportunities from at least two perspectives professional careers

the effect of regulation on nonuniform electricity price schedules in the united states abstract an empirical examination of factors that influence a public utility s choice regarding the degree of nonuniformity in its price schedules is reported in this paper in particular the results support the sherman visscher theory that tighter rate of return regulation encourages a monopolist to adopt more rapidly declining rate structures some types of regulatory authority have flatter rate structures than others suggesting that the rate of return induced distortion may be countered by direct regulatory oversight somewhat surprisingly scale economics influence rate structures only weakly casting doubt on the traditional claim that average price declines because of decreasing average cost

competition in interrelated markets an empirical study abstract this paper studies competition in small concentrated and interrelated markets our data set consists of price information from 486 driving schools in 235 local markets in sweden which gives a large sample to test hypotheses on how market structure influences competition the results show that the price in a market is lower if prices in nearby markets are low and the distances to them are short as suggested in models of spatial competition moreover we find that prices in closely located markets are interdependent it is also shown that prices are increasing in firm concentration within a market as most theories of oligopoly predict

organizational choices and performance in distribution systems this article studies the performance of distribution networks as the result of a range of organizational choices the analytical part of the article surveys the vast literature devoted to franchising and dual distribution from this framework several testable propositions linking network performance to organizational choices are derived three complementary criteria of performance are taken into account the internationalization rate the expansion rate and the market share this article provides evidence for the simultaneity between these performance criteria analytically related as indicators of the network commercial performance thus the econometrical model is defined as a system of simultaneous equations free of endogeneity regarding the explanatory variables the estimations on recent french data obtained using the three stage least squares method provide robust results and show that the type of distribution network the number of company owned outlets in the network the type of sector and the

price relationships in the petroleum market an analysis of crude oil and refined product prices in this paper the relationships between crude oil and refined product prices are investigated in a multivariate framework this allows us to test several partly competing assumptions of earlier studies in particular we find that the crude oil price is weakly exogenous and that the spread is constant in some but not all relationships moreover the multivariate analysis shows that the link between crude oil prices and several refined product prices implies market integration for these refined products this is an example of supply driven market integration and producers will change the output mix in response to price changes

time series representations of economic variables and alternative models of the labour market accepting the hypothesis that the time series facts of the aggregate labour market may be summarized by the linear autoregressive and moving average representations of wages prices unemployment and interest rates implies that a useful theory ought to lead to predictions about these representations following this approach this paper first catalogues many of the time series facts about the aggregate labour market and then compares them against alternative models of the labour market based on the intertemporal substitution and staggered contract hypotheses

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

tests of market models heteroskedasticity or misspecification abstract this paper investigates the nature and the incidence of heteroskedasticity and misspecification in the market models by utilizing tests that are generally applicable the results show that heteroskedasticity appears more frequently than misspecification even though both are serious problems the evidence also indicates that the use of a quadratic market model or equally weighted market returns may lead to a smaller percentage of heteroskedastic cases but that in general this advantage has to be offset against an increase in the occurrence of specification errors small firms and january returns are also observed to produce a higher incidence of both heteroskedasticity and misspecification

motives for private income transfers private income transfers are becoming increasingly recognized as a key aspect of the u s economy the majority of private income transfers occur inter vivos i e between living persons but very little is known about this type of transfer behavior this paper tests alternative hypotheses concerning motivation for inter vivos transfers two motives are considered altruism and exchange evidence presented here casts doubt on the altruistic model of transfer behavior observed patterns for inter vivos transfers are more consistent with exchange related motives this finding has important implications for the effects of public transfer programs on the distribution of economic well being

spatial price competition a semiparametric approach we investigate the nature of price competition among firms that produce differentiated products and compete in markets that are limited in extent we propose an instrumental variables series estimator for the matrix of cross price response coefficients demonstrate that our estimator is consistent and derive its asymptotic distribution our semiparametric approach allows us to discriminate among models of global competition in which all products compete with all others and local competition in which products compete only with their neighbors we apply our semiparametric estimator to data from u s wholesale gasoline markets and find that in this market competition is highly localized

indirect competition with spatial product differentiation although two markets may appear to be separate sometimes one firm participates in both of them that firm provides a link between the two markets such a straddling firm transmits indirect competition from each market to the other since its actions reflect competitive conditions in both markets in a model of spatial product differentiation the author shows that indirect competition may make a market perform significantly better than the number of firms would indicate moreover total consumer surplus increases if two previously distinct markets are linked by a straddler finally the author considers implications of these results for antitrust analysis copyright 1989 by blackwell publishing ltd

developing countries in the world trading system from gatt 1947 to the third ministerial meeting of wto 1999 the debate on the role of openness to international flows of goods technology and capital in the development process is as old as economics after all adam smith praised the virtues of openness and competition in the wealth of nations a moment s reflection should be enough to convince anyone that the sources of economic development are essentially three the growth in inputs of production improvements in the efficiency of allocation of inputs across economic activities and innovation that creates new products new uses for existing products and brings about increases in the efficiency of use of inputs

efficient share tenancy contracts under risk the case of two rice growing villages in thailand abstract two categories of thai sharecroppers are observed to be efficient those under high poverty and high risk and those in a long term relation of gift exchange with their landlord econometric estimates show that use of variable factors by these sharecroppers is insignificantly different from that by owner operators and significantly higher than that by generic sharecroppers interpretations for this behavior are provided by models of sharecropping under safety first and of repeated contracts with gift exchange

gender discrimination and compensating differentials in sweden the determinants of the unexplained component of the male female wage difference in sweden are examined the hypothesis that there is a compensating wage differential associated with undesirable job charcteristics is tested hedonic wage equations are estimated using data collected in the 1981 swedish level of living survey the estimation takes into consideration possible sample selection bias due to the non randomness takes of employment and the potential endogeneity of job choice variables in wage offer equations overall the analysis indicates that compensating wage differentials are not a major determinant of the male female wage difference in sweden

payment source and the cost of hospital care evidence from a multiproduct cost function with multiple payers abstract this study investigates the capacity of hospitals to vary the intensity of their services based on patients expected sources of payment while the concept of price discrimination by hospitals based on payer generosity cost shifting has been discussed extensively the notion that hospitals can adjust payer specific marginal costs to reflect differences in reimbursement policies has not been studied in depth to examine this issue this analysis employs a multiproduct cost function with hospital outputs defined as admissions by payment source controlling for the distribution and severity of illness casemix for each payer marginal costs of casemix adjusted discharges are obtained and compared for medicare medicaid private payers and a residual category that includes uncompensated care we find that indeed payer specific marginal costs generally reflect payer generosity

demand for farm output in a complete system of demand functions demand interrelationships for farm outputs that are theoretically consistent with consumer demand and marketing group behavior provide important linkages between retail and farm prices a conceptual model based on reduced form specifications for retail and farm prices is formulated and applied empirically to a set of eight disaggregated food commodities this approach circumvents the need for retail quantities which are frequently unavailable for disaggregated food commodities the results are consistent with theory and generally indicate significant substitution between farm and marketing inputs except for poultry derived demand elasticities are at least 40 larger compared to those derived assuming fixed proportions

market structure and the role of consumer information in the physician services industry an empirical test abstract this paper applies panzar and rosse s 1987 econometric test of market structure to examine two long debated issues what is the market structure for physician services do more physicians in a market area raise the search cost of obtaining consumer information and increase prices satterthwaite 1979 1985 for primary care and general and family practice physicians the monopolistically competitive model prevailed over the competing hypotheses monopoly perfect competition and monopolistic competition characterized by consumer informational confusion although less conclusive there is some evidence to support the monopolistically competitive model for surgeons and the consumer informational confusion model for internal medicine physicians

the interpretation of test statistics this paper investigates what can and cannot be learned from specification testing it focuses on the determinants of non centrality parameters which in turn determine the power of test statistics when the sample is large and the truth is close to the null hypothesis the squared cosine of a certain angle which also has a simple interpretation in terms of artificial regressions turns out to play a crucial role tests of regression models are divided into two types tests against regression directions and tests against non regression directions a number of useful specification tests of each type are discussed with emphasis on their power when the truth is not an alternative against which they were constructed l interpretation des tests statistiques ce memoire examine ce qu on peut et ne peut pas

game theoretic pricing and ordering decisions with partial lost sales in two stage supply chains abstract few papers have studied the optimal pricing and ordering with partial lost sales from a two stage game theoretic perspective this paper considers a supply chain game with a buyer and a seller through pricing and ordering models with partial lost sales we evaluate the optimal solutions for the buyer and the seller and provide insights into both the deterministic and stochastic demand models we also propose search algorithms to obtain the global optimum when convexity and concavity conditions are not satisfied

on market integration and liberalisation method and application to ethiopia the article suggests further improvements in the methodology to analyse market integration it provides corrections to and methodological extensions of recent work in this journal it also presents a way of applying market integration techniques to the analysis of shocks such as market liberalisation and war the method is applied to the effects of liberalisation and the end of the civil war on food markets in ethiopia the conclusion is that liberalisation had important effects on the long run and short run integration of food markets