employer initiated job terminations recent interest in pension reform and mandatory retirement has led to a considerable body of literature on job separation the analysis has however focused primarily on the employee s reasons for and reaction to job separation much less attention has been paid to the theoretical factors influencing the employer s decision to terminate a person s employment much of the debate centers on questions concerning the productivity of older workers representatives of the elderly not only argue that members of their constituency want to continue to work but that they are highly productive the implication is that if employers terminate older workers it must reflect employer discrimination against equally productive but older workers becker 1 however argues that the case for discrimination is weak competitive markets would lead to nondiscriminating firms driving out the discriminatory firms furthermore since employers will someday become old they are less likely to discriminate on the basis of age than other factors such as race or sex the implication is that if older workers are being terminated this must reflect that their productivities have dropped below their wages this paper explores the relationship between productivities and compensation paid by a nondiscriminatory employer who terminates older workers the analysis yields answers to the following questions at what point will a firm decide to terminate the employment of a person embodying the employer s investment in specific training if productivities vary with age how does the productivity of an older terminated worker compare with that of a younger worker have older workers passed their peak productivity years

optimal job assignment and investment in specific human capital an application to professional teachers the purpose of this paper is to analyse the impact of asymmetric information upon labour market decisions first in the face of uncertainty concerning person specific information self selection employment contracts develop which induce sorting within the labour market second we show the existence of a smaller share in investment in specific human capital for those who accept the self selection contract relative to those who refuse such contracts thus the earnings of those who accept such contracts are less responsive to changes in specific human capital than the earnings of those who refuse these contracts third we applied the model to the market for professional teachers in british columbia canada the results of the empirical tests were shown to be consistent with the hypotheses proposed in addition once we controlled for the level of and the distribution to human capital the public independent earnings differential fell from 64 3 to 23 9

the nonparametric risk adjusted efficiency measurement an application to taiwan s major rural financial intermediaries in this article a nonparametric approach is used to incorporate risk into the measurement of technical efficiencies of the major financial intermediaries in rural taiwan risk is treated as a joint but undesirable output given the fact that various regulatory actions may prevent its free disposability three risk indicators nonperforming loans allowance for loan losses and risky assets are employed alternatively in the empirical work results suggest that all three risk constraints are binding regulations on controlling risky assets and loan loss reserves are effective but more burdensome than those on controlling loan quality

teacher testing teacher education and teacher characteristics school officials and legislators have long been concerned with the possibility of declining teacher quality see e g sean corcoran et al 2002 beginning in the 1960 s states began testing prospective teachers in a direct effort to ensure that teachers meet minimum standards for basic skills and subject knowledge by 1999 41 states required applicants to pass some sort of standardized certification test as a theoretical matter however the impact of such testing is ambiguous test requirements may establish a minimum achievement standard as their proponents hope on the other hand testing and other certification requirements may deter some qualified applicants from teaching if these requirements are perceived as costly this is the barriers to entry story first noted in the occupational licensing context by milton f friedman and simon kuznets 1945 another concern with job applicant testing is the possibility of an adverse impact on minority candidates who usually do worse on tests see david autor and david scarborough 2003 for a recent study paralleling increased state involvement in teacher certification is the increase in teachers educational credentials especially in public schools for example in 1971 over two thirds of public school teachers had a b a while only 27 percent had a master s or education specialist s degree by 1991 however over half of public school teachers 52 6 percent had a master s or education specialist s degree in contrast the proportion of private school teachers

job change patterns and the wages of young men this study uses data from the national longitudinal survey of youth to distinguish empirically between mover stayer search good and experience good models of job mobility we estimate wage models in which the pattern of overall job mobility affects both the level and tenure slope of the log wage path after controlling for the correlation between mobility patterns and time constant person and job specific unobservables we find that workers who undergo persistent mobility have lower log wage paths than less mobile workers this finding is consistent with models in which job mobility is driven by time varying unobservables such as experience good models where changes in perceived match quality cause turnover

economic efficiency and downside risk this article investigates the impact of downside risk on cost and revenue efficiency re for a sample of farms downside risk or loss below a certain level of return is a concern regardless of producer risk preferences and thus a suitable measure of risk to use downside risk was measured as the weighted summation of net farm income below the amount needed for unpaid labour during the previous 10 years cost and re were estimated using traditional input and output measures and then re estimated including each farm s downside risk comparisons were made between the efficient farms with and without downside risk and the average for all farms as expected downside risk plays an important role in explaining farm inefficiency failure to account for downside risk overstates inefficiency and can lead to unrealistic expectations in potential efficiency improvements

