product introduction decisions in a duopoly abstract in this paper we model a dynamic environment with two firms that fight for share of industry sales and profit in a market with constant size they capture share by repeatedly introducing new products price changes from period to period reflecting each firm s learning we formulate the problem as a repeated game where each player s decision at each period is to introduce a new product we find that in general each firm s frequency of product introductions clockspeed in equilibrium decreases as its fixed product introduction cost increases further we find that a higher rate of manufacturing learning results in a higher clockspeed and in a higher market share and also results in significantly worse profits for the competitor the results underscore the importance of manufacturing expertise in a firm s ability to introduce new products

panel estimates of a two tiered earnings frontier this paper uses panel data to estimate a two tiered instead of a one tiered frontier model the innovation is to develop a two step maximum likelihood procedure yielding consistent estimates of inefficiency while at the same time accounting for heterogeneity the model is applied by estimating a two tiered earnings function to obtain indices of worker and firm incomplete labour market wage information using panel data from the panel study of income dynamics 1969 84 the estimation preserves the traditional quadratic age earnings profile but measures the extent to which employers often pay more than necessary to hire a worker incomplete employer information while at the same time employees often accept wages less than they could otherwise command incomplete employee information the results indicate that employees acquire less information than employers 1996 john wiley sons ltd

primal and dual capacity utilization an application to productivity measurement in the u s automobile industry capacity utilization measures have traditionally been constructed as indexes of actual as compared to potential output this potential or capacity output y can be represented within an economic model of the firm as the tangency between the short and long run average cost curves economic theoretical measures of capacity utilization cu can then be characterized as y y where y is the realized level of output these quantity or primal cu measures allow for economic interpretation they provide explicit inference as to how changes in exogenous variables affect cu additional information for analyzing deviations from capacity production can be obtained by assessing the dual cost of the gap in this article the definitions and representations of primal output and dual cost cu measures are formalized within a dynamic model of a monopolistic firm as an illustration of this approach to characterizing cu measures a model is estimated for the u s automobile industry 1959 1980 and primal and dual cu

technological advancement learning and the adoption of new technology abstract this research focuses attention upon three related issues the persistence of technological progress over time multiple adoption decisions over a long horizon and the impact of production based learning on those decisions we develop a simple economic model for a single product producing firm incorporating continuous technological progress linear product demand linear switching costs and experience based cost reductions a dynamic programming framework is used to evaluate cases where either one or an unlimited number of adoptions are allowed over an infinite horizon both structural and numerical results are presented fundamental results serve to explain several counter intuitive dynamics in the single adoption case faster rates of technological progress as well as growing markets or a steeply sloping demand curve serve to delay adoption while an increased ability to learn may accelerate it when multiple adoptions are allowed the adoption of any particular technology presents a window of opportunity in which future investment will be warranted if for whatever reason this window has passed then maintaining the older technology becomes more attractive than adoption thus seemingly outdated technologies may remain embedded in some settings

toward a public choice theory of monopoly regulation its many dimensions from the perspective of market economics this new thrust was consolidated in 1976 by s peltzman who developed a formal market model in which regulations were viewed as commodities brokered via political markets in response to bids and counter bids by those who stood to gain or to lose from specific regulation outcomes the subsequent contribution by becker 1983 added insights and institutional flesh to the stigler peltzman embryo confirming regulation as an integral component of mainstream market economics an important implication of such contributions especially those from the chicago perspective is that regulation for the most part confirms resource efficiency within market process that political markets in the absence of entry barriers are just as effective as are competitive commodity markets in achieving economic efficiency defined within a comparative institutions framework nowhere is this complacency more apparent than in the conclusion drawn by becker 1983 from a detailed formal analysis of competition among pressure groups for political influence

competition and substitutability in the swedish pharmaceuticals market substitution possibilities between brand name pharmaceuticals are analysed the analysis is based on data from three different markets the prescription drug market for beta blocking agents the over the counter market for purgatives and the hospital market for two pharmaceutical treatments for gastric ulcers the results indicate that there exist some substitution possibilities among the brand name drugs included in the study

technological expectations and adoption of improved technology abstract attention is focused upon the adoption demand rather than the creation supply of new technology which improves from time to time based on the expected flow of technological progress over which the firm demander has no control it must decide either to adopt the current best available technology or to postpone adoption the distinguishing features of the model are that more than one technological innovation is anticipated and expectations about the likelihood of such innovations are revised as time passes since the last innovation our analysis shows that the firm will adopt the current best practice if its technological lag exceeds a certain threshold moreover as time passes without new technological advances it may become profitable to purchase a technology that has been available even though it was not profitable to do so in the past

an estimation of the swiss hydropower rent the electricity generation in switzerland is mostly based on hydropower 58 and nuclear power 38 the exploitation of water in the hydropower sector can generate significant economic rent one possibility to capture this rent is through royalties or fees this system has been used in switzerland since many decades however the actual water fee system is not flexible and does not take into consideration different production costs between the type and location of hydropower plants furthermore storage plants can sell electricity to a higher price than run of river plants a flexible system is needed in a liberalized electricity market to take into account these different production situations and the fact that prices may vary considerably over time the main goal of this paper is to calculate the potential economic rent that could be generated in the swiss hydropower sector under a future liberalized market based on the results of the paper it can be concluded that the introduction of a flexible fee system could improve the competitiveness of the hydropower sector and promote an energy system based on renewable energy sources

parametric approaches to productivity measurement a comparison among alternative models this paper deals with modeling total factor productivity tfp growth in a flexible manner using panel data several competing parametric models are used to explore whether there are any similarities in the estimates of tfp growth and technical change among these models using a primal approach we decompose tfp growth into different components the models are then used to measure productivity and technical change in the swedish cement industry in general the results are found to be model dependent and often conflicting although much less so for returns to scale and overall productivity growth

disentangling spillover effects of antibiotic consumption a spatial panel approach literature on socioeconomic determinants of antibiotic consumption in the community is limited to few countries using cross sectional data this article analyses regional variations in outpatient antibiotics in italy using a balanced panel dataset covering the period 2000 to 2008 we specify an econometric model in which antibiotic consumption depends upon demographic and socioeconomic characteristics of the population the supply of health care services in the community and antibiotic copayments the model is estimated by means of ordinary least squares ols techniques with fixed effects fe the implications of consumption externalities across geographical areas are investigated by means of spatial lag and spatial error models slfe and sefe we find significant and positive income elasticity and negative effects of copayments antibiotic use is also affected by the age structure of the population and the supply of community health care finally we find evidence of spatial dependency in the use of antibiotics across regions this suggests that regional policies e g public campaigns aimed at increasing efficiency in antibiotic consumption and controlling bacterial resistance may be influenced by policy makers in neighbouring regions there will be scope for a strategic and coordinated view of regional policies towards the use of antibiotics

bus transit technical efficiency using latent class stochastic indirect production frontier using an indirect production frontier ipf this article examines technical inefficiency within a latent class framework while simultaneously accounting for allocative distortions from operating and capital subsidies it identifies two latent classes of us public transit systems one characterized by economies of scale with 16 61 technical inefficiency and the other by diseconomies of scale with 14 16 technical inefficiency it decomposes technical inefficiency among some of its sources and finds that the incentive tier of federal operating subsidies regulations regarding years of vehicle use subsidy induced allocative distortion from labour overuse relative to capital negatively influence technical inefficiency in all transit systems for the latent class 1 transit systems the sources of lower technical inefficiency are operating speed purchased transportation and years of vehicle use regulation for the latent class 2 transit systems these sources are subsidy induced capital labour allocative di

spatial patterns in local taxation tax mimicking or error mimicking this paper tests for mimicry in local tax setting by using a panel data set of the english non metropolitan districts in the 1980s when property tax rate variability across districts was highest the results confirm the presence of large and significant spatial interactions among districts even after allowing for district specific and time effects a district appears to be significantly affected by its neighbours policies a 10 increase in the local property tax rate of a district s neighbours leads to an increase of 4 5 in its own property tax rate on the other hand the absence of correlation in tax rates between lower tier district authorities and upper tier county authorities suggests that the spatial pattern in district tax rates is not simply driven by spatially auto correlated shocks

demand systems and the true subindex of the cost of living for pharmaceuticals this paper investigates the demand for prescription pharmaceuticals at the retail level we use complete demand systems to investigate elasticity for major classes of pharmaceuticals we estimate both a regular and an inverse demand system using a differential version of the rotterdam model we find that both systems yield negative and statistically significant own price elasticities the results indicate that pharmaceutical demand curves are not perfectly inelastic as some industry commentators suggest we use the results of the complete demand system and a variant of a formula developed by balk 1990 to derive a cost of living subindex for retail pharmaceuticals we find that retail pharmaceutical prices using our index rise faster than wholesale prices calculated either by the bls or by the methods developed by berndt et al 1993

capacity utilization measures underlying economic theory and an alternative approach measures of industrial capacity utilization hereafter cu have been used extensively in helping to explain changes in the rate of investment labor productivity and inflation the cu measures have also been used to obtain indices of capital in use as distinct from capital stock in place a number of alternative measures of cu are periodically calculated and published the 1980 economic report of the president for example contains three series that by the federal reserve board the u s department of commerce bureau of economic analysis and the wharton school of finance other publicly available series are those prepared by mcgraw hill publishing company the u s department of commerce bureau of the census and rinfret boston associates inc although a host of cu measures is publicly available it is not at all clear how one should interpret changes over time in each measure or variations among them a principal reason underlying these interpretation problems is that the crucial link between underlying economic theory and the constructed measure of cu is weak one way in which this issue has manifested itself in the policy domain over the last five years has been with respect to the uncertain effects of dramatic increases in energy prices on capacity output and on cu each of the cu measures noted above is computed in such a way that explicitly ignores any role for energy prices yet several times during the last decade though growth to apparently high rates of cu had taken place investment and average labor productivity were much lower than expected and the rate of price increase much greater in brief during the last decade the explanatory power of alternative cu measures has dropped sharply some have conjectured that post opec energy price increases may have brought about major changes in the u s economy so that old quantitative relationships between measured cu and investment labor productivity and price inflation may have been altered substantially in order to assess effects of changes in pe on cu a re examination of the notion and measurement of cu is needed based on the framework of the economic theory of the firm that is the focus of this paper

diversification strategies and scope economies evidence from a sample of italian regional bus transport providers a growing number of local public transport lpt companies diversify their production lines by providing a large set of services we investigate the cost structure of a sample of lpt companies operating in italy and assess the presence and the magnitude of scope economies we split the whole sample of firms according to their diversification strategy private firms mainly diversifying in competitive transport related services and public firms providing nontransport services in regulated markets scope economies appear sizeable for both groups but higher for firms pursuing a transport related strategy suggesting caution in the multiutility development pursued by public lpt firms in italy

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

comparative performance of short run capacity utilization measures abstract we present parametric estimates for primal and dual capacity utilization and then evaluate their comparative performance empirical findings indicate that alternative capacity utilization ratios depending upon the reference variables are procyclically consistent with each other

economies of scale and utilization in the swiss electric power distribution industry economies of scale and utilization in the swiss electricity distribution industry are analysed a translog variable cost function was estimated using panel data for a sample of 39 municipal utilities over the period 1988 1991 economies of both scale and utilization appear to exist in the distribution of electricity both for small medium and large sized utilities thus the empirical evidence suggests sub additivity of the cost function over the relevant range of output for the swiss electricity distribution utilities a necessary condition for a natural monopoly to exist

the determinants of efficiency the case of the spanish industry the aim of this paper is to analyse the factors explaining the technical efficiency of spanish industrial sectors during the period 1991 1994 using the survey of business strategies sbe of the ministry of industry and energy it analyses whether efficiency can be explained by factors external to the firm such as the degree of competition in the markets in which it operates characteristics of the firm size organization advantages of location participation of public capital etc as well as the effects of dynamic disturbances that may affect the degree of utilization of the productive capacity

x efficiency rent seeking and social costs reply contrary to their claim naughton and frantz fail to disprove the fundamental difference in the social costs of rent seeking and x inefficiency identified in our paper nor have they shown that our measure of the social costs is incorrect what they have done is introduce in an ex post fashion fixed costs for x inefficiency but they fail to provide any explanation of why the inefficiency should take the fixed cost form or why there should be unrecoverable sunk costs quite aside from the issue of dissipation naughton and frantz also argue that the level of rent seeking cost is inherently vague a contention with which we disagree

cost structure and productivity growth of the taiwanese international tourist hotels abstract this study investigates the cost structure and economic implications of the taiwanese international tourist hotel industry a multi product translog cost function with three inputs and three outputs is estimated using seemingly unrelated regression estimation and three stage least squares a balanced panel dataset consisting of 47 international tourist hotels in taiwan over the period 1997 2001 was obtained from taiwanese tourism bureau and used to estimate the cost function the results show that both scale and scope economies exist in the taiwanese international tourist hotel industry in addition productivity growth is positive over the study period managerial and policy implications for the taiwanese international tourist hotel industry are also discussed

rent seeking and x inefficiency this paper discusses the social cost of monopoly with special attention given to the geometric representation of that social cost notably rent seeking and x inefficiency the possibility of an overlap between these two measures is examined in particular the paper addresses a problem of measure identification which highlights the need to reconsider the normative microfoundations of rent seeking

resource rent taxation and benchmarking a new perspective for the swiss hydropower sector the electricity generation in switzerland is mainly based on hydropower 55 of total production the exploitation of water in the hydropower sector can generate significant so called resource rents these are defined by the surplus return above the value of capital labor materials and energy used to exploit hydropower in switzerland hydropower producers pay to the state a fixed fee per kw gross capacity with this system the substantial differences in costs revenues and in the production characteristics of the hydropower plants are not taken into account in this context the following paper has two main goals 1 to discuss the introduction in the swiss hydropower sector of a new payment system based on a resource rent tax 2 to propose a combination of a rrt system with a benchmarking analysis of the production cost obtained through the estimation of a stochastic frontier variable cost function we estimate a true random effects stochastic frontier variable cost function using panel data in order to overcome the asymmetric information problem in addition using the information on cost efficiency of the single companies we show how to introduce in the rrt scheme a benchmark system which gives incentives to minimize the production costs

taxation of economic rents economic rents have long been identified as an efficient tax base in addition the recent literature documents that rent income is highly concentrated and that rents are quickly increasing rent taxation thus seems attractive for reasons of both efficiency and equity nevertheless rent taxation remains a marginal topic in research and policy making in a systematic review of the neoclassical literature on different rent types we find that some types of rents reflect inefficiencies and should thus be minimized while others reward investments and should be supported in line with social welfare what remains for taxation are land rents one of the few true scarcity rents land rents have significant potential to improve the efficiency of the tax system we then begin to develop a comprehensive theory of land rent taxation by identifying relevant efficiency and equity effects the interaction of many of these effects remains unexplored which might explain policymakers hesitation in using land taxes to date

cost structure and technological change of local public transport the kaohsiung city bus case this study has developed a translog cost function for the kaohsiung city bus kcb to analyse its cost structure and economic characteristics based on monthly data over the time period from january 1996 to december 2000 the empirical results reveal that economies of density in the provision of bus services in kaohsiung do prevail the estimated marginal cost which is less than the average cost but greater than the current bus fare indicates that the subsidy is necessary due to the existence of returns to density rtd the kcb could obtain cost saving benefits by extending its output scale the kcb production technology is also not neutral the effects of technological change on the kcb costs suggest that over the period 1996 2000 technological progress did lead to cost saving the pure productivity growth rate increased from 0 45 in 1998 to 3 in 2000

the impact of ownership on the cost of bus service provision an example from italy this article examines the potential impact of ownership on the cost of bus service provision for a sample of 65 private and 12 public companies providing local public transit lpt in piedmont italy from 1998 to 2002 a translog cost frontier is estimated using the model in battese and coelli 1995 where inefficiency scores are allowed to vary across firms and over time a public ownership dummy is included in the inefficiency model and it is always positive and significant density and scale economies and cost inefficiencies are then computed private companies seem to experience higher density and scale economies than public ones cost inefficiencies appear higher in the public sample

technology adoption with uncertain future costs and quality in this paper we study the impact of uncertainty about future innovations in quality and costs on consumers technology adoption decisions we model the uncertainty in the technology s quality and costs as a markov process and consider three models of the adoption decision the first model assumes that consumers do a simple net present value npv analysis that compares the npv of adopting to that of not adopting without considering the possibility of waiting the second model is a stochastic dynamic program that considers the possibility of waiting and views the adoption decision as a one time event i e the consumer will only make a single purchase the only question is when the third model allows repeat purchases so the consumer may upgrade by purchasing new versions of the technology whenever it suits her we study structural properties of these models e g the following what changes in qualities and costs will make the consumer better off what changes will encourage adoption we will see that the simple npv and single purchase model have many intuitive properties with the right notion of improvements and reasonable assumptions about the technology changes we find that improvements in the technology make the consumer better off and encourage adoption here improvements are defined using a partial order on quality and cost pairs the results are more complicated in the repeat purchase model under the same conditions on technology changes technology improvements will make the consumer better off however except for special cases of transitions these improvements may make the consumer better off and discourage adoption

incentive regulatory policies the case of public transit systems in france we assess the empirical relevance of the new theory of regulation using a principal agent framework to study the regulatory schemes used in the french urban transport industry taking the current regulatory schemes as given the model of supply and demand provides estimates for the firms inefficiency the effort of managers and the cost of public funds it allows us to derive the first best and second best regulatory policies for each network and compare them with the actual situation in terms of welfare loss or gain fixed price policies lie between fully informed and uninformed second best schemes cost plus contracts are dominated by any type of second best contract from these results we may conjecture that fixed price contracts call for better informed regulators

reducing urban public transport costs by tendering lots a panel data estimation allotment is for urban authorities a governance strategy to reduce public transport costs it consists of dividing a network into several lots so as to multiply the number of calls for tender on the one hand gains should be obtained by increasing competition for the market and reducing the costs of obtaining accurate information on the other hand cutting a network into several parts is also expected to have negative consequences on production costs in terms of lower returns to scale many industry stakeholders believe that the latter element more than compensates for the former in this article we estimate a translog cost function with a panel of 141 french urban public transport networks our main conclusion is that scale economies are exhausted for a production of about 3 million vehicle kilometres per year therefore as far as returns to scale are concerned allotment would reduce the costs of public transport services for the main cities of our sample a second dividend for allotment is then presented and implies that the assumed trade off between returns to scale and increased competition is irrelevant

managing a product family under stochastic technological changes abstract this paper characterize a decision framework by which a firm can manage generational product replacements under stochastic technological changes first we characterize an optimal threshold based product replacement policy that maximizes the firm s expected total profit for a finite planning horizon with this policy the firm should optimally replace its current product when the performance gap of the product is above a threshold upon each product replacement we also show that the firm should adopt the latest technology for the new product second using stochastic ordering concepts we quantify the negative impact from the accelerated technological changes on the expected total profit finally we provide an analytical example based on a consumer choice model and characterize a technology follower s joint product replacement and pricing decisions upon the arrival of each innovation from a technology leader

x efficiency rent seeking and social costs comment in 1966 harvey leibenstein published his seminal paper on x efficiency in which he argued that imperfectly competitive market structures are likely to give rise to an intra firm non allocative or x inefficiency measured as the elevation of costs due to monopoly power he also argued that these inefficiencies not captured by the harberger triangle harberger 1959 are likely to be larger than the allocative losses reported by harberger one year later in 1967 gordon tullock tullock 1967 published a paper on the welfare costs of monopoly power and theft in it he cited leibenstein s 1966 paper as part of his own discussion as to why the harberger estimates of the welfare losses from monopoly power are likely to be underestimated tullock did not explicitly criticize the notion of x inefficiency what he did was to state his preference for analyzing these non harberger type effects of monopoly power in terms of the traditional framework of maximizing behavior other writers working within a rent seeking framework however have been explicit in their rejection that either x inefficiency can exist or that it has any impact on social welfare crain and zardkoohi 1980 more recently two papers both published in this journal have been more inclined to assume that x inefficiency can exist and is potentially important the first of these is by crew and rowley 1988 the second and the focus of our paper is by formby keeler and thistle 1988 hereafter fkt fkt present two models of x inefficient production first pure pecuniary x inefficiency and second real x inefficiency these refer to x inefficiency in the form of payments to resource owners in excess of their opportunity costs and x inefficiency in the form of slacking off labor respectively further in their model of real x inefficiency fkt distinguish between zero and positive non pecuniary benefits accruing to the owners of slack resources fkt then compare their models of x inefficiency to rent seeking behavior in order to comment on the relative social costs of each

the influence of ownership on the cost of bus service provision in switzerland an empirical illustration in deregulated transport markets a firm s ownership status and management system represent an important issue property right theory suggests that productivity and performance are higher in the private than in the public sector in switzerland providers of bus transportation are traditionally corporations though a large part of their equity shares are still held by the public sector federal government cantons municipalities this paper examines the potential impact of ownership on the cost of bus service provision for a sample of private public and mixed bus companies in switzerland the estimation of a translog cost model has been considered for 34 bus transit companies observed over 5 years 1991 1995 the results only partially confirm that if the private sector holds shares in the company s capital efficiency is enhanced in addition measures of economies of scale and density are derived and discussed within the actual public transport policy

a generalized production frontier approach for estimating determinants of inefficiency in u s dairy farms this article investigates farm level efficiency of u s dairy farmers by estimating their technical and allocative efficiency technical inefficiency is assumed to be composed of a deterministic component that is a function of some farm specific characteristics and a random component by doing this we extend the stochastic frontier methodology in which determinants of technicial inefficiency are explicitly introduced in the model given the inputs variations in efficiency of farms are then explained by both deterministic and random components of technical inefficiency the empirical results indicate that a levels of education of the farmer are important factors determining technical inefficiency and b large farms are more efficient technically than small and medium sized farms both technical and allocative inefficiency are found to decrease with increase in the level of education of the farmer

x efficiency and technical efficiency efficiency measurement has become a very popular field in applied economics in recent years and with this interest there has been a large intellectual investment in refining the empirical methods available to researchers in the area in this paper we relate these developments to harvey leibenstein s original 1966 insight into the psychological ideas underlying the notion that economic agents may not achieve maximal efficiency in their productive decisions and behaviour of course it is always possible to argue that apparent inefficiency only arises from a failure of the observer to realise what it is that is being maximized however we evade this easy escape route into non falsifiable hypothesizing and instead take at face value the fact that too many empirical studies have come up with substantial measures of inefficiency for us to ignore its importance for normative economics

excess capacity and limit pricing an empirical test entry may be inhibited by expectations that incumbents have lower marginal costs incumbents may be able to use limit pricing or excess capacity to further this expectation we construct an empirical model of oligopoly capacity and pricing decisions and of entrant responses the results support the hypothesis that both lower prices and greater excess capacity inhibit entry they further support limit pricing but provide no evidence that oligopolies deliberately install excess capacity to deter entry the results suggest however that limit pricing firms may exploit the entry inhibiting effects of unintended excess capacity by raising their limit prices

estimating cost functions in regulated industries characterized by asymmetric information abstract in this paper a structural model is developed to estimate a cost function that includes both an adverse selection and a moral hazard variable it is shown how traditional cost function estimates may produced biased results if moral hazard is present this gives an alternative reason to feinstein and wolak the econometric implications of incentive compatible regulation in g f rhodes ed advances in econometrics vol 9 159 204 jai press greenwich ct 1991 of why scale economics may be overestimated in regulated industries parameter estimates from our model can be used to design an optimal contract or any other regulatory mechanism we illustrate our approach using data from the norwegian bus transport industry

frontier production functions and technical efficiency a survey of empirical applications in agricultural economics abstract the modelling and estimation of frontier production functions has been an important area of econometric research during the last two decades forsund lovell and schmidt 1980 and schmidt 1986 present reviews of the concepts and models involved and cite some of the empirical applications which had appeared to their respective times of publication this paper seeks to update the econometric modelling of frontier production functions associated with the estimation of technical efficiency of individual firms a survey of empirical applications in agricultural economics is an important part of the paper

determinants of out of pocket pharmaceutical expenditure and access to drugs in catalonia this article examines the determinants of the demand for pharmaceuticals in catalonia using the latest available official survey data having accounted for the individual differences in cost sharing among consumers as well as the influence of self medication the article builds a model of the household determinants of pharmaceutical expenditure and consumption the econometric application deals with the infrequency of purchases and the nondistinction between out of pocket spending and drug cost sharing our results suggest that income and the variables accounting for the effect of cost sharing were significantly associated with drug use but not drug expenditure furthermore gender health status and having health insurance appear to be significant predictors access to pharmacies increases both drug use and expenditure self medication also increases drug expenditure out of pocket these results are relevant for the entire spanish case where current reform proposals have recommended the introduction o

biases in frontier estimation due to heteroscedasticity abstract this paper investigates the effects of heteroscedasticity on the parameters in frontier regression models a monte carlo experiment is employed to determine that heteroscedasticity leads to overestimation of the intercept and underestimation of the slope coefficients

capacity utilisation and profitability a decomposition of short run profit efficiency the principal aim of this paper is to measure the amount by which the profit of a multi input multi output firm deviates from maximum short run profit and then to decompose this profit gap into components that are of practical use to managers in particular our interest is in the measurement of the contribution of unused capacity along with measures of technical inefficiency and allocative inefficiency in this profit gap we survey existing definitions of capacity and after discussing their shortcomings we propose a new ray economic capacity measure that involves short run profit maximisation with the output mix held constant we go on to describe how the gap between observed profit and maximum profit can be calculated and decomposed using linear programming methods the paper concludes with an empirical illustration involving data on 28 international airline companies the empirical results indicate that these airline companies achieve profit levels which are on average us 815m below potential levels and that 70 of the gap may be attributed to unused capacity

measures of capacity utilization and its determinants a study of indian manufacturing we estimate capacity utilization cu rates in for selected industries in indian manufacturing for the 20 year period 1976 1996 we estimate a generalized leontief variable cost function with capital as a quasi fixed input to derive our cu measures using error component techniques we note substantial variations in cu both across industries and over time in general we find that cu rates were higher in the earlier time period dropped in the mid 80s and started rising again in the early 90s cu rates in our analysis are sensitive to input prices with the sole exception of the price of labor we also confirm the standard result that variations in demand are a significant driving force for variations in cu we find that cu is positively related to the magnitude of labor intensity in production this holds for both between industries and within industries empirical results also indicate that traditional measures of cu such as minimum capital output ratio and peak to peak are not appropriate proxies for

a joint measurement of efficiency and effectiveness for non storable commodities integrated data envelopment analysis approaches efficiency and effectiveness for non storable commodities represent two distinct dimensions and a joint measurement of both is necessary to fully capture the overall performance this paper proposes two novel integrated data envelopment analysis idea approaches the integrated charnes cooper and rhodes iccr and integrated banker charnes and cooper ibcc models to jointly analyze the overall performance of non storable commodities under constant and variable returns to scale technologies the core logic of the proposed models is simultaneously determining the virtual multipliers associated with inputs outputs and consumption by additive specifications for technical efficiency and service effectiveness terms with equal weights we show that both iccr and ibcc models possess the essential properties of rationality uniqueness and benchmarking power a case analysis also demonstrates that the proposed novel idea approaches have higher benchmarking power than the conventional separate dea approaches more generalized specifications of idea models with unequal weights are also elaborated

labour and capital saving technical change in telecommunications the australian telecommunications sector is being improved and extended through substantial recent investment in intelligent technology such as digital switching fibre optics satellite and cellular transmission and the internet these technologies are being progressively integrated with technology from the broadcasting computer and electronics industries providing a unified information infrastructure for information transmission and processing technological progress embodied in new equipment has the effect of increasing the efficiency of the factors of production such efficiency increases can be biased towards a particular factor for instance the impact of labour augmenting technical change is a decline in the cost of labour per unit of production when such biases are apparent the relativity between the costs of labour and capital per unit of production is changed in the longer term technical change can impact on the rate of employment growth and also on the rate of capital accumulation in th

a branch of economics is missing micro micro theory jn the life history of most sciences there are movements toward the study of larger aggregates or toward the detailed study of smaller and more fundamental units my impression is that in most fields the movement toward the study of more micro units has predominated yet in economics in the 1930 s the movement was in the macro direction both physics and biology in the last three decades have made great strides by studying smaller and smaller entitiesphysics by studying more minute fundamental particles and biology by studying the fundamental elements determining genetics in a general sense economics has not been moving in this direction although some work of this nature exists the purpose of this paper is to review some samples of the work that exists and to argue that this area must become a major field of economic research and study the question of how individuals in multiperson firms influence firm decisions seems like such a natural question to ask that it is amazing that it is not part of the formal agenda of economists as a profession of course it has been asked but not by present day economists in their professional capacity in other words micromicroeconomics has never become an established field for the most part theorists have not only not raised this question but they have continued to develop micro theory in such a way as to discourage economists from raising this question part of the reason for this lies in the maximizing and optimizing biases of conventional micro theory and part can be ascribed to the consequences of the long period required to refine the theory so that elements that did not fit the basic model were discarded

the spanish automotive industry scale economies and input relationships this paper investigates the existence of economies of scale in the spanish automobile industry as well as the substitution possibilities between input pairs and the direct and cross price elasticities of demand for the various inputs by estimating a translog cost function for both a three input model involving capital labour and intermediate goods as well as a four input model where energy is separated from other intermediate goods the results of this study are consistent with the hypothesis of economies of scale in the spanish automobile industry particularly at the low and mean levels of output these results also are consistent with the hypothesis that capital is a substitute for the other inputs but that labour and intermediate goods are complements labour and energy also appear to have a complementary relationship over most of the data points in this study the significance of a complementary relationship between labour and intermediate goods is that any attempt by the spanish government to res

hydroelectric rent and precipitation variability the case of norway abstract norway is about to reorganize its electricity production sector from a predominantly administered one to one which is based on market prices and principles of efficiency the objective of this paper is to model the energy sector and to measure the size of hydro rent before and after the reorganization we construct a regionally diversified and integrated equilibrium model of production transmission and distribution of hydroelectricity particular attention is paid to the role of precipitation variability for the size and regional variation of hydro rent we consider alternative routes for assessing the size of hydro rent in a long run perspective

on optimal replacement thresholds with technological expectations abstract y balcer and s a lippman 1984 j econ theory34 292 318 develop a model to analyze the buy or wait problem under technological change they show that this dynamic problem has a threshold solution if the difference between the best available technology and that currently held exceeds a certain threshold then buy they also claim that the threshold is increasing in the discovery potential that is the faster the technology is changing the higher the threshold in this note we point out an error in the proof of that theorem and further we provide a numerical counterexample to the claim journal of economic literature classification numbers o32 o33

profit management of car rental companies abstract a car rental company consists of a fleet of available rentable vehicles waiting to be rented and being rented we model the company as a family of birth death processes bdps in equilibrium with finite size indexed by the company utilization parameter this metric is the ratio of the primary birth and death rates in these bdps relying on the basic concepts of company information and company entropy i e mean information we promote a procedure for profit management of car rental companies the company entropy represents the company uncertainty i e risk moreover finding optimal values of company utilization and fleet size leads to a unique management of that uncertainty introducing the coefficient of proportionality of a company as ratio of the renting revenue per vehicle per day and costs per vehicle per day we obtain an expression for the mean profit per day of a company i e profit attained per day from the average number of simultaneously rented vehicles as a function of company utilization fleet size and coefficient thus the profit management procedure reduces to finding optimal values of these three metrics as the key profit drivers of the rental business moreover an expression for the minimal value of the coefficient is introduced as a function of the other two metrics determining the zero mean profit per day thereby the efficiency of the company s fleet is determined as a reciprocal of this minimal value the developed procedure is illustrated on a company which is represented by the erlang loss system

rent seizing and environmental concerns a parametric valuation of the italian hydropower sector abstract this paper is the first attempt to estimate the hydroelectricity rent in italy as several concessions are about to expire and the first to analyze the implications of different redistribution mechanisms due to budgetary constraints local authorities want to capture a higher part of the rent thought to be considerable at the same time the renewal procedure entails the implementation of environmental mitigation measures as set forth in the water framework directive hence rent seizing and environmental protection generate a major trade off we focus our analysis on the county of sondrio home to 18 of the overall hydropower capacity where the first renewals will take place we obtain the highest rent ever estimated for hydropower production averaging from 30 3 mwh to 82 4 mwh these high values explain why local authorities are pushing for the introduction of a 30 revenue sharing fee as they would earn almost 90 of the rent much more than the 50 currently seized albeit satisfying the rent seizing objective the proposed fee hinders the implementation of costly mitigation measures in this paper we advocate the adoption of a resource rent tax as we show that it would reduce the trade off between rent seizing and environmental protection

the measurement and sources of technical inefficiency in the indonesian weaving industry production function models are estimated with a time series of cross section data on indonesian weaving establishments the sources of technical inefficiency are investigated three firm attributes are identified as being potentially related to firm efhciency tbey are firm ownership age and size the importance of these attributes as sources of inefficiency in the indonesian weaving industry is investigated and the implications of the find ings discussed

x efficiency rent seeking and social costs this paper investigates shifts in cost functions of monopoly and regulated firms operating under conditions of x inefficiency and rent seeking behavior we show that x inefficiency and rent seeking have significantly different implications for economic welfare distinctions are drawn between pecuniary and real x inefficiency and between sunk and continuing rent seeking costs in general for a given cost shift rent seeking behavior implies larger social costs than does x inefficiency theory however cost shifts caused by either x inefficiency or rent seeking are observationally equivalent this implies empirically measured cost shifts cannot unambiguously be attributed to either cause

measuring efficiency in the public sector using nonparametric frontier estimators a study of transit agencies in the usa transit agencies in the usa must provide service under increasing operating constraints using data from 1989 1993 technical efficiency among these firms is estimated and characteristics indicative of differential efficiency in transit agencies are identified this paper verifies the robustness of the second step regression results to the choice of efficiency measure by comparing results of the two step regressions using a pair of non parametric efficiency estimators it is discovered that the structure of government subsidy to this industry negatively affects not just cost efficiency but technical efficiency as well furthermore maintenance appears to be an important component of operational efficiency in this industry

production and costs in the south african motor vehicle industry this study investigates the existence of economies of scale in the south african motor vehicle industry as well as the substitution possibilities between input pairs and the direct and cross price elasticities of demand for the various inputs because of data limitations a translog cost function was estimated for only a three input model corresponding to a homogeneous production function involving capital labour and intermediate goods the issue of the existence of economies of scale in the south african motor vehicle industry is a particularly important one because south africa once again is a member of gatt and a full participant in the international trade arena the null hypothesis of constant returns to scale was rejected at the 0 5 level of significance thus the results of this model are certainly consistent with economies of scale in the south african motor vehicle industry the estimated direct price elasticities were consistent with the hypothesis that during the past two decades capital wa

efficiency and effectiveness in the urban public transport sector a critical review with directions for future research abstract this paper proposes a self contained reference for both policy makers and scholars who want to address the problem of efficiency and effectiveness of local public transport lpt with special emphasis on urban transit in a sound empirical way framing economic efficiency studies into a transport planning perspective it offers a critical discussion of the existing empirical studies relating them to the main methodological approaches used the connection between such perspectives and operations research studies dealing with scheduling and tactical design of public transport services is also developed the comprehensive classification of selected relevant dimensions of the empirical literature namely inputs outputs kind of data analysed methods adopted and policy relevant questions addressed and the systematic investigation of their interrelationships allows us to summarise the existing literature and to propose desirable developments and extensions for future studies in the field

cost structure and capacity in the norwegian pelagic fisheries the parameters of the short run cost function are estimated for three vessel types taking part in the norwegian pelagic fisheries purse seine vessels trawlers and coastal vessels the generalized translog functional form is used estimates of returns to scale are calculated and the results indicate that there are substantial economies of scale in all vessel classes it is further investigated whether excess capacity varies with vessel size and age the analysis suggests increased quotas per vessel to avoid rent dissipation with the total allowable catch given the number of participating vessels must be reduced

interpretation and measurement of capacity utilization the case of korean manufacturing this paper focuses attention on the conceptual difference between optimal ex ante and actual ex post capacity untilization cu the dynamic version of the efficient output approach to capacity untilization which this paper presents is theoretically superior to other alternative approaches our concept of optimal cu has been applied to estimate cu measures for korean manufacturing we fing that our measure of cu explains the trends and cycles in korean economy rather convincingly and that korean manufacturing has adjusted much more flexibly to market demand shocks than it has to exogenous changes in factor prices from the examination of the determinants of cu we find that while wages and material prices have positive effects on cu energy prices and capital stock have nagative effects the study also implies that overambitious government incentive policies to stimulate investment may have an adverse effect on capacity utilization

capacity utilization and its determinants for a container shipping line theory and evidence under utilization of fleet capacity appears to be a long lasting issue in the container shipping industry also there are some difficulties unsolved while measuring the ratio of capacity utilization cu of a container shipping line from the perspective of an engineering approach the slots capacity installed is the most popular way to represent the capacity output since the slots capacity installed lacks theoretical support this study adopts an economics model to find the capacity output of a shipping line further the derived cu ratio identifies the realized utilization of fleet capacity for a shipping line focused on the three largest container shipping lines in taiwan this article shows that their fleet capacity are totally under utilized and the movement patterns of cu ratios are approximately identical in addition the variations of cu ratios also suggest that the enactment of ocean shipping reform act has contributed a positive effect on the capacity utilization of a container shipping line