private values of risk tradeoffs at superfund sites housing market evidence on learning about risk this paper incorporates a bayesian learning model into a hedonic framework to estimate the value that residents place on avoiding cancer risks from hazardous waste sites we show that residents are

the constitution of economic policy one of the most exciting intellectual moments of my career was my 1984 discovery of knut wicksell s unknown and untranslated dissertation finanztheoretische untersuchungen buried in the dusty stacks of chicago s old harper library only the immediate post dissertation leisure of an academic novice allowed for the browsing that produced my own dramatic example of learning by serendipity wicksell s new principle of justice in taxation gave me a tremendous surge of self confidence wicksell who was an established figure in the history of economic ideas challenged the orthodoxy of public finance theory along lines that were congenial with my own developing stream of critical consciousness from that moment in chicago i took on the determination to make wicksell s contribution known to a wider audience and i commenced immediately a translation effort that took some time and considerable help from elizabeth henderson before final publication this abstract was borrowed from another version of this item

willingness to pay to reduce mortality risks evidence from a three country contingent valuation study valuing a change in the risk of death is a key input into the calculation of the benefits of environmental policies that save lives typically such risks are monetized using the value of a statistical life vsl since the majority of the lives saved by environmental policies are those of older persons there has been much recent debate about whether the vsl should be lower for the elderly to reflect their fewer remaining life years we conducted a contingent valuation survey in the uk italy and france designed to answer this question the survey was administered in these three countries following a standardized protocol our results suggest that the vsl is 1 022 million or 2 264 million depending on whether we use median or mean wtp the vsl is not significantly lower for older persons but is higher for persons who have been admitted to a hospital or emergency room for cardiovascular and respiratory problems income is positively and significantly associated with wtp the income elasticities of the wtp increase gradually with income levels and are between 0 15 and 0 5 for current income levels in eu countries we use the responses to the wtp questions to estimate the value of an extension in remaining life expectancy the value of a loss of one year s life expectancy is 54 000 or 163 000

rates of time preference and consumer valuations of automobile safety and fuel efficiency this article estimates hedonic price models for automobiles using a data set on almost 3 000 households from the u s department of energy residential transportation energy consumption survey the standard hedonic models are generalized to recognize the role of discounting of fuel efficiency and safety yielding an estimated rate of time preference ranging from 11 to 17 percent this range includes the prevailing rate of interest for car loans in 1988 and is consequently consistent with market rates purchasers exhibit an implicit value of life ranging from 2 6 to 3 7 million which is within the range found in the labor market as well as other market contexts the model also estimates a significant price effect for auto injury risks and fuel efficiency

alternative approaches to valuing intangible health losses the evidence for multiple sclerosis abstract this study uses both risk risk and risk dollar approaches to assess intangible health losses associated with multiple sclerosis ms using an estimation approach that adjusts for potential perceptional biases that may affect the expressed risk tradeoffs we estimated parameters of the utility function of persons with and without ms as well as the degree of subjects overestimation of the probability of obtaining ms the sample included subjects from the general population and persons with ms we found that marginal utility of income is lower in the state with ms than without it however the difference in marginal utility in the two states was greater for persons without ms than for those with the disease persons with ms overestimated the probability of acquiring ms to a greater extent than did persons within ms correcting for overestimation of this probability the value of intangible loss of a statistical case of ms derived from responses of the general population was us 350 000 to us 500 000 persons with ms were willing to pay somewhat more than this d80 i18 j17

efficient estimation of structural hedonic systems when a product or job is not homogeneous but instead embodies several different characteristics it is difficult to use price information about the product to learn anything about the structure of the supply and demand for the embodied characteristics s rosen 1974 highlighted this problem and suggested that the estimated slope of the price characteristic relation the marginal price could be used instead of standard prices in otherwise standard estimation of the supply and demand system however recently brown and h rosen 1982 brown 1983 and mendelsohn 1985 have pointed out that this method is applicable only when the marginal price depends on variables not found in the supply and demand equations in this paper we show that since the hedonic system matches consumers with high demand for the characteristic to firms with low costs of producing it exogenous variables from the supply equation are not valid instruments in the demand equation and vice versa therefore even when the brown rosen mendelsohn brm condition holds estimation of the identified system by standard simultaneous equations techniques will produce inconsistent estimates we then show that the system can be identified despite the absence of the standard instruments and develop an efficient estimator for the identified system since cross equation constraints make estimation of hedonic systems particularly vulnerable to specification error we also consider some specification tests in this section we consider a simple model with only one characteristic the extension to several characteristics is straightforward the basic model developed by rosen can be described as follows firms with different technologies produce products which provide consumers with varying levels of some characteristic z each consumer buys one unit of the good the product is such that an amount of z from two units of the good provides less utility than the same amount of z embodied in a single unit e g acceleration in a car safety in a job consumers

asset specificity and economic organization abstract this paper examines the optimization problem of firm and market organization in which both production cost and transaction cost differences are expressed as a function of asset specificity in general markets enjoy advantages by aggregating the demands of many buyers thereby realizing economies of scale or scope such production cost savings need to be assessed in relation to the transaction cost advantages that internal organization sometimes enjoys over markets in adapting to changed circumstances as it turns out both production cost economies and the transaction cost differences between firm and market organization vary systematically with the characteristics of the investments this paper employs a unified framework to assess the choice of organization form the condition of asset specificity is featured

beyond implicit prices recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model using a two stage hedonic pricing methodology we estimate a system of structural demand equations for different sources of transport related noise in the first stage we identify market segments using model based clustering techniques and estimate separate hedonic price functions hpfs for each segment in so doing we show how a semiparametric spatial smoothing estimator outperforms other standard specifications of the hpf in the second stage we control for non linearity of the budget constraint and identify demand relationships using techniques that account for problems of endogeneity and censoring of the dependent variable our estimated demand functions provide welfare estimates for peace and quiet that we believe to be the first derived from property market data in a theoretically consistent manner

willingness to pay and the distribution of risk and wealth willingness to pay wtp most economists believe is an appropriate benefits metric for government expenditure and regulatory policies that reduce risks to human life it depends however on the distribution of risk and wealth currently society s expenditures overemphasize concentrated risks say after the fact treatment as opposed to prevention a dead anyway effect complements excess attention to intense interests in explaining this our normative criterion for spending on risk reduction is what a rational albeit uninsured individual confronting lotteries on future risks to life and wealth would choose for himself this requires correcting wtp to eliminate the dead anyway effect but continues to reflect that wealth enhances the utility of living

willingness to pay for car safety evidence from sweden this study estimates a marginal willingness to pay wtp function for a road mortality risk reduction observed marginal wtp from the swedish car market is used and found to be positively correlated with the baseline risk of the cars no statistically significant relationships between examined owner attributes e g wealth and background risk and marginal wtp are found when comparing the estimated monetary value of a non marginal risk reduction derived from the integral of the marginal wtp function with an estimate based on marginal wtp we find in line with expectations that the difference between the estimates is negligible for smaller risk reductions and small 4 10 also for relatively large risk reductions

non contractible investments and vertical integration in the mexican footwear industry abstract this paper examines patterns of integration among manufacturers and retailers using data from a survey of footwear manufacturers in mexico the property rights framework developed in papers by grossman and hart 1986 j polit econ 94 691 and hart and moore 1990 j polit econ 98 1119 is differentiated from the standard empirical transactions cost framework in the context of this industry the most relevant distinction between the two frameworks is that the property rights framework addresses both the benefits and costs of integration while the transactions cost framework focuses only on variation in the benefits of integration we show that the costs of integration are highest where the retailer s non contractible investment has an important effect on the overall profits from the relationship consistent with the property rights framework the data suggest that integration is less likely in these circumstances

the estimation of demand parameters in hedonic price models this paper shows that the econometric problem of estimating hedonic demand parameters is not a standard identification problem caused by demand supply interaction as has been often assumed estimation procedures based on this assumption lead to biased results the hedonic estimation problem is instead caused by the endogeneity of both prices and quantities when households face a nonlinear budget constraint an instrumental variables solution to this problem is suggested using instruments that exogenously shift the budget constraint

accounting price of an exhaustible resource response and extensions wei environ resour econ 60 579 581 2015 presents a novel derivation of the accounting price for an exhaustible resource in a non optimal economy subject to an allocation mechanism we show that wei 2015 and hamilton and ruta environ resour econ 42 53 64 2009 are in fact employing different and mutually exclusive allocation mechanisms for the economy and this explains the differences between the respective accounting prices because accounting prices must be defined subject to the allocation mechanism for the economy the prices derived in the two papers are equally valid within their respective allocation domains further analysis shows that if there is declining marginal product of factors a hartwick investment rule for the model economy set investment just equal to depletion valued at the accounting price will lead to declining consumption for the wei 2015 accounting price and increasing consumption for the hamilton and ruta 2009 accounting price this result is extended to consider the accounting standards recommended in the un seea system of environmental economic accounting 2012 central framework united nations european commission food and agriculture organization of the united nations international monetary fund organisation for economic co operation and development world bank 2012 as well as accounting for environmental externalities from resource use

vertical integration and firm boundaries the evidence since ronald h coase s 1937 seminal paper a rich set of theories has been developed that deal with firm boundaries in vertical or input output structures in the last twenty five years empirical evidence that can shed light on those theories also has been accumulating we review the findings of empirical studies that have addressed two main interrelated questions first what types of transactions are best brought within the firm and second what are the consequences of vertical integration decisions for economic outcomes such as prices quantities investment and profits throughout we highlight areas of potential cross fertilization and promising areas for future work

contract duration and relationship specific investments empirical evidence from coal markets this paper examines the importance of specific relationship investments in determining the duration of coal contracts negotiated between coal suppliers and electric utilities data for 277 coal contracts are used to perform the analysis the results provide strong support for the view that buyers and sellers make longer commitments to the terms of future trade at the contract execution stage and rely less on repeated bargaining when relationship specific investments are more important

measuring sustainability in the un system of environmental economic accounting the adoption of the system of environmental economic accounting 2012 central framework as a un statistical standard is a landmark in environmental accounting the seea has the same authority and weight as the system of national accounts in the pantheon of official statistics the seea defines the unit value of depletion of an exhaustible resource to equal the average unit value of the asset the total asset value divided by the physical stock of resource by applying this definition to a non optimal dasgupta heal solow model of an extractive economy we show that depletion adjusted net saving as defined in the seea supports a generalized version of the hartwick rule this measure of saving can guide policies for sustainable development in extractive economies in particular fiscal policies concerning consumption and investment expenditures funded by resource rents the conditions required to support this finding are i that extraction declines over time at a constant rate and ii that the marginal cost of resource extraction is constant a less general result holds in the case of increasing marginal extraction costs

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

identifying hedonic models economic models for hedonic markets characterize the pricing of bundles of attributes and the demand and supply of these attributes under different assumptions about market structure preferences and technology see jan tinbergen 1956 sherwin rosen 1974 and dennis epple 1987 for contributions to this literature while the theory is well formulated and delivers some elegant analytical results the empirical content of the model is under debate it is widely believed that hedonic models fit in a single market are fundamentally underidentified and that any empirical content obtained from them is a consequence of arbitrary functional form assumptions the problem of identification in hedonic models is a prototype for the identification problem in a variety of economic models in which agents sort on unobservable to the economist characteristics models of monopoly pricing michael mussa and sherwin rosen 1978 robert wilson 1993 and models for taxes and labor supply james heckman 1974 sorting is an essential feature of econometric models of social interactions see william brock and steven durlauf 2001 in this paper we address the sorting problem in hedonic models nesheim 2001 extends this analysis to a model with peer effects in this paper we note that commonly used linearization strategies made to simplify estimation and justify the application of instrumental variables methods produce identification problems the hedonic model is generically nonlinear it is the linearization of a fundamentally nonlinear model that produces the form of the identification problem that dominates discussion in the applied literature linearity is an arbitrary and misleading functional form when applied to empirical hedonic models our research establishes that even though sorting equilibrium in a single market implies no exclusion restrictions the hedonic model is generically nonparametrically identified instrumental variables and transformation model methods identify economically relevant parameters even 1 without exclusion restrictions multimarket data widely viewed as the most powerful source of identification achieves this result only under implausible assumptions about why hedonic functions vary across markets

accounting price of an exhaustible resource a comment in a paper titled wealth accounting exhaustible resources and social welfare hamilton and ruta environ resour econ 42 1 53 64 2009 derived accounting price for an exhaustible resource in eq 18 in the so called el serafy economy el serafy in environmental accounting for sustainable development the world bank washington 1989 however the result is not plausible since they improperly replace constant extraction in the value of the resource stock eq 17 with current resource stock divided by reserve life in their derivation in the short comment i show that the accounting price should be the same as the unit user cost defined by el serafy environmental accounting for sustainable development the world bank washington 1989

subcontracting and competitive bidding on incomplete procurement contracts this article examines the impact of incomplete contracts on subcontracting and the design of procurement auctions i estimate the effect of ex post contract revisions on unit costs for both subcontracted and in house performed work items on bridge projects procured by the california department of transportation i model a scoring auction showing how ex post revisions skew bidding decisions and estimate unit costs from bid data using the method of sieve estimation the results highlight the cost implications of incomplete contracting frictions subcontracting decisions and bidding distortions in conclusion i propose alternative auction mechanisms that could improve outcomes

contractual form and market thickness in trucking a central proposition of the transaction costs literature is that firms will substitute more complicated contractual arrangements for simple spot arrangements when transactions involve relationship specific investments i investigate this proposition by testing whether simple spot arrangements are less common when local trucking markets are thin i find that doubling the thickness of the market increases the likelihood that simple spot arrangements govern transactions by about 30 for long hauls i find weaker evidence of relationships between local market thickness and contractual form for short hauls hauls for which quasi rents are particularly small contracts protect quasi rents over a surprisingly large range but they play a less important role as quasi rents decrease

power in a theory of the firm transactions take place in the firm rather than in the market because the firm offers power to agents who make specific investments past literature emphasizes the allocation of ownership as the primary mechanism by which the firm does this within the contractibility assumptions of this literature we identify a potentially superior mechanism the regulation of access to critical resources access can be better than ownership because i the power agents get from access is more contingent on their making the right investment and ii ownership has adverse effects on the incentive to specialize the theory explains the importance of internal organization and third party ownership

endogenous matching and the empirical determinants of contract form empirical work on contracts typically regresses contract choice on observed principal and agent characteristics if i some of these characteristics are unobserved or partially observed and ii there are incentives whereby particular types of agents end up contracting with particular types of principals estimated coefficients on the observed characteristics may be misleading we address this endogenous matching problem using a data set on agricultural contracts between landlords and tenants in early renaissance tuscany controlling for endogenous matching has an impact on parameters of interest and tenants risk aversion appears to have influenced contract choice

do the near elderly value mortality risks differently wage hedonic models are estimated with the health and retirement study to measure the risk wage tradeoffs value of statistical lives for older workers the analysis explicitly allows for multiple employment states including retirement using a multinomial selection model the results suggest that the oldest and most risk averse workers require significantly higher not lower compensation to accept increases in job related fatality risks

wealth accounting exhaustible resources and social welfare the empirical literature on natural resource accounting uses methods which implicitly or explicitly entail measuring changes in total resource asset value when an exhaustible resource is depleted in contrast the growth theoretic literature on saving social welfare and sustainable development is built upon a central finding that the change in real wealth as measured by net or genuine saving is proportional to the change in social welfare we show that the change in total wealth exceeds the change in real wealth in optimal and non optimal models of resource extracting economies this suggests that the change in social welfare is over estimated when the change in total resource asset value is used as the measure of depletion a simple empirical exercise using world bank data on adjusted net saving reinforces the results from theory

the valuation of risks to life evidence from the market for automobiles using hedonic regression techniques estimates of the willingness to pay for changes in the risks of dying can be inferred from actual behavior in market situations involving risk dollar tradeoffs thaler and rosen 1975 pioneered this approach obtaining estimates of the value of a statistical life using labor market data in this paper we use the hedonic technique to obtain the first estimates of the value of a statistical life from data on the market for automobiles our estimated value of a statistical life for the sample as a whole is 3 357 million 1986 dollars copyright 1990 by mit press

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

property prices and exposure to multiple noise sources hedonic regression with road and railway noise this study examines the effect of road and railway noise on property prices it uses the hedonic regression technique on a swedish data set that contains information about both road and railway noise for each property and finds that road noise has a larger negative impact on the property prices than railway noise this is in line with the evidence from the acoustical literature which has shown that individuals are more disturbed by road than railway noise but contradicts recent results from a hedonic study on data of the united kingdom

viewpoint empirical research on firms boundaries empirical research on the determinants of firms boundaries has flourished over the past 25 years this article discusses the progress that has been made to date emphasizing the intellectual advances made by researchers in this literature during this period i stress empirical researchers important role in operationalizing theoretical concepts and relate how success on this dimension brings these concepts to bear on real life make or buy decisions i also discuss shortcomings in the current literature in particular the paucity of research on how variation in firms boundaries can affect economic outcomes and point to how and where such shortcomings might be overcome la recherche empirique sur les determinants des frontieres de l entreprise a fleuri au cours des derniers 25 ans cet article discute des progres accomplis en mettant l accent sur les avancees intellectuelles faites par les chercheurs dans la litterature specialisee durant cette periode on souligne le role important des chercheurs empiriques dans l operationnalisation des concepts theoriques et on explique comment les succes dans ce registre ont contribuea faire que ces concepts ont eu un impact sur les decisions de faire ou faire faire dans la vie reelle on discute aussi des deficiences de cette litterature en particulier la pauvrete des travaux de recherche sur l impact de la variation dans les frontieres des entreprises sur les rendements economiques et on suggere comment de telles deficiences pourraient etre corrigees

2 the institutional structure of production 1 prize lecture to the memory of alfred nobel december 9 1991 this abstract was borrowed from another version of this item

retail contracting theory and practice we summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers we do this using studies of traditional and business format franchise relationships as well as studies of salesforce integration decisions some of the patterns that we uncover are consistent with a standard incentive cum insurance theory of organization while others are not we brie y review some theoretical extensions that seem promising in terms of reconciling seeming con icts between theory and practice i introduction manufacturers of retail products must decide whether to sell their products to consumers themselves vertical integration or to sell via independent retailers vertical separation when manufacturers do not perform the sales function internally but want exclusive retailers they usually choose some form of franchising 1 many theories attempt to explain the choice of retail organizational form moreover a considerable body of empirical evidence concerning this choice is accumulating we attempt to evaluate this econometric evidence and relate it to the theories to accomplish this task we assess studies of franchising arrangements as well as studies of sales force organization in industrial settings the paper is organized as follows in the next section we highlight a number of regularities that arise in the empirical literature on retail contracting in particular we nd that i risk is positively related to the use of high powered incentives vertical separation ii the importance of the agent s eiort in production is positively related to the use of high powered incentives

affiliation integration and information ownership incentives and industry structure this paper presents theory and evidence on horizontal industry structure at issue is the question what makes industries necessarily fragmented the theoretical model examines trade offs associated with affiliation and integration and how they are affected by the contracting environment i show how contractual incompleteness can lead industries to be necessarily fragmented i also show that contractual improvements will tend to lead to a greater concentration of brands but whether they lead industries to be more or less concentrated depends on what becomes contractible i then discuss the propositions generated by the model through a series of case study examples i introduction two core theoretical literatures underlie much of the field of industrial organization theories of industry structure and theories of the firm although the issues these literatures emphasize are very different they actually seek to explain the same thing theories of industry structure are in a way also theories of firms boundaries likewise theories of firms boundaries can also be read as theories of industry structure these literatures have different strengths and weaknesses the industry structure literature provides several good explanations for why industries might be necessarily concentrated the traditional literature bain 1956 scherer 1980 emphasizes factors such as scale economies market size and entry barriers the newer literature adds concepts such as heterogeneity in tastes the strength of price competition and consumers sensitivity to sunk expenditures such as advertising spence 1976 dixit and stiglitz 1977 salop 1979 sutton 1991 but most industries are fragmentedfmost of their output is produced by small independently owned firmsfparticularly those in the service and retail sectors 1 as i describe in more detail

simultaneity in the market for housing characteristics abstract the nature of simultaneity in the markets for housing characteristics is examined simultaneity is found to arise in the implicit markets for individual characteristics because of the presence of nonlinearity in the market hedonic price function for housing however this simultaneity is not the kind discussed by s rosen j political econ 82 34 55 1974 between firm supplies and household demands as a result the rosen suggestion of identifying demand with firm supply shifters is inappropriate among the alternative approaches to identification the most desirable involve use of data over two or more markets in which residence for a given household is exogenous to the choice of housing

clustering agency costs and operating efficiency evidence from nursing home chains models of horizontal integration typically describe a trade off between multiunit efficiencies and managerial agency costs in extreme cases where managers cannot be incented contractually private ownership is thought to be the primary organizational substitute in this paper we explore geographic clustering as an alternative strategy for controlling managerial agency costs within the chain form of organization clustering may facilitate scale efficiencies in both monitoring and supervision resulting in reduced agency costs and improved application of the chain s business model we test this hypothesis in the nursing home industry which is characterized by managerial contract costs resulting from multitask models of production we find that clustered nursing homes achieve higher quality conditional on labor inputs and patient characteristics the clustering effect is concentrated on reductions in minor potential harm violations which are difficult to observe without close monitoring several proxies for local organizational experience local learning cannot account for our findings which are robust to a variety of alternative clustering definitions and competing explanations based on gaming behavior further tests indicate that chains endogenously pursue clustering presumably to realize the benefits of improved quality outcomes this paper was accepted by bruno cassiman business strategy

capturing knowledge within and across firm boundaries evidence from clinical development how do firm boundaries influence employees acquisition of information using detailed project level data and qualitative evidence i document that pharmaceutical firms are more likely to outsource the coordination of data intensive clinical trials while they are more likely to assign knowledge intensive trials to internal teams managers do not choose between market and hierarchy but between the hierarchy of the firm in which subjective performance evaluations are combined with flat explicit incentives and the hierarchy of its subcontractor whose virtue stems precisely from the ability to provide high powered incentives on a narrow set

the boundaries of the firm revisited why do firms exist what is their function and what determines their scope these remain the central questions in the economics of organization they are also central questions for business executives and corporate strategists the worldwide volume of corporate mergers and acquisitions exceeded 1 6 trillion in 1997 it is hard to imagine that so much time effort and investment bankers fees would be spent on adjusting firm boundaries unless there was some underlying economic gain indeed the exceptional levels of merger and acquisition activity over the past two decades are a strong indication that economically significant forces do determine organizational boundaries the study of firm boundaries originated with the famous essay by coase 1937 who raised the question of why we observe so much economic activity inside formal organizations if as economists commonly argue markets are such powerful and effective mechanisms for allocating scarce resources coase s answer was in terms of the costs of transacting in a world of imperfect information when the transaction costs of market exchange are high it may be less costly to coordinate production through a formal organization than through a market in large part thanks to the work of williamson 1975 1985 recent decades have seen a resurgence of interest in coase s fundamental insight that firm boundaries can be explained by efficiency considerations our understanding of firm boundaries has been sharpened by identifying more precisely the nature and sources of transaction costs in different circumstances in the process the focus of

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

the theory of the firm as governance structure from choice to contract the propositions that organization matters and that it is susceptible to analysis were long greeted by skepticism by economists one reason why this message took a long time to register is that it is much easier to say that organization matters than it is to show how and why the prevalence of the science of choice approach to economics has also been an obstacle as developed herein the lessons of organization theory for economics are both different and more consequential when examined through the lens of contract this paper examines economic organization from a science of contract perspective with special emphasis on the theory of the firm

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

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

the making of economic policy a transaction cost politics perspective economic policymaking as a political process the normative approach to policy analysis the positive view of political economy a synthesis the policy process in real time a theme transaction costs the transaction cost politics framework political outcomes and economic efficiency transaction cost analysis in politics mechanisms to cope with transaction costs in politics national differences two case studies to illustrate transaction cost politics tax and expenditure reform in the united states the gatt and national trade politics some reflections and suggestions some lessons for the policy process the role of the economist concluding comments appendix multiprincipal multitask agencies

willingness to pay and sensitivity to time framing a theoretical analysis and an application on car safety stated preference sp surveys attempt to obtain monetary values for non market goods that reflect individuals true preferences numerous empirical studies suggest that monetary values from sp studies are sensitive to survey design and so may not reflect respondents true preferences this study examines the effect of time framing on respondents willingness to pay wtp for car safety we explore how wtp per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a swedish contingent valuation survey our theoretical model predicts the effect to be nontrivial in many scenarios used in empirical applications in our empirical analysis we examine the sensitivity of wtp to an annual and a monthly scenario our theoretical model predicts the effect from the time framing to be negligible but the empirical estimates from the annual scenario are about 70 higher than estimates from the monthly scenario

hedonic pricing of agriculture and forestry externalities in this study the hedonic price method was used toidentify and monetarize some of the external effectsof agricultural and sylvicultural activities weexamined the renting price of ruralself catering cottages or gites intensivelivestock farming caused the renting price ofgites to decrease whereas permanent grassland hadthe opposite effect

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

exploring benefit transfer disamenities of waste transfer stations the benefit transfer method was developed as an alternative way to value externalities using values from studies of similar circumstances carried out at similar sites somewhere else given the challenges and high costs inherent in assessing the actual cost specifically in order to test the performance of the benefit transfer method employing hedonic price models this study focused on estimates of disamenities associated with waste transfer stations at four different cities in israel the sites were intentionally selected to represent a variety of circumstances we transferred the estimated benefit function from a study site to a policy site the goodness of fit was examined by comparing the calculated value with actual data from the policy site to test the sensitivity of the benefit transfer function to socioeconomic and housing characteristics it was repeatedly applied to different sets of observations the findings suggest that a relatively large number of alternative benefit functions are transferable statistical inequality outcome regarding the degree of similarity between samples does not unequivocally rule out the appropriateness of transferring environmental values across studies transfer errors varied between 21 and 29 and the absolute average error for all transfers was 15 4 errors were lower for transfer between relatively similar cities in terms of size and location and between sub samples that were similar in socioeconomic characteristics and housing type however when a site with very dissimilar data was involved the average absolute error rose to 19

investing exhaustible resource rents and the path of consumption we set out dollar valued net national product for an economy with a wasting essential stock oil deposit we take up maintaining capital intact and locally unchan ging consumption the percentage change in net investment or genuine savings relative to the market rate of interest denotes whether current consumption is rising

airline firm boundary and ticket distribution in electronic markets abstract the electronic markets hypothesis emh predicts that the intense intrusion of information technology it into the market system has a strong influence on the degree of market coordination as transaction costs go down due to inexpensive it enabled exchange of information market based economic activities increase contrary to the predictions of the emh us legacy airlines have increasingly relied on hierarchical governance and oppose market based economic activities using us legacy airline distribution strategies as an example this paper demonstrates that even dominant players in an oligopolistic industry operating during the explosive evolution of electronic markets are subject to the predictions set by the emh predictions of the emh are tested by analyzing 17 years of operational data using the dea data envelopment analysis method tobit regression is executed in tandem with dea to test the hypothesis that various strategies deployed by the legacy airlines have a strong impact on operational performance despite the perceived market power possessed by the strongest players and the apparent inverse relationship between it driven distribution and production within hierarchies the end results reveal that legacy airline business strategies such as disintermediation to exclude downstream players or vertical integration to compete with rivals have created a negative impact on the business performance of airlines operational efficiency has not improved

retail contracting and costly monitoring theory and evidence abstract we reconcile seemingly conflicting hypotheses and evidence that surface in the principal agent literature specifically we examine the literature that deals with the effect of costly monitoring on retail organizational form our principal agent model of the optimal relationship between up and downstream firms allows the principal to garner two types of imperfect signals of agent effort sales data and behavior data the model yields predictions that we confront with the econometric evidence which comes from both franchising and sales force compensation literatures we find that when variation in the informativeness and in the cost of increasing the informativeness of both signals is considered the evidence is consistent with the theory