adverse selection without single crossing monotone solutions abstract the single crossing assumption simplifies the analysis of screening models as local incentive compatibility becomes sufficient for global incentive compatibility if single crossing is violated global incentive compatibility constraints have to be taken into account this paper studies monotone solutions in a screening model that allows a one time violation of single crossing the results show that local and non local incentive constraints distort the solution in opposite directions therefore the optimal decision might involve distortions above as well as below the first best decision furthermore the well known no distortion at the top property does not necessarily hold the results show that the decision can even be distorted above first best for all types sufficient conditions for existence strict monotonicity and continuity of the solution are presented a new necessary condition satisfied by such solutions is found an algorithm based on this condition can calculate continuous and strictly monotone solutions

multidimensional incentive compatibility and mechanism design abstract incentive compatibility conditions are characterized in general for problems in which several goods are to be allocated and agents types are multidimensional two questions of monopoly pricing under multidimensional uncertainty are then analyzed first we find the optimal nonlinear pricing scheme when the monopolist knows only the distribution of an arbitrarily parameterized family of demand curves and second we solve for the optimal bundling policy for a multiproduct monopolist

an equilibrium analysis of wage productivity gaps we develop a model in which each firm chooses a hiring standard as well as a wage schedule and an application fee we then characterize the set of nash equilibria and establish necessary and sufficient conditions for the existence of equilibrium if the distribution of productivities within each ability type is gaussian workers who pass the test will be paid more than the value of their marginal product while workers who fail the test will receive a wage net of the application fee below the value of their marginal product

specific human capital and sorting mechanisms in labor markets three major avenues of research on employment contracts which incorporate asymmetric information have been pursued first researchers have considered contracts in which the supply of employee effort is costly to monitor 3 8 9 12 second the allocation of labor has been examined when innate person specific characteristics are unobservable 4 5 14 15 third employment contracts have been designed when economic agents are uncertain about the state of nature concerning the worker s marginal product and the employee s reservation wage 6 7 this research agenda has provided an elaborate array of models which yield employment contracts that reduce the distortionary effects of asymmetric information however these models have two major short comings first under uncertainty concerning personspecific information employers have an incentive to screen employees the existing literature has analyzed two distinct screening mechanisms guasch and weiss 4 5 consider screening through wages while white 15 has considered screening through specific human capital however each mechanism has been analyzed in isolation the present paper combines these screening mechanisms and examines the impact of each upon the optimal employment contract second although the existing literature on employment contracts offers a general framework for analysis it is not directly amenable to empirical verification the present paper rectifies these short comings by developing a model which incorporates both screening mechanisms under asymmetric information and thereby provides a model conducive to empirical verification in our analysis three major simplifying assumptions are made first because we assume employees have no choice regarding the effort they supply we abstract from the agency problem discussed in the literature cited above second we assume employees differ in their innate person specific characteristics the latter is assumed to be observed by

are rising earnings profiles a forced saving mechanism this paper tests the hypothesis that rising earnings profiles are a mechanism by which individuals engage in forced saving it does this by examining the cross sectional relationship between overwithholding on income tax payments behavior that is consistent with a preference for forced saving and the slopes of age earnings profiles the forced saving hypothesis receives support from earnings regression estimates individuals who receive tax refunds are on earnings profiles that are significantly steeper and have significantly lower intercepts copyright 1995 by royal economic society

multiproduct nonlinear pricing with multiple taste characteristics we analyze optimal multiproduct nonlinear prices in the case where consumer tastes are characterized by more than one taste parameter we present conditions under which the optimal nonlinear price schedule can be computed by finding optimal price schedules separately for each market if so they are unbundled if not they are bundled bundling is weakly superior to unbundling and is strictly superior when a condition that we term uniform ordering of demand curves is weakly violated with uniform ordering of demand curves multiproduct nonlinear prices have the same features as single product ones without this condition it is easy to construct examples that contradict some well known results from the standard literature in mechanism design

a study of bank efficiency taking into account risk preferences abstract i use the stochastic cost frontier approach to investigate efficiency of banks operating in the third federal reserve district accounting for the quality and riskiness of bank output in addition to the mean and mode of the conditional distribution of the one sided error term i calculate confidence intervals for the inefficiency measures based on the conditional distribution the results indicate that third district banks are operating at cost efficient output levels and product mixes but are not efficiently using their inputs the second part of the article relates the inefficiency measures to several correlates

