analytical solution for an investment problem under uncertainties with shocks abstract we derive the optimal investment decision in a project where both demand and investment cost are stochastic processes eventually subject to shocks we extend the approach used in dixit and pindyck 1994 to deal with two sources of uncertainty and we assume that the underlying processes are jump diffusion processes assuming certain conditions on the parameters we are able to derive a closed expression for the value of the firm finally we present comparative statics for the investment threshold with respect to the relevant parameters

campaign contributions and congressional voting a simultaneous probit tobit model m any citizens and scholars have been troubled by the influence that special interest groups appear to exert over policymaking as a result of their roles in the financing of political campaigns these concerns inspired the enactment of a number of election law reforms in the 1970s and have led to increasing popular support for public financing of electoral campaigns despite the public attention these issues have attracted few social scientists have attempted to analyze the financial relationships between interest groups and policymakers empirically 1 one such study was reported by durden and silberman 1976 who included contributions from the afl cio political action committee as an independent variable in an equation explaining congressional voting on minimum wage legislation their results indicated that campaign contributions significantly affected voting on that issue the work i have done differs substantially from that of durden and silberman in two ways first i have chosen to examine issues which were of considerably narrower concern than the minimum wage issue in the interest of simplicity i examine issues of concern to just one or a few groups i have also used a different econometric technique if campaign contributions are actually endogenous as seems plausible the single equation estimation technique employed by durden and silberman is subject to a possible simultaneous equations bias for each issue studied i have therefore jointly estimated a two equation system explaining both votes on the bill and contributions from an associated interest group the simultaneous probit tobit model which i use takes into account the dichotomous nature of the variable indicating a congressman s vote the non negativity constraint imposed on the contribution variable and the possibility of correlation between the error terms for the equations explaining these two variables 2 full information maximum likelihood fiml estimates for the model are consistent and asymptotically efficient

determinants of female administrative support personnel compensation at a large public university compared with research on faculty salaries and executive compensations very little is known about the earnings of administrative office support personnel this paper constructed and estimated the total compensation variant of a modified human capital earnings model using a 1989 90 fiscal year microdata sample consisting of about 300 all female office workers administrative secretaries regular secretaries and clerks at a large public university the total compensation consisting of wages plus actual dollar costs of five employer paid health life accident longevity sick leave vacation and pension benefit plans specification fitted the data reasonably well the pattern of estimated differential returns to specific human capital attributes within administrative support occupations tends to be significant and is consistent with the skill atrophy prediction of the human capital theory implications of the findings for secretarial productivity career choice decisions and opportunities for advancemen

innovations improvements and the optimal adoption of new technologies abstract this paper extends the literature on technology adoption by introducing a distinction between technological breakthroughs innovations and the engineering refinements improvements that follow such a breakthrough firms do not necessarily wait for a future technological breakthrough but instead have an incentive to delay the adoption of a new technology until it is sufficiently advanced we characterize a firm s adoption decision as the solution to a continuous time infinite horizon dynamic programming problem which gives rise to an ordinary differential equation that is highly non linear and does not have a closed form solution we thus employ projection techniques and show how these techniques can be applied to the analysis of optimal stopping problems

technology acquisition with technological progress effects of expectations rivalry and uncertainty abstract we study the effect of expectations regarding technological progress on a firm s technology adoption decision in a duopoly new generation technologies become available one in each period with successive generations representing better and better performance a game theoretic framework is used involving two identical firms competing in the same market over two periods it is shown that expectations retard adoption of the first period technology it is also shown that an asymmetric equilibrium results in higher social welfare and that more investment does not necessarily mean higher levels of welfare uncertainty is shown to have either no effect or a negative effect on the adoption of the current technology when nash equilibrium holds however when subgame perfect equilibrium holds uncertainty has a more complicated effect and numerical examples show that it may even encourage the adoption of the current technology relative to the deterministic equilibrium

