price discrimination in broadway theater a common thread in the theory literature on price discrimination has been the ambiguous welfare effects for consumers and the rise in profit for firms relative to uniform pricing in this study i resolve the ambiguity for consumers and quantify the benefit for a firm i describe a model of price discrimination that includes both second degree and third degree price discrimination using data from a broadway play i estimate the structural model and conduct various experiments to investigate the implications of alternative pricing policies the observed price discrimination may improve the firm s profit by approximately 5 relative to uniform pricing while the difference for aggregate consumer welfare is negligible also i show that the gain from changing prices in the face of fluctuating demand is small under the observed price discrimination

nonlinear pricing in an oligopoly market the case of specialty coffee firms that use nonlinear pricing may distort product characteristics away from their efficient levels this paper offers the first empirical study of this issue using data from a specialty coffee market i estimate a structural utility model to compute consumers benefits from changing products sizes i then compare the estimated benefits to cost data design distortions are relatively large for products not targeted to the highest demand consumers distortions decrease toward zero with drink size for products with the largest profit margins these results support some of the central predictions from nonlinear pricing theory including no distortion at the top

the internal market and hospital efficiency a stochastic distance function approach the uk internal market was one of the first european attempts to introduce a competitive mechanism in the provision of hospital services the assumption was that competition would have led hospitals to increase efficiency in the use of their resources the aim of this paper is to analyse the effectiveness of this kind of reform by measuring the changes in technical efficiency of a panel of 52 acute scottish hospitals observed from 1991 92 to 1996 97 the time period covers the whole duration of the internal market and the sample contains a different mix of both trusts and non trusts where the former embed the proper working of the reform the selected model is a stochastic output distance function that includes an interaction dummy variable to allow for parameters to change over time the results show a structural break after which hospitals change not only the way in which they provide their services but also the kind of services they provide favouring the quicker treatment of patients on a day basis

deregulation consolidation and efficiency evidence from the spanish insurance industry this paper provides new information on the effects of deregulation and consolidation in financial services markets by analyzing the spanish insurance industry the sample period 1989 98 spans the introduction of the european union s eu third generation insurance directives which deregulated the eu insurance market deregulation has led to dramatic changes in the spanish insurance market the number of firms declined by 35 average firm size increased by 275 and unit prices declined significantly in both life and non life insurance we analyze the causes and effects of consolidation using modern frontier efficiency analysis to estimate cost technical and allocative efficiency as well as using malmquist analysis to measure total factor productivity tfp change the results show that many small inefficient and financially underperforming firms were eliminated from the market due to insolvency or liquidation as a result the market experienced significant growth in tfp over the sample period consolidation not only reduced the number of firms operating with increasing returns to scale but also increased the number operating with decreasing returns to scale hence many large firms should focus on improving efficiency by adopting best practices rather than on further growth

equilibrium demand elasticities across quality segments abstract empirical studies find substantial differences in demand elasticities and associated markups among products of different quality this paper analyzes the theoretical determinants of such variation we present a simple model that allows for horizontal and vertical differentiation and accounts for endogenous entry we find that most economic forces in our model such as consumers price sensitivity the scope for product differentiation and sunk costs of entry are likely to induce lower equilibrium demand elasticities for higher quality products in contrast other economic forces such as marginal cost of production and the distribution across consumers of the willingness to pay for quality may induce the opposite pattern these results provide an organizing framework through which empirical findings may be interpreted and may also help to predict variation in demand elasticities for markets in which empirical estimates of elasticities are unavailable or infeasible to obtain

efficiency of the medical care industry evidence from the italian regional system abstract what might be the relation between clinical research and efficiency of medical care suppliers is the hypothesis of a positive relation consistent considering efficiency as the supplier s ability to maximize the number of patients hospitalized in a mobility process among regions i e mobility balance this work aims at highlighting the existence of a positive externality of pharmaceutical clinical research on that kind of efficiency in other words an externality is able to affect the patients perception of good bad quality of outputs supplied by the medical care industry leading their mobility process taking italy and the mobility of patients among regions into account an operational research study will be performed in order to support this assumption the goal of this work is to show an alternative way to increase the efficiency of medical care suppliers on the market of health care that is to say through their competitiveness on the market of human experimentation

measuring the efficiency of european railways this paper is concerned with the definition and measurement of efficiency in a public body specifically railways the authors argue against commonly used measures such as profit and labour productivity in favour of a production possibility frontier approach physical measures of input and output are derived and applied using a variety of methodologies results from some of the most popular such as data envelopment analysis and corrected ordinary least squares using the translog function are shown to be potentially misleading two original approaches one using uniform efficiency distributions and the other applying bayesian state space techniques are developed and applied but these too are found to be potentially unreliable comparison with results from other authors finally lead to the conclusion that accurate measurement of efficiency is not possible although the research is able to indicate good and bad performers the final conclusion is that efficiency on the railway is a product primarily of go

the determinants of efficiency and productivity in the swiss insurance industry abstract using state of the art frontier efficiency methodologies we study the efficiency and productivity of swiss insurance companies in the life property casualty and reinsurance sectors from 1997 2013 in this context we provide the first empirical analysis of internationalization strategies of insurance companies a topic of high interest in the business and economics literature but one that has to date not been the focus of efficiency studies in the insurance sector we find that productivity and efficiency have improved with regard to property casualty and reinsurance in the case of life insurance productivity and efficiency diminished however life insurance firms with higher levels of international business exhibit superior efficiency levels we observe that diversification strategies directed to the european market are more beneficial compared to those targeting markets outside of europe

the empirical performance of the ecb s repo auctions evidence from aggregated and individual bidding data abstract we analyze the empirical performance of the ecb s fixed rate tenders by estimating bid functions using aggregated and individual bidding data the intention of the study is twofold first in view of the ecb s emphasis on the principle of equal treatment we employ the aggregated data to compare the bidding behavior of german and non german banks specifically we investigate banks overbidding and its response to opportunity cost and interest rate expectations second we use the individual bidding data of german banks and estimate panel data models to investigate the impact of a bank s type on its bidding the results indicate that large banks bid more informed or sophisticated than smaller banks with regard to interest rate expectations however there is no evidence for a size effect in banks overbidding behavior

budget constrained frontier measures of fiscal equality and efficiency in schooling equality and efficiency are key issues in educational reform here the authors analyze the efficiency and equality consequences of various school finance reforms using a cost indirect output distance function this function readily models multiple output production under conditions of budgetary constraint and provides a natural measure of performance that is closely related to farrell type measures of efficiency the analysis suggests that despite school district inefficiency finance reforms can affect student achievement however any potential gains in output from redistribution are dwarfed by the potential gains from increased efficiency more strikingly the analysis demonstrates that budgetary reforms designed to equalize expenditures could actually increase the inequality of student achievement

price discrimination and retail configuration the hypothesis that price discrimination based on willingness to pay for quality can occur in multifirm markets is confirmed using microdata on gasoline retailing a test that discriminates between price structures associated with discrimination and with cost driven competitive differentials is developed and implemented with controls for variation in outlet and market characteristics a second test based on profitability variation rejects a competitive peak load pricing explanation for the observed price dispersion the data suggest that price discrimination at the retail level adds at least 9 a gallon to the average price of full service gasoline

do competitively acquired funds induce universities to increase productivity abstract this paper analyzes the impact of private and public third party funds on the productivity of swiss university departments and public research institutions estimating a production function assuming that labor inputs produce master students and scientific publications reveals a positive effect of public third party funding on productivity but not for private funds however once we include technology transfer as an additional output the coefficient for public third party funding turns insignificant while private funding becomes significant indicating that the disciplining effect of public donors focuses on publications while private donors foster technology transfer we employ three alternative approaches to tackle endogeneity and find qualitatively robust results

why did the banks overbid an empirical model of the fixed rate tenders of the european central bank abstract this paper tests two alternative hypotheses for the overbidding behavior of the banks in the fixed rate tenders conducted by the european central bank ecb from january 1999 until june 2000 one hypothesis attributes the overbidding to the expectations of a future tightening of monetary policy while the other attributes it to the liquidity allotment decisions of the ecb the model is estimated with individual bidding data of the spanish banks and also with aggregate bidding data of all spanish banks and all banks in the euro area the empirical results provide support for the second hypothesis

scale economies x efficiency and convergence of productivity among bank holding companies abstract are the less productive banks catching up to the more productive ones and if so how quickly and by what means the objective of this study is to answer these questions by looking for convergence in productivity among bank holding companies bhcs in the us past research has identified two major factors governing productivity in the banking sector scale economies and x efficiency if the gains from scale economies decline with firm size and if the only difference between bhcs lies in their initial size then the initially smaller bhcs should eventually catch up to the initially larger ones because the former tend to grow more quickly however the findings from this study do not support this hypothesis of absolute convergence indeed the findings show strong evidence for conditional convergence which means that the steady state productivity to which a bhc is converging is conditional on the bhcs own level of x efficiency conditional convergence implies that initial differences in x efficiency among bhcs can between them create permanent differences in steady state productivity

the repo auctions of the european central bank and the vanishing quota puzzle until june 2000 the european central bank ecb used fixed rate tenders for its weekly repo auctions a switch to variable rate tenders became necessary due to massive overbidding by banks in this paper we introduce a stylized game among banks to investigate this overbidding phenomenon our results confirm the weakness of the fixed rate tender format and indicate that the ecb s liquidity management has significantly improved since the switch to the variable rate system yet recent episodes of rate cut expectations suggest that the ecb s practice of setting a minimum bid rate should be abandoned in favor of a more symmetric interest rate target

european central bank operations experimental investigation of the fixed rate tender abstract in an experimental study the auction procedure of the fixed rate tender is investigated with which the main refinancing operation of the eurosystem was carried out in the past in june 2000 the fixed rate tender was replaced by the american variable rate tender this change was occasioned by the suspicion that banks grossly exaggerate their liquidity needs in their bids the experimental results clearly support this hypothesis and demonstrate that the fixed rate tender method can be a regular invitation to the banks to continually raise their bids from auction to auction

economies of scale and scope in the finnish non life insurance industry abstract economies of scale and scope in finnish non life insurance are studied the production process is separated into cost and portfolio management functions firms expand their branch network to either gain market power or informational advantages there are diseconomies of scale at firm and economies of scale at branch level and economies of scope in production large firms in the non life insurance industry pay a substantial premium to gain market power via branch networks the retained premiums curve of portfolio management is u shaped and a positive function of the number of branches

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

book value intertemporal pricing and quality discrimination in the us market for books abstract publishers produce books in hardcover and paperback versions with different prices and time of market introduction analysis of detailed book level data reveals that i price cost differentials cannot be explained by cost differences making this an example of quality discrimination ii market introduction time strongly affects sales suggesting that time is the crucial dimension of discrimination and iii there is substantial price rigidity across books and over time prices depend on cost shifters but not on demand shifters i discuss an explanation for this last finding in terms of the nature of demand in this market

under pressure how the business environment affects productivity and efficiency of european life insurance companies deregulation and widespread economic changes have fundamentally affected the business environment of european life insurance companies over the last decades we apply multi stage data envelopment analysis to identify the impact of the changing environment on productivity and efficiency of european life insurance companies considering a sample of 970 life insurance companies from 14 european countries we show that general economic capital market and insurance market conditions are important drivers of efficiency although we find no technical change in the european life insurance sector we nonetheless observe an efficiency increase in 2002 2013 that leads to an increase in total factor productivity these trends can be explained by more challenging business conditions in the 2000s our results emphasize the need to control for the business environment in cross country efficiency studies

measuring the joint impact of governance form and economic regulation on airport efficiency abstract this paper examines the joint impact that governance structure and economic regulation has on airport efficiency the previous literature has focused on one or the other of these factors but not both the empirical investigation uses a semi parametric bayesian distance stochastic frontier model as well as a data envelopment analysis dea model based on a panel of airports in several countries we find that the form of economic regulation is relatively more important than the type of governance in affecting efficiency the article provides measures of changes in expected efficiency when either or both the governance form and price regulation changes

selling costs and switching costs explaining retail gasoline margins recent theoretical work has shown that price discrimination can take place in imperfectly competitive as well as monopoly markets the persistence of higher retail margins on unleaded than on leaded gasoline during the 1980s suggests that discrimination may occur even in very competitive markets this article studies a number of cost based explanations for such gasoline pricing as well as the possibility of price discrimination the analysis indicates that gas stations discriminate against groups of customers who are less likely to switch to another station the conclusions highlight the influence of shopping or search costs on pricing decisions even in markets thought to be quite competitive

the daily market for funds in europe what has changed with the emu this paper shows that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate we reach this conclusion by comparing the behavior of this rate in germany before and after the start of the emu the analysis of the german experience allows us to isolate the effects on the overnight rate of these particular instruments of monetary policy to illustrate that this outcome is a general conclusion and not a particular result of the german market we develop a theoretical model of reserve management which is able to reproduce our empirical findings

bidding behavior in the snb s repo auctions abstract the swiss national bank snb provides reserves to market participants via fixed rate tender auctions we analyze the banks bidding behavior and identify the determinants for the decision to participate as well as on the amount to tender we find that a bank s bids from the previous day the amount of maturing repo operations with the snb as well as the maturing volume on the interbank repo market have for most banks a significant effect the autonomous factors government balances at the snb and currency in circulation are of only minor importance a further determinant is the attractiveness of the snb s auction rate compared to the prevailing interbank market repo rate further the question is addressed whether the bidding behavior changed in the financial market crisis of 2007 2008 there is little evidence of a systematic change in bidding behavior in the crisis this results from the fact that the snb has addressed the volatile demand for reserves in the crisis with overnight fine tuning operations

a positive theory of fixed rate funds supplying operations in an accommodative financial environment abstract this paper studies bidding behaviors in fixed rate funds supplying auctions using a simple game theoretic model while the existing literature argues that such auction schemes are vulnerable to the overbidding problem the bid to cover ratio for the bank of japan s current fixed rate operations has remained stable after reviewing the stylized repo game and the mechanism of overbidding under the fixed rate operations we argue that the current framework of fixed rate funds supplying auctions operated by the bank of japan and the recent accommodative financial environment make bidders loss functions locally satiated given this argument it is shown that any stable bid to cover ratios other than either undersubscription or overbidding can be supported by an equilibrium finally we empirically find that the ratio under the bank of japan operations has been influenced by such financial conditions proxied by market interest rates and term spreads

efficiency in the international insurance industry a cross country comparison the purpose of this paper is to provide new empirical evidence on frontier efficiency measurement in the international insurance industry a topic of great interest in the academic literature during the last several years a broad efficiency comparison of 6462 insurers from 36 countries is conducted different methodologies countries organizational forms and company sizes are compared considering life and non life insurers we find a steady technical and cost efficiency growth in international insurance markets from 2002 to 2006 with large differences across countries denmark and japan have the highest average efficiency whereas the philippines is the least efficient regarding organizational form the results are not consistent with the expense preference hypothesis which claims that mutuals should be less efficient than stocks due to higher agency costs only minor variations are found when comparing different frontier efficiency methodologies data envelopment analysis stochastic frontier analysis

the public accounting industry production function abstract a translog function is specified to represent the relation between revenue and human resource inputs in public accounting firms estimation of the model using a balanced panel of annual data for 64 large cpa firms for the period 1995 1999 indicates that increasing returns to scale prevail in the public accounting industry justifying recent merger and acquisition activities among accounting firms average marginal revenue product of partners increased monotonically from 1995 to 1998 decreased slightly in 1999 and was about nine times that of other professionals during 1995 1999 the public accounting industry exhibited continuing improvement in productivity over the 5 years

measuring cost efficiency in the property liability insurance industry abstract escalating prices and periodic availability problems in property liability insurance markets are often attributed to insurance company inefficiency and lax claims settlement practices this paper investigates these issues by estimating stochastic cost frontiers for three size stratified samples of property liability insurers over the period 1980 1988 a translog cost function and input share equations are estimated using maximum likelihood techniques the results show that large insurers operate in a narrow range around an average efficiency level of about 90 percent relative to their cost frontier efficiency levels for medium and small insurers are about 80 and 88 percent in relation to their respective frontiers wider variations in efficiency are present for these two groups in comparison with large insurers large insurers slightly over produce loss settlement services while small and medium size insurers under produce this output the small and intermediate size groups are characterized by economies of scale suggesting the potential for cost reductions from consolidations in the industry

organizational form and efficiency the coexistence of stock and mutual property liability insurers this article introduces a new approach cross frontier analysis for estimating the relative efficiency of alternative organizational forms in an industry the technique is illustrated by analyzing a sample of stock and mutual property liability insurers using nonparametric frontier efficiency methods cross frontier analysis measures the relative efficiency of each organizational form by computing the efficiency of each stock mutual firm relative to a reference set consisting of all mutual stock firms we test agency theoretic hypotheses about organizational form including the managerial discretion and expense preference hypotheses the results indicate that stocks and mutuals are operating on separate production and cost frontiers and thus represent distinct technologies consistent with the managerial discretion hypothesis the stock technology dominates the mutual technology for producing stock outputs and the mutual technology dominates the stock technology for producing mutual outputs however consistent with the expense preference hypothesis the stock cost frontier dominates the mutual cost frontier our findings thus suggest a richer interpretation of organizational form than provided by previous researchers

a textbook example of international price discrimination we show that books for general audiences are similarly priced internationally but textbooks are substantially more expensive in the united states we argue that cost factors cannot explain this phenomenon and discuss several demand side explanations

the effect of organizational structure on efficiency evidence from the spanish insurance industry this paper provides new information on the effects of organizational structure on efficiency by analyzing spanish stock and mutual insurers over the period 1989 1997 we test the efficient structure hypothesis which predicts that the market will sort organizational forms into market segments where they have comparative advantages and the expense preference hypothesis which predicts that mutuals will be less efficient than stocks technical cost and revenue frontiers are estimated using data envelopment analysis the results indicate that stocks and mutuals are operating on separate production cost and revenue frontiers and thus represent distinct technologies in cost and revenue efficiency stocks of all sizes dominate mutuals in the production of stock output vectors and smaller mutuals dominate stocks in the production of mutual output vectors larger mutuals are neither dominated by nor dominant over stocks in the cost and revenue comparisons thus large mutuals appear to be vulnerable to competition from stock insurers in spain overall the results are consistent with the efficient structure hypothesis but are generally not consistent with the expense preference hypothesis

overbidding in fixed rate tenders the role of exposure risk abstract the fixed rate tender is one of the main procedures used by central banks in the implementation of their monetary policies while academic research has largely dismissed the procedure owing to its tendency to encourage overbidding central banks such as the ecb and the bank of england have continued using it we investigate this apparent conflict by considering an auction theoretic setting with private information about declining marginal valuations since overbidding entails exposure risk an equilibrium may exist even if bids are costless and the intended volume is pre announced in fact the allotment quota may be strictly below one with certainty also with adaptive expectations overbidding need not escalate however the resulting allocation is typically inefficient empirical proxies of exposure risk are significant in both euro and sterling operations our findings have implications in particular for the potential reintroduction of pro rata allotment in the main refinancing operations of the eurosystem

cost efficiency and scale economies in the turkish insurance industry this article examines the cost efficiency and scale economies of insurance firms in the turkish insurance industry over a 15 year period 1990 2004 using the stochastic cost frontier model cost efficiency scores and scale economies were estimated for each firm in the sample the results show that mean cost inefficiencies range between 18 3 and 36 9 of total costs and they do not tend to decrease over time on average small firms are more cost efficient than large firms economies of scale appear present and significant for any class size the results suggest that there is a substantial difference in scale economies between small and large insurance firms

interest on reserves and the flexibility of monetary policy in the euro area this paper shows that remunerating required reserves can increase the flexibility of monetary policy the remuneration at the current policy rate implies constant net marginal interest costs of holding required reserves this allows the central bank to change the policy rate also within a reserve maintenance period without inducing a problematic reserve shifting on behalf of the banks in the euro area required reserves are remunerated at an average rate therefore the way in which reserves are remunerated has to be changed in order to make use of the advantage of a higher flexibility of monetary policy

efficiency in the greek insurance industry this paper employs the two stage procedure of simar and wilson 2007 to analyse the effects of deregulation on the efficiency of the greek insurance industry the efficiency is estimated by means of data envelopment analysis dea the companies are ranked according to their crs efficiency score for the period 1994 2003 the first stage results indicate a decline in efficiency over the sample period while the second stage results confirm that the competition for market shares is a major driver of efficiency in the greek insurance industry

the measurement of efficiency in life insurance estimates of a mixed normal gamma error model abstract this paper make three contributions to the literature on efficiency in financial services first it presents estimates of a mixed error cost frontier in which the variances of both the normal and gamma distributions can vary with firm size second it extends the literature on life insurance scale and product mix economies by incorporating and measuring x inefficiency estimates of x inefficiency range from 35 to 50 ray scale economies exist up to 15 billion in assets third comparisons of normal gamma estimates with other methods 3 thick frontier weighted least squares half normal distributions 3 demonstrate some of their pitfalls

organization and efficiency in the international insurance industry a cross frontier analysis abstract this paper employs cross frontier analysis an innovative tool based on data envelopment analysis to provide new insight into the relationship between organization and efficiency in international insurance markets we are the first to empirically test the expense preference hypothesis and the efficient structure hypothesis in a large cross country study for this purpose we consider 23 807 firm years for 21 countries from northern america and the european union a dataset not previously analyzed in this context we find evidence for the efficient structure hypothesis in selected market segments but we find no evidence for the expense preference hypothesis our results provide insight into the competitiveness of stock and mutual insurers from different countries at the country level the results can be used to compare different insurance markets our findings are especially interesting for the strategic management of insurance companies as well as for regulators and boards of national insurance associations

changes in the cost of intermediation the case of savings and loans the minimum cost output configuration for a firm may change as the result of a variety of factors including changes in market structure in this paper we test this structural change hypothesis with savings and loan data we find support for the hypothesis that separable constant returns to scale production functions characterize the average savings and loan in our sample in 1983 this is in contrast to the cost complementarities found in 1978 we argue that this result may be the result of regulatory changes that allowed savings and loans to alter their production mix to fully capture the benefits of joint production it seems reasonable to assume that the cost minimizing configuration of a multiproduct firm is potentially subject to nonstationarity during periods of structural change in input and or output markets the late 1970s and early 1980s represent such a period of turbulence for many markets in the financial services industry volatile interest rates combined with technological and regulatory changes may have caused firms in this industry to alter their output mixes in an effort to capture cost complementarities from joint production the purpose of this paper is to test this hypothesis of structural change in the savings and loan industry using both a translog and minflex laurent translog mlt specification of the production function we have chosen to investigate savings and loans s ls during the late 1970s and early 1980s for two reasons first s ls provide an ideal vehicle for testing our hypothesis because they were restricted almost exclusively to mortgages and securities as outputs before the passage of the depository institutions deregulation and monetary control act of 1980 and the garn st germain act of 1982 moreover there were also market changes with respect to both the pricing and mix of inputs i e deposits our second rationale involves the fact that there is a large and growing body of literature in the area of what is now called the

third degree price discrimination in a short stay accommodation industry this article analyses the pricing in the short stay accommodation industry in tasmania it utilizes a novel 2008 survey of tasmanian short stay accommodation firms in which business managers were asked about their perception of the elasticity of their firm s demand in each of the market segments that their firm supplied this direct observation of elasticity allows us to demonstrate that firms price across market segments act in a manner consistent with the lerner index and the theory of third degree price discrimination further we show in line with expectations based on the literature that increased quality of the accommodation lowers the elasticity of demand while the elasticity of demand is higher in winter surprisingly internet sales channels do not exhibit a different elasticity of demand to other sales channels

price discrimination with differentiated products definition and identification i introduction price discrimination is said to exist when the same product is sold to different consumers at different prices most economists also agree that price discrimination is at work when similar but not identical products are sold at prices that do not reflect differences in costs economics textbooks are rife with examples such as student or senior citizen discounts hardcover and paperback versions of books dinner versus lunch prices at restaurants airfares with various restrictions and price spreads of retail gasoline products on the other hand some economists have criticized the identification of such apparent price anomalies as price discrimination for example lott and roberts 1991 argue that there are usually cost based explanations for these phenomena and propose such explanations for the cases of airfare gasoline and restaurant prices nevertheless the authors do not challenge the conventional wisdom that price differences that cannot be explained by cost differences are discriminatory in recent years a number of papers have set out to empirically assess instances of alleged price discrimination the literature goes to great lengths to control for potential sources of cost variation among different products and thus to the extent that it is successful is not subject to the lott roberts critique almost all studies conclude that price discrimination is practiced in the particular market they analyze a skeptic of course could always argue that some sources of cost variation have not been accounted for and thus dismiss the results as erroneous despite the mild controversy over the methodology and its effectiveness the basic premise seems universally accepted the existence of price variation that cannot be explained by cost differences constitutes price discrimination this is not however a formal definition in fact there is no single widely accepted definition of price discrimination when products are not homogeneous some authors define price discrimination to exist when price cost margins absolute differences between differentiated products are unequal whereas others prefer to compare price cost markups percentage differences few authors have discussed the relative merits of one measure over the other 1 the relationship between the two has never been spelled out and the choice among them remains arbitrary in this article i aim to shed some light on this issue and provide some guidelines to empirical researchers interested in price discrimination i start by providing an overview of the current state of the literature in section ii i introduce the two competing definitions of price discrimination and briefly discuss the justification that has been provided for each i then review the empirical literature that uses one or the other definition as the basis of testing for price discrimination i present the basic methodology and discuss the definitional choices made by researchers investigating different market environments the picture that emerges from this overview is murky and provides little guidance to the empirical practitioner the absence of controversy on the choice of definition might simply reflect the fact that the two commonly used definitions are equivalent in section iii i show that this is not the case specifically it is possible for one definition to indicate the presence of price discrimination and for the other one to reject it it is also possible for the two measures to take opposite signs that is one product may have a higher markup and a lower margin than the other i also show that in general the margin criterion is more likely to indicate the presence of price discrimination i conclude that the choice of definition has important implications and should be given careful consideration the challenge is to come up with a consistent way of thinking about price discrimination that can easily be applied in a variety of settings

mergers and technical efficiency in spanish savings banks a stochastic distance function approach abstract the aim of this paper is to test the temporal variation of technical efficiency of spanish savings banks during the period 1985 1998 furthermore we test whether merged and non merged firms have different levels and temporal patterns of technical efficiency a stochastic output distance function r w shephard theory of cost and production functions princeton university press princeton nj is employed to accommodate multiple output technology the distance function provides the advantage that it does not need information about prices so it can accommodate the multi product nature of the financial sector only using the quantities as data an important point when the assumptions about perfectly competitive markets are unlikely to be met the temporal variation of efficiency is modeled extending the battese and coelli journal of productivity analysis 3 1992 153 169 approach in two ways relaxing the monotonicity of the temporal variation pattern of the efficiency term and allowing for different patterns of efficiency change between merged and non merged firms

the demise of the mutual organizational form an investigation of the life insurance industry we investigate the role of organizational structure in financial services markets by examining the u s life insurance industry traditionally stock and mutual life insurers were equally represented but now the industry is mainly composed of stock firms we find operational efficiency access to capital and tax savings are important determinants for this shift the incentive to demutualize differs by the type of conversion full demutualization is chosen for efficiency and access to capital reasons and partial conversion using a mutual holding company is chosen for tax savings firm operational efficiency improves after conversion we also find the efficiency of the stock organizational form dominates that of the mutual structure during our sample period 1995 to 2004

overbidding in fixed rate tenders an empirical assessment of alternative explanations abstract this paper investigates various theories explaining banks overbidding in the fixed rate tenders of the european central bank ecb using auction data from both the bundesbank and the ecb we show that none of the theories can on its own explain the observed overbidding this implies that the proposed new rules by the ecb aimed at neutralizing interest rate expectations would not eliminate overbidding if the rationing rule in the fixed rate tenders remains unchanged

an efficiency comparison of the non life insurance industry in the bric countries abstract we analyze the efficiency of non life insurance companies in four of the fastest growing markets in the world the bric brazil russia india china countries an innovative feature of this paper is its incorporation of uncontrollable variables in the efficiency analysis using multi stage data envelopment analysis dea this approach captures cross country differences such as the political and economic environment and allows distinguishing between managerial inefficiency and inefficiency due to environmental conditions we find that the environment affects the efficiency of non life insurers operating in the bric countries furthermore in a regression of firm characteristics on efficiency scores we identify four drives of efficiency size profitability solvency and ownership form the results further our understanding of the insurance industry in the bric countries in regard to its efficiency and the environment in which it operates

the regulation of privatized monopolies in the united kingdom this article examines the experience in the united kingdom with the regulation of privatized monopolies its conclusions are 1 that there are significant differences between rpi x or price cap and u s rate of return regulation which provides greater scope for bargaining in the former system 2 that u k regulators have taken seriously their duty to promote competition but that the existing economic literature is of limited help in this task 3 that price regulation is likely to be more effective where technology is changing slowly and or where technology is changing rapidly and 4 that the case for rpi x price cap rather than rate of return regulation is strongest in telecommunications gas supply and electricity supply and least strong in gas and electricity transmission grids

fire insurance in germany a comparison of price performance between state monopolies and competitive regions abstract up until 1994 there were two different forms of organizing the fire insurance market in germany while a state monopoly applied in 13 regions a competitive market system combined with government regulation existed in the rest of the country this study identifies the effects of market forms on the price performance of insurance companies it is based on annual company data including premium revenues damage payments and general expenses for the period 1980 1994 the estimation results indicate that monopolies had a 22 percent lower markup on damage payments compared to companies in competitive regions with an average markup of 42 percent the difference may be explained by higher selling costs for companies in competitive markets indicated by a high share of commissions in total expenses

collateral and short squeezing of liquidity in fixed rate tenders abstract the paper models fixed rate tenders where a central bank offers to lend central bank funds to financial institutions bidders are constrained by the amount of collateral they have we focus on the strategic interaction between bidding in the tender and trading in the interbank market after the tender where short squeezes could occur we examine how the design of the tender affects equilibrium bidding behavior and the incidence of short squeezes important elements in the analysis include the type of policy implemented by the central bank as well as bidders initial endowments of liquidity and collateral three instruments for softening short squeezes are identified the tender rate the tender size and admissible collateral increasing the tender rate or size tends to decrease the probability and severity of a short squeeze the possibility of a short squeeze may induce bidders to oversubscribe even if the tender rate is higher than the competitive rate

technical efficiency of european railways a distance function approach this study has two principal objectives the first objective is to measure and compare the performance of european railways the second objective is to illustrate the usefulness of econometric distance functions in the analysis of production in multioutput industries where behavioural assumptions such as cost minimization or profit maximization are unlikely to be applicable using annual data on 17 railways companies during 1988 1993 multioutput distance functions are estimated using corrected ordinary least squares cols the resulting technical efficiency estimates range from 0 980 for the netherlands to 0 784 for italy with a mean of 0 863 the distance function results are also compared with those obtained from single output production functions where aggregate output measures are formed using either total revenue or a tornqvist index the results obtained indicate substantial differences in parameter estimates and technical efficiency rankings casting significant doubt upon the reliability of

x efficiency in the us life insurance industry abstract using six years of data 1985 1990 we estimate hybrid translog cost functions for 561 life insurers we examine the resulting residuals to determine the relative efficiency of insurers in the sample we then test the residuals to see if they are related to so called x efficiencies because of internal and external monitoring or to other factors related to rent seeking results show a large degree of persistent inefficiency seems to exist among sample firms the inefficiencies relate to some internal or external monitoring and rent seeking may be occurring

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

forward looking behavior in ecb liquidity auctions evidence from the pre crisis period abstract using data from the pre crisis period we investigate banks joint bidding behavior in the ecb s main refinancing operations mro and longer term refinancing operations ltro we test whether banks bid at lower rates in mros before the ltro and at higher rates after the ltro compared to other operations we motivate this by findings from the auction literature suggesting that agents bidding behavior is forward looking and takes sequences of future auctions into account we offer two findings first we find that in general banks bid in the mro before the ltro at lower rates as compared to other mros moreover mro participants that also bid in the following ltro bid at even lower rates compared to peers not bidding in the ltro these findings support the hypothesis that banks view obtaining liquidity from the two operations as a substitute second we find that banks generally bid more aggressively in the mro after the ltro banks that participated also in the ltro preceding the mro bid at substantially higher rates these findings reflect that short banks with potentially large net liquidity needs in the mro after the ltro bid more aggressively although size plays a considerable role for bidding behavior the conclusions are valid for banks of different sizes

insurance companies in mozambique a two stage dea and neural networks on efficiency and capacity slacks this article analyses the efficiency of mozambique insurance companies using a dea model two dea models are used and a bootstrap approach adopted furthermore the efficiency scores are predicted based on neural networks the results reveal that mozambique insurance companies output increasing potentials are severely constrained particularly in terms of the ceded reinsurance increasing potentials policy implications are derived

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

quality based price discrimination and tax incidence the market for gasoline and diesel cars in europe the existing tax policies toward gasoline and diesel cars in european countries provide a unique opportunity to analyze quality based price discrimination and the implied tax incidence in my econometric framework consumers choose the type of engine based on their annual mileage prices are set by the manufacturers the relative pricing of gasoline and diesel cars appears to be consistent with monopolistic price discrimination effectively segmenting low mileage from high mileage consumers on average about 75 to 90 of the price differentials between gasoline and diesel cars can be explained by markup differences i draw implications for the effectiveness and the revenue effects of tax policy