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

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

an antitrust analysis of bundled loyalty discounts abstract consider a monopolist in one market that faces competition in a second market bundled loyalty discounts in which customers receive a price break on the monopoly good in exchange for making all purchases from the monopolist have ambiguous welfare effects such discounts should not always be treated as a form of predatory pricing in some settings they act as tie in sales existing tests for whether such discounts violate competition laws do not track changes in consumer surplus or total surplus we apply a new test to an illustrative example based on smithkline that assumes the tied market has homogeneous goods if the tied market is characterized by hotelling competition bundling by the monopolist causes the rival firm to reduce its price in numerical examples we find that this can deter entry or induce exit

deferred compensation vs efficiency wages an experimental test of effort provision and self selection abstract we compare the ability of two common compensation structures efficiency wages ew and deferred compensation dc at inducing effort from workers we test predictions on effort provision and elicit preferences between the two wage structures the theoretical predictions on effort are generally well supported although we find over provision of effort with ew in consequence although the theoretical prediction that dc is more cost effective is supported the difference is small we also find a marked preference for ew that cannot be explained by risk aversion the two effects combine to largely dissipate any advantage that dc may have in inducing effort

explaining organizational diseconomies of scale in r d agency problems and the allocation of engineering talent ideas and effort by firm size the comparative efficiency and success of small firms in r d remains largely unexplained this paper empirically examines scale diseconomies in offering employment contracts as an explanation for diseconomies of scale in r d the paper argues that small firms more efficiently resolve the severe agency problems of hidden information and hidden behavior in r d small firms more efficiently offer contracts that reward performance than large firms and consequently small firms attract and retain engineers with higher ability and skill further small firms through these more performance contingent contracts induce higher levels of effort than large firms the study tests and generally confirms these hypotheses using data collected from 912 current and former engineering employees of two large high technology companies

opportunistic behavior by firms in implicit pension contracts several studies have established that under the most common form of pension coverage benefits accrue disproportionately near the end of a worker s career such backloading establishes a penalty for early quitting but may also create an incentive for opportunistic firm behavior because benefits generally are a function of highest earnings when nominal earnings are expected to rise an employer can reduce pension liabilities by discharging workers prior to retirement this paper uses the national longitudinal survey of mature men to test whether such actions by employers are systematic we estimate that pension covered workers with mean losses are less likely to be discharged unexpected increases in pension losses due to increases in inflation however raise the risk of discharge we find no evidence that the minimum vesting standards of the employees retirement income security act reduces the likelihood of discharge for older workers who previously were not vested these results are consistent with an implicit pension contract under which employer compliance is enforced by reputation

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

customized bundle pricing for information goods a nonlinear mixed integer programming approach this paper proposes using nonlinear mixed integer programming to solve the customized bundle pricing problem in which consumers are allowed to choose up to n goods out of a larger pool of j goods prior work has suggested that this mechanism has attractive features for the pricing of information and other low marginal cost goods although closed form solutions exist for this problem for certain cases of consumer preferences many interesting scenarios cannot be easily handled without a numerical solution procedure in this paper we investigate the efficiency gains created by customized bundling over the alternatives of pure bundling or individual sale under different assumptions about customer preferences and firm cost structure as well as the potential loss of efficiency caused by pricing with incomplete information about consumer reservation values our analysis suggests that customized bundling enhances sellers profits and enhances welfare when consumers do not place positive values on all goods and that this consumer characteristic is much more important than the shape of the valuation distribution in determining the optimal pricing scheme we also find that customized bundling outperforms both pure bundling and individual sale in the presence of incomplete information and that customized bundling still outperforms other simpler pricing schemes even when exact consumer valuations are not known ex ante

asset allocation in a downside risk framework 1991 asset allocation in a downside risk framework financial analysts journal vol 47 no 5 pp 28 40

minimum wage effects on employment substitution and the teenage labor supply evidence from personnel data using personnel data from a large us retail firm i examine the firm s response to the 1996 federal minimum wage increase compulsory increases in average wages had negative but statistically insignificant effects on overall employment however increases in the relative wages of teenagers led to significant increases in the relative employment of teenagers especially younger and more affluent teenagers further analysis suggests a pattern consistent with noncompetitive models where the legislation affected mainly the wages of teenagers and so was only moderately binding it led both to higher teenage labor market participation and to higher absolute employment of teenagers

var seductive but dangerous value at risk var has gained rapid acceptance as a valuable approach to risk management not all vars are equal however a study of var techniques used by dealers and end users reveals that var calculations differ significantly for the same portfolio vars are extremely dependent on parameters data assumptions and methodology calculation of eight common vars for three hypothetical portfolios demonstrates the potentially seductive but dangerous nature of any single approach to risk management in sum although var and other quantitative techniques are necessary aspects of an effective risk management program they are not sufficient to control risk

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

optimal minimum wage legislation in this paper we present a model in which minimum wage legislation may be pareto optimal this arises because a higher wage would be preferred to the market clearing wage by demanders for and suppliers of labour even though unemployment is induced and minimum wage legislation is needed to support the preferred equilibrium consider a labour market where the quality of labour depends positively on the wage offered if labour quality is highly sensitive to wage increases effective unit labour cost will fall as the wage rises this would lead the representative firm to prefer paying an above market clearing wage and to ration job slots such an effect has been studied when quality depends on an individual firm s wage offer see for example weiss i980 or stiglitz i974 suppose however that labour quality depended not on any individual firm s wage offer but on the average market wage if firms were atomistic each invidual firm would have an incentive to undercut the optimal above marketclearing wage trying to get the quality benefits of high average wages while paying lower wages itself the high wage solution would not be viable legislation fixing minimum wages might be required to support the preferred equilibrium quality might depend on average market wages when workers must decide whether or not to enter a labour market before they can sample and obtain specific job offers migration into labour markets for example rural to urban migration in less developed countries provides one example as the decision to migrate and therefore the quality of the labour pool will depend on some average of expected wage offers the decision over which profession to enter at the beginning of the educational process provides another example of course imperfect information plays a key role here it is assumed that both firms and workers have imperfect information about the suitability of individual workers for jobs both before and to a lesser extent after employment has begun this lack of information will rule out both profitable selfselection mechanisms and wages strictly proportional to output so that firms will care about the quality of the labour pool the non optimality of market clearing prices which will be demonstrated makes this paper similar to a number of papers on the implications of adverse selection in labour and product markets one may mention two excellent papers on screening in labour markets by guasch and weiss i980 i98i this paper builds on some of the results in those papers stiglitz and weiss i98i show how credit rationing may arise from a similar type of argument wilson

uniform two part tariffs and below marginal cost prices disneyland revisited i introduction since cournot s 1838 classic analysis of a hard nosed sole proprietor of a spring pricing water to maximize his profit the simple theory of monopoly has concluded that a monopolist will produce the level of output at which marginal revenue is equal to marginal cost and sell this output at the market clearing price hicks 1935 with a negatively sloped demand curve this results in the monopoly equilibrium price exceeding marginal cost and in less output than would be demanded if price is equal to marginal cost in a seminal contribution to the analysis of twopart tariffs oi 1971 elicited some surprise when he pointed out that a profit maximizing monopolist might under some conditions choose a marginal price that is less than the marginal cost 1 later work by schmalensee 1981 described a specific set of conditions in which pricing below marginal cost would be observed despite these demonstrations the subsequent literature on uniform two part tariffs for the most part considers below marginal cost pricing a thoroughly atypical outcome 2 however as an empirical matter pricing below marginal cost is easily found disneyland like recreation ski resorts buffet service of food and the ubiquitous presence of open bowls of peanuts in bars are but a few examples srinagesh 1991 has argued convincingly that the practice of setting marginal prices below marginal cost is so common in telecommunications offerings that it can justifiably be labeled a stylized fact this paper fills the theoretical void by answering the following questions about pricing below marginal cost using two part tariffs in oi s model with demand heterogeneity is the set of demand and cost parameters that induce such pricing small or large when it occurs will the price typically be slightly or substantially less than marginal cost how large of an effect can such pricing have on profits and does it typically have a small or large effect we consider the class of all linear demand models with two types of consumers and a monopolist with constant marginal costs who charges a profit maximizing uniform two part tariff we first show that two conditions are necessary for below marginal cost pricing to occur 1 the consumer demand curves intersect at a strictly positive price and quantity 2 the marginal cost is less than the demand curve intersection price it is shown that pricing below marginal cost arises when consumers have sufficiently different demand elasticities so that the revenue losses arising from the high usage of the elastic consumer are more than offset by revenue gains obtained from the large entrance fee charged to the inelastic consumer 3 next we determine how the monopolist sets prices to maximize profits given parameter values of the model we then describe the behavior of p c the ratio of the optimal marginal price to marginal cost over the parameter space this provides the basis for determining regions in the parameter space in which p less than c i e where p c less than 1 to indicate quantitatively the potential significance of pricing below marginal cost we find that sampling uniformly over the parameter space satisfying the two necessary conditions induces below marginal cost pricing 40 of the time furthermore conditional on price being less than marginal cost the mean ratio of p c with uniform sampling is 55 what relevance do these calculations with such a simple and austere model have for understanding nonlinear pricing in the real world in an important recent paper sibley and srinagesh 1997 study nonlinear pricing in multiproduct markets they show that a critical assumption for below marginal cost pricing to occur is a uniform ordering of demand curves condition which is the generic equivalent of the non crossing of demands condition in the analysis of nonlinear pricing of a single product they demonstrate that violation of the uniform ordering condition is necessary for below marginal cost pricing to occur when demand cross elasticities are zero that such pricing easily arises when the condition is violated and indicate how extremely restrictive the condition is

step by step the benefits of stage based r d licensing contracts we examine how a licensor can optimally design licensing contracts for multi phase r d projects when he does not know the licensee s project valuation leading to adverse selection and cannot enforce the licensee s effort level resulting in moral hazard we focus on the effect of the phased nature typical of such projects and compare single phase and multi phase contracts we determine the optimal values for the upfront payment milestone payments and royalties and the optimal timing for outlicensing including multiple milestones and accompanying payments can be an effective way of discriminating between licensees holding different valuations without having to manipulate the royalty rate which induces licensees to invest less resulting in lower project values and socially suboptimal solutions interestingly we also find that multiple milestone payments are beneficial even when the licensor is risk averse contrary to standard contract theory results which recommend that only an upfront payment should be used in terms of licensing timing we show that the optimal time depends on the licensor s risk aversion the characteristics of the licensee and the project value

multiproduct nonlinear pricing typically work on mechanism design has assumed that all private information can be captured in a single scalar variable this paper explores one way in which this assumption can be relaxed in the context of the multiproduct nonlinear pricing problem it is shown that the firm will choose to exclude some low value consumers from all markets a class of cases that allow explicit solution is derived by making use of a multivariate form of integration by parts in such cases the optimal tariff is cost based

theoretical foundations for sticky wages abstract the paper compares three different types of theoretical explanation of sticky wages they are implicit contracts efficiency wage models and insider outsider models it then reconsiders keynes rationale for sticky wages which focuses on relative wage issues finally the paper considers possible directions for future research

the effect of risk based capital requirements on profit efficiency in banking the purpose of this paper is twofold to show how to measure profit efficiency in banking using a newly developed technique and to use that technique to determine the effect of risk based capital requirements on the profit performance of us banks the measure of profit efficiency used captures deviations from profit maximization arising from technical inefficiency caused by a lack of managerial oversight and allocative inefficiency which is caused by managers choosing a nonoptimal mix of inputs and outputs a leverage ratio constraint and a risk weighted capital ratio constraint are explicitly included in the model which allows identification of the effect on profits of those constraints the techniques are applied to random samples of us banks for 1990 1992 and 1994 the results indicate that allocative inefficiency is a larger source of profit loss than technical inefficiency and that the risk based capital standards have a significant effect on bank allocative efficiency

delayed payment contracts and a firm s propensity to hire older workers there are jobs for which firms employ older workers but tend not to hire new older workers this may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts can introduce a form of fixed costs into the employment relationship much as with hiring and training costs these fixed costs lead firms to hire primarily young long term workers while firms employ older workers workers who are serving out the last years of their contract they tend not to hire them this paper presents empirical evidence that is consistent with this argument

consumption retirement and social security evaluating the efficiency of reform that encourages longer careers abstract this paper proposes and analyzes a social security reform in which individuals no longer face the oasi payroll tax after say age 54 or a career of 34 years and their subsequent earnings have no bearing on their benefits we first estimate parameters of a life cycle model our specification includes non separable preferences and possible disability it predicts a consumption expenditure change at retirement we use the magnitude of the expenditure change together with households retirement age decisions to identify key structural parameters the estimated magnitude of the change in consumption expenditure depends importantly on the treatment of consumption by adult children of the household simulations indicate that the reform could increase retirement ages one year or more equivalent variations could average more than 4000 per household and income tax revenues per household could increase by more than 14 000

job loss and the regions how important is redundancy meager n 1984 job loss and the regions how important is redundancy reg studies 18 459 467 the paper argues that the common emphasis when comparing job losses between regions or industries etc on net employment decline and on redundancy as the major component of it may be misplaced and may conceal important differences between the regions or industries compared the argument is illustrated with data from a local labour market motherwell and with official data on the british regions it is shown in particular that when considered as a component of gross employment change redundancy may not dominate job loss future work should therefore concentrate to a greater extent on gross changes and on non redundancy methods of job loss

multiproduct pricing in major league baseball a principal components analysis the empirical analysis of multiproduct pricing suffers from a lack of clear theoretical guidance and appropriate data limitations which often render traditional regression based analyses impractical this paper analyzes ticket parking and concession pricing in major league baseball for the period 1991 2003 using a new methodology based on principal components which allows inferences to be formed about the factors underlying price variation without strong theoretical guidance or abundant information about costs and demand while general demand shifts are the most important factor they explain only half of overall price variation also important are price interactions that derive from demand interrelationships between goods and the desire to maximize the capture of consumer surplus in the presence of heterogeneous demand

migration selectivity and the effects of public programs abstract a model of the spatial distribution of mobile heterogeneous agents is formulated to assess how a price change or program subsidy that is location specific affects the composition of local residents via selective migration and thus biases evaluations of the effectiveness of the program based on its local consequences longitudinal data from colombia are used to test the implications of migration selectivity the findings confirm the existence of selective migration suggesting that local subsidies to human capital attract high income but within income groups low fertility households and those with low human capital endowments these migration patterns are shown to be consistent with the dominance of endowment over tastes heterogeneity in the population under plausible behavioral assumptions

bundling with customer self selection a simple approach to bundling low marginal cost goods with declining costs of distributing digital products comes renewed interest in strategies for pricing goods with low marginal costs in this paper we evaluate customized bundling a pricing strategy that gives consumers the right to choose up to a quantity m of goods drawn from a larger pool of n different goods for a fixed price we show that the complex mixed bundle problem can be reduced to the customized bundle problem under some commonly used assumptions we also show that for a monopoly seller of low marginal cost goods this strategy outperforms individual selling m 1 and pure bundling m n when goods have a positive marginal cost or when customers have heterogeneous preferences over goods comparative statics results also show that the optimal bundle size for customized bundling decreases in both heterogeneity of consumer preferences over different goods and marginal costs of production we further explore how the customized bundle solution is affected by factors such as the nature of distribution functions in which valuations are drawn the correlations of values across goods and the complementarity or substitutability among products altogether our results suggest that customized bundling has a number of advantages both in theory and practice over other bundling strategies in many relevant settings

pension reversions and worker stockholder wealth transfers this paper examines the relative importance of transfers from workers to shareholders in the firm s decision to terminate their overfunded defined benefit pension plans in contrast to earlier studies i find evidence that firms terminate their pension plans to relieve themselves of implicit promises to workers of future compensation in addition financing and tax considerations influence the reversion decision the results suggest that the 1986 excise tax on asset reversions reduced termination for reversion by 36 percent in 1986

quality distortion by a discriminating monopolist the standard model of monopolistic imperfect quality discrimination involving consumer self selection has shown that no distortion occurs at the highest quality level while all lower quality levels are degraded in order to maintain profitable market segmentation this result flows from the assumption that consumers with a higher total utility of quality also have a higher marginal utility of quality the paper develops a reasonable model in which the standard assumption is not satisfied and this alternative model yields vastly different conclusions regarding the form of quality distortion in particular quality may be enhanced not degraded to maintain profitable market segmentation copyright 1989 by american economic association

strategic promotion and compensation within a hierarchical firm structure this paper details how the composition of a worker s skills and the non observability of a worker s ability affect wage and promotion paths promotionbased compensation schemes derive naturally from the worker s asymmetrically observed ability promotion takes place over time and is inefficient since employers strategically exploit their knowledge of an able worker s ability conversely employers may be unable to efficiently demote and retain bad managers without paying bonuses employers are led to promote educated employees before their equally or more able but uneducated counterparts explanations for fast track promotions plans and other empirical regularities are provided

two part tariffs with quality degradation abstract this paper examines a firm s incentive to sell a service that is of lower quality when the firm offers a menu of two part tariffs each tariff is characterized by a fixed fee together with two screening instruments these being a uniform per unit charge and a quality restriction we find that allocation of quality is monotonic in type while per unit charge might be non monotonic the results thus contradict one of the most established insights in nonlinear pricing that the per unit charge should be monotonically decreasing over the type space we show that this practice increases welfare due to increased consumption efficiency