existence and characterization of optimal growth paths including models with non convexities in utilities and technologies this paper is concerned with the existence and characterization of optimal growth paths in continuous time infinite horizon problems and brings to bear on these issues mathematical techniques presented by the author in chichilnisky 1977 these techniques non linear functional analysis in hilbert weighted l2 and sobolev spaces permit generalization clarification and simplification of existing results in particular the following points are of importance i as hilbert spaces are self dual continuous linear functionals on the commodity space are elements of the space and thus have a totally natural interpretation as prices we therefore obtain that commodity and price paths are in the same spaces a useful property to prove existence in general equilibrium models a failure to meet this condition has led to earlier work on characterization being troubled by the problem that supporting linear functionals are not always interpretable as prices so that one cannot always give a price characterization of optimal and efficient paths in the present framework this problem does not arise ii a natural way to pose the problem of finding an optimal path is as one of maximizing a continuous function on a compact set a major advantage of the techniques we use here is demonstrated by the fact that we are actually able to follow this approach iii because of ii it is possible to establish the existence of an optimal path without the use of any convexity assumptions on either the technology or the preferences this is a major relaxation of earlier conditions and enables existence results to be applied to models with increasing returns in production non convex preferences and endogenous population for instance in lane 1977 both the feasible net production set and the preference ordering are in general non convex due to the endogenous response of population growth to income in ryder and heal 1973 and wan 1970 non convexities appear as well as in environmental and biological problems discussed for example in clark 1976 in this latter case the logistic growth functions of biological populations introduces non convexities in a natural way iv it can be shown that the prices that arise within this framework provide a well defined present value for every feasible program this makes it possible to provide a full characterization of optimal and efficient paths in terms of profit maximization without any reference to transversality conditions this characterization is thus analogous to that

global dynamics in a model with search and matching in labor and capital markets abstract in this paper global macroeconomic dynamics are studied when search frictions are present in both labor and capital markets on the basis of the merz 1995 macroeconomic model with labor market frictions and capital accumulation our paper offers an extension to frictions in capital markets analogously modeled as a search and matching process using the merz model as limit case we consider exogenous as well as endogenous borrowing constraints we also allow the cost of issuing bonds to change endogenously as we show capital market frictions exacerbate and accentuate the interaction between the two markets and magnify the effects of shocks on output consumption employment and welfare this interaction of the frictions in labor and capital markets are also shown to give rise to multiple equilibria on the basis of numerical solution techniques instead of relying on first or second order approximations around a unique steady state our paper uses dynamic programming techniques to compute decision variables and the value function directly and assess the local and global dynamics of the model the steady state solutions are studied by using the hamiltonian and the dynamics are assessed for various model variants by using dynamic programming techniques

the value of corporate voting rights and control a cross country analysis this paper measures the value of corporate voting rights specifically of the control block of votes in a sample of 661 dual class firms in 18 countries in 1997 a consistent measure across countries is proposed the measure is adjusted for takeover probability block holding costs and dividend and liquidity differences between the share classes the value of controlblock votes varies widely across countries it is close to half of firm market value in south korea andclose to zero in finland the value of control block votes is interpretedas a lower bound for actual private benefits of the controlling shareholder the legal environment law enforcement investor protection takeover regulations andpower concentrating corporate charter provisions explain 68 of the cross country variation in the value of control block votes

differential games with nonconvexities and positive spillovers abstract this paper deals with differential games characterized by nonconvexities and increasing returns the objective function of the players is convex in the control variables and nonconvex in the state variables we employ the open loop nash equilibrium solution concept this framework enables us to handle games characterized by positive spillovers and strategic complementarities e g capital accumulation differential games with learning by doing where the knowledge available to a firm is given by the knowledge accumulated by the economy as a whole

productivity and distribution effects of codetermination in an efficient bargaining model codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing the empirical test is based on german data and includes years before and after the extension of german codetermination law in 1976 the estimates determine the productivity of labor and relative bargaining power of capital and labor it turns out that codetermination does not affect productivity but leads to a significant increase in workers bargaining power and the distribution of rents

discrete choice cannot generate demand that is additively separable in own price abstract we show that in a unit demand discrete choice framework with at least three goods demand cannot be additively separable in own price this result sharpens the analogous result of jaffe and weyl 2010 in the case of linear demand and has implications for testing of the discrete choice assumption out of sample prediction and welfare analysis

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

optimal investments with increasing returns to scale the author analyzes the firm optimal investment policy assuming a pure increasing returns to scale technology and adjustment costs the existence of an optimal plan is proved by applying a new set of necessary and sufficient conditions for optimality the analysis is carried out in a linear quadratic framework that enables one to study a general nonlinear problem in a neighborhood of the long run equilibrium the investment policy shows a reverse accelerator effect in a general setting he proves that the saddle point characterization is a sufficient condition for a stationary competitive equilibrium to be a finitely optimal trajectory copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

co determination and innovation this paper examines the effect of the german co determination law of 1976 mitbestg on the innovative activity of german firms co determination applies to firms with 2 000 employees or more data from 1971 1976 and 1981 1990 on 148 firms are used to compare the number of patents granted to co determined firms before and after the introduction of the law several control variables are applied and in particular in order to avoid a possible bias from specific effects of firm size we compare the co determined firms with others before and after 1976 the results do not support the view that co determination slows down technological progress and reduces innovativity

a complete characterization of optimal growth paths in an aggregated model with a non concave production function the convexity of technology has played a crucial role in economic analyses of optimal one sector growth problems for example two of the key results on the traditional model of ramsey 1928 that have relied on the convexity of the technology are that optimal intertemporal growth involves moving monotonically towards a unique steady state as in cass 1965 koopmans 1965 and that the value function is a concave differentiable function of the initial capital stock as in benveniste and scheinkman 1979

competition and cooperation in corporate governance the effects of labor institutions on blockholder effectiveness in 23 european countries we provide an analysis of the costs and benefits of blockholding in europe where it is a dominant but certainly not universal corporate governance strategy for shareholders of publicly listed firms we find that the effectiveness of blockholding is conditioned by the specific labor institutions that distinguish european countries from the rest of the world and that these institutional effects involve both competition and cooperation between blockholders and collective labor interests we also find that relational blockholders are better able to cope with or benefit from these institutional effects than arm s length blockholders empirically we use advanced meta analytic methods on a total sample of 748 569 firm year observations derived from 162 studies covering 23 european countries

the union impact on profits evidence from industry price cost margin data this paper uses industry price cost margin data to estimate the extent to which unions reduce profits estimates allowing for the endogeneity of union status are contrasted with estimates that assume union status is exogenous and not determined in part by either profitability or industry structure endogeneity is found to be an important consideration in estimating the union impact on profits two stage estimates are considerably larger than ols estimates the final section explores the total estimated redistribution from capital to labor in the manufacturing sector an important conclusion is that unions raise prices less than was previously believed

ownership structure speculation and shareholder intervention an institution holding shares in a firm can use information about the firm both for trading speculation and for deciding whether to intervene to improve firm performance intervention increases the value of the institution s existing shareholdings but intervention only increases the institution s trading profits if it enhances the precision of the institution s information relative to that of uninformed traders thus the ability to speculate can increase or decrease institutional intervention we examine key factors that affect the intervention decision the usefulness of short swing provisions and restricted shares in encouraging institutional intervention and implications for ownership structure across different firms institutional investors hold an ever greater fraction of corporate america s equity traditionally these institutions were stock pickers who tried to beat the market through trading if a firm whose stock they held seemed headed for trouble these investors headed for the door the wall street rule more recently some of these institutions have been using the ownership rights attached to their shares to pressure firms to act in the shareholders interest some have even argued that there is a synergy between gathering information for use in trading shares speculation and intelligently pressuring firms to improve performance intervention we argue that these motives can also conflict analyzing these motives allows us to predict which firms are most likely to attract institutional intervention which in turn has crosssectional implications for firm ownership structure recent examples suggest that institutional investors with large stakes sometimes intervene and sometimes follow the wall street rule so that there is indeed a choice to be studied in the early 1990s there was a wave of activism by a variety of large institutional investors among them calpers the california public employees pension fund putnam management a mutual fund manager and j p morgan a bank holding company these institu

economic effects of codetermination the success of west german scandinavian and japanese economies particularly when compared with lagging productivity and competitiveness of the u s and the u k have focused attention on comparative institutions in labour markets and corporate control declining unions and increasing reliance on competitive market pressures in the angloamerican countries contrast with more state intervention and regulation of the european social market economies as noted by henzler 1992

optimal scientific production over the life cycle the paper develops an optimization model of the career of a scientist recognizing that research efforts and networking get more efficient if the scientist is more knowledgeable history dependent solutions are developed we give a theoretical underpinning of the four different research patterns detected in way et al 2017 proceedings of the national academy of sciences if the scientist does not bother about his reputation at the end of his career we show that a sufficient education level is needed for the scientist to develop a typical research pattern where productivity increases in the beginning of his career while it declines towards retirement if the education level is not sufficient a fading research pattern will result where productivity declines over time on the other hand when the scientist appreciates to have a good reputation at the end of his career sufficient education will result in increasing productivity over the career lifetime preventing a midlife slump

which demand systems can be generated by discrete choice we provide a simple necessary and sufficient condition for when a multiproduct demand system can be generated from a discrete choice model with unit demands

delaying product introduction a dynamic analysis with endogenous time horizon abstract we consider a capital accumulating incumbent firm which produces an established product and has the option to introduce an improved substitute product to the market by incurring adoption costs we find that depending on the initial capacities on the established market and the value of adoption costs three scenarios are possible namely introducing immediately later or abstaining from product introduction in case of delayed product introduction the incumbent reduces capacities for the established product before the new product is introduced we find that the higher the adoption costs the higher is the gain by delaying the product introduction compared to immediate introduction from a welfare perspective the product introduction is welfare enhancing but the option of delay decreases the welfare gain the model is calibrated using data on hard disk and solid state drives

a dns curve in a two state capital accumulation model a numerical analysis abstract in this paper we study a capital accumulation model in an optimal control theoretic framework where the capital stock and the investment rate are modelled as state variables and the change in the investment rate as control adjustment costs are introduced for investment rate and its change moreover we model network externalities by a convex segment in the revenue function which implies the existence of two long run optimal steady states one with a low level and the other with a high level capital stock it depends on the initial capital endowment and initial investment rate to which steady state it is optimal to converge we numerically compute a curve in the state plane for which it holds that when starting from a point on this curve the decision maker is indifferent between going to either one of these steady states and identify this curve as the dns curve the negative slope of the dns curve indicates that there is a trade off between the initial capital endowment and initial investment rate

perfectly competitive models of endogenous business fluctuations the endogenous hypothesis is not new at a pre analytic level it is based on the simple intuition that market mechanisms are inherently dynamically unstable at least around their stationary positions in this note i want to stress the theoretical point that there is nothing in the working of a perfectly competitive market system that prevents it from displaying persistent and endogenous fluctuations and that moreover such fluctuations may have their origins in market fundamentals such as factor intensities factor substitutability degree of impatience and so forth nevertheless macroeconomic models of endogenous fluctuations still have to prove that apart from being very beautiful they can also be useful to understand the so called heal world hit sunt leones this article is not intended to be a survey of all that has been written in this area in the last decade i have no title whatsoever to talk about empirical studies chera sayers contribution in this same volume addresses that guestion scheinkman 1990 is a readily available survey of nonlinear statistical methods that are relevant to this debate as for the theory incompetence recommends that i avoid touching on sunspot equilibria olg models and more generally expectations driven cycles they are instead discussed in jean michel grandmont s article finally marketing awareness implies recommending boldrin and woodford 1990 as a reasonably complete survey of what the endogenous cycle research program has recently produced at a theoretical level

market valuation of employee stock options this study investigates whether investors incorporate the value of a firm s outstanding employee stock options into its stock price i estimate the outstanding options value for a sample of firms for which outstanding fixed options exceed 5 of outstanding common shares in 1988 i find a negative correlation between the value of outstanding options and a firm s share price the correlation is stronger i for the option s intrinsic value than for the option s time value ii for options that are later in their vesting stage than earlier in their vesting stage and iii for large firms than for small firms in addition the fasb s method for calculating compensation expense has no explanatory power in the presence of this paper s calculation of the options value

infrastructure growth and the two dimensions of industrial policy when sustained growth depends on establishing an indivisible infrastructure for directly productive activities dpas both discrete and marginal departures from optimal growth can undermine the dynamic efficiency of the market producers anticipations of paying monopoly fees for infrastructure services dampen their incentive to invest in dpas and may prevent the economy from reaching a minimal level of activity that would justify investment in a large indivisible infrastructure and potential investors in infrastructure may be intimidated by the prospect of expropriatory regulation thus a credible prior commitment to effective but fair regulation is necessary for achieving optimal growth but it may not be sufficient low level expectations before the infrastructure is established can be self fulfilling indicating a role for coordinative industrial policy investment subsidies even in conjunction with regulation cannot induce an efficient equilibrium

internal bargaining labor contracts and a marshallian theory of the firm the theme of this paper is due to alfred marshall who states that nearly the whole income of a business may be regarded as a composite quasi rent divisible among different persons in the business by bargaining supplemented by custom and by notion of fairness and the division of quasi rents entails de facto some sort of profit loss sharing between almost every business and its employees principles of economics 8th ed book vi ch viii sec 10 pp 520 21 marshall emphasizes that a significant portion of composite quasi rent is derived from the organization of business and would be lost if employer employee connections were dissolved in this view bargaining can even be tacit insofar as there is an organizational basis which ensures agreement among the concerned parties consequently internal bargaining models of the firm may be applicable to the analysis of european style codetermination and japanese style labor management also as the relative bargaining strength between labor and management changes such a view of the firm admits as its extrema the organization of a labor managed firm lmf and the textbook case of a profit maximizing firm pmf masahiko aoki 1980 1982 and jan svejnar 1982 have recently explored models of an internal bargaining firm their analyses however consider the firm s long run behavior only under restricted circumstances without market uncertainty the relevance of the internal bargaining approach to profit sharing and labor management would be enhanced if we integrated the firm s short run wage employment policies with its long run plans for the rate of growth and capital labor substitutions this i do by underscoring the firm s organizational basis which is essentially a long term contractual association between workers and management i combine costas azariadis 1975 and martin baily s 1974 apparatus of labor contracting with efficient bargaining to investigate the effect of varying degrees of labor s bargaining power upon the firm s shortand long run policies under uncertainty these results are then contrasted with the empirical findings of collective bargaining for example richard freeman and james medoff 1981 conventional results of lmf models jaroslav vanek 1970 benjamin ward 1958 and the recent macroeconomic approaches to wage employment adjustments ian mcdonald and robert solow 1981

skiba points in free end time problems abstract since the end of the seventies skiba points have been studied in infinite time optimal control problems with multiple steady states at such a skiba point the decision maker is indifferent between choosing trajectories that approach different steady states this paper extends this theory towards free end time optimal control problems where the decision maker collects a salvage value at the endogenous horizon date in particular besides operating forever the decision maker can choose to stop operations immediately or to operate during a finite time interval after which the decision maker stops and collects a salvage value this paper illustrates the new theory with a firm level capital accumulation problem in which the manager has the option to sell the firm be acquired at any time this situation may be relevant for certain high tech start ups that create intellectual property which may be of value to an acquiring firm and which is hard for an outside firm to tap in other ways e g via licensing

capital accumulation under technological progress and learning a vintage capital approach abstract in standard capital accumulation models all capital goods are equally productive and produce goods of the same quality however due to technological progress in reality it holds most of the time that newer capital goods are either more productive process innovation or produce goods of better quality product innovation implications of process innovation for the firm s investment policies are investigated while the output price development is subject to a business cycle and a given generation of capital goods gets more productive over time due to learning the problem is turned into an optimal control model that distinguishes the vintages of capital goods and where unlike most of the recent contributions it is possible to keep on investing in older technologies it is shown that i learning is one of the reasons why a firm may invest in old technologies even when apparently superior technologies are available ii investments in machines of a given age increase more over time under faster technological progress iii under faster technological progress investments are more vulnerable to output price developments and iv on average machines are older during recessions in deciding whether to invest in newer or older capital goods also the lower productivity due to aging versus differences in cost of discounting and acquisition have to be taken into account

unionization and profitability evidence from the capital market this paper examines the effect of unionization on the profitability of firms abnormal monthly common stock returns for a sample of 253 nyse listed firms are estimated for the month in which the union petitions for an election and for the month in which the national labor relations board certifies the election outcome the results suggest that unionization on average is associated with a reduction in equity value when unions win an election the average loss associated with the unionization drive is 3 8 percent of equity value when unions lose an election there is an average net reduction of 1 3 percent in the equity value of the firm

capital labor and the firm a study of german codetermination under the german corporate governance system of codetermination employees are legally allocated control rights over corporate assets through seats on the supervisory board that is the board of nonexecutive directors the supervisory board oversees the management board the board of executive directors approves or rejects its decisions and appoints its members and sets their salaries we empirically investigate the implications of this sort of labor participation in corporate decision making we find that companies with equal representation of employees and shareholders on the supervisory board trade at a 31 stock market discount as compared with companies where employee representatives fill only one third of the supervisory board seats we show that under equal representation management board compensation provides incentives that are not conducive to furthering shareholders interests possibly because labor maximizes a different objective function than shareholders we document that under equal representation companies have longer payrolls than their one third representation peers have finally we provide evidence that shareholders respond to the allocation of control rights to labor by linking supervisory board compensation to firm performance and by leveraging up the firm jel g32 g34

anticipation effects of technological progress on capital accumulation a vintage capital approach abstract due to embodied technological progress new generations of capital goods are more productive therefore in order to study the effects of technological progress a model must be analyzed in which different generations of capital goods can be distinguished we determine in what way the firm adjusts current investments to predictions of technological progress in the presence of market power we show that a negative anticipation effect occurs i e current investments in recent generations of capital goods decline when faster technological progress will take place in the future because then it becomes more attractive to wait for new generations of capital goods in case that only investments in new machines are possible actually a whole wave of anticipation phases arises

non convexities in continuous time investment theory that non convex preferences or technologies cause problems for economic theory is well known in recent years there have been numerous contributions to the nonconvexity problem in the context of models with a finite dimensional commodity space in the capital theory context non convexities have received explicit treatment in a few papers in two distinguishable ways the problem is cast either in a discrete time framework aoki 1971 rothschild 1971 or in a continuous time framework in which there are implicitly unbounded economies of scale in investment the latter formulation leads to jumps in the state variable or lumpy investment the standard problem treated is one of decreasing costs in the installation of new capacity contributions include chenery 1952 dixit mirrlees and stern 1975 hartwick 1976 manne 1967 srinivasan 1967 starrett 1978 and weitzman 1970 these types of analysis unfortunately ignore some of the most interesting problems associated with non convexities in investment theory in a discrete time framework the important distinction between stocks and flows is blurred while the capacity installation problem by admitting unbounded scale economies excludes the smoothing of state variables that follows by allowing for eventually increasing costs of adjustment in this paper we undertake a systematic examination of non convexities or sometimes non concavities in the context of a classic problem in continuous time investment theory the optimal accumulation of capital by a firm maximizing its present value over an infinite horizon while the results obtained are specific to this particular model we feel that they can be qualitatively extended to any capital theory problem which can be cast in a continuous time optimal control theory framework there are various sorts of non2 convexities which can arise in these problems first there can be either stock or flow non convexities that is non convexities which are introduced into the net benefit function the measure of the flow of benefits at each moment through changes in the capital stock state variable on the one hand or changes in the flow of investment control variable on the other if the benefit and transition functions are not concave in both these variables then necessary conditions are no longer sufficient for optimality and conventional marginal analysis fails non convexities can also be introduced into the value functional which has a stock dimension in order to examine these different sorts of non convexity problems we shall now present the basic economic problem a firm is faced with the problem of maximizing the present value of discounted cash flow over an infinite horizon hence it chooses an investment programme i t to maximize 00

dynamic capital structure choice and investment timing abstract the paper considers the problem of an investor that has the option to acquire a firm initially this firm is run as to maximize shareholder value where the shareholders are risk averse to do so it has to decide each time on investment and dividend levels the firm s capital stock can be financed by equity and debt where less solvable firms pay a higher interest rate on debt revenue is stochastic we find that the firm is run such that capital stock and dividends develop in a fixed proportion to the equity in particular it turns out that more dividends are paid if the economic environment is more uncertain we also derive that the relationship between the levels of risk aversion of the current shareholders and the potential investor is a significant determinant in establishing whether the firm is a profitable takeover target for the investor

efficiency and internal organization works councils in west german firms efficiency voice theory has not explained why highly competent managers cannot maintain effective communication without formal or mandatory institutions of l abor s voice powerful west german works councils are negatively rela ted to productivity in the sample suggesting that the best managers can do better without councils however excessive pressure on worker s should encourage both unionization and councils to gain compensatin g differentials and the simultaneous wls tobit estimates also suppor t this effect general productivity benefits from formal voice organi zation are strongly rejected but evaluating welfare efficiency and causality directly requires data on job satisfaction and managerial ability copyright 1987 by the review of economic studies limited

a new look at optimal growth under uncertainty abstract we consider the discounted optimal growth model under uncertainty and model the stochastic technology as a transition probability mapping inputs into random outputs this formulation allows for weaker assumptions of monotonicity and convexity on the technology associated with second order stochastic dominance and permitting some increasing returns preserving all the conclusions of this model furthermore in this framework the differentiability of the unique optimal policy is obtained in an elementary way from the smoothness of the data our results provide support for the contention that stochastic modeling in economics should be more than a mere extension of the deterministic realm

on the choice of incentives in firms abstract simple models of individual and group incentives under uncertainty are compared and comparative performance is shown to depend upon various exogenous parameters the incentive effects of profit sharing will thus vary with organizational and other characteristics that may be difficult to observe and attempts to quantify productivity effects that neglect selection bias are likely to be misspecified significant selection effects are found in previously used firm level data and productivity effects of existing profit sharing are found to be much larger than potential effects in firms without sharing arrangements this throws doubt on policies to encourage sharing in isolation

why capital hires labor a bargaining perspective organizational forms often serve as vehicles for the appropriation of quasi rent capitalist firms typically emerge when production requires noncontractible investments in specific physical assets because worker control would divert quasi rents away from ass et owners ex post conversely labor managed firms tend to emerge in niches requiring specialized human capital but general purpose physi cal assets a key result is that capitalist firms can persist in competitive markets even when labor managed firms would yield a larg er total surplus copyright 1993 by american economic association

two state capital accumulation with heterogenous products disruptive vs non disruptive goods the paper considers the problem of a firm that while producing a standard product has the option to introduce an innovative product the innovative product competes with the standard product and will therefore reduce revenues of the standard product a distinction is made between innovative products that do or do not become even more relatively appealing as their market share grows e g because of network externalities it is shown that in the former case which we call a disruptive good history dependent long run equilibria can occur which are in line with recent real life economic examples

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

optimal firm growth under the threat of entry the paper studies the incumbent entrant problem in a fully dynamic setting we find that under an open loop information structure the incumbent anticipates entry by overinvesting whereas in the markov perfect equilibrium the incumbent slightly underinvests in the period before the entry the entry cost level where entry accommodation passes into entry deterrence is lower in the markov perfect equilibrium further we find that the incumbent s capital stock level needed to deter entry is hump shaped as a function of the entry time whereas the corresponding entry cost where the entrant is indifferent between entry and non entry is u shaped

demand for differentiated products discrete choice models and the characteristics approach we propose a specific characteristics framework in order to construct linkages between alternative conceptual approaches to modelling product differentiation first it is shown that a demand system which satisfies the gross substitutes property imposes specific requirements on the locations of products in particular the dimension of the characteristics space must be larger than or equal to the number of products minus one we then identify a method for casting a given demand system subject to certain restrictions into our characteristics framework this is illustrated for the logit probit and linear probability models of discrete choice theory finally we find a characteristics representation of the ces representative consumer

codetermination as a strategic advantage abstract a theoretical model of codetermination is considered where consistent with german institutions firm owners bargain with employees representatives about employment but not about wages a duopoly and a more general oligopolistic situation are analyzed for some range of bargaining power a prisoner s dilemma exists codetermination leads to increased profits if the other firm is a traditional profit maximizer bargaining is the dominant strategy although joint profits would be maximized with unrestricted profit maximization the theory is tested with data from 22 german firms who operate in the same markets over 23 years codetermined firms actually show a different behavior than other companies

the effect of wage bargains on the stock market value of the firm the author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs using bargaining unit wage data and nyse stock returns he estimates a dollar for dollar trade off between these variables this result is consistent with stock valuations based on present value maximizing managerial decisions that is the results are consistent with hotelling s lemma the author also finds support for the hypothesis that collective bargains maximize the sum of shareholder and union member wealth that is the results are consistent with strong efficiency in the contracting environment copyright 1989 by american economic association

alternative mechanisms for corporate control we examine performance and management characteristics of fortune 500 firms experiencing one of three types of control change internally precipitated management turnover hostile takeover and friendly takeover we find that firms experiencing internally precipitated management turnover perform poorly relative to other firms in their industries but are not concentrated in poorly performing industries in contrast targets of hostile takeovers are concentrated in troubled industries there is also weaker evidence that hostile takeover targets underperform their industry peers we interpret this evidence as consistent with the idea that the board of directors is capable of firing managers whose leadership leads to poor performance relative to industry but that an external challenge in the form of a hostile takeover is often required when the whole industry is in decline the evidence also indicates that firms run by a member of the founding family are less likely to experience either internally precipitated top management turnover or a hostile takeover on the other hand firms whose top management team is dominated by a single relatively young top executive while lacking in internal discipline are more likely to experience a hostile takeover this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item