the efficiency of electric power pools evidence from firing unit data 1986 the efficiency of electric power pools evidence from firing unit data applied economics vol 18 no 12 pp 1323 1334

perishable inventory theory a review this paper reviews the relevant literature on the problem of determining suitable ordering policies for both fixed life perishable inventory and inventory subject to continuous exponential decay we consider both deterministic and stochastic demand for single and multiple products both optimal and sub optimal order policies are discussed in addition a brief review of the application of these models to blood bank management is included the review concludes with a discussion of some of the interesting open research questions in the area

multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

optimal control of a dual service rate m m 1 production inventory model we analyse a dual source production inventory model in which the processing times at a primary manufacturing resource and a second contingent resource are exponentially distributed we interpret the contingent source to be a subcontractor although it could also be overtime production we treat the inventory and contingent sourcing policies as decision variables in an analytical study and additionally allow the primary manufacturing capacity to be a decision variable in a subsequent numerical study our goal is to gain insight into the use of subcontracting as a contingent source of goods and whether it can fulfill real world managers expectations for improved performance we prove that a stationary non randomised inventory and subcontracting policy is optimal for our m m 1 dual source model and moreover that a dual base stock policy is optimal we then derive an exact closed form expression for one of the optimal base stocks which to our knowledge is the first closed form solution for a dual source model we use that closed form result to advantage in a numerical study from which we gain insight into how optimal capacity subcontracting and inventory policies are set and how effectively a contingent source can reduce total cost capacity cost and inventory cost we find that i the contingent source can reduce total cost effectively even when contingent sourcing is expensive and ii contingent sourcing reduces capacity cost more effectively than it does inventory cost

a stochastic production function for machine repair although work by levhari and sheshinski 1970 and syrquin 1972 suggests that general functional forms such as the cobb douglas and ces accurately approximate a machine repair stochastic production process this paper shows that these authors have not adequately captured the stochastic nature of the production process more importantly while general forms are convenient and widely employed this paper argues that there is a more direct method for determining the properties of the production process

experience learning and returns to scale the experience curve is a tool for forecasting future decreases in average cost as a function of cumulative output volume the extent of an experience effect has profound implications for both pricing strategy and the focus on market share as a managerial objective at the same time the underlying sources of the experience effect are not well understood this article demonstrates that as commonly measured experience effects are aggregated with the effects of increasing returns to scale this implies that standard experience curve estimates are misspecified because they suffer from an omitted variable bias strategic implications of the experience scale link are discussed

the political economics of austerity the 2007 8 financial crisis has reignited the debate about economic austerity with the aim of understanding why a government would pursue such a policy in the current context of persistent economic recession this article traces the social political and economic developments that have together shaped the evolution of ideas about austerity from the earliest theorizing by the classical political economists some three hundred years ago throughout the historical narrative important analytical themes revolve around the arguments used to justify austerity notably appeals to ethics and morality reinforced by misleading analogies drawn between government budgets and the accounts of firms and households these include concerns about inflation and the observed relationship between inflation and unemployment ricardian equivalence and non keynesian effects of austerity and the correlation between public debt levels and economic growth the class analytics of austerity who bears the burden of austerity and who benefits and the process by which alternative ideas penetrate the mainstream and reconstitute the conventional wisdom are also important analytical themes

economies of scope and economies of agglomeration abstract agglomeration economies are economies external to the firm and plant but internal to a particular location in this paper the notion of agglomeration economies is formally investigated the implications of the concept for urban structure and industrial organization are then traced under specified considerations weak economies of agglomeration as defined in this paper are shown to be necessary for the existence of an urban area

reap what you sow agricultural technology urbanization and structural change abstract this paper studies how productivity enhancing agricultural technology affects urbanization by provoking structural change we investigate these issues using a natural experiment in the united states the results show that technologies which improve crop productivity lead to a less urbanized economy as economic activity relocates from manufacturing and services towards agriculture the effects are highly persistent and are driven by the technology increasing agricultural labor demand our findings highlight the potentially unintended disruptive force of innovative technologies

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

scale of production and choice of technique in the engineering industries in developing countries this article examines the relationship between scale of production optimal choice of technique and costs for three engineering industries nuts and bolts iron founding and machine tools in all three industries costs of production fell as the scale of output increased this was associated with switches of technique and the spread of fixed costs over a larger number of units the capital output ratio fell and labour productivity increased with increases in scale while in most cases the capital labour ratio increased the implications of these findings are briefly discussed

excess capacity as a barrier to entry an empirical appraisal this paper examines excess capacity barriers to entry and investment dynamics in a sample of thirty eight chemical product industries logit and log linear models of investment behavior are estimated and specific case examples are considered the results show that incumbents rarely built excess capacity pre emptively in an effort to deter entry in general entrants and incumbents exhibited similar investment behavior

labor heterogeneity wage bargaining and agglomeration economies abstract the modern economy is characterized by increasing returns to scale diverse production technology and specialized labor requirements with heterogeneous production technology increasing returns to scale and specific labor requirements we show that average productivity increases with the size of the labor market the larger the size of the market the better the matches between workers and firms resulting in lower on the job training costs through the wage bargaining between firms and workers the savings in training costs are transmitted into higher wages

sine praejudicio economics and the 2014 scottish independence referendum the purpose of this paper is to analyse the contribution of expert economic opinion to the 2014 referendum campaigns on scottish independence we argue that the input from economics to both sides of the debate as well as to independent analysis was constrained by a mainstream economics framing the result was a focus on calculable outcomes predicated on unchanging institutions and behaviour and the question of currency arrangements that assumes the status quo is an optimal currency area as the consequences of constitutional change for institutions and behaviour are uncertain an equilibrium framework treats anything beyond calculable prediction as a shock inducing fear of the unknown in contrast a political economy approach is tailored to analysing uncertain developments and encompassing the broader issues relating to values democracy and power and is thus better suited to the analysis of constitutional change

market structure uncertainty and intrafirm diffusion the case of optical scanners in grocery stores this study uses monthly data on the adoption of optical scanners by sixty three grocery chains in thirty two large u s cities to identify the determinants of the rate of intrafirm diffusion the methodology involves a two stage approach that relates market environment characteristics to the estimated rate of intrafirm diffusion the results indicate that firms with larger market shares adopt a new innovation scanners more quickly initially but diffuse the innovation through their stores more slowly than firms with smaller market shares in addition firms that lag competitors in the initial adoption of scanners tend to diffuse the innovation more quickly copyright 1992 by mit press

on the adoption of new technologies we investigate the incentives of private firms to adopt new technologies econometric investigation is performed on a pooled sample of individual us airline firms over the period 1971 to 1986 for which extensive information on available jet aircraft technology and fleet choice have been recorded given the incidence of successive commercial aircraft innovations and variation in production attributes across firms we are able to consider a wider array of time dependent and time independent adoption influences than in previous firm level studies to the extent that our study provides useful general insights into adoption decisions by firms the results have implications for us global competitiveness policy one key finding is that firms subject to increased product market competition exhibit a higher propensity to adopt technological innovations

efficiency analysis of cournot competition in service industries with congestion we consider cournot competition in the presence of congestion effects our model consists of several service providers with differentiated services each competing for users who are sensitive to both price and congestion we distinguish two types of congestion effects depending on whether spillover costs exist that is where one service provider s congestion cost increases with the other providers output level we quantify the efficiency of an unregulated oligopoly with respect to the optimal social welfare with tight upper and lower bounds we show that when there is no spillover the welfare loss in an unregulated oligopoly is limited to 25 of the social optimum even in the presence of highly convex costs on the other hand when spillover cost is present there does not exist a constant lower bound on the efficiency of an unregulated oligopoly even with affine cost we show that the efficiency depends on the relative magnitude between the marginal spillover cost and the marginal benefit to consumers this paper was accepted by christian terwiesch operations management

congestion pricing and capacity of large hub airports a bottleneck model with stochastic queues this paper models and estimates congestion prices and capacity for large hub airports the model includes stochastic queues time varying traffic rates and endogenous intertemporal adjustment of traffic in response to queuing delay and fees relative costs of queuing and schedule delays are estimated using data from minneapolis st paul simulations calculate equilibrium traffic patterns queuing delays schedule delays congestion fees airport revenues airport capacity and efficiency gains the paper also investigates whether a dominant airline internalizes delays its aircraft impose it tests game theoretic specifications with atomistic nash dominant stackelberg dominant and collusive airline traffic

policy review section in this policy review section gerry stoker of the institute of local government studies presents a critical review of the role of urban development corporations udcs in comparing the experience of the udcs consideration is given to the varying nature of the land and property market in each udc area to the relationship with local authorities and other local bodies and the regeneration strategies pursued by the udcs this is followed by an assessment of the impact of the udcs in economic social and political terms in the second article john britton of the university of toronto examines the theoretical case for interventionist public policies to assist the innovation process in small and medium sized enterprises these arguments are supported by a review of the experience of various national support programmes introduced in the uk in particular the manufacturing advisory service introduced in 1978 and the design advisory service launched in 1982

ski lift pricing with applications to labor and other markets the market for ski runs or amusement rides often features admission tickets with no explicit price per ride therefore the equilibrium i nvolves queues which are systematically longer during peak periods s uch as weekends moreover the prices of admission tickets are much l ess responsive than the length of queues to variations in demand eve n when these variations are predictable despite the queues and stick y prices the authors show that the outcomes are nearly efficient und er plausible conditions they then show that similar results obtain f or some familiar congestion problems and for profit sharing schemes i n the labor market copyright 1987 by american economic association

third degree price discrimination in the presence of congestion externality this paper analyzes third degree price discrimination of a monopoly airline in the presence of congestion externality when all markets are served the model features the business passenger and leisure passenger markets where business passengers exhibit a higher time valuation and a less price elastic demand than leisure passengers our main result is the identification of the time valuation effect of price discrimination which can work in the opposite direction as the well known output effect on welfare this time valuation effect clearly explains why discriminating prices can improve welfare even when this is associated with a reduction in aggregate output

impact of plant size and focus on productivity an empirical study recent popular business literature has suggested that there is a significant trend in the united states for firms to decrease the size and increase the focus of manufacturing plants they operate and that this leads to higher productivity this paper tests empirically the validity of these claims we analyze data on virtually the entire population of manufacturing plants in the united states and find that contrary to the popular business literature the average size of plants increased during the period 1972 1984 however consistent with the popular notion the rate of growth in plant size slowed considerably and even turned negative for a category of large plants plant focus did increase during this period we then investigate the relationship between productivity and plant characteristics including plant size and plant focus overall our results do not support the popular argument that reduction in plant size results in productivity gains however we do find support for this argument in some two digit sic industries also scale economies in the entire population decreased over the period 1972 1982 we also find only limited support for the popular argument that plant focus increases productivity

retrospectives the lost art of economics economists generally divide economics into two distinct categories positive and normative but how applied economics fits within these categories is unclear this paper argues that applied economics belongs in neither normative nor positive economics instead it belongs in a third category the art of economics currently many economists are trying to use a methodology appropriate for positive economics to guide their applied work work that properly belongs in the art of economics this three part distinction is not mine but dates back to a classic book the scope and method of political economy 1891 by john neville keynes in his book keynes argued that economists failure to distinguish the art of economics as a separate branch from positive and normative economics would lead to serious problems one hundred years later he has turned out to be clairvoyant

the international context for industrialisation in the coming decade export orientated industrialisation strategies are currently in vogue whether as an active choice by ldcs or as a consequence of pressure from the imf and the world bank the attractiveness of these strategies stems from the historic success of the nics particularly south korea taiwan singapore and hong kong yet there are signs that the changing nature of the global economy will have a major impact on industrialisation in peripheral economies and in particular on eoi strategies this paper focuses on four aspects of this changing international climate restricted market access radical electronics based technical change the nature of the structural adjustment programmes enforced by the imf and the world bank and the effect of increased military expenditures in the third world

optimal pricing of flights and passengers at congested airports and the efficiency of atomistic charges abstract this paper investigates and compares airport pricing policies under various types of competition considering both per passenger and per flight charges at congested airports we show that an airport requires both pricing instruments to achieve the first best outcome and we distinguish their role by showing that congestion externalities need to be addressed through per flight tolls whereas the inefficiency caused by airlines market power exertion must be corrected with per passenger subsidies we also show that bertrand competition with differentiated products a type of behavior recently pointed out by the empirical literature as pertinent has policy implications that diverge from analyses that assume cournot competition the welfare gains and congestion reductions of congestion pricing would be higher than what has been advanced before the degree of self financing of airport infrastructure under optimal pricing would be increased and may approach exact self financing and the implied differentiation of charges between asymmetric airlines would be significantly smaller presumably enhancing the political feasibility of welfare maximizing congestion pricing as the potential distributional concerns would be decreased finally we numerically analyze second best policies and find that atomistic pricing may offer a relatively attractive alternative to first best congestion pricing

radial and non radial decompositions of profit change with an application to indian banking abstract grifell tatje and lovell grifell tatje e lovell c a k 1999 profits and productivity management science 45 1177 1193 made significant contributions to the literature on the extended radial dea framework by decomposing profit change into six mutually exclusive components their approach however poses two basic problems first the radial estimates on these components might give conflicting signals about the direction of profit change after the full radial efficiencies are achieved when slacks are present second evaluations of these components using base period prices as weights can be potentially misleading to address these concerns we first introduce non radial dea models and then provide a few strong theoretical arguments in favor of using as weights either current period prices or an average price covering both periods to value the contributions of each of these components the indian banking sector is taken as a case study to illustrate the radial and non radial decompositions of profit change so as to empirically examine the role of competition on profit change and its drivers our broad empirical results are as follows first radial and non radial models yield diametrically opposite results on the contributions of various components second the increasing efficiency change trends in all ownership groups after 2002 indicate that the government reform process instituted on the banking industry has had a favorable effect on the performance of the indian banking sector third despite the fact that nationalized banks are the oldest banks their output and resource allocation behaviors do not reflect their learning experience

rank stock order and epidemic effects in the diffusion of new process technologies an empirical model in this article we construct a general duration model of technology adoption that incorporates the main factors discussed in different theories of diffusion of new process technologies the model is applied to data on diffusion of cnc in the uk engineering industry although we find strong evidence in support of rank and endogenous learning effects there seems to be little evidence in support of the stock and order effects the main factors affecting the diffusion of cnc are found to be endogenous learning firm size industry growth rates the cost of the technology and expected changes in the cost of the technology

complementarity and cumulative learning effects in early diffusion of multiple technologies this paper concentrates on the contextual diffusion of flexible automation production and design engineering technologies in the italian metalworking industry the authors use duration data analysis with explanatory covariates to point out the role of complementarities between the technologies examined and learning by using effects matured with experience of previously available technologies in shaping diffusion paths the impact of industry and plant specific control variables as well as that of the stock of previous adopters on adoption probabilities is also taken into account in addition the authors analyze duration versus calendar time dependence of adoption probabilities copyright 1995 by blackwell publishing ltd

regulation innovation and the introduction of new telecommunications services i examine the effects of fcc regulation on the innovation and introduction of advanced telecommunications services in the united states an interim of lighter regulation provides an experiment to test the regulatory regime s impact the econometric model comprises an arrival process for service innovation followed by a duration process for regulatory delay the number of services the firms created during the interim is 60 99 higher than the model predicts they would have created if the stricter regulation had still been in place overall firms would have introduced 62 more services to consumers during the study period if the regulation had not been in place

the stochastic determinants of hospital bed supply this paper uses a general queuing theoretic model to derive more appropriate measures of hospital quality such as turn away probabilities and patient s expected waiting time than have been used in recent empirical work e g joskow 1980

hospital scale economies due to stochastic demand and service abstract this paper uses queuing theory to approximate empirically the potential for hospital scale economies due to the stochastic nature of hospital demand and service these results suggest that scale economies due to stochastic demand and service are likely to be important only for the consolidation of small specialized hospital units

entry and learning this paper shows the difficulties associated with discerning the impact of learning and pressures of competitive entry on the price and cost of production in commodity markets it shows that the patterns of price and cost movements over time will be dramatically affected by the entry of new competitors if firms possess u shaped average cost curves entry alone can generate price and cost declines which look like learning induced reductions alternatively cost increases may occur even when learning is quite strong this research has dramatic managerial and empirical implications managers operating in highly competitive environments subject to rapid entry must put more emphasis on the role of their own day to day decisions in affecting cost the fact that costs have declined may have nothing to do with learning but may be driven by their reactions to competitive pressures investigators empirically estimating learning curves must also be cognizant of the role entry plays in affecting cost simple compa

branching scale economies and banking costs abstract in this paper we develop and estimate a model of bank costs based on a theory of the branch cost function first we show that convenient branch location is important to banking customers and implies that banks do not necessarily operate branches at minimum average cost this theoretical result provides a rationale for including branch variables in the bank cost function second we estimate a statistical cost equation derived explicitly from assumptions about the branch cost function and including branch output variables our empirical results suggest substantial economies of scale at the branch level but no economies from expansion by branching finally we show that the resulting cost structure of the banking industry does not imply that a highly concentrated banking structure is necessary for efficiency thus economies of scale would not be expected to force small banks out of the market even if current restrictions on interstate banking are liberalized

congestion pricing of canadian airports abstract under congestion pricing canadian airports would annually save between 72 and 105 million social costs per landing and takeoff decrease about 300 at toronto and vancouver and 50 at calgary and montreal slot constraints fail to eliminate this airport congestion congestion prices are lower on average than existing weight based prices current airport capacity accommodates at least five more years of traffic growth before congestion reaches current levels substantial welfare gains occur even if dominant airlines already internalize their self imposed delays this article calculates equilibrium congestion pricing schedules traffic rates queuing delays layover times and connection times by time of day

pricing the major us hub airports abstract implementing congestion pricing at 27 major us airports would reduce delays by 13 passenger years and 1000 aircraft hours every day saving 3 5 million dollars daily chicago and atlanta would save about 1000 dollars per aircraft airport revenues would increase about 11 million dollars daily a bottleneck model with stochastic queues estimates substantial welfare gains whether or not airlines internalize self imposed delays erroneously imposing fees from the non internalizing specification on internalizing airlines however would be a costly mistake the model calculates equilibrium traffic rates queuing delays layover times connection times and congestion fee schedules by minute of the day

the economics of airport congestion pricing abstract conventional economic wisdom suggests that congestion pricing would be an appropriate response to cope with the growing congestion levels currently experienced at many airports several characteristics of aviation markets however may make naive congestion prices equal to the value of marginal travel delays a non optimal response this paper develops a model of airport pricing that captures a number of these features the model in particular reflects that 1 airlines typically have market power and are engaged in oligopolistic competition at different sub markets 2 part of external travel delays that aircraft impose are internal to an operator and hence should not be accounted for in congestion tolls and 3 different airports in an international network will typically not be regulated by the same authority we present an analytical treatment for a simple two node network and some numerical results to illustrate our findings some main conclusions are that second best optimal tolls are typically lower than what would be suggested by congestion costs alone and may even be negative and that cooperation between regulators need not be stable but that non cooperation may lead to welfare losses also when compared to a no tolling situation

market segmentation and the diffusion of quality enhancing innovations the case of downhill skiing we report econometric results concerning the diffusion of detachable chairlifts in the united states that provide the first empirical evidence that the adoption of a technological innovation by a firm decreases the likelihood that a local competitor will also adopt it we model the effect that an innovation in service speed has on a f s incentive to differentiate the quality of its service from that of its competitors in our model the incentive to adopt is negatively related to the number of competitors who have already adopted our empirical results support this hypothesis

airlines strategic interactions and airport pricing in a dynamic bottleneck model of congestion abstract this paper analyzes efficient pricing at a congested airport dominated by a single firm unlike much of the previous literature we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers we show that a stackelberg leader interacting with a competitive fringe partially internalizes congestion and that there are various toll regimes that induce the welfare maximizing outcome widening the set of choices for regulators in particular charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization to both the leader and the fringe yields the first best outcome

two tier pricing of shared facilities in a free entry equilibrium we explore how well the market will provide shared facilities which are subject to congestion it is usually efficient to have multiple facilities because it is more efficient to spend resources on facilities than to endure crowding costs we assume firms can charge a membership price and a visit price we present a symmetric nash equilibrium in these two prices we show that ifthe number offirms is large the membership price will be small thus the membership price is a measure of market power when entry occurs in response to positive profit but such that entry is deterred by the prospect of negative profit in a symmetric nash equilibrium the endogenous number offirms is bounded below by one fewer than the efficient number thefees paid by a client converge to an appropriately defined competitive price as the economy is replicated

systematic peak load pricing congestion premia and demand diverting empirical evidence abstract this paper finds empirical support to systematic peak load pricing in airlines higher fares in ex ante known congested periods it estimates a congestion premia and supports the main empirical prediction in gale and holmes gale i holmes t 1993 advance purchase discounts and monopoly allocation of capacity american economic review 83 135 146 less discount seats on peak flights

rival precedence and the dynamics of technology adoption an empirical analysis this study employs information on the adoption of automatic teller machines by banking firms to examine the nature of firm reactions to rival precedence in the adoption process using a failure time estimation procedure it is found that the ado ption of this innovation by rivals increases the conditional probabil ity that a decision to adopt will be made the effect of spillovers f rom technology adoption and the interaction of market concentration a nd rival precedence are also investigated finally the study shows w ith an example how the estimation procedure may be used to test the u nderpinnings of diffusion processes copyright 1987 by the review of economic studies limited

the marginal and average returns to schooling in the uk abstract we explore the possibility that different instruments may affect different margins of the schooling distribution and consistent with recent evidence we find a large significant downward bias in the least squares estimate of the returns to schooling and that the estimates are stable with respect to the choice of instruments however when we remove the assumption that log wages are linear in years of schooling we find sensitivity to the choice of instrument

operations research in inventory management a review and critique the objectives of inventory management including the relevant related costs are examined in this paper a brief review of standard problems that have been effectively solved is presented however we point out that a serious gap exists between theory and practice in many organizations suggestions are made for bridging this gap finally a list is provided of a number of research problems whose implementable solution would have a major beneficial impact on the practice of inventory management

experience curves and industrial policy abstract experience curves purport to show that average real price or costs of a product decrease with its cumulative output and are used to justify increases in industrial concentration on efficiency grounds but the published evidence for their existence is not always convincing even if they do exist they are merely mongrel relationships reflecting many economic forces including technical progress and economies of scale in addition to learning or experience they should not be generalised to all products or be used to underpin industrial policy

small businesses as a research subject some reflections on knowledge of small businesses and its effects on economic theory most economists agree in their view of small and medium sized enterprises or small businesses smes as a marginal scientific subject they may go so far as to ignore them either because they think these economic units do not lend themselves to conventional economic studies studies which for instance take into account the sacred cow theory of economies of scale or because they see them as being not really different from big businesses

on the efficiency of competitive markets for operating licenses some economists and policy makers have suggested that market allocation of scarce operating licenses broadcasting licenses and airport slots for instance would lead to their efficient use this paper demonstrates that a competitive market allocation of operating licenses whether attained through auctioning selling or allowing resale of the rights does not in general assure efficiency the profit criterion that would guide the allocation of licenses in a competitive market would not necessarily lead to the uses that maximize social benefits the paper shows that the difference between private and social incentives in the allocation process can be quite large the theory is then applied to discussions of allocating airport takeoff and landing slots and broadcasting licenses

the economies of massed reserves the economy of massed reserves first mentioned by e a g robinson 1958 pp 26 27 is now firmly established in the industrial organization literature as an example of a potential plant level scale economy the massing of reserves results in a savings in the proportion of required reserves to expected output as the scale of a facility increases examples of such reserves are bank tellers specialized tools and equipment repairmen inventories spare parts and checkout lines the potential economies from massing reserves are dependent on the underlying stochastic processes governing the supply and or demand of the service provided theoretical justification for the economies of massed reserves has usually been based on an appeal to the law of large numbers for example donald hay and derek morris wrote the law of large numbers makes the number of breakdowns more predictable in a plant using a large number of machines so that the number of stand by maintenance staff need not be increased in proportion to size 1979 p 44 this paper demonstrates that the law of large numbers does not provide a theoretical explanation of massed reserves scale economies instead it is shown that the expected economies of massed reserves can be calculated from the steady state properties of well known queuing models queuing models apply to any case where a servicing input is held in reserve to cope with the stochastic nature of the market or production process in addition a method for quantifying the expected economies of queuing processes is developed the magnitude of these expected economies is shown to be significant and calculable for example the expected economies inherent in a widely applied queuing model are shown to exceed 23 percent in some cases section i establishes the irrelevance of the law of large numbers as a theory of scale economies section ii provides a formal method for determining the scale economies inherent in the most often mentioned massed reserves example machine repair section iii shows that the same method can be used to calculate scale economies for the remaining massed reserves examples specialized repair tools and equipment checkout counter clerks bank tellers and other service personnel capacity and inventories and spare parts in addition it is demonstrated that the same method can be used to calculate scale economies for some multiproduct operations

is extending compulsory schooling alone enough to raise earnings evidence from french and british compulsory schooling laws in this paper i compare two reforms that raised the minimum school leaving age to 16 in france 1967 and in england and wales 1972 using a regression discontinuity design i find that while the reform in england and wales led to a 6 7 percent increase in hourly wages per additional year of compulsory schooling the impact of the change to french law was close to zero the results suggest that the major difference between the two reforms was that the fraction of individuals holding no qualifications dropped sharply after the introduction of the new minimum school leaving age in england and wales whereas it remained unchanged in france

long run profit functions for multiproduct firms a long run specification of the multiproduct profit function is developed from the restricted profit function the multiproduct restricted profit function and the envelope condition are used to estimate the optimal long run levels of the quasi fixed factor formulas for long run marshallian elasticities of substitution and transformation economies of scope product specific and overall economies of scale and economic measures of capacity utilization are developed for the translog functional form the methodology is illustrated by a case study of the new england otter trawl industry

sequential peak load pricing the case of airports and airlines we investigate airport peak load pricing using a vertical structure of airport and airlines we find that a profit maximizing airport would charge higher peak and off peak runway prices and a higher peak off peak price differential than a public airport consequently airport privatization would lead to both fewer total passengers and fewer passengers in the peak period although peak travelling passengers benefit from fewer delays this low level of peak congestion is not efficient suggesting that airport privatization cannot be judged based on its effect on congestion alone we also examine pricing behaviour of a public airport constrained to charge a time independent price on etudie la tarification de pointe dans une structure verticale d aeroports et de compagnies d aviation on decouvre qu un aeroport qui maximise ses profits chargerait des prix plus eleves pour l usage des pistes tant aux heures de pointe qu en autre temps qu un aeroport public ainsi qu un differentiel plus grand entre ces differents moments en consequence la privatisation des aeroports va entrainer a la fois moins de passagers et moins de passagers aux heures de pointe meme si ceux qui voyagent aux heures de pointe vont devoir subir moins de delais cette moindre congestion n est pas efficace voila qui suggere qu on ne doit pas evaluer la privatisation des aeroports seulement a l aune de l impact sur la congestion les auteurs examinent aussi les strategies de tarification d un aeroport public contraint a imposer une tarification qui ne peut varier selon le moment d usage dans le temps

technical change and scale economies given stochastic demand and production abstract this paper provides a formal attempt to separate the effects of changes in scale and technology for a relatively general class of queuing models the paper makes a distinction between the output rate and capacity while changes in technology affect the output rate and lead to larger indivisible production units this change in the output rate has often been confused in the literature as a change in scale as a result the importance of scale economies claimed has often been due more to the potential for technological change not the potential for scale economies inherent to these queuing processes

the choice of ski areas estimation of a generalized ces preference ordering with characteristics abstrac t a generalized ces gences preference ordering is developed and estimated it incorporates characteristics of both the individual and the activities the gences is used to explain the share of ski time an individual allocates to each ski area as a function of site characteristics skiing ability and costs the stochastic specification limited the shares to the 0 1 simplex this specification was found to be more appropriate than the conventional normality assumption the null hypothesis that preferences are homothetic and additive is rejected charactenrstics ability and costs are important determinants of demand the estimated elasticities provide numerous insights into skier behavior

economics and underdetermination a case study of urban land and housing economics underdetermination associated with the duhem quine thesis is a familiar if under researched theme in economics in the light of this we examine the development of urban land and housing economics through its cartesian dualistic delineation of theory and data the contemporary mainstream approach appears unable to circumvent the problem of underdetermination in effect it employs the strong version of duhem quine in its retention of the assumption of a single unitary competitive market and associated access space trade off conversely we highlight the affinity of ely s and the later columbia school s approach to pragmatists dewey and peirce which provides a more fruitful basis for explanation

an experimental evaluation of strategic preemption abstract this paper reports the results of a series of two stage two person noncooperative games where one player can strategically preempt the other in one of our designs the subgame perfect equilibrium entails complete preemption in the other it entails partial preemption the data show that players tend to completely preempt when it is privately optimal however when partial preemption is privately optimal a non trivial fraction of players persist in choosing the non preemptive structure this may result because of occasional irrational behavior following preemptive play which induces some dominant agents to play less aggressively

addressing uncertainty in economics and the economy this article explores the way society in general and economists in particular deal with fundamental uncertainty it is argued that uncertainty is interdependent with the evolution of institutions and behaviour including that designed to help society cope with uncertainty whilst some mainstream theory does address uncertainty it employs a much narrower concept than fundamental uncertainty generally in spite of the evident increase in fundamental uncertainty during the crisis most mainstream theory ignores it although ignoring uncertainty can sometimes be a successful coping mechanism it is argued that as a blanket coping mechanism ignoring uncertainty seriously limits the realism of theory and therefore also practice and policy it is concluded that economists should embrace uncertainty by tailoring methodologies and theories to address it this would provide a more fruitful basis for policy aimed at reducing uncertainty in the economy and also reducing our own uncertainty

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

learning and the behavior of potential entrants this is the publisher s version also available electronically from https editorialexpress com cgi bin rje online cgi action view year 1984 issue sum page 281 tid 120733 sc 7okbhr2g

models of technology diffusion abstract the literature on new technology diffusion is vast and it spills over many conventional disciplinary boundaries this paper surveys the literature by focusing on alternative explanations of the dominant stylized fact that the usage of new technologies over time typically follows an s curve the most commonly found model which is used to account for this model is the so called epidemic model which builds on the premise that what limits the speed of usage is the lack of information available about the new technology how to use it and what it does the leading alternate model is often called the probit model which follows from the premise that different firms with different goals and abilities are likely to want to adopt the new technology at different times in this model diffusion occurs as firms of different types gradually adopt it there are actually many ways to generate an s curve and the third class of models which we examine are models of density dependence popularized by population ecologists in these models the twin forces of legitimation and competition help to establish new technologies and then ultimately limit their take up finally we look at models in which the initial choice between different variants of the new technology affect the subsequent diffusion speed of the chosen technology such models often rely on information cascades which drive herd like adoption behaviour when a particular variant is finally selected

decomposing capacity utilization in data envelopment analysis an application to banks in india abstract this paper briefly reviews the existing methods of capacity utilization in nonparametric framework from economic perspectives and then suggests an alternative in the light of limitations therein in the spirit of work by coelli et al coelli t j grifell tatje e perelman s 2002 capacity utilisation and profitability a decomposition of short run profit efficiency international journal of production economics 79 261 278 we propose two methods radial and non radial to decompose the input based physical technological capacity utilization into various meaningful components viz technical inefficiency ray economic capacity utilization and optimal capacity idleness a case study of indian banking industry is taken as an example to illustrate the potential application of these two methods of decomposition our two broad empirical findings are that first competition created after financial sector reforms generates high efficiency growth and reduces excess capacity second the cost gap of the short run cost from the actual cost is higher for the nationalized banks over the private banks indicating that the former banks though old do not reflect their learning experience in their cost minimizing behavior

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

another look at airport congestion pricing we study alternate approaches to implement congestion pricing at us airports conventional formulations toll all aircraft without determining whether a plane operated by a given airline delays other planes that it operates or planes operated by other airlines recent work points out optimal pricing calls for carriers to be charged only for the delay they impose on other airlines we find a small difference between the net benefits generated by the two congestion pricing policies because the bulk of airport delays are not internalized and because the efficiency loss from pricing internalized congestion is small jel l11 l93 r41

the raising of the school leaving age returns in later life using the recently released uk household longitudinal study we examine whether the raising of the school leaving age in 1972 had a permanent impact on earnings for individuals in their early 50s

do carriers internalize congestion costs empirical evidence on the internalization question abstract economists have long suggested overhauling the existing u s airport landing departure fees to reflect market valuations of scarce runway capacity economists however do not agree on the optimal congestion based pricing scheme while some researchers advocate for a uniform congestion fee regardless of a carrier s airport market share others suggest that airport tolls should only reflect the congestion costs imposed on other carriers this paper uses ten years of ontime performance data to empirically determine if carriers internalize congestion costs while previous researchers e g mayer christopher sinai todd 2003a network effects congestion externalities and air traffic delays or why all delays are not evil american economic review 93 4 1194 1215 use excess travel time to measure flight delays the contribution of this paper is the addition of on time arrival and delay measures based on actual versus scheduled arrival and departure times we find that estimates based on these new delay measures reverse earlier findings by mayer and sinai 2003a network effects congestion externalities and air traffic delays or why all delays are not evil american economic review 93 4 1194 1215 and hence imply that carriers are not internalizing flight congestion costs

the economics of medicare equilibrium within the medical community this paper partially fills a theoretical void by developing an integrated model of the various branches of the medical community a consistent and general framework is adopted to analyze equilibrium within the market for medical services under a stylized form of socialized medicine without invoking demand shifting the optimization problem faced by each agent is specified and the equilibrium is defined the effect of various parameter changes on the market for medical services is analyzed the predictions are not contradicted by the stylized facts

the incidence of congestion tolls on urban highways abstract the incidence of an optimal short run congestion toll is investigated using an equilibrium model of modal choice and congestion on a highway corridor served by express bus transit it is argued that for an externality tax the usual equi revenue analysis of burdens is inappropriate instead welfare effects are computed under three alternative assumptions about redistribution of toll revenues in almost all cases the net result is benefits for all income groups it is concluded that congestion tolls should not be rejected on grounds of income distribution but that an explicit package of tolls and revenue uses is probably a political prerequisite for adoption

the nature of heterodox economics heterodoxy serves as an umbrella term to cover the coming together of separate projects or traditions in answering the question what distinguishes heterodoxy from the orthodoxy the author argues that matters of ontology are central in answering the question how are the various traditions that make up the modern heterodoxy to be distinguished from each other the author defends criteria other than varying commitments to specific substantive theories policy measures or techniques or basic units of analysis

forced to be rich returns to compulsory schooling in britain do students benefit from compulsory schooling in an important article oreopoulos 2006 studied the 1947 british compulsory schooling law change and found large returns to schooling of about 15 using the general household survey ghs re analysing this dataset we find much smaller returns of about 3 on average with no evidence of any positive return for women and a return for men of 4 7 additionally we utilise the new earnings survey panel data set nespd that has earnings information superior to that in the ghs and find similar estimates zero returns for women and returns of 3 to 4 for men

economics of a bottleneck abstract drawing on vickrey amer econ rev 59 251 261 1969 and subsequent literature this paper provides a thorough economic analysis of the simplest bottleneck model of road congestion with peak load demand in the morning rush hour a fixed number of identical individuals one per car must travel from home to work between which is a bottleneck of given capacity the costs of travel include queuing time and schedule delay time early or late for work the frequency distribution of departure times adjusts so that in equilibrium all individuals have the same travel costs the paper extends the previous literature by examining a coarse toll and solving for optimal capacities the application of congestion tolls can generate efficiency gains by altering the frequency distribution of departure times previous estimates of the efficiency gains from congestion tolling are likely to be substantially downward biased because they have ignored this effect