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

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

a test of the structure of pac contracts an analysis of house gun control votes in the 1980s enactment of the bill was a major victory for the national rifle association which had worked for years to win relaxation of the landmark gun control act of 1968 congressional quarterly almanac 1986 p 82 i introduction every election the same political action committees pacs contribute millions of dollars to candidates for office well informed participants in the political process surely must get value for their money yet empirical research fails to provide systematic evidence that campaign contributions influence congressional roll call votes 1 a mischaracterization of the exchange between pacs and politicians may produce these contradictory results empirical studies of roll call voting typically use pac contributions from only one election cycle earlier studies generally assume prepayment in the prior congress while more contemporary studies assume a spot exchange recent empirical work however suggests another possibility interest groups may buy current influence with money spent over multiple election cycles stratmann 1995 shows that contributions from both the current and the previous election cycles influence floor votes on agricultural price supports snyder 1990 1992 presents evidence that interest groups make long term investments in politicians previous studies by arbitrarily imposing a payment structure may have produced erroneous estimates of the influence of pac money on legislative votes we examine roll call votes on gun control in the u s house of representatives during the 1980s to determine whether pacs make spot market purchases prepay for votes in the prior election cycle or make long term investments we investigate whether pac contributions have a durable long term investment effect as snyder 1992 suggests we consider two types of evidence concerning the campaign contribution contract first we examine the pattern of expenditures by the two dominant interest groups concerned with gun control the national rifle association nra and hand gun control hgc their expenditures provide strong evidence against the spot market exchange hypothesis both groups made significant expenditures in sessions of congress in which no floor vote occurred nor were these expenditures purchasing services such as committee work in a spot market exchange further 1986 nra expenditures are significantly higher for first term representatives which is consistent with long term investments but contradicts a spot exchange since freshmen have the least influence to sell second we include expenditures from both the current and the five previous election cycles as separate independent variables in a model of roll call voting to date no empirical paper tests whether pac money from more than two cycles influences roll call voting and only stratmann 1995 and grenzke 1989 use a model that specifies money from more than one cycle in an equation explaining roll call votes our probit estimates indicate that nra expenditures in the three most recent election cycles and hgc expenditures in the two most recent cycles buy votes the independent effect of expenditures from different cycles suggests that contributions are neither an unqualified one session prepayment nor a spot exchange the influence of nra expenditures two sessions prior to the roll call votes is evidence of a long term investment the literature on the determinants of roll call voting assumes that pac contributions alter representatives votes interest groups might instead simply provide campaign assistance to their supporters to affect the composition of congress stratmann 1991 bronars and lott 1997 if a difficult to quantify variable and thus omitted from regressions signals a representative s true position and interest groups make campaign contributions on the basis of this variable pac contributions might appear to influence votes the pattern of contributions and votes on gun control however indicates attempts by the nra and hgc to influence votes not merely the composition of congress

a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

constituency opinion and pac contributions a case of the national abortion and reproductive rights action league to test whether interest group politics doharm to a representative democracy thispaper simulates congressionaldistrict level constituency opinion onabortion analyzing the relationshipbetween the constituency opinion andnaral s contributions in the 102nd and103rd congresses this paper presentsempirical evidence that naral scontribution decision is influenced byconstituency opinion the evidence however is mixed constituency opinioninfluences naral s decision on who will getits money constituency opinion however does not influence naral s decision on whowill get more money according to theseresults financial representation byinterest groups does not seriously causeharm to a representative democracy but itcan still bias the representativeness tosome extent an interest group may selectlegislators whose districts support itsposition less strongly and contribute agreater amount of money to the legislators

investment in technological innovations an option pricing approach abstract this paper develops a model of the optimal investment strategy for a firm confronted with a sequence of technological innovations we incorporate many of the most important characteristics of real world technology markets for example we permit innovations to be stochastic in their arrival times and their profitability we also incorporate learning so that firms adopting current innovations become better able to benefit from future innovations the model yields four distinct investment strategies the model is then used to predict actual firm policy these implications are discussed and compared with observed firm behavior

measuring the extent of earnings discrimination an update ordinary least squares ols regression and data from the march 1990 current population survey are used to estimate yearly earnings averages for white males white females black males and black females in order to test for the possible existence or gender and or race discrimination earnings estimates are decomposed using the tradional oaxaca 1973 and blinder 1973 methodology in comparing these results with those from carlson and swartz 1988 using 1979 data we find that overall and unexplained residual differences have declined quite substantially but that they still favour white males we then incorporate an extension of the traditional methodology jackson and lindley 1989 which allows for testing for the significance of enexplained residuals and for jointly testing for the significance of residual effect components the constant and coefficient effects these results call into question the unambiguous conclusion that earnings differentials uniformly favour white males strong support is

biomass and ccs the influence of technical change the combination of bioenergy production and carbon capture and storage technologies beccs provides an opportunity to create negative emissions of co2 in biofuel production however high capture costs reduce profitability this paper investigates carbon price uncertainty and technological uncertainty through a real option approach we compare the cases of early and delayed ccs deployments an early technological progress may arise from aggressive r d and pilot project programs but the expected cost reduction remains uncertain we show that this approach results in lower emissions and more rapid investment returns although these returns will not fully materialise until after 2030 in a second set of simulations we apply an incentive that prioritises sequestered emissions rather than avoided emissions in other words this economic instrument does not account for co2 emissions from the ccs implementation itself but rewards all the sequestered emissions in contrast with technological innovations this subsidy is certain for the investor the resulting investment level is higher and the project may become profitable before 2030 negative emission in bioethanol production does not seem to be a short term solution in our framework whatever the carbon price drift

the danish green certificate system some simple analytical results we formulate a simple static equilibrium model for the electricity market taking account of both green certificates and co2 emission permits the objective is to investigate the relationship between these markets under the existence of upper and lower price bounds on the green certificates both in the short and in the long run we perform various comparative static changes of the parameters of the model and study how these affect the endogenous variables of the model as well as producers and consumers surplus we also investigate the effects of imports and exports of electricity several comparative static results are derived and in particular it is shown that harsher co2 emission constraints and increased import wholesale price both may lead to reduced capacity of green electricity

is there gender discrimination in named professorships an econometric analysis of economics departments in the us south this study examines the correlates of the probability that an individual academician holds a named professorship named professorships like other positions within an organization are determined by a mixture of market and non market forces thus both merit both past and expected future productivity and discrimination may play a role regression results and blinder oaxaca decomposition tests presented here support a conclusion of gender discrimination in the named professorship process at american institutions of higher education specifically it is found that gender discrimination results in a 7 6 percentage point disadvantage for females relative to males regarding the likelihood of holding a named professorship in economics

irreversible investment and r d spillovers in a dynamic duopoly investments in new production processes usually involve a significant amount of rd an increase in uncertainty delaying the equilibrium calls for higher subsidization rates third numerical simulations show that the spillover reduces the difference between the leader s and the follower s maximum value functions accordingly our model can help generate realistic market betas

the gender salary gap in british academia this paper considers salary determination and the gender salary gap in the academic labour market utilizing a particularly detailed data set of academics from five old established universities results reveal an aggregate gender salary differential for academic staff of 15 most of this differential can however be explained by our model evidence suggests a limited opportunity for female academics to combine career and family despite the flexibility of an academic job and emphasizes the importance of mobility to the male career publication record is found to be an important determinant of salary

labor pac contributions and labor legislation a simultaneous logit approach labor pacs are used to explore the potential congressional influence of campaign contributions from special interest groups pacs of organized labor are particularly useful for two reasons first a set of labor issues are defined each year by the afl cio and so ad hoc decisions about pertinent legislation are not made by the researcher secondly there are measurable traits of representatives and constitutents that may lead to a predisposition of labor support by combining these two attributes a model is developed to investigate the question of congressional influence

the influence of gender on faculty salaries in the united states 1969 89 this study estimates the earnings differential between the male and female faculty in the united states over a period of two decades 1969 1989 five micro level data sets are used for this purpose a modified version of the widely used oaxaca model is used in the estimations it is found that the racial earnings gap narrowed considerably more than did the gender earnings differential over this period a higher male female earnings gap at the professor level relative to junior ranks suggests that relatively recent entrants in the academic labour market face a less discriminatory environment than did their predecessors a controversial finding is that the discriminatory component of the earnings differential between male and female faculty fell between 1969 and 1984 but rose thereafter

good timing the economics of optimal stopping abstract this paper presents an economic interpretation of the optimal stopping of perpetual project opportunities under both certainty and uncertainty prior to stopping the expected rate of return from delay exceeds the rate of interest the expected rate of return from delay is the sum of the expected rate of change in project value and the expected rate of change in the option premium associated with waiting at stopping the expected rate of return from delay has fallen to the rate of interest viewing stopping in this way unifies the theoretical and practical insights of the theory of stopping under certainty and uncertainty

trade protection and the role of campaign contributions in u s food and tobacco industries to exert political pressure an organization must be capable of obtaining contributions from its members for lobbying activities for this reason past studies analyzing the determinants of political outcomes such as tariffs such as caves 1976 lavergne 1983 saunders 1980 salamon and siegfried 1977 ray 1981a 1981b have used an industry s structural characteristics such as the number of firms and the sales concentration ratio to account for political activity more recently baldwin 1989 among other economists has advocated the study of more direct indicators of lobbying such as political funding levels and the number of employees supported by private interests the importance of lobbying activity in determining the levels of trade protection depends upon the responsiveness of government to such activity bhagwati 1989 distinguishes two types of government behavior passive behavior and self willed behavior under the first type policymakers maximize political support and will be more likely to respond to lobbying activity 1 however if behavior is driven by self willed principles then policymakers will make choices that reflect the needs of their constituents and will be less susceptible to special interest group pressures viewed from the perspective of an industry that is willing to spend resources in order to influence political outcomes contributions to political candidates can have a facilitative and or a persuasive role 2 under a facilitative role campaign contributions are merely a transaction cost for granting access and enabling the industry to inform politicians about the industry s needs in this case the industry structural characteristics are what lend political weight under a persuasive role campaign contributions are independently effective in influencing political outcomes regardless of the industry s structural attributes combining the latter role with the passive government behavior discussed above gives rise to models of exchange and political investment as in the work of peltzman 1976 concern over identifying the determinants of trade barriers and the role of campaign contributions in particular follow from three considerations the first consideration is efficiency if institutional arrangements encourage lobbying as a means of influencing policy choices then a significant waste of resources may occur through competition in the political arena 3 lobbying therefore may result in a decline of overall economic efficiency the second consideration is the dominance of special interests over social concerns the arguments for protection often include protection of jobs and unfair competition which may differ from the factors that drive the policy decisions such as the strength of special interest lobbying the third consideration is redistributional justice a significant redistribution of wealth may occur as trade barriers increase prices and domestic industry profits at the expense of domestic consumers the objectives of this article are twofold the first objective is to explain the variation of the level of trade barriers tariffs and import quota tariff equivalents these will be explained in terms of industry structure characteristics number of firms seller concentration and geographic dispersion comparative disadvantage and lobbying activities using data from the u s food and tobacco manufacturing industries for the empirical analysis the second objective is to ascertain the role and importance of lobbying activities in determining the levels of trade barriers a novel feature of this article is that it incorporates more direct measures of lobbying activity such as the contributions of political action committees pacs associated with the industries affected by the trade barriers it also emphasizes the need to consider contributions and protection together in order to capture the exchange between political investments and income transfers as shown in snyder 1990

timing of investment under technological and revenue related uncertainties the effects of two forms of uncertainty on the timing of irreversible investment are considered technological uncertainty is modeled as a poisson arrival process that reduces the cost of investment while revenue uncertainty is modeled as a diffusion process technological uncertainty has no effect on the optimal investment policy when revenue uncertainty is absent however when combined with revenue uncertainty increased technological uncertainty makes investment less attractive relative to waiting the paper also makes a more general point in clarifying the difference in how diffusion type of uncertainty and unidirectional stochastic progress affect investment timing

pacs and the congressional supermarket the currency is complex although pacs attempt to influence the legislative process with contributions this research finds little evidence that the contributions of 120 pacs affiliated with 10 organizations affected the voting patterns of the house members who served continuously from 1975 to 1982 in the few cases in which a relationship between contributions and a member s votes is established the analysis indicates that contributions are a surrogate measure of a more important and larger package of support for the member from the interest groups two stage least squares regression models are used to test the relationship between pac contributions and a member s votes controlling for the incumbent s ideology and party and the political leaning of the district interviews with pac officials supplement the statistical analysis

interactions between the power and green certificate markets abstract the current trend of liberalising the power markets is combined with ambitious deployment plans for power production based on renewable energy supplies a new policy scheme to ensure this extension has been developed in the form of a green certificate system with a politically determined target of deployment in such a system producers of renewably based electricity receive tradable certificates in proportion to the electricity they produce the producer can thereby sell these certificates and receive additional revenue apart from the power price this paper studies the price and consumption effects of such a system with a simple model we show that the effects are ambiguous this ambiguity is caused by the interaction between the two markets therefore the green certificate system is difficult to manage if the state has parallel energy targets such as a desired deployment of renewably based energy and a stabilisation or reduction of the energy consumption in addition this complicates the regulation through a deployment target of renewably based power production as the regulator has to be aware of the different effects which follow a specific target until now these effects have not been considered in the analyses of the green certificate system when introducing the system even though it might have considerable consequences for the success of the system

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

the investment strategies for a dynamic supply chain under stochastic demands abstract a successful supply chain management scm should aim to maximize the net present value of joint profits along the supply chain however the volatile market conditions cause the future cash flows along the supply chain more difficult to anticipate to obtain higher supply chain value the supplier and the retailer should cooperatively determine the optimal entry time this paper proposes a two stage dynamic optimization model by using a real option approach and then performs the sensitivity analyses for the option value and the investment threshold the impacts of some critical factors including the growth rate and the volatility of demand shock sunk cost and relating operational costs cost rates fix costs holding costs of inventory and shipping costs are investigated

the ideological component of senate voting different principles or different principals evidence exists on both sides of the question of whether or not legislator specific ideologically driven shirking of constituent interest occurs in this paper we use a well known model of such shirking by senators as our point of departure and add measures of inter state constituent interests the role of campaign contributions and hence the importance of whether or not senators are up for reelection we find some evidence that the model provides a stronger explanation for senators up for reelection than for those who are not and that campaign contributions help determine voting decisions by these legislators finally accounting for inter state constituent interests shirking is not a significant variable in the voting decisions of senators facing reelection thus it appears that the reelection interests of some senators have been mistaken for ideologically driven shirking

optimal timing of transmission line investments in the face of uncertain demand an option valuation approach abstract grid based electrification programmes involve irreversible transmission line investments that can be delayed by temporarily resorting to decentralized powet supply technologies in this context decision makers face the difficulty that the future evolution of demand and thus the returns from postponing the transmission line investment are uncertain this imposes an opportunity cost resembling the value of a financial call option therefore standard option valuation techniques can be applied to solve the problem of timing transmission line investments in the presence of stochastic demand it is shown analytically and in terms of numerical examples that demand uncertainty may provide a strong incentive to defer the extension of the grid beyond the date that would be optimal under deterministic conditions

sex discrimination in faculty salaries evidence from a historically women s university during the past several years a number of studies have appeared in this review and elsewhere examining the earnings and promotion of women faculty a finding common to most of these studies is that the female male salary differential is smallest at entry level but widens over time 2 indeed george johnson and frank stafford state after presenting such evidence for michigan state university we believe this qualitative result would be observed for any university in the united states for which the sample size is sufficiently large 1974 p 899 while the qualitative findings of faculty salary studies have been similar interpretations have differed on the one hand the human capital view attributes the widening sex differential or flatter female earnings profile to differences in acquired skill and productivity this literature emphasizes differences in continuous labor market experience hours of work and the relative teaching research division of labor on the other hand the discrimination view attributes the widening differential to increased labor market discrimination with respect to experience the sex differential is smallest at entry level where universities must compete and pay prevailing salaries to attract incoming faculty members however discrimination is more easily exercised in the internal university labor market by male faculty and administrators as job mobility lessens with age because of fixed costs tied moves 3 university specific job training a shorter benefit span etc the strongest evidence supporting the discrimination view is the existence of significant unexplained salary differentials even where detailed data exist on research and teaching performance the purpose of this note is to examine the salary structure at a large university which was historically the state s university for women but is now fully coeducational to our knowledge no other such study is available comparison of results from such a study with those already in the literature can shed light on the interpretation of salary differential studies we find somewhat surprisingly an exception to the finding by johnson and stafford and others of a widening femalemale salary differential with experience apart from some qualifications discussed below we find a small differential at entry but little difference in the reward structure to men and women with respect to experience ceteris paribus alternative interpretations of this evidence are provided while we cannot clearly test between the human capital and discrimination explanations for salary differentials our evidence strongly suggests that universities can and do exercise significant discretion in the awarding of salaries discretion which is presumably made possible by the not for profit nature of these institutions see armen alchian and reuben kessel section i briefly describes the data source while section ii examines specification and then tests for functional form section iii university of north carolina greensboro we thank terry g seaks and frank stafford for helpful suggestions we are equally responsible for the contents of the paper a partial list includes george johnson and frank stafford with later comments by steven farber and by myra strober and alice quester nancy gordon thomas morton and ina braden emily hoffman david katz marianne ferber and jane loeb ferber and betty kordick ferber loeb and helen lowry and james koch and john chizmar 2 there is debate over whether the differential begins to narrow late during the working life as argued by johnson and stafford see johnson and stafford 1977 and ferber loeb and lowry 3viewing mobility within a household context see jacob mincer the potential for discrimination against married women faculty may be higher than with male or unmarried female faculty

second mover advantages in the strategic adoption of new technology under uncertainty abstract this paper introduces technological uncertainty into a timing game of new technology adoption it is shown that the timing neither necessarily involves first mover advantages in precommitment equilibria reinganum review of economic studies xlviii 1981 395 405 nor rent equalization due to the threat of preemption fudenberg and tirole review of economic studies lii 1985 383 401 rather there may be second mover advantages because of informational spillovers furthermore the model predicts that the equilibrium payoffs will typically be discontinuous and non monotonic in the probability that the new technology is profitable a welfare analysis reveals several market failures and suggests that policy intervention should adequately depend on the nature of uncertainty and the rate of technological progress

optimal timing of technology adoption abstract in a dynamic programming framework this paper investigates the optimal timing of technology adoption by a competitive firm when technology choice is irreversible and the firm faces a stochastic innovation process with uncertainties about both the speed of the arrival and the degree of improvement of new technologies a numerical example illustrates how the optimal timing decision is affected by changes in parameter values reflecting market conditions the firm s initial technological attributes and the characteristics of the stochastic innovation process some of these effects turn out to be in sharp contrast to common intuition contrasting the optimal decision rule derived here with the rule obtained under the net present value shows that the former implies a slower pace of adoption than implied by the latter the optimal decision rule is generalized for the case of multiple technology switches and it is shown that for all the switching decisions except the last one the optimal rule satisfies the net present value criterion

watchfully waiting medical intervention as an optimal investment decision abstract watchfully waiting involves monitoring a patient s health state over time and deciding whether to undertake a medical intervention or to postpone it and continue observing the patient in this paper we consider the timing of medical intervention as an optimal stopping problem the development of the patient s health state in the absence of intervention follows a stochastic process geometric brownian motion spontaneous recovery occurs in case the absorbing state of good health is reached we determine optimal threshold values for initiating the intervention and derive comparative statics results with respect to the model parameters in particular an increase in the degree of uncertainty over the patient s development in most cases makes waiting more attractive however this may not hold if the patient s health state has a tendency to improve the model can be extended to allow for risk aversion and for sudden poisson type shocks to the patient s health state

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

irreversible investment uncertainty and ambiguity the case of bioenergy sector we analyze production and investment decisions of an agent in industrial activities that are characterized by two forms of uncertainty demand uncertainty in terms of number of buyers and competitive effect uncertainty in terms of other energy resource we apply our model on the bioenergy industries we compare the case of an ambiguity neutral agent with that of an ambiguity averse agent we show that the investment decision of an agent depends on the effects of both the capital investment and the level of production on the cost and the uncertainty the agent is confronted with moreover we find that ambiguity aversion tends to decrease the agent s optimal levels of production and investment our numerical analysis of the french case illustrates the different effects associated with demand uncertainty and competitive effect uncertainty

pacs lobbies and political conflict the case of gun control previous research has shown that pac contributions from the national rifle association as well as letters and lobbying by handgun control inc significantly affected congressional voting on the firearms owners protection act of 1986 holding constant ideology party constituency characteristics and a proxy for prior position on the issue using data from that study this paper shows that contributions have a somewhat different effect than lobbying contributions from nra were primarily targeted at nra supporters and had the net effect of making the progunners even more so contributions from handgun control while they did not significantly reinforce the proclivities of the gun controllers were directed only at that group at least in this case money appears to exacerbate conflict by contrast the police lobby directed its attention at both gun controllers and pro gunners the lobby effectively induced pro gunners to moderate their position

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

investments of uncertain cost abstract this paper examines irreversible investment decisions when projects take time to complete and are subject to two types of cost uncertainty the first is technical uncertainty i e uncertainty over the physical difficulty of completing a project which is only resolved as the investment proceeds the second is input cost uncertainty i e uncertainty over the prices of construction inputs or over government regulations affecting construction costs which is external to the firm these two types of uncertainty have very different effects on the investment decision a simple investment rule is derived that maximizes firm value and is used to analyze the decision to start or continue building a nuclear power plant during the 1980s

entry level salaries of academic economists does gender or age matter i introduction since the mid 1970s earnings differentials in academic labor markets have been extensively investigated with particular attention focused on salary differentials between males and females the leading studies use similar methodologies but differ in terms of the time period analyzed data sources and whether a single academic discipline or multiple disciplines are considered for example johnson and stafford 1974 investigate several academic professions in 1970 jusenius and scheffler 1981 consider a single discipline economics in 1973 and include a cross section of universities and professorial ranks as well as race several investigators including katz 1973 hirsch and leppel 1982 rickman 1984 and raymond sesnowitz and williams 1988 focus on a single college or university and include diverse academic disciplines the latter two studies raise the question of whether gender continued to matter in academic labor markets in the 1980s and reach opposite conclusions a consistent finding transcending early studies of academic labor markets is that earnings differentials are smallest between men and women who are at the beginning of their careers for example johnson and stafford in a widely cited study state the most important finding is that the salaries of females start out at not much less than those of males 4 to 11 percent in the six disciplines in our sample and then decline 1974 901 this paper investigates entry level salaries in a single academic discipline by considering a cross section of newly hired economists the primary source of labor market information is a unique survey of entry level salaries in the 1987 88 academic year it might seem that by the late 1980s gender differentials should have disappeared at the entry level but like johnson and stafford s 1974 earlier result our survey reveals newly hired females received 1060 3 4 percent less than males our principal purpose is to determine whether this gender differential and the effects of age are significant once other determinants of earnings are taken into account for example we consider and control for terminal degree status the quality of the ph d granting department field of specialization highest degree offered by the hiring department differences in cost of living across areas and other institutional factors that can influence beginning entry level salaries we first describe the data set developed primarily from a survey which is used to estimate entry level earnings equations we also briefly compare our survey to other surveys providing information on market outcomes for economists we then present estimates of the determinants of entry level salaries and discuss the influence of gender age and other determinants of earnings ii the survey a total of 469 u s economics departments were surveyed in the summer and fall of 1987 with 258 departments responding 55 percent 1 the 1987 88 academic year salary of each new hire was requested of each department demographic information age sex and human capital characteristics ph d granting university primary field of specialization and degree status were also requested for each new hire in addition the survey included questions on whether the hiring college university is privately or publicly supported the administrative reporting channel of the economics department highest degree offered and number of entry level persons hired the identities of the hiring department and the university at which the newly hired economist did his or her graduate work are used to construct two measures of quality the quality of the department where the ph d work was done is the first measure and the quality of the hiring department is the second 2 the survey was designed to provide microdata on individual entry level economists for the purpose of estimating earnings equations in an effort to maximize responses the questionnaire was intentionally brief only questions directly relevant to estimating the earnings equation of entry level economists were included

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero