a risk responsive acreage response function for millet in niger abstract in this paper the impact of price risk on millet production in niger is investigated the hypothesis that farmers respond to output price risk is tested the results indicate that millet acreage planted decreased when millet price risk increased or when price risk of the competing crop decreased and therefore farmers do respond to changes in risk

the union impact on profits in the supermarket industry a number of studies have found that unions lower profits but controversy continues over whether the union impact is or is not greater in more concentrated markets this empincal controversy is linked to two underlying issues whether unions distort capital investment decisions and the total volume of monopoly profits in the u s economy research on the supermarket industry reveals that unions lower profits substantially in this sector and that indeed their impact is greater when local markets are more concentrated recently there has been an explosion of research concerning the union impact on profits and the associated question of whether or not unions reduce profits more in noncompetitive than competitive sectors for a review of studies see voos and mishel 1986 this has become an important empirical issue for a variety of reasons one concern has been whether unions distort capital investment decisions insofar as unions merely capture monopoly rents as opposed to reducing the rate of return in competitive industries the presumption is that unions create less distortion a separate issue has been whether or not previous research has underestimated the extent of total monopoly rents in the u s economy this would occur if observed profits are less than total profits in noncompetitive sectors because in those sectors a portion of monopoly rents is being redistributed to unionized employees while most studies find that unions lower profits there is some controversy regarding whether or not unions reduce profits more in industries with less competitive market structures freeman 1983 and karier 1985 both find that unions have a much larger effect in concentrated industries however hirsch and connolly 1985 question that conclusion and clark 1984 reports contrary evidence with regard to market share all previous investigations of this issue utilize manufacturing inter industry data cross sections of predominantly manufacturing firms or 2 digit sic manufacturing industry observations disaggregated by state this paper reports the results of research designed to ascertain whether unions reduce profits in one relatively homogeneous nonmanufacturing industry supermarkets and if their impact is larger when local markets are more concentrated lamm 1982 and marion et al 1979a and 1979b have explored the impact of unions and of concentration respectively on food prices moreover excellent data on supermarket profits exist the data give our study several unique qualities because observations are on firms in specific geographic markets in a single disaggregate industry any estimated union profit effect cannot be said to result from a correlation between unionism and unobserved industry specific factors the study is also the first to be based on evidence from the nonmanufacturing sector the data utilized and the model estimated the data on which this research was based were gathered under subpoena by the joint economic comreceived for publication july 8 1985 revision accepted for publication october 17 1985 university of wisconsin and industrial union department afl cio respectively special thanks to frederick geithman for many helpful suggestions and for research assistance and to bruce marion for making the data available to us and for commenting on our results all opinions as well as errors are the authors own funds for a portion of this research came from the university of wisconsin graduate school during a portion of this research mishel was affiliated with cornell university

union nonunion compensation differentials and industry structure abstract this paper examines the impacts of industry output and labor input market structures on workers total compensation in u s manufacturing for empirical analysis cps may 1983 data were matched with 1982 census of manufacturing results indicate that employees in highly concentrated product markets proxied by four firm concentration ratio crr earn more independent of their union membership second union members in the smaller plant sizes have the most to gain and the union advantage disappears for medium to large plants third and perhaps most important the joint effects of unionism and crr on earnings depend on the size of the manufacturing plant in conclusion the paper finds support for dowrick s 1989 conjecture that profits enhancing product market conditions generally tend to increase earnings

marketing margins and price uncertainty the case of the u s wheat market this paper seeks to determine the effect of changes in output price risk on marketing margins a theoretical model of price determination in a marketing channel with risk averse firms is developed this model shows that if marketing firms are competitive and decreasingly absolute risk averse then an increase in output price risk should result in higher expected marketing margins empirical evidence from the wheat marketing channel supports the theoretical model increased price variability significantly increases wheat marketing margins for both the farm mill margin and the mill retail margin these results suggest a potential benefit from price stabilization programs

