an analysis of interfirm cooperation theory and evidence from electric power pools this paper develops and tests a model for analyzing the extent to which an individual utility participates in a power pool it incorporates the benefits and costs of pool membership in a profit maximization model of an individual utility the study finds that coordination reflects the benefits and costs the degree to which other utilities are committed to the pool and the utility s behavior toward other utilities the results show that large firms are reluctant to pool with small firms and the us pools tend to be loosely coordinated policy implications are that regulatory commissions can be instrumental in coordination efforts and that interstate cooperation among regulatory authorities is needed to encourage pooling and obtain regional solutions to regional problems it is also important to reduce the transactional costs of pooling wherever possible 37 references 3 figures 1 table

the optimum degree of rate of return regulation a two sector analysis recently considerable attention has been given to the economic effects of rate of return regulation of monopoly firms one of the conclusions of the literature on this subject is that some regulation is always better than no regulation from a welfare point of view the purpose of this paper is to show that such a conclusion does not necessarily hold in a two sector analysis under rate of return regulation the firm s prices are set such that the rate of return to capital does not exceed some fair rate allowed by the regulatory authority it has been asserted that a profit maximizing monopoly firm will react to such a constraint by employing more of all inputs thereby expanding output but will employ more than the efficient level of capital relative to the other inputs 1 8 a corollary to this proposition is that if the regulatory constraint is tightened in the sense of lowering the allowed rateof return toward the market price of capital services the monopoly firm will respond with additional output but will move further from its expansion path if these effects occur such a form of regulation would involve significant welfare considerations from the viewpoint of the economy in which the monopoly firm operates the increased output and corresponding lower unit price represents a benefit however the inefficient use of capital imposes a cost on the economy the question is then whether this form of regulation represents a second best solution more specifically the

voters as fiscal conservatives voters penalize federal and state spending growth this is the central result of my analysis of voting behavior in presidential senatorial and gubernatorial elections from 1950 1988 the composition of federal spending growth seems irrelevant the vote loss to the president s party from an extra dollar of defense or nondefense spending is the same however in gubernatorial elections expansion of state welfare spending exacts a disproportionate political price deficit financing of federal or state spending does not appear to matter politically i conclude by discussing the obvious question of why government budgets have grown in the face of this voter hostility

what can we learn from the grand policy experiment lessons from so2 allowance trading stable url http links jstor org sici sici 0895 3309 28199822 2912 3a3 3c69 3awcwlft 3e2 0 co 3b2 tthe journal of economic perspectives is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgtue jun 26 16 25 17 2007

regional differences in nuclear and fossil fuel generation of electricity previous research on electric gen eration costs has mainly relied on economy wide data this study disaggregates a broad sample into regions known to have marked differences in fossil fuel availability climate regulatory ef fects and other variables we find differences exist in generation costs among the studied re gions and nuclear power using estimates of scale economies and other measures we also find smaller minimum efficient size fossil fuel firms than previous studies based on recent cost information this study provides insights into several industry structure issues such as capac ity expansion competition input costs environ mental policy and transmission access jel q42

pricing in the nuclear power industry public or private interest this paper tests empirically the ramsey version of the public interest theory of regulation by examining the pricing practices in the nuclear power industry using a 1985 cross sectional sample of 40 electric utilities other researchers have avoided this segment of the industry because of difficulties with nuclear fuel data or perceived differences in the underlying production function we show that regulators respond to political influences according to the stigler peltzman version of regulation and that ramsey pricing cannot be validated at least for the nuclear segment of the electric power industry

effects of regulation on utility financing theory and evidence standing of these cross sectional variations might be afforded by the detailed examination of specific industry characteristics and their relationship to firms financing patterns the present study offers a methodology for approaching this issue the first step is to assemble joint theories of industry and financial structure in order to identify the ways in which changing industry conditions might be associated with changes in financing evidence on such simultaneous changes can then be examined in an attempt to identify the most plausible joint theory the methodology is used to investigate the effects of state commission regulation on the financing of electric utilities this is a natural candidate for study since regulation is such a salient feature of the industry in addition the regulatory system imparts some interesting special features to the very nature of utility capital structures inherent in all capital structures for example are opportunities for shifting wealth between bondholders and shareholders but under regulation these wealth shifting opportunities are expanded to encompass consumers as well finally the study of regulation has resulted in several relatively well specified theories of why regulation is imposed and what its observable effects should be in section i the different theories of capital structure and regulation are discussed and their joint implications are derived the capital structure theories include the perfect capital market theory the debt capacity theory and the financing hierarchy theory the regulatory theories include the public interest or market failure theory the political economy theory and the imperfect monitoring theory in section ii financing data from the early days of state commission utility regulation are used to try to distinguish

demand for locally provided public services within the median voter s framework the case of the brazilian municipalities in this paper we estimated the demand for local public spending for the brazilian municipalities within a median voter s framework the rationale for applying that framework came from the fact that in federal systems voters preferences are more likely to be reflected at the local level as the consumers of public services have a better knowledge of the benefits and costs of the local public expenditures results obtained are consistent with the theoretical background thus suggesting that this hypothesis might be useful to describe the demand for local public goods in brazil in particular the use of quantile regression permitted us to investigate the impacts of the conditioning variables on local public expenses across different expenditures classes thus allowing for heterogeneity across municipalities our results also suggest that the impact of the city size on the quality of club goods shows crowding effects as is between zero and one however in the estimated models marginal congestion slightly d

regulation of administered prices an empirical analysis of the microeconomics of price movement in finland 1972 77 curiously enough the concept of administered prices launched by gardiner means in his 1934 report to the u s secretary of agriculture still shows up in discussions on price policy and control today almost fifty years since it was coined and three decades after the discussion2 in which it should have been buried even more astonishing is the fact that its spin off administered inflation a term introduced by the kefauver committee in 1957 3 is still a part of economic language in some instances in the basic formulation that of means in 1935 administered prices are not assumed to be explicitly linked with market power but simply prices set by administrative action and held constant for a period of time means 12 p 78 although the hypothesis in this form was based on no economic reasoning of acceptable clarity it might still be accepted for the simple truism it is clearly some prices will change more seldom than others since for one thing costs of price changes will vary as is intuitively clear and as shown by sheshinski and weiss 17 pp 294 95 the optimal strategy of a firm in an inflationary environment will consist of longer intervals between successive price changes the higher the cost of such a change is under some very special assumptions risk aversion may also serve as an explanation to a decrease in the number of price changes relative to the number of changes in cost as indicated by the results of schramm and sherman 1 5 4 the administered inflation hypothesis as forwarded by means in his 1957 testimony before the kefauver committee means 12 pp 101 29 and by

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

rate structures in nuclear and non nuclear us electric utility jurisdictions this study investigates whether the structure of customer rates for us electric utilities with nuclear power generation is significantly different from the rate structure of non nuclear utilities using previous estimates of the marginal costs of generation by nuclear and fossil fuel plants and of transmission and distribution tests are made to determine if pricing practices are similar in nuclear and non nuclear jurisdictions the results show that the rate structure for the nuclear utilities is inefficient with industrial rates significantly higher than first best or second best pricing criteria allow whereas the rates for non nuclear utilities are second best efficient with a slight favouritism toward the industrial class

partial adjustment and staggered price setting this paper compares taylor style staggered price setting to partial adjustment of prices or calvo staggering in a small optimizing is lm model in contrast to the overwhelming perception in the literature the models are not similar for most parameterizations in particular the dynamic response of the economy to shocks is quite different in the two models and the welfare cost of price rigidity is eight or more times larger in the calvo model than in the taylor model for typical calibrations suggestions for calibrations under which the models are more similar are also presented

the influence of the economic approaches to regulation on banking regulations a short history of banking regulations this article highlights the theoretical foundations of the regulations at work in the banking sector and examines their responsibility in the onset of the 2007 2008 financial crisis drawing a parallel between the main changes in banking regulations since the 1960s and the evolutions in the economic analyses of regulation over the same period it shows that the shift from the public interest theory of regulation that prevailed until the late 1960s towards the private interest theory of regulation accounts for the substitution of micro prudential regulations for macro prudential ones and explains a paradigmatic change in the conception of the regulatory instruments of the banking authorities it also shows that although the outcome of several factors the 2007 2008 crisis was also a consequence of the fact that the economic analysis of banking regulations supported micro prudential regulations that fail to take the global features and impact of banking activities into account and have proved unable to recommend effective solutions in a context of crisis

efficiency based rank assessment for electric power industry a combined use of data envelopment analysis dea and dea discriminant analysis da abstract this study discusses a combined use of dea data environment analysis and dea da discriminant analysis to determine the efficiency based rank of energy firms this type of performance evaluation is important because we often have a difficulty in accessing a large sample on energy firms to derive reliable empirical results the proposed approach is useful in dealing with such a limited number of energy firms often found in previous dea studies on energy industries in the world the proposed approach uses dea to classify energy firms into efficient and inefficient groups based upon their efficiency scores then it utilizes dea da to assess their efficiency scores and ranks in this stage we can find an adjusted efficiency score for each energy firm the proposed approach provides us with the following analytical capabilities all of which cannot be found in a conventional use of dea in assessing energy firms first the proposed dea approach can avoid zero in all multipliers on efficient energy firms by incorporating scsc strong complementary slackness condition so that it can handle an occurrence of multiple reference sets and multiple projections the dea result classifies all energy firms into efficient and inefficient groups second dea da applied to the two groups evaluates all energy firms by an industry wide evaluation not depending upon a limited number of efficient energy firms in a reference set as found in a conventional use of dea the analytical capability can reduce the number of efficient energy firms third the proposed approach can provide their efficiency based ranking scores finally we can conduct a rank sum test based upon their ranking scores to obtain a statistical inference as an application this study uses the proposed approach to examine the performance of japanese electric power industry we find two economic implications one of the two implications is that no major change has occurred in the operational performance of japanese electric power industry because of japanese sluggish economy from 2005 to 2009 the other implication indicates that there are strategic differences in the operation of japanese electric power firms after the liberalization

market structure in the us electricity industry a long term perspective we estimate changes in market structure in the us electric power industry during the last three decades using two independent approaches first we estimate an industry wide conjectural variations parameter we find that industry concentration was generally rising during the 1970s but has been gradually and consistently falling since the early 1980s to check the robustness of these results we then use a translog production function to estimate the lerner index the results confirm that the industry was becoming less concentrated during the 1980s though the lerner index tended to fluctuate during the late 1980s and early 1990s our results suggest that the current state of the electricity industry may have more to do with long term changes in market structure than recent attempts to establish competitive wholesale electricity markets

capital vintage time trends and technical change in the electric power industry beginning with tinbergen in 1942 economists have employed a time trend in cost or production functions to represent the rate at which new technology is introduced into the production unit in sufficiently flexible models of the production process the time trend may be used to obtain estimates of the rate as well as direction of technical change the use of the time trend is generally defended on pragmatic grounds as no theoretical justification exists for assuming that new technology is introduced at a steady rate that is independent of a firm s investment in r d education capital of a more recent vintage etc in recent years alternatives to the traditional time trend have been sought to represent the rate at which new technology is introduced research in this area has been concentrated in the telecommunications industry where the stock of r d or the percentage of calls completed by direct dialing or modern switching facilities have been employed as technological indices by nadiri and schankerman 32 denny et al 14 and christensen et al 7 the latter two studies indicate that explicit technological indices provide a better representation of the pace of innovation than the time trend this conclusion must remain tentative however as it is not possible to determine what is the true direction of technical change in these studies this shortcoming is overcome in a recent study by kopp and smith 24 who compare the performance of time trends and explicit technological indices in a study using pseudo data generated by process analysis models their results unambiguously support the use of technologically explicit indicators of technical change and indicate that the use of a time trend may not provide a consistent estimate of the direction of technical change this study does not however shed any light on the ability of a time trend to accurately reflect the rate of technical change the purpose of this study is to investigate the effects of alternative technological indices on the estimated rate and direction of technical change in the electric power industry the performance of a time trend is compared with that of a vintage index computed as the average age of a firm s steam generating capacity this latter index is consistent with the notion that new technology is embodied in newly constructed capital an assumption sup

cost efficiency of electric grid utilities in china a comparison of estimates from sfa mle sfa bayes and stoned cnls with the purpose of estimating the range of cost efficiency levels of the power grid sector in china we assembled a data set including 23 provincial power grid companies spanning from 2005 to 2009 and conducted an empirical study based on the sfa mle sfa bayes and stoned cnls methodologies empirical results show that the average values of efficiency from different models vary from 0 85 to 0 92 depending especially on the assumptions underlying inefficiency content further results demonstrate that there is exogenous technical progress during the sample period and per capita gdp of the province is negatively related to the costs of the electric grid company located in the corresponding province we hope this empirical study will contribute to the debate on an efficiency based regulation scheme which was introduced to the chinese electric grid sector on a pilot base in 2014

service quality in the electricity industry the role of privatization and managerial behavior abstract this paper analyzes the relationship between privatization and service quality in the electricity industry and tests the hypothesis that managerial behavior is a significant intervening factor the sample includes 31 italian distributors over the period 1998 2004 their quality performance is represented by continuity of supply an aspect of quality that is both contractible and regulated results of the empirical analysis suggest that the transfer of shareholdings to private investors does not lead to quality degradation the results also suggest that managerial dominance translates into a reduction in supply quality this effect is likely to be particularly strong for public sector utilities

multiple output production and pricing in electric utilities empirical studies of the electric utility industry have generally focused on one of several issues such as the presence or absence of regulation induced input mix distortions the rules used to select regulated prices whether electricity is one output or several or the naturalness of the electric utility monopoly this paper contributes a method which permits simultaneous estimation of demand elasticities pricing rule parameters and marginal rates of transformation within one econometric model since firms make input and output decisions given the demand and regulatory conditions facing them the marginal rates of substitution and transformation are dependent on the demand elasticities of each consumer class and the prices permitted by regulators its purposes are two first i examine the appropriateness of a multiple output model of production is electricity one output or are the products sold to different consumers distinct outputs most but not all previous studies treat electricity as a homogeneous product 2 while this assumption may be justified for studies which deal strictly with generation of electricity joskow and schmalensee 27 54 5 observe3 that

rate of return regulation and product variety abstract this paper examines the effect of rate of regulation on a monopolist that faces a market of observationally identical but heterogeneous consumers under plausible technological conditions rate of return regulation increases the quality offered to any consumer and expands the variety of products it offers some consumers receive a quality that is greater than the socially optimal quality rate of return regulation unambiguously increases consumers surplus if the allowed rate of return is close to the monopoly rate of return social welfare increases as well

time of use pricing for load management programs in taiwan power company load management programs have been actively performed by the utilities to reduce peak demand and improve system load factor in recent years the time of use tou tariff based on the peak load pricing theory has been one of the most effective load management strategies proper tou rate structure can actually reflect the generation cost of electricity supplying and give a guideline for customers to modify the power consumption pattern so that the system load factor can be improved the inverse electricity pricing rule can be applied as the basis of tou pricing in this paper the price elasticities of industrial customers of taipower system are solved by the statistical regression model with 2620 data samples

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

monetary policy endogenous inattention and the volatility trade off this paper addresses the output price volatility puzzle by studying the interaction of optimal monetary policy and agents beliefs we assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs endogenous inattention is a nash equilibrium in the information processing rate although a decline of policy activism directly increases output volatility it indirectly anchors expectations which decreases output volatility if the indirect effect dominates then the usual trade off between output and price volatility breaks down this provides a potential explanation for the great moderation that began in the 1980 s

regulated equity returns a puzzle abstract based on a database of u s electric utility rate cases spanning nearly four decades the returns on equity authorized by regulators have exhibited a large and growing premium over the riskless rate of return this growing premium does not appear to be explained by traditional asset pricing models often in direct contrast to regulators stated intent we suggest possible alternative explanations drawn from finance public policy public choice and the behavioral economics literature however absent some normative justification for this premium it would appear that regulators are authorizing excessive returns on equity to utility investors and that these excess returns translate into tangible profits for utility firms

the multiproduct firm quality choice and regulation a monopolist facing a market of heterogeneous consumers will distort the quality a rray this paper explores three regulatory remedies minimum quality s tandards mqs maximum price regulation mpr and rate of return re gulation rorr that can counteract this distortion mqs and mpr rais e the quality offered to consumers with a low willingness to pay for quality while mqs have no effect on the quality offered to consumers with a high willingness to pay mpr decreases the quality offered to this group if production of high low quality goods is capital i ntensive rorr increases decreases the quality offered to both grou ps copyright 1988 by blackwell publishing ltd

pricing efficiency under rate of return regulation some empirical evidence for the electric utility industry the authors test quasi optimal pricing rules for rate of return regulation for a sample of electric utilities they estimate the regulated cost function and demand equations by class of customer for the sample to yield the cost and demand parameters required to assess the utility rate structures the results indicate that the price structure of electricity by class of customer is not quasi optimal and that welfare improvement might be possible under alternative prices searching for the price structure which satisfies the criteria they find that commercial users rates have been too high relative to residential and to a lesser extent industrial rates they note that commercial uses tend to be less organized and more poorly represented in the rate making process 16 references 8 tables

revealed preferences for car tax cuts an empirical study of perceived fiscal incidence voting in an election in which elimination of the local car tax is the central issue shows how a highly visible universal tax cut can prevail in the electoral process even if benefits are skewed toward upper income households these results are consistent with positive models of fiscal structure choice in which fiscal systems are the consequence of support maximizing politicians attempting to supply net benefits to easily identifiable interest groups without generating significant opposition from other groups

regulatory preferences and two part tariffs the case of electricity the purpose of this paper is to develop and demonstrate a method for deriving and testing regulatory preferences within and across customer classes and to assess the impact of these preferences on price structures and regulatory effectiveness in the electric utility industry the method extends a technique described in both nelson and ross for uncovering interclass preferences in a uniform price framework 24 33 34 by employing a two part tariff framework the extension enables the derivation of both interclass and intraclass preferences intraclass preferences can be derived in a two part tariff framework because regulators can discriminate not only between customer classes as with uniform prices but also within a customer class two part tariffs are also introduced because actual price structures in the electric utility industry are better approximated by two part tariffs than by uniform prices models of optimal two part tariffs particularly those of schmalensee and sherman and visscher are extended to allow regulatory preferences to vary across and within heterogeneous customer classes 36 37 13 27 11 25 19 18 22 2 these variable preferences are incorporated into a weighted social surplus function which regulators are assumed to maximize given this model of regulatory behavior preference weights can be derived for the electric utility industry with information on the markups of both per unit prices over marginal costs of kwh output and fixed charges over the marginal costs of customer connection and on output and connection demand elasticities

the effects of lump sum subsidies on the structure of production and productivity in regulated industries abstract the theoretical model developed in this paper indicates that a lump sum subsidy granted to a monopolist facing a binding rate of return constraint will result in a higher level of capital employed and output produced furthermore production costs at any level of output will be higher compared to the pre subsidy situation the empirical results emanating from the application of the model to the bus transport sector indicate that lump sum subsidies have been factor biased and have led to higher costs as predicted by the model the average rate of productivity growth has been reduced by 0 60 percentage points per year as a direct result of the lump sum subsidy

regulatory restructuring and incumbent price dynamics the case of u s local telephone markets prior to the telecommunications act of 1996 many u s states restructured their regulatory framework by replacing rate of return regulation with competition in both the local exchange service and local long distance markets and adopting price regulation price caps and price freezes using a panel data set of incumbent firm prices for three services i investigate whether price regulation and differences in entry conditions affect incumbent operators rate structures i find that competition has prompted a significant amount of rate rebalancing by reducing the amount of cross subsidization present in local telephone markets in addition the added flexibility of price cap regulation speeds the rate rebalance effects of competition

optimal departures from marginal cost pricing the case of a rate of return constraint models of the regulated monopoly can be categorized under two general types depending on the process by which commodity prices are determined through regulation the first type assumes that the regulator exogenously specifies the regulatory constraint and that the firm chooses its price structure so as to maximize profit subject to this imposed side condition baumol and klevoric review much of this literature in 2 the second class of models assumes that the regulator or the firm chooses a price structure which maximizes a welfare function serving consumer desires subject to a regulatory constraint at the resultant second best output combination the firm is assumed to minimize cost the studies by baumol and bradford 1 boiteux 3 manne 7 and rees 11 are representative of this approach the present paper is concerned with the characterization of a solution to the second type of problem for a case which is not clearly dealt with in the literature in particular we discuss quasi optimal pricing in the presence of a rate of return constraint on capital to our knowledge the only other study which directly addresses this problem is the classic article of baumol and bradford 1 in their initial presentation of the quasi optimal pricing rules they consider a partial equilibrium situation in which a monopoly firm s n commodity prices are being chosen so as to maximize an objective function subject to a regulatory constraint which places a fixed upper bound on profit they point out that a rate of return constraint on capital is equivalent to a fixed profit constraint with maximal profit equal to zero if the regulator s imposed or fair rate of return is equal to the opportunity cost of capital on the other hand if as is typically assumed the fair rate is greater than the cost of capital then maximal profit m in their notation varies with the firm s output levels for this case baumol and bradford note that the regulatory constraint h r c m where r is total revenue and c is total cost can be modified by defining c c m and writing the basic profit constraint as r c 0 their quasi optimality rules can then be reinterpreted in terms of c they then candidly note 1 269 that economic interpretations are however clouded by this modification no further discussion of this case is presented

pricing inefficiency under profit regulation rate of return regulation of a profit seeking firm invites two kinds of distortion 1 inputs may not be chosen efficiently to produce given levels of output and 2 the output levels may not be chosen efficiently most attention has been accorded the first of these the technical input distortion it can even be controlled at least in principle under particular goals and by alternative forms of profit regulation we focus here on the second distortion the matter of inefficient output levels caused by nonoptimal relative prices for multiple outputs our approach is to present second best welfare maximizing prices and then see whether firms will adopt them when seeking goals other than welfare goals such as profit sales cost or output and when subject to various constraints which represent profit regulation over a range of possible goals and forms of profit constraint we find pricing efficiency is difficult to achieve by pursuing a maximum sum of profits per unit of capital or of cost pricing efficiency can be approached but the promise of that remedy is limited inducing reasonably efficient relative prices in a multiproduct regulated firm thus is seen as a difficult task that deserves considerably more attention than it has received

on inflation and output with costly price changes a simple unifying result this paper determines the real effects of credible disinflation when price setting is staggered the results are surprising a fairly quick disinflation causes a boom this finding suggests that nominal price rigidity alone does not explain why disinflation is costly in actual economies this abstract was borrowed from another version of this item

product complementarities capabilities and governance a dynamic transaction cost perspective the organization and governance of the transactions that comprise a bundling arrangement depend on the distribution of capabilities among firms and the amount of time during which the window of opportunity for earning rents is expected to remain open firms engaged in inter firm collaboration must undertake support transactions related to billing marketing customer support and product repair these support transactions differ from the core transactions that have traditionally been perceived as sufficient to provide a product bundle since support transactions create costs of their own the market may turn out to be an expensive means of governing collaborative arrangements undertaken for bundling purposes the telecommunications service sector provides an illustration copyright 1997 by oxford university press

sticky information the impact of different information updating assumptions vector auto regressions applied to u s data find that inflation and output experience persistent and hump shaped responses to unanticipated monetary shocks one monetary model that can generate these responses employs sticky information under sticky information a firm may costlessly change its nominal price every period however the firm can only occasionally update the information upon which it bases decisions we show that this result hinges critically on the assumption that each firm receives information updates randomly if on the other hand each firm updates its information at infrequent but fixed intervals a the output response is not persistent and only weakly hump shaped under one year price contracts b the inflation response suffers diminished persistence and a reduced hump shape c the inflation response remains unrealistic under longer durations

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco