multiple equilibria and deterrence in airline markets we use data from the us airline industry to estimate a model of entry deterrence we model the interaction among airlines as a repeated static game where we allow for a very general form of heterogeneity we consider a menu of three alternative games that describe the strategic interaction among airlines simultaneous and sequential move games and a sequential move game with deterrence investments following bernheim 1984 deterrence investments include all investment that raises barriers to entry and for which the incumbent must incur some investment costs we show that the profits that incumbents can make in the sequential game both with and without deterrence investments are larger than those that they can make if the game is played simultaneously thus we find that on average it is profitable for all firms to deter new entrants with the exception of united airlines remarkably united airlines was under bankruptcy protection during the period of analysis suggesting that its deterrence investments were not credible overall we find that the data is explained better by a model where firms make deterrence investments thus we cannot reject the hypothesis that incumbents deter entrants in the airline industry

book review feature public policy in an uncertain world by charles f manski cambridge ma harvard university press 2013 pp 224 39 95 isbn 978 0674066892

not all rivals look alike estimating an equilibrium model of the release date timing game a very serious game of strategy is at work a cross between chess and chicken which studio distribution chiefs play year round but with increasing intensity during the summer and holiday release period new york times december 6 1999 hubris hubris if you only think about your own business you think i ve got a good story department i ve got a good marketing department we re going to go out and do this and you don t think that everybody else is thinking the same way in a given weekend in a year you ll have five movies open and there s certainly not enough people to go around joe roth chairman of walt disney studios answering a question about the large number of major movies opening within days of each other los angeles times december 31 1996 i introduction the number of americans who go to the movies varies dramatically over the course of the year and sometimes more than doubles within a period of two weeks at the same time the first week accounts for almost 40 of the box office revenues of the average movie the combination of these two facts makes the timing of launching a new movie a major focus of attention for distributors of movies with virtually no subsequent price competition the movie s release date is one of the main short run vehicles by which studios compete with each other in this paper i develop and estimate a model of discrete games which allows me to analyze this release date timing game most empirical industry studies focus on price and quantity competition taking other product characteristics as given in many industries however prices play a very small role and competition is channeled through other product attributes the entertainment industry is a prime example competition among movies television programs or broadway shows is on nonmonetary product attributes such as content advertising and time therefore understanding competition in such industries requires a model that endogenizes some of these product attributes especially those that can be changed in the short run this paper provides a framework in which release decisions can be endogenized and nonprice competition can be analyzed the absence of price competition is useful because it allows the focus of the analysis to be on the timing dimension without relying on assumptions about the nature of the postrelease price competition 1 together with the frequent timing decisions associated with different movies this makes the motion picture industry quite attractive for empirical analysis of the timing game this industry however is not the only example in which timing decisions play a central role similar timing considerations are also important in the release decisions of books compact disks and other new products as well as in the scheduling decisions of major events television programs flight schedules and promotional sales 2 when taking on a new project distributors of movies typically plan for a friday release which falls within a relatively short window of time carefully chosen to match the type of the movie this makes the choice of the release date a very discrete one the exact friday within the season is generally determined by a strategic timing game played among distributors before each release season distributors scramble to release their movies on big holiday weekends when demand is high when doing so each distributor tries to release on the attractive holiday weekend and at the same time to deter competitors from doing the same the extent to which distributors are successful in doing so largely depends on the quality of the movies at their disposal and on the way they can compete with movies released by other studios thus modeling this timing game must account for the asymmetries among movies and for the variation in these asymmetries across release seasons specifically i develop and estimate a sequential move game with private information i assume that the observed release date decisions are the equilibrium outcome of such a game

estimating a model of strategic network choice the convenience store industry in okinawa this paper investigates a determinant of location choice for multistore retailing firms the trade off between the business stealing effect and the cost saving effect from clustering their own stores i present an empirical model of network choice by two multistore firms i use lattice theoretical results to address the computational burden of solving for an equilibrium in store networks the framework integrates the static entry game of complete information with post entry outcome data while using simulations to correct for the selection of entrants i present an application of the model to the case of the convenience store industry in okinawa island japan using unique cross sectional data on store networks and revenues i use parameter estimates to examine the impact of a hypothetical horizontal merger on store configurations costs and profits results suggest a retailer s trade off between cost savings and lost revenues from clustering its stores is positive across markets and negative within a market i find an acquirer of a hypothetical merger of two multistore firms would decrease its number of stores in suburbs but increase its number in the city center

market structure and product quality a study of the 2002 japanese airline merger abstract this study examines the economic consequences of a horizontal merger between japanese airlines that took place in 2002 with particular emphasis on quality responses to the airline merger a structural model allows firms to determine not only prices but also flight frequencies the obtained estimates would reject the hypothesis that the merger facilitated coordinated effects efficiency gains from the merger are estimated as not trivial and are more strongly observed in marginal costs per flight rather than in marginal costs per passenger welfare effects of the merger are positive but vary by market structure neglecting endogenous flight frequency overstates the welfare gains especially for smaller markets finally remedial measures imposed by the authority did little for the merger outcomes

building new plants or entering by acquisition firm heterogeneity and entry barriers in the u s cement industry i estimate a model of entry for the cement industry that considers two options of expansion building a plant or acquiring an incumbent the model takes into account that there is a transfer of the buyer firm level characteristics to the acquired plants which affects profits from the acquisition estimates show that a less permissive reagan bush administration s merger policy would decrease the number of acquired plants by 71 greenfield entry would increase by 9 2 and consumer surplus would decrease by 23 5 results suggest that regulators should be concerned about policies that negatively affect the efficient reallocation of assets between incumbents and entrants

hospital choices hospital prices and financial incentives to physicians we estimate an insurer speci c preference function which rationalizes hospital referrals for privately insured births in california the function is additively separable in a hospital price paid by the insurer the distance traveled and plan and severity speci c hospital xed eects capturing hospital quality we use an inequality estimator that allows for errors in price and detailed hospital severity interactions and obtain markedly dierent results than those from a logit the estimates indicate that insurers with more capitated physicians are more responsive to price capitated plans send patients further to utilize similar quality lower priced hospitals but the cost quality trade odoes not vary with capitation rates the patient protection and aordable care act of 2010 includes provisions to establish ac countable care organizations acos in the medicare program these are groups of health care providers that oer services to a large number of patients and are eligible to share in any cost savings they achieve for the medicare program 1 private sector acos are forming in parallel to this initiative often with very similar structures and payment arrangements the proportion of savings acos keep is linked to their performance on quality standards the goal of the initiative is to reduce health care costs in both medicare and private insurance and to improve coordination of care the tying of cost savings to quality standards is designed to mitigate the concern that an increase in incentives to control costs might lead to a decrease in the quality of care the health policy literature has noted that similar cost control incentives are currently utilized by some health maintenance organizations hmos in california and elsewhere 2 in this paper we investigate the impact of these incentives on the cost and quality of care provided to patients focusing in particular on the choice of hospital for privately insured patients giving birth we use

two stage budgeting and exact aggregation this paper presents an econometric model of demand for energy based on two stage budgeting the model provides own price and cross price elasticities of demand for energy and nonenergy commodities for the united states these elasticities are estimated separately for households classified by family size age of head region race and urban versus rural residence price elasticities are presented conditional on total energy expenditure and total expenditure on all commodities the model combines individual cross section data with aggregate time series data and is based on exact aggregation over individual demand functions

selection of energy performance contracting business models a behavioral decision making approach abstract as a market based mechanism which can actively promote energy efficiency energy performance contracting epc is now universally accepted throughout china and has been incorporated into various business models four of these business models are frequently adopted in china the share savings model the guaranteed savings model the energy cost trust model and the finance lease model the choice of a suitable business model has been recognized as one of the most important factors in the effective implementation of epc projects in this paper the selection of epc business models is formulated as a multi criteria decision making mcdm problem when selecting an epc business model it is natural for decision makers dms to express their preferences opinions in linguistic terms given the characteristics of epc projects taking dms psychological behavior into account is of considerable and realistic significance todim an acronym in portuguese of interactive and multicriteria decision making has been verified as an effective behavioral decision making method to address the problem of epc business model selection an extended todim method based on multi granularity linguistic terms and entropy measure is proposed the sensitivity and comparison analyses show that dms psychological behavior can affect the selection order with respect to the given epc business models one case of a real life campus epc project demonstrates that the validity and applicability of the proposed extended todim method for solving the epc business model selection problem

trucks without bailouts equilibrium product characteristics for commercial vehicles the entry and exit of products rather than firms serve as the main equilibrating force in many markets so accurately predicting changes from a merger or bankruptcy should incorporate this behavior this paper estimates a structural model of the us commercial vehicle market and demonstrates the importance of allowing for endogenous product offerings in the context of the 85 billion automotive industry bailout in 2009 under alternate policies that facilitate an acquisition or liquidation of gm and chrysler product entry and exit moderate markup increases and output decreases by up to three quarters

public private partnerships for energy efficiency projects a win win model to choose the energy performance contracting structure abstract to stimulate private sector investments and promote energy efficiency in recent years through public private partnership arrangements the public sector uses private companies the energy service company esco to perform one or more activities related to the provision of energy services and the contractual arrangements defining the contracting parties obligations and rights are traditionally based on energy performance contracting epc although epc is a valuable model for delivering public energy efficiency projects the adoption is still far from its vast potential mainly because of two unresolved issues the dilemma of equally sharing the benefits between the public and private parties so as assuring a win win condition and the lack of adequate public procedures that support the selection of the most appropriate epc schema given certain circumstances and projects characteristics the existing literature have analyzed the advantages of epc mechanism for delivering energy efficiency projects and explored the critical success factors of epc however it does not provide any solution to address the issues that hamper the adoption of epcs in public sector to fill this gap this paper proposes a model for assessing and benchmarking the net benefits of the different epc structures so as choosing the epc schema that creates a win win solution for both the esco and the government by balancing the private sector s profitability needs and the public sector s economic interests the assessment of the benefits of the epc schema for contractual parties and the benchmark among the contracts are based on an economic approach which expresses the net benefit gained by each party through the three epc contracts in monetary terms and benchmarks the three epc schema through the net present value npv method the win win condition is ensured by the contract that minimizes the difference between the net profits npv gained by the contractual parties this will support the public authority in the decision making process about the epc structure to be adopted to develop an energy efficiency project as a ppp to demonstrate the applicability of the proposed model we apply it to an energy efficiency project launched by the municipality of noci southern italy

airport presence as product differentiation there is now widespread recognition that an airline s operation at a given airport greatly affects its competitive position on routes flown out of that airport see m levine 1987 s borenstein 1989 s morrison and c winston 1989 and myself 1989 among many others airlines typically defend any competitive advantage as stemming from the lower costs and better service that are said to be generated by hub and spoke route systems airline critics typically respond that airlines gain market power by dominating individual airports both views are at least plausible huband spoke transportation networks reduce the number of round trips necessary to carry a given number of passengers on a given set of itineraries while increasing the number of passenger miles flown if there are sufficient economies of scale in plane size then the advantages of hubbing can overcome the disadvantage in passenger miles resulting in lower total costs by pooling passengers with different ultimate destinations a hubbed system can also offer more frequent flights than would be economically feasible under a nonstop system it also appears however that airlines gain other advantages from a large presence at an airport incumbent airlines are the major source of financing for many airports and therefore gain a large degree of bureaucratic control over airport operations this control may enable them to block the entry or expansion of rivals airlines with a large presence in a given city also gain advantages from frequent flyer plans and nonlinear travel agent commission schedules see again levine and others if the bureaucratic and marketing advantages of airport presence are sufficient to prevent most attempts at entry then incumbents may gain the ability to exercise traditional market power by restricting output and driving up prices this paper argues that both simple costreducing and naive market power stories are inappropriate for the airline industry i present a model in which consumers are willing to pay a premium for the services of the dominant airline this premium may be related to a number of factors including flight frequency frequent flier miles and travel agent commission overrides this model has the advantage of treating oligopoly product differentiation in an explicit way of treating price as an endogenous variable and of allowing for airport presence to affect both costs and demand

quantifying the cost of excess market thickness in timber sale auctions abstract in auctions with endogenous entry theory predicts that too many potential bidders or the excess market thickness may actually decrease the seller s expected revenue and the social welfare generated by the auction this paper proposes a computationally easy method for estimating the optimal number of potential bidders in timber sale auctions with endogenous entry and an uncertain number of active bidders and then quantifies the cost of excess market thickness it is found that the welfare loss due to the excess market thickness is moderate in this market

playing the fertility game at work an equilibrium model of peer effects we study workplace peer effects in fertility decisions using a game theory model of strategic interactions among coworkers that allows for multiple equilibria using register based data on fertile aged women working in medium sized establishments in denmark we uncover negative average peer effects allowing for heterogeneous effects by worker type we find that positive effects dominate across worker types defined by age or education negative effects dominate within age groups and among low education types policy simulations show that these estimated effects make the distribution of where women work an important consideration beyond simply if they work in predicting population fertility

price competition under mixed multinomial logit demand functions in this paper we postulate a general class of price competition models with mixed multinomial logit demand functions under affine cost functions in these models the market is partitioned into a finite set of market segments we characterize the equilibrium behavior of this class of models in the case where each product in the market is sold by a separate independent firm we identify a simple and very broadly satisfied condition under which a pure nash equilibrium exists and the set of nash equilibria coincides with the solutions of the system of first order condition equations a property of essential importance to empirical studies this condition specifies that in every market segment each firm captures less than 50 of the potential customer population when pricing at a specific level that under the condition is an upper bound for a rational price choice for the firm irrespective of the competitors prices we show that under a somewhat stronger but still broadly satisfied version of the abov

localized market power in the u s airline industry this paper tests whether the observed dominance of most city pair markets and airports in the u s domestic airline industry by single carriers confers any pricing power on the dominan t firms the results of fixed effects estimation indicate that airport dominance by a carrier does confer upon it substantial pricing power whereas dominance at the route level seems to confer no such pricing power additionally the authors find a positive yet small correlation between both route concentration and price and airport concentration and price the quantitative importance of airport dominance reveals that the most promising direction for public polic y aimed at improving the industry s performance is to ensure equal acc ess to sunk airport facilities copyright 1993 by mit press

the strategic timing incentives of commercial radio stations an empirical analysis using multiple equilibria commercial radio stations and advertisers may have conflicting interests about when commercial breaks should be played this article estimates an incomplete information timing game to examine stations equilibrium timing incentives it shows how identification can be aided by the existence of multiple equilibria when appropriate data are available it finds that stations want to play their commercials at the same time suggesting that stations incentives are at least partially aligned with the interests of advertisers although equilibrium coordination is far from perfect coordination incentives are much stronger during drivetime hours when more listeners switch stations and in smaller markets

competition and mergers in the retail market for toys i study competition between big box retailers k mart and wal mart and toy retailers kb toys and toys r us with the aim of estimating wal mart s effect on the profits of toy retailers using rece

entry in monopoly market this paper develops new empirical models of market concentration from game theoretic models of entry we construct our models from inequality conditions that describe entrants equilibrium strategies in simultaneous move and sequential move games and use them to study the effects of entry in isolated monopoly markets for new automobiles from estimates of the market size necessary to support one and two dealers we conclude that monopoly dealers do not block the entry of a second dealer we also find that entry does not cause price cost margins to fall by much

does multimarket contact facilitate tacit collusion inference on conduct parameters in the airline industry we provide empirical evidence that multimarket contact facilitates tacit collusion among airlines using a flexible model of oligopolistic behavior where conduct parameters are modelled as functions of multimarket contact we find i carriers with little multimarket contact do not cooperate in setting fares whereas carriers serving many markets simultaneously sustain almost perfect coordination ii cross price elasticities play a crucial role in determining the impact of multimarket contact on equilibrium fares iii marginal changes in multimarket contact matter only at low or moderate levels of contact iv assuming firms behave as bertrand nash competitors leads to biased estimates of marginal costs

set identification in models with multiple equilibria we propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies it is shown that in the case of shapley regular normal form games the identified set is characterized by the inclusion of the true data distribution within the core of a choquet capacity which is interpreted as the generalized likelihood of the model in turn this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them in all normal form games the identified set is characterized in terms of the value of a submodular or convex optimization program efficient algorithms are then given and compared to check inclusion of a parameter in this identified set the latter are illustrated with family bargaining games and oligopoly entry games copyright 2011 oxford university press

energy performance contract models for the diffusion of green manufacturing technologies in china a stakeholder analysis from smes perspective abstract small and medium sized enterprises smes are significant to china s emission reduction programme this research aims to improve our understanding of the challenge of diffusing green manufacturing technologies among smes in china specifically this study examines the chinese government s effort to facilitate reduction of energy consumption among smes through energy performance contracts epcs to incentivize domestic manufacturers to adopt energy efficient measures eems in order to reduce demand for energy and corresponding drop in emissions the data is gathered from relevant epc stakeholders in the national motor upgrading demonstration project and its implementation in dongguan city which is based on 30 in depth interviews and 6 focus group discussions using stakeholder analysis this study finds that guaranteed energy savings model is the favorite model in implementation given the gained benefits outweigh committed resources and the control capability overrides possible risks among the two core stakeholders the outcomes of this study may allow the government to have a clear understanding of stakeholder perception of the different epc models used in china so the design and deployment of these mechanisms can be improved

upstream innovation and product variety in the u s home pc market this article investigates the welfare implications of the rapid innovation in central processing units cpus and asks whether it results in inefficient elimination of basic personal computer pc products i analyse a game in which firms make multiple discrete product choices and tackle challenges such as partial identification and sample selection estimation results demonstrate that the demand for pcs is highly segmented and that fixed costs consume a substantial portion of the per unit producer profit the estimated model implies that intel s introduction of its pentium m chip contributed significantly to the growth of the mobile pc segment and to consumer welfare the lion s share of the benefits to consumers was enjoyed by the 20 least price sensitive consumers i also find that the pentium m crowded out the pentium iii and pentium 4 technologies and that the benefits to consumers from keeping those older products on the shelf would have been comparable to the added fixed costs while total welfare cannot be increased by keeping older technologies on the shelf such a policy would have allowed the benefits from innovation to trickle down to price sensitive households improving their access to mobile computing

inference on causal and structural parameters using many moment inequalities this article considers the problem of testing many moment inequalities where the number of moment inequalities denoted by p is possibly much larger than the sample size n there is a variety of economic applications where solving this problem allows to carry out inference on causal and structural parameters a notable example is the market structure model of ciliberto and tamer 2009 where p 2m 1 with m being the number of firms that could possibly enter the market we consider the test statistic given by the maximum of p studentized or t type inequality specific statistics and analyse various ways to compute critical values for the test statistic specifically we consider critical values based upon 1 the union bound combined with a moderate deviation inequality for self normalized sums 2 the multiplier and empirical bootstraps and 3 two step and three step variants of 1 and 2 by incorporating the selection of uninformative inequalities that are far from being binding and a novel selection of weakly informative inequalities that are potentially binding but do not provide first order information we prove validity of these methods showing that under mild conditions they lead to tests with the error in size decreasing polynomially in n while allowing for p being much larger than n indeed p can be of order exp nc for some c 0 importantly all these results hold without any restriction on the correlation structure between p studentized statistics and also hold uniformly with respect to suitably large classes of underlying distributions moreover in the online supplement we show validity of a test based on the block multiplier bootstrap in the case of dependent data under some general mixing conditions

policy influence and private returns from lobbying in the energy sector in this article i quantify the extent to which lobbying expenditures by firms affect policy enactment to achieve this end i construct a novel dataset containing all federal energy legislation and lobbying activities by the energy sector during the 110th congress i then develop and estimate a game theoretic model where heterogeneous players choose lobbying expenditures to affect the probability that a policy is enacted i find that the effect of lobbying expenditures on a policy s equilibrium enactment probability to be statistically significant but very small nonetheless the average returns from lobbying expenditures are estimated to be over 130

barriers to entry in the airline industry a multidimensional regression discontinuity analysis of air 21 abstract we investigate the success of legislation aimed at increasing competition at highly concentrated u s airports mainly by forcing these airports to increase the availability of scarce facilities we use a multidimensional regression discontinuity approach to exploit a sharp discontinuity in the law s implementation and identify its effects we find that fares decrease by 13 4 20 2 in markets with one both end point s covered approximately half of the decline is driven by the entry of low cost carriers we find little evidence that the fare declines were accompanied by a diminished quality of service and passenger volumes increased which suggests the legislation improved consumer welfare

how store format choices and market structure affect agglomeration economies and competition among chain stores in the us supermarket industry this article studies how store format choices and market concentration affect agglomeration economies and competition among chain stores using data on supermarket chains in arizona georgia and il

structural estimation of sequential games of complete information in models of strategic interaction there may be important order of entry effects if one player can credibly commit to an action e g entry before other players if one esti mates a simultaneous move model then the move order effects will be confounded with the payoffs this paper considers nonparametric identification and simulation based estimation of sequential games of complete information relative to simultaneous move games these models avoid the problem of multiple equilibria and require fewer payoff normalizations we apply the estimator in several monte carlo experiments and to study entry order effects using data from the airline industry

the dynamic spillovers of entry an application to the generic drug industry this paper examines whether experience from entry in one market can potentially enhance profitability at a future market opportunity for a related product we formulate and estimate a dynamic game of entry in which forward looking firms make decisions not just based on present benefits of past entry but also anticipating potential future benefits of current entry dynamic spillovers of entry are incorporated through a firm specific unobservable to the researcher cost that depends on past entry decisions the unobserved costs may also be serially persistent thus the model allows for firm specific unobserved heterogeneity that evolves based on firm actions the challenge of estimating a dynamic game with serially correlated unobserved state variables subject to endogenous feedback is overcome by embedding a particle filter based technique in a nested fixed point algorithm using an application to a stylized model of entry in the generic pharmaceutical industry we underscore the motivation for the model specification and the methodology developed our estimates imply positive spillover effects of entry moreover these spillovers suggest heterogeneity not just across firms but also within firms over time based on their history of entry decisions our results illustrate that entry may potentially provide firms with additional strategic advantage in later markets and that entry spillovers may be an important factor to consider in the equilibrium evolution of the generic drug industry the web appendix is available at https doi org 10 1287 mnsc 2016 2648 this paper was accepted by j miguel villas boas marketing

the value of information in the court get it right keep it tight one should always subordinate his own personal views whether they be economic social political or whatever they may be because when you are talking about your own views you are only one of millions of individuals in the country when you are interpreting the law perhaps you have a special skill and special training that does give you the right to pass on these questions i have to confess that in this open area sometimes inevitably a man is the product of his own background and he may be somewhat influenced but i will do my very best to subordinate those considerations because i think that is the duty of any judge justice john stevens in his senate confirmation hearing

estimating a war of attrition the case of the us movie theater industry this paper estimates the impact of competition and exogenous demand decline on the exit process of movie theaters in the us from 1950 1965 i modify fudenberg and tirole 1986 s model of exit in a duopoly with incomplete information to an oligopoly i estimate this model with panel data using variations in tv diusion across house holds and other market characteristics to identify the parameters in the theater s payo function and the distribution of unobservable exit values using the estimated model i show that theaters who are making negative pro ts may choose to remain in the market if they expect to outlast their competitors because at that point their pro ts would increase this creates a signi cant delay in the exit process in addition by decompos ing the across market variation in the exit process i nd that tv diusion explains a substantial proportion of the variation in the exit process

nonparametric engel curves and revealed preference this paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand knowledge of expansion paths is shown to improve the power of nonparametric tests of revealed preference the tightest bounds on indifference surfaces and welfare measures are derived using an algorithm for which revealed preference conditions are shown to guarantee convergence nonparametric engel curves are used to estimate expansion paths and provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory an application is made to a long time series of repeated cross sections from the family expenditure survey for britain the consistency of these data with revealed preference theory is examined for periods of consistency with revealed preference tight bounds are placed on true cost of living indices

estimation of a model of entry in the airline industry this paper considers the effect of an airline s scale of operation at an airport on the profitability of routes flown out of that airport the empirical methodology uses the entry decisions of airlines as indicators of underlying profitability the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city pair profitability these estimates imply that city pair profits increase in airport presence and decrease rapidly in the number of entering firms the literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms

socially optimal subsidies for entry the case of medicare payments to hmos the u s medicare program has increased its spending on private medicare plans in anticipation of larger consumer surplus and higher efficiency to evaluate the welfare consequences of such policy interventions i develop an empirical model with endogenous entry counterfactual simulation reveals the following subsidizing hmo entry can be justified to enhance national welfare no excessive entry the level of price subsidies in 2008 however is far beyond the optimal level and the geographic inconsistency between the subsidies and the medicare fee for service costs is another source of inefficiency resolving this geographic inconsistency significantly raises national welfare by restructuring entry

an empirical model of firm entry with endogenous product type choices i describe a model of entry with endogenous product type choices these choices are formalized as the outcomes of a game of incomplete information in which rivals differentiated products have nonuniform competitive effects on profits i estimate the model for location choices in the video retail industry using a nested fixed point algorithm solution the results imply significant returns to product differentiation simulations illustrate the tradeoff between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry

identifying and testing models of managerial compensation this article analyses the identification and empirical content of the pure moral hazard pmh and the hybrid moral hazard hmh principal agent models the pmh model has hidden actions while the hmh model has hidden information in addition to hidden actions in both models agents are risk averse and principals are risk neutral the article derives the equilibrium restrictions from the optimal contract and uses the restrictions to show that the models have empirical content for any given risk aversion parameter the models other parameters are non parametrically point identified the risk aversion parameter and hence the model are however only partially identified management s ability to manipulate accounting reports arises endogenously within hmh models but not in all versions of pmh models we use our framework to investigate whether shareholders contract with management recognizing that accounting reports are susceptible to manipulation and therefore endogenous to the incentives offered to management the data reject all models in which accounting reports are verifiable furthermore the version of the pmh in which accounting reports can be manipulated is rejected if expected compensation is restricted to be positive

who thinks about the competition managerial ability and strategic entry in us local telephone markets we examine us local telephone markets shortly after the telecommunications act of 1996 the data suggest that older experienced educated managers tend to enter markets with fewer competitors this motivates a structural econometric model based on behavioral game theory that allows heterogeneity in managers ability to correctly conjecture competitor behavior we find that manager characteristics are key determinants in managerial ability furthermore our estimate of ability predicts out of sample success counterfactuals provide insight into the industry s struggles despite substantial indirect subsidies it is only when the ability to correctly conjecture competitor behavior is high that firms enter empty markets

when should sellers use auctions the simultaneous bid auction is a standard method for sellers to solicit offers from buyers a simple alternative is for a seller to ask buyers to make offers sequentially if it is costly for buyers to participate the sequential mechanism will tend to be more efficient than the simultaneous auction because later potential buyers can condition their participation decisions on earlier bids however the sequential mechanism s greater efficiency may not produce higher revenues because while the possibility of deterring later potential entrants can lead early bidders to bid aggressively the fact that later firms might be deterred will tend to reduce revenues the relative revenue performance of the mechanisms will therefore depend on whether the threat of potential future competition which can raise bids in the sequential mechanism is more valuable to the seller than actual competition which will tend to be greater in the simultaneous auction the relative revenue performance of these alternative mechanisms has direct implications for how assets should be sold in the case of how to structure the sale of corporations this question has attracted attention from practitioners and commentators since the delaware supreme court s 1986 revlon decision charged a board overseeing the sale of a company with the duty of getting the best price for the stockholders revlon v mcandrews and forbes holdings 1986 in practice

household gasoline demand in the united states supported by the mit center for energy and environmental policy research the u s dept of energy and the national science foundation

semiparametric estimation of the intercept of a sample selection model this paper provides a consistent and asymptotically normal estimator for the intercept of a semiparametrically estimated sample selection model the estimator uses a decreasingly small fraction of all observations as the sample size goes to infinity as in heckman 1990 in the semiparametrics literature estimation of the intercept has typically been subsumed in the nonparametric sample selection bias correction term the estimation of the intercept however is important from an economic perspective for instance it permits one to determine the wage gap between unionized and nonunionized workers decompose the wage differential between different socioeconomic groups e g male female and black white and evaluate the net benefits of a social programme

specifying a structural matching game of trading networks with transferable utility structural estimation of matching games with transferable utility including matching games of trading networks and many to many matching is increasingly popular in empirical work i explore several modeling decisions that need to be made when specifying a structural model for a matching game one decision is the choice of a game theoretic solution concept to impose in the structural model i discuss pairwise stability competitive equilibrium and noncooperative games such as auctions another decision is whether to work with a continuum of agents or a finite number of agents i explore other issues as well

changes in the distribution of male and female wages accounting for employment composition using bounds this paper examines changes in the distribution of wages using bounds to allow for the impact of nonrandom selection into work we show that worst case bounds can be informative however because employment rates in the united kingdom are often low they are not informative about changes in educational or gender wage differentials thus we explore ways to tighten these bounds using restrictions motivated from economic theory with these assumptions we find convincing evidence of an increase in inequality within education groups changes in educational differentials and increases in the relative wages of women

getting the incentives right energy performance contracts as a tool for property management by local government energy conservation is a challenging and difficult task because disincentives in the building sector inhibit innovation the municipality of rotterdam experimented with an energy performance contract that aimed to avoid disincentives and replace them with a stimulus for innovation this article investigates whether the design requirements for performance management found in the management literature were fulfilled during the development of the contract and its implementation the outcomes of the experiment show substantial energy conservation around 30 percent the existing incentive structure was changed through the use of a performance management contract and perverse effects that are mentioned in the literature were limited the incentives established between the commissioning party and the contractor triggered better performance and innovation although balancing the responsibilities between the principal and the agent was demanding and time consuming energy performance contracts are a useful piece of the sustainability puzzle but tailor made refinements are necessary

testing for optimal monetary policy via moment inequalities the specification of an optimizing model of the monetary transmission mechanism requires selecting a policy regime commonly commitment or discretion in this paper we propose a new procedure for testing optimal monetary policy relying on moment inequalities that nest commitment and discretion as two special cases the approach is based on the derivation of bounds for in ation that are consistent with optimal policy under either policy regime we derive testable implications that allow for specification tests and discrimination between the two alternative regimes the proposed procedure is implemented to examine the conduct of monetary policy in the united states economy

regulation and capacity competition in health care evidence from u s dialysis markets abstract this paper studies entry and capacity decisions by dialysis providers in the united states we estimate a structural model where providers make continuous strategic choices of capacity based on their private information about own costs and knowledge of the distribution of competitors private information we evaluate the impact on the market structure and providers profits under counterfactual regulatory policies that increase the costs or reduce the payment per unit of capacity we find that these policies reduce the market capacity as measured by the number of dialysis stations however the downward sloping reaction curve shields some providers from negative profit shocks in certain markets the paper also has a methodological contribution in that it proposes new estimators for bayesian games with continuous actions

choosing between order of entry assumptions in empirical entry models evidence from competition between burger king and mcdonald s restaurant outlets we demonstrate how a non nested statistical test developed by vuong 1989 can be used to assess the suitability of alternate order of entry assumptions used for identification purposes in empirical entry models as an example we estimate an entry model of mcdonald s and burger king restaurant outlets in united states the data set focuses on relatively small isolated markets for these markets the non nested tests suggest that order of entry assumptions that give burger king outlets a first mover advantage are statistically preferred last a monte carlo experiment provides encouraging results suggesting that the vuong type test yields reliable results within the entry model framework

market structure and multiple equilibria in airline markets we provide a practical method to estimate the payoff functions of players in complete information static discrete games with respect to the empirical literature on entry games originated by bresnahan and reiss 1990 and berry 1992 the main novelty of our framework is to allow for general forms of heterogeneity across players without making equilibrium selection assumptions we allow the effects that the entry of each individual airline has on the profits of its competitors its competitive effects to differ across airlines the identified features of the model are sets of parameters partial identification such that the choice probabilities predicted by the econometric model are consistent with the empirical choice probabilities estimated from the data we apply this methodology to investigate the empirical importance of firm heterogeneity as a determinant of market structure in the u s airline industry we find evidence of heterogeneity across airlines in their profit functions the competitive effects of large airlines american delta united are different from those of low cost carriers and southwest also the competitive effect of an airline is increasing in its airport presence which is an important measure of observable heterogeneity in the airline industry then we develop a policy experiment to estimate the effect of repealing the wright amendment on competition in markets out of the dallas airports we find that repealing thewright amendment would increase the number of markets served out of dallas love

nonparametric bounds on treatment effects assume that each member of a population is characterized by values for the variables ya yb z x here x is a vector describing a person and z is a binary variable indicating which of two treatments this person receives the treatments are labelled a and b the variables ya and yb are scalar measures of the outcomes of the two treatments for example a cancer patient might be treated by a drug therapy or b surgery the relevant outcome y might be life span following treatment an unemployed worker might be given a vocational training or b job search assistance here the relevant outcome might be labor force status following treatment assume that a random sample is drawn and that one observes the realizations of z x and of the outcome under the treatment received thus ya is observed if treatment a is received but is a latent variable if treatment b is received similarly yb is either observed or latent suppose that one wants to learn the difference in expected outcome if all persons with attributes x were assigned to treatment a or b this treatment effect is

nonparametric estimation of exact consumers surplus and deadweight loss we apply nonparametric regression models to estimation of demand curves of the type most often used in applied research from the demand curve estimators we derive estimates of exact consumers surplus and deadweight loss which are the most widely used welfare and economic efficiency measures in areas of economics such as public finance we also develop tests of the symmetry and downward sloping properties of compensated demand we work out asymptotic normal sampling theory for kernel and series nonparametric estimators as well as for the parametric case the paper includes an application to gasoline demand empirical questions of interest here are the shape of the demand curve and the average magnitude of welfare loss from a tax on gasoline in this application we compare parametric and nonparametric estimates of the demand curve calculate exact and approximate measures of consumers surplus and deadweight loss and give standard error estimates we also analyze the sensitivity of the welfare measures to components of nonparametric regression estimators such as the number of terms in a series approximation

bank panics government guarantees and the long run size of the financial sector evidence from free banking america governments attempt to increase the confidence of financial market participants by making implicit or explicit guarantees of uncertain credibility confidence in these guarantees presumably alters the size of the financial sector but observing the long run consequences of failed guarantees is difficult we look to america s free banking era and compare the consequences of a broken guarantee during the indiana centered panic of 1854 to the panic of 1857 in which guarantees were honored our estimates of a model of endogenous market structure indicate substantial negative long run consequences to financial depth when panics cast doubt upon a government s ability to honor its guarantees

competitive dialogue procedure for sustainable public procurement the construction sector has adopted green public procurement to improve its environmental performance green public procurement is a process whereby contracting authorities aim to procure services and products that meet environmental requirements in recent years green public procurement has extended to sustainable public procurement which involves the incorporation of both environmental and social considerations in the procurement of goods and services previous studies have suggested the relevance of contractor engagement strategies and the need for appropriate models to promote dialogue in sustainable public procurement this paper illustrates one such model called the competitive dialogue procedure this newly introduced procurement procedure allows the contracting authority to hold discussions with shortlisted contractors regarding the authority s requirements the paper uses the practical case of the kvarnholmen link project in sweden the kvarnholmen link is an infrastructure project that includes the construction of a bridge tunnel underpass and pedestrian and bike path action research was conducted to examine the competitive dialogue procedure this paper has strengthened the conceptualisation that the procedure can facilitate sustainable public procurement with the aid of its key elements such as provisionally preferred solution and dialogue sessions in addition the paper analyses the consequences of the weight used for environmental considerations in the bid evaluation process this paper recommends that contracting authorities implementing competitive dialogue procedure must use provisionally preferred solution to identify sustainable public procurement preferences dialogue sessions with contractors should involve discussions regarding sustainable public procurement to ensure consistency between the weight for environmental considerations and respective preferences

environmental value chain in green sme networks the threat of the abilene paradox abstract demand side policies are an important complement to subsidies in fostering green product service markets green public procurement gpp in particular presents valuable characteristics in terms of directionality volumes and measurability despite being widely analysed from a public perspective gpp development is still under explored from a corporate point of view to shed some light on the strategic attitude of firms towards gpp this paper discusses an exploratory research in the field of road construction an inductive analysis of direct observations and theoretical contributions suggests the potential for the so called abilene paradox to hamper gpp opportunities for small and medium enterprises in fact in times of crisis increased pressures to improve performance and reduce risk resistance to change and strategic myopia can easily impair inter organizational interactions and thus prevent potentially innovative networks from pressuring public investments in green supply chains the related policy suggestions represent a first attempt to enter the realm of systemic approaches to gpp

firm organizational heterogeneity and market structure evidence from the japanese pesticide market abstract this paper empirically investigates the effects of the organizational forms of firms on their entry behaviors and market structure to exploit the exogenous variation in firm organizational forms we use japanese pesticide market data first our empirical analysis shows that a model of imperfect competition fits the japanese pesticide market well despite the existence of regulations we then estimate the effect of organizational heterogeneity on entry behavior firms having capital ties with special distribution networks tend to enter this market more readily than do firms without such ties furthermore diversified and vertically nonintegrated firms are more likely to enter this market than are stand alone and vertically integrated firms these findings suggest that markets with distribution related diversified and vertically nonintegrated potential entrants are more competitive than those with the same number of potential entrants that have no such characteristics

predatory reputation in us airline markets abstract despite its long history in antitrust policy predation remains a poorly understood phenomenon the main difficulty is in empirically identifying predatory intent i propose a method for measuring the effect of reputation whose significance would enable us to infer predatory intents maximum likelihood estimation using simulated annealing algorithm is conducted with a sample of us airline markets the results provide some support for the presence of entrants learning and reputation effect as an application i discuss how the outcomes of my empirical model could help analyze such antitrust cases as the american airlines case