unions and monopoly profits using cross sectional data for u s manufacturing the author identifies a negative effect of unions on the profits of highly concentrated industries and virtually no effect on the profits of unconcentrated industries the results for concentrated industries are explained in terms of the monopoly model which predicts a negative effect of unions on profits equivalent to the change in employer s surplus the monopoly model also suggests that previous profit studies which omitted the union variable were likely to significantly underestimate the relationship between concentration and profits this prediction is also supported by empirical evidence m sany studies have demonstrated the ability of unions to raise wages above the level of nonunion workers higher union wages in turn may affect the level of prices employment capital intensity productivity and profits recent studies by clark 1982 and freeman 1983 have found significant negative effects of unions on profit rates in the united states using line of business data from 1970 to 1980 for 900 firms clark found a negative effect of unions on the rate of return to capital more specifically the union effects were found to be significantly negative when market shares were low and insignificant when market shares were high according to clark the absence of a union effect in the latter case can be explained by the ability of firms with market power to pass on higher union wages into higher prices 1982 p 47 on the other hand freeman 1983 using data from the survey of manufactures from 1958 to 1976 and the internal revenue service from 1965 to 1976 also found a negative effect of unions on profits contrary to clark s results however the union profit effect was negative only in concentrated industries the point of contention appears to be the role of concentration in determining the union profit effect rather than the overall negative impact of unions the results of clark and freeman are important because previous industrial organization research on profit rates generally ignored unions for instance of the forty six profit studies surveyed by weiss 1974 none included a union variable more recently a profit study in this review by ravenscraft 1983 using high quality line of business data from the federal trade commission also ignored unionization as will be demonstrated the omission of the union variable leads to an understatement of the effect of industrial concentration on profits this means that concentrated industries generate much greater profits than indicated by previous research in order to measure the size of the understatement a new concept employer s surplus is developed which illustrates the theoretical impact of a union wage increase on monopoly profits the empirical estimates of employer s surplus in this paper indicate how monopoly profits are divided between firms and unions most of the data used in this study were obtained from james medoff and charles brown 2 unlike the previous two studies each observation corresponds to a state by two digit sic industry for manufacturing in 1972 because of the large variations in unionization across states this data set offers a useful test of the union profit effect i employer s surplus according to accepted theory the profit maximizing monopolist will employ labor up to the point where the market wage equals the marginal revenue product mrp 3 if for simplicity we assume that all other factors are variable then the mrp curve represents the monopolist s long run demand for labor in the absence of unions employment is determined by the intersection of the mrp curve and nonunion wage wn as pictured in figure 1 if unions raise wages to wa employment will decrease from ln to l with the reducreceived for publication november 28 1983 revision accepted for publication july 6 1984 eastern washington university i am very grateful to dave bunting lisa brown bill dickens claire brown and george strauss for their valuable suggestions on this research this paper is a revised version of chapter 3 from the author s ph d thesis the union impact on profits productivity and prices university of california berkeley 1 see parseley 1980 for a recent review of this literature 2 i would like to thank brown and medoff for making these data available to me 3 marginal revenue product is equal to marginal revenue multiplied by marginal physical product see rees 1979

transparency efficiency and the distribution of economic welfare in pass through investment trust games we design an experiment to examine behavior and welfare in a multi level trust game representing a pass through investment in an intermediated market in a repeated game an investor invests via an intermediary who lends to a borrower a pre experiment one shot version of the game serves as a baseline and to type each subject we alter the transparency of exchanges between non adjacent parties we find transparency of the exchanges between the investor and intermediary does not significantly affect welfare however transparency regarding exchanges between the intermediary and borrower promotes trust on the part of the investor increasing welfare further this has asymmetric effects borrowers and intermediaries achieve greater welfare benefits than investors we discuss implications for what specific aspects of financial market transparency may facilitate more efficiency

the structural determinants of union bargaining power this paper investigates the structural determinants of variation in union power across manufacturing industries using a pooled sample of unionized establishments from the expenditure on employee compensation surveys of 1968 72 the author estimates wage equations augmented with measures of product market structure bargaining structure and the size distribution of unions the results suggest that union wage gains are greatest where discretionary pricing power enhances employers ability to pay and where unions achieve high coverage practice centralized bargaining and avoid union fragmentation on the other hand centralized bargaining provides no advantage in competitive industries

a test of whether millet acreage in niger is determined by official or private market prices niger has two separate marketing channels for grain one is the official system operated by the government the other is a parallel channel of private traders researchers or policy makers wanting to study effects of price policies on producers are faced with two sets of prices this paper seeks to answer the question which prices matter non nested hypothesis tests are conducted for millet acreage response equations the results show that prices from the larger private market are the prices that matter

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

marshall and walras disequilibrium trades and the dynamics of equilibration in the continuous double auction market prices and quantities converge to the theoretical competitive equilibria in continuous double auction markets the double auction is not a tatonnement mechanism disequilibrium trades take place the absence of any influence of disequilibrium trades which have the capacity to change the theoretical equilibrium appears to be due to a property found in the marshallian model of single market adjustments the marshallian model incorporates a principle of self organizing coordination that mysteriously determines the sequence in which specific pairs of agents trade in an environment in which market identities and agent preferences are not public disequilibrium trades along the marshallian path of trades do not change the theoretical equilibrium the substance of this paper is to demonstrate that the marshallian principle captures a natural tendency of the adjustment in single continuous double auction markets and to suggest how it takes place the marshallian model of quantity adjustment and the walrasian model of market price adjustment can be seen as companion theories that explain the allocation and price processes of a market the marshallian model explains the evolution of the allocation who will meet and trade and the walrasian excess demand explains the evolution of prices when they do

experimental economics accounting and society in memory of john dickhaut abstract this volume consists of papers presented at a conference in memory of john dickhaut the conference sponsored by the economic science institute at chapman university focused on four areas of john s research interests during his career accounting and society methodology in experimental economics neural economics and trust and reciprocity all of the papers make novel interesting contributions to the study of human behavior in economic institutions and should interest readers in a range of fields including accounting anthropology economics finance neurology and psychology

inducing risk neutral preferences with binary lotteries a reconsideration abstract we evaluate the binary lottery procedure for inducing risk neutral behavior we strip the experimental implementation down to bare bones taking care to avoid any potentially confounding assumptions about behavior having to be made in particular our evaluation does not rely on the assumed validity of any strategic equilibrium behavior or even the customary independence axiom we show that subjects sampled from our population are generally risk averse when lotteries are defined over monetary outcomes and that the binary lottery procedure does indeed induce a statistically significant shift toward risk neutrality this striking result generalizes to the case in which subjects make several lottery choices and one is selected for payment

a market equilibrium analysis of the impact of risk on the u s rice industry an economic model of supply demand for u s rice suggests that increases in risk result in decreased acreage and increased marketing margins in a market equilibrium context the empirical results also suggest rice production and rice prices are more responsive to changes in risk faced by marketing firms than changes in risk faced by producing firms

estimation of multicrop production functions this paper considers whether separability or nonjointness is the better approach for attaining tractability for multicrop production function estimation characteristics of agricultural production associated with allocated inputs physical constraints and output determination imply sufficient nonjointness for estimation whereas separability is less plausible the paper also addresses estimation of production functions with allocated inputs where allocations are not observed and demonstrates a proposed approach by way of example

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

controlling preferences for lotteries on units of experimental exchange in an experimental setting when outcomes are stochastically related to actions predictions of equilibrium behavior depend not only on the participants preference orderings of outcomes but also on their orderings of lotteries on outcomes as well we introduce and test a reward structure that can be utilized in any experimental setting to allow the experimenter to decree beforehand the subjects preferences for lotteries on experimental outcomes we show analytically that the proposed reward structure can induce subjects to behave as if they have the decreed preference function defined on experimental outcomes empirical tests using two different choice settings provide evidence to support this ability to control preferences

you cannot gamble on others dissociable systems for strategic uncertainty and risk in the brain a b s t r a c t this paper tests whether strategic uncertainty employs circuits in the brain that encode risk and utility or circuits that are involved in theory of mind tom we compare participants decisions in a stag hunt game with an equivalent choice between bernoulli lotteries where the probabilities are equal to the mixed nash equilibrium of the stag hunt game behavioral data suggests that most participants are more willing to choose the payoff dominant option in a stag hunt game than the equivalent lottery neuroimaging shows that activations in the regions of the brain commonly associated with tom are correlated with a participant s propensity to choose payoff dominant this suggests that individuals who mentalize the other person are more likely to be cooperative than those who do not

the validity of profits structure studies with particular reference to the ftc s line of business data the simple proposition that consumerdamaging collusion is more likely to occur when there are fewer competitors has given rise not only to legal restrictions of economic activity thought to restrict output but also to an enormous amount of empirical work attempting to relate market concentration to the exercise of monopoly power most such studies measured market structure by an index of concentration for example four firm concentration or herfindahl and performance by accounting profit for example net profit divided by assets or price cost margins sales less direct costs divided by sales from the positive statistically significant correlations often found between greater concentration and profit with other factors presumably accounted for some researchers conclude that increases in concentration are anticompetitive and that concentration therefore is bad the concentration profits studies have been criticized essentially on two grounds one is that the positive relationship is not indicative of collusive behavior in particular oliver williamson 1968 john mcgee 1971 harold demsetz 1973 1974 and sam peltzman 1977 point out that higher profits could result from efficiencies experienced by large firms which resulted both in greater market shares and high levels of concentration analytical arguments show that higher profits logically follow as much from lower costs that are associated with higher levels of concentration as from collusion determined higher prices some empirical evidence that supports this belief is presented by demsetz peltzman and bradley gale and ben branch 1982 however their findings have been contested on the grounds that the data used are biased or inadequate or that the researchers have not demonstrated that the observed higher profits greater concentration relationship was caused by lower costs 2 the second criticism is that available data provide an inadequate basis for such conclusions the concentration numbers are based usually on industries defined by the commerce department s standard industrial classifications sic the sic definitions tend to be supply production rather than demand determined include nonhomogeneous products and exclude sales of similar products that are included in different sic groups or are imported the profit data are taken from accounting reports that provide poor measures of economic values weiss 1974 describes many of these problems however he does not believe that these shortcomings invalidate the studies as weiss 1979 concludes

substitution between production labor and other inputs in unionized and non unionized manufacturing the ease of substitution between labor and other factors of production is an important determinant of the elasticity of demand for labor and thus of the economic effects of unionism all else the same the greater the elasticity of substitution the greater is the elasticity of derived demand and the greater the displacement of labor for a given union induced wage increase in sectors where this elasticity is large unions are likely to be relatively weak and able to win only slight wage gains freeman and medoff 1981 and forthcoming or if they win large gains will have to pay a high price in terms of lost jobs in the sectors where the elasticity is small unions may be able to extract a substantial wage premium at little cost in terms of employment moreover as a simple general equilibrium model indicates the elasticity of substitution between labor and other factors in the unionized sector is a key parameter in determining the impact of the iiunion wage effect on the earnings of nonunion workers and on the efficiency of the economy johnson and mieskowski 1970 despite the importance of the elasticity of labor demand for an analysis of unionism little attention has been given to the absolute and relative magnitude of this elasticity under collective bargaining while there is some discussion of technological change and the substitution of capital and nonproduction workers for organized production workers in the institutional literature e g slichter 1941 slichter healy and livernash 1960 bok and dunlop 1970 modern econometric work provides no estimates of the relevant parameters as a result johnson and mieskowski 1970 rees 1963 lewis 1964 and others have been forced to evaluate union effects with guesstimates of the elasticities of concern in union settings this paper attempts to fill some of the gap in our knowledge by providing estimates for u s manufacturing of the constant output elasticity of demand for unionized and nonunionized production workers and of the elasticity of substitution between these workers and other inputs the analysis concentrates on what we call the relative inelasticity hypothesis which states that the demand for production workers will be more inelastic in the presence of a union for two reasons the likelihood that unions have organized and survived in sectors with low elasticities and the effects of various contract provisions on the ability of management to substitute other factors for production labor the study is divided into four sections section i develops the rationale for the relative inelasticity hypothesis and describes the nature of the empirical analysis conducted to test its validity the second section uses a 1972 state by 2 digit standard industrial classification sic industry data file for manufacturing to estimate the elasticity of substitution between production labor and both nonproduction labor and capital in the union and nonunion sectors of u s manufacturing industries section iii provides estimates based on a 1968 72 sample of manufacturing establishments of the elasticity of substitution between production and nonproduction labor the only two inputs for which information is available the final section briefly summarizes the findings and discusses their implications for understanding the impact of trade unionism on the u s economy to preview the ensuing discussion our main conclusion is substitution between production labor and other inputs is generally lower in union received for publication march 6 1978 revision accepted for publication august 17 1981 both authors are with harvard university and the national bureau of economic research supported by u s department of labor grant no j 9 m 6 0094 national science foundation grant no apt77 16279 and the national bureau of economic research under its program of research on labor economics we are especially grateful to jane mather for her invaluable assistance on this project and to greg bialecki charles brown gary chamberlain kathy coons jon fay martin van denburgh and lori wilson for their significant contributions the study has not been reviewed by the board of directors of the national bureau

extensification of agriculture and deforestation empirical evidence from sudan extensification of agriculture is one of the major factors contributing to the destruction of forests in africa in sudan such horizontal expansion comes at the expense of land devoted to trees and other vegetation thereby inducing conditions that are inimical to sustainable agricultural production different factors have contributed to extensification although high economic returns from crop mainly sorghum production was an important factor encouraging extensification of rainfed mechanized farming other factors outside agriculture have also contributed to that expansion this paper uses data from eastern sudan and an acreage response model to identify the most important factors influencing acreage expansion different measures and forms of risk were used in the acreage response model the paper shows how policies in the energy sector can indirectly influence acreage expansion in the agricultural sector

the impact of price risk on sow farrowings 1967 78 several studies have attempted with varying degrees of success to quantify price risk variables for crops at various levels of aggregation just behrman traill and lin price risk in particular market situations is an empirical issue and difficult to predict ex ante several factors suggest the potential for a risk response in sow farrowings the limited ability of hog futures market prices to forecast subsequent cash prices leuthold and hartman martin and garcia indicates that the level of uncertainty about future price is high this coupled with livestock producers reticence to use the futures market as a hedging mechanism leuthold suggests that producers exposure to existing price risk may be prevalent this analysis quantitatively examines the importance of input and output price risk on aggregate sow farrowings first the price risk model is reviewed briefly then a conventional adaptive expectations model is used to develop price and risk variables alternative definitions of risk are assessed finally futures prices are used to generate expected price and risk variables

high stakes behavior with low payoffs inducing preferences with holt laury gambles abstract kahneman and tversky 1979 argued that risky decisions in high stakes environments can be informed using questionnaires with hypothetical choices yet results by holt and laury 2002 suggest that questionnaire responses and decisions in hypothetical and low monetary payoff environments do not well predict decisions in higher monetary payoff environments this raises the question of whether investigating decision making in high stakes environments requires using high stakes here we show that one can induce preferences using the binary lottery reward technique e g berg et al 1986 in order to study high stakes decision making using low stakes in particular we induce preferences such that decisions in a low stakes environment reflect well the choices made in the high stakes environment of holt and laury 2002 this finding is of interest to anyone interested in studying high stakes decision behavior without paying high stakes

preference reversals the impact of truth revealing monetary incentives researchers vigorously debate the impact of incentives in preference reversal experiments do incentives alter behavior and generate economically consistent choices lichtenstein and slovic 1971 document inconsistencies reversals in revealed preference in gamble pairs across paired choice and individual pricing tasks the observed pattern is inconsistent with stable underlying preferences expressed with simple errors lichtenstein and slovic 1973 and grether and plott 1979 introduce incentives but aggregate reversal rates change little these results fostered numerous replications and assertions that models of non stable preferences are required to explain reversals contrary to this research we find that incentives can generate more economically consistent behavior our reevaluation of existing experimental data shows that incentives have a clear impact by better aligning aggregate choices and prices the effect is sufficiently large that with truth revealing incentives a stable preferences with error model not only explains behavior but fits the data as well as any model possibly could

do unions capture monopoly profits this paper challenges the conclusion reached in recent studies that unions reduce profits exclusively in highly concentrated industries from their review of previous studies and their analysis of 1977 data on 367 fortune 500 firms the authors conclude that there is no convincing evidence that concentration produces monopoly profits for unions to capture moreover they find that the union wage effect is not greater in concentrated industries as suggested by the hypothesis that unions capture concentration related profits evidence is found suggesting that a firm s market share its expenditures on research and development and its protection from foreign competition provide more likely sources for union rents than does industry concentration several recent studies have found that unions reduce profits significantly and some have concluded that this profit reduction is restricted to highly concentrated industries both conclusions are important the finding that unions reduce profitability indicates that in general the cost increasing effects of unions outweigh any positive productivity effects they may bring to the workplace such a

the play out effect and preference reversals evidence for noisy maximization abstract in this paper we document a play out effect in preference reversal experiments we compare data where preferences are elicited using 1 purely hypothetical gambles 2 played out but unpaid gambles and 3 played out gambles with truth revealing monetary payments we ask whether a model of stable preferences with random errors e g expected utility with errors can explain the data the model is strongly rejected in data collected using purely hypothetical gambles however simply playing out the gambles even in the absence of payments shifts the data pattern so that noisy maximization is no longer rejected inducing risk preferences using a lottery procedure using monetary incentives or both shift the data pattern further so that noisy maximization achieves the best possible fit to the aggregate data no model could fit the data better we argue that play out shifts the response pattern by inducing value because subjects can use outcomes to keep score induction or monetary payments create stronger induced values shifting the pattern further

human economic choice as costly information processing abstract we develop and test a model that provides a unified account of the neural processes underlying behavior in a classical economic choice task the model describes in a stylized way brain processes engaged in evaluating information provided by the experimental stimuli and produces a consistent account of several important features of the decision process in different environments e g when the probability is specified or not ambiguous choices these features include the choices made the time to decide the error rate in choice and the patterns of neural activation the model predicts that the further two stimuli are from each other in utility space the shorter the reaction time will be fewer errors in choice will be made and less neural activation will be required to make the choice the model also predicts that choices with ambiguity can be made more quickly and will require reduced neural activation in the horizontal intra parietal sulcus than for choices with risk also everything else being equal a larger value of certainty option in the choice will induce larger neural activation and less experience on the part of the subject making choices will induce larger activation we provide experimental evidence that is consistent with these predictions

union membership determination and industry characteristics recent literature on the economics of unionism has expanded beyond its customary focus on the wage and nonwage effects of collective bargaining and given increased attention to the determinants of union membership previous union membership studies have been couched primarily within an individual choice framework whereby utility maximizing individuals choose either to join or not to join a union empirical work typically treats membership as a function of some vector of personal characteristics 1 2 10 11 21 it is our contention that such studies can best be interpreted as explaining the determination of the union status of jobs and that several industry and firm characteristics in addition to personal characteristics can be expected to affect significantly union membership in this paper theory and evidence relating to the effects of firm and industry characteristics on union membership are presented industry level data are bridged with a large microdata set containing individual characteristics in order to examine the determinants of unionism among workers in manufacturing utilizing a simultaneous model and controlling for sample selection bias we find that product market concentration capital intensity establishment size and job risk significantly affect the likelihood of union membership