investor preference for large firms new evidence on economies of size in the last several decades industrial organization literature has been replete with studies demonstrating a systematic relationship between accounting rates of return and firm size in the direction of greater and more stable accounting profits for larger firms these studies have been subject to criticism for an alarming number of statistical and conceptual problems the most important of which alleges a serious bias in accounting profit measures as proxies for economic profit 2 the criticisms have resulted in a stalemate in the interpretation of empirical evidence on firm size and performance nevertheless there is continued interest in the area ostensibly resulting from policy concerns with large firm advantages in both product and capital markets this paper provides new evidence concerning the industrial organization literature controversy of the connection between firm size and performance stock market data are used to examine the relationship between capital market returns risk and firm size the findings suggest that even if there were no advantages of large size in the product market equal rates of operating profit large firms would still have a substantial capital raising advantage over small firms this advantage is unrelated to the widely recognized floatation cost economies even after controlling for nondiversifiable risk using the capital asset pricing model capm investors still demonstrate a statistically significant and economically important preference for the securities of larger firms investors apparently place a premium on large firms which is not attributable to large firms observed lower risk as captured by the widely used measure of nondiversifiable risk beta risk this finding a fresh contribution to the

structural breaks and energy efficiency in fiji this paper examines how energy output ratios eyrs in fiji have responded to the major energy crises and in particular if these ratios have declined after the energy shocks the expectation is that energy efficiency should improve after an energy crisis for this purpose we have used at first a few simpler procedures and then a recently developed more powerful tests for structural breaks by bai and perron bai j perron p 1998 estimating and testing linear models with multiple structural changes econometrica 66 47 78 bai j perron p 2003a computation and analysis of multiple structural change models journal of applied econometrics 18 1 22 bai j perron p 2003b critical values for multiple structural change tests econometrics journal 6 72 78 policy implications of our results are discussed

small firms and the merger mania empirical research has found an average or even superior performance of small firms this seems to be at variance with the secular concentration process and the recurrent merger waves this paper tries to integrate size and merger research higher profitability of small firms is explained by their incentive structure and shorter decision lags but also by lower wages and higher individual risk premia their faster growth in the eighties was in addition fostered by diversification of demand miniaturization of technology and a need for flexibility under uncertainty the merger wave on the other hand does not necessarily prove that large firms are superior managers and shareholders may be seduced by stockmarket optimism a sizeable industry of banks agents and lawyers have their own interests in mergers mergers may be important in declining markets and for the acquisition of technology on average mergers do not improve efficiency profits or internal growth small and large firms serve different purposes performance depends on the market incentives and technology the establishment growth and closure of small firms as well as mergers are attempts to find the optimal organization for utility maximization in a world of severe uncertainty and diverse needs

dynamic market models in industrial organization abstract this paper surveys empirical work done on dynamic models of market performance these fall into one of two categories structural models which model how market structure and performance change in response to entry and reduced form models which describe change regardless of how it is brought about a typical example of each type of model is chosen from the literature and simulations are used to draw out the implications of the estimated coefficients both models depict the competitive process in the us economy as being extremely slow

recent trends in the size structure of italian manufacturing firms this paper analyses the re emergence of small scale production which has characterised the more recent phase of industrial development in western countries providing updated evidence about the phenomenon and focussing in particular the attention on italy where it has been assuming peculiar relevance

on the relationship between aggregate merger activity and the stock market abstract this paper presents substantial evidence to show that the well documented correlation between aggregate merger activity and indices of share prices is unstable and thus of little predictive value further granger causality testing suggests that such correlations are spurious reflecting other more fundamental forces which jointly determine movements in both series

the decline of dominant firms 1905 1929 the theory of dynamic limit pricing implies that a firm maximizes its wealth by gradually sacrificing its dominant market share we extend the theory by simulation methods to show that higher structural entry barriers generally result in both higher profits and a slower sacrifice of market share the model is applied to 42 once dominant firms in u s manufacturing to explain jointly the declines of their market shares and the profit rates earned during 1905 1929 the statistical results agree substantially with the hypothesis that these firms behaved consistently with maximizing their wealth through dynamic limit pricing

behavioural attitudes towards water saving evidence from a study of environmental actions given the growing emphasis being placed on water conservation in and around the home by water companies there is a pressing need to identify the characteristics of the water saver so that policy makers can more accurately target initiatives for water conservation this paper examines the social attitudinal and behavioural composition of water saving activities using a sample of 1600 households from devon the research sought to examine the links between water saving energy conservation green consumerism and waste management in and around the home accordingly the extent to which water saving can be placed within a behavioural context that incorporates different environmental behaviours is discussed the data relating to water saving are then analysed and four different types of individual are defined according to their behavioural characteristics these are examined in the context of their demographic composition and a range of attitudinal factors the policy implications of the research are described throughout the paper

dynamic limit pricing and internal finance abstract this paper examines a model of dynamic limit pricing with a profit maximizing fringe constrained to finance new investment from internal finance in a differential game the dominant firm controls price thereby determining the current earnings of the fringe while the fringe chooses its optimal retention ratio if market growth is less than the discount rate an important feature of the solution is that price must eventually drop to the fringe long run cost of production if market growth is initially rapid the dominant firm is much more aggressive in limiting fringe growth

estimating short and long run relationships a guide for the applied economist many applied economists face problems in selecting an appropriate technique to estimate short and long run relationships with the time series methods this article reviews three alternative approaches viz general to specific vector autoregressions and the vector error correction models as in other methodological controversies definite answers are difficult it is suggested that if these techniques are seen as tools to summarize data as in smith 2000 often there maybe only minor differences in their estimates therefore a computationally attractive technique is likely to be popular

the structure of demand for health care latent class versus two part models we contrast the two part model tpm that distinguishes between users and non users of health care with a latent class model lcm that distinguishes between infrequent and frequent users in model comparisons using data on counts of utilization from the rand health insurance experiment rhie we find strong evidence in favor of the lcm we show that individuals in the infrequent and frequent user latent classes may be described as being healthy and ill respectively although sample averages of price elasticities conditional means and event probabilities are not statistically different the estimates of these policy relevant measures are substantively different when calculated for hypothetical individuals with specific characteristics

responses to changes in domestic water tariff structures a latent class analysis on household level data from granada spain a problem that affects the estimation of water demand functions is the presence of unobserved individual heterogeneity which means that a common demand function is unlikely to represent the behavior of all users we implement latent class models to estimate water demand functions for four groups of users who are classified according to their unobservable preferences this more flexible approach makes it possible to distinguish four different response patterns to changes in the drivers of water use including different price elasticities these results should be of particular interest to regulators who would like to tailor water demand management policy to heterogeneous users our analysis exploits household level panel data on residential water demand and consumers characteristics obtained by combining information from a survey of 1 465 domestic users in the city of granada and bimonthly price and consumption data supplied by this city s water supplier from the period 2009 2011

demand side management policies for residential water use who bears the conservation burden to assess the potential for urban demand side management dsm policies as a water resource management tool we analyze the extent to which price and alternative policy instruments such as use and quantity restrictions and subsidies for water efficient technologies reduce residential demand and their distributional implications by type of household using detailed household level panel data for two california communities the results suggest that the ultimate effects of dsm policies in terms of the reduction in aggregate demand and distribution of water savings among household classes depend both on the policy instrument selected and the composition of aggregate demand

raiders or saviors the evidence on six controversial investors abstract carl icahn irwin jacobs carl lindner david murdock victor posner and the late charles bluhdorn are usually portrayed as corporate raiders the evidence here however shows that between 1977 and 1982 when it was first announced that they had purchased stock in a given firm stock prices on average increased significantly the investors activities in target firms for the two years following the initial stock purchase are likewise inconsistent with raiding we discuss two hypotheses that are consistent with the evidence first these investors improve the management of target firms second they are systematically able to identify under priced stocks

european industrial policy and industrial policy in europe among the most vexing problems facing those concerned with the formation and implementation of industrial policy is deciding what it is why it exists and whether there ought to be more or less of it than exists at present any random collection of six economists is sure to produce at least a dozen different opinions on the subject not least because many economists have trouble in reconciling their gut reaction that industrial policy should not exist with the obvious fact that it does the vigorous debate that now rages between those who believe that industrial policy should and those that believe that it should not be consciously pursued by gov ernments is but a pale reflection of the true diversity of opinion that exists on the subject even amongst that group of economists who are enthusiastic about industrial policy the range of specific policy proposals that have been put forth is enormous and the debate within this group is no less active and acrimonious than that between the pros and antis following what is a clear if unintended character istic of many of the contributions to this debate this paper is devoted to complicating ratherthan simpli fying the issues in particular the question that we shall explore is whether there might be a type of industrial policy which should be applied at a supra national level although this question has been actively discussed in europe since the signing of the treaty of rome at least the revival of free marketideologies the looming menace of 1992 and recent discussions of european political union have all added a good deal of fuel to the fire more than a few ambitious european politicians have launched initiatives that apparently usurp national policy prerogatives and the response by many national governments has become increasingly angry and strident traditional liberalism struggled for years to define the boundaries of the state in terms of the

life after takeover economic consequences of takeovers are investigated by analyzing profitability of enterprises acquired a s a direct or indirect white knight consequence of tender offer s target companies pre tender profitability averaged 0 97 percentag e points below peer industry norms nine years after takeover acquir ed lines of business had operating income assets percentages 3 10 poi nts below those of non tender lines with similar industry bases mark et shares and merger accounting methods most of the targets postta keover profit decline stemmed from asset value writeups there is no indication that on average the acquirers raised their targets operat ing profitability net of merger related accounting adjustments copyright 1987 by blackwell publishing ltd

an inverse relationship between efficiency and profitability according to size of upper austrian firms some further tentative results this paper examines the relationships between profitability and firm size and efficiency and firm size based on firms in upper austria there is considerable evidence suggesting that the average profitability of small enterprises exceeds that of large firms however productivity tends to be positively related to firm size these empirical findings present something of a paradox

demand specification for municipal water management evaluation of the stone geary form to specify demand in most water allocation problems researchers face a tradeoff between flexibility and parsimony flexible forms are less constraining on elasticity estimates but require large parameter sets that tend to cause poor out of sample forecasts and computational difficulties using a five year panel of texas municipalities the parsimonious stone geary form yields estimated demand functions that are comparable to flexible form results the stone geary specification also provides an estimate of the portion of water use that may not be responsive to price and is useful in analysing price structures and designing conservation policies

industrial organization paradigms empirical evidence and the economic case for competition policy the recent reform of competition policy in canada prompts one to ask whether there remains a tenable economi c case for antitrust policy to answer this question this paper begi ns by sketching competing industrial organization i o paradigms th e empirical evidence bearing on these paradigms particularly the m ainline structure conduct performance paradigm which has provided the main theoretical support for competition policy is examined it is concluded that recent theoretical and empirical work in i o have undermined the traditional economic case for competition policy the last section of the paper attempts a partial reconstruction of the ca se for competition policy along somewhat unorthodox lines

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

a discrete continuous choice approach to residential water demand under block rate pricing reply waldman is quite correct in noting that the microeconomic theory of block rate pricing in hewitt and hanemann hh 1995 is given for the general case of a k block rate structure whereas the econometric theory is largely confined to the case of exactly two blocks the extension in waldman to the more general case of k blocks is correct although the extension itself could be even more general if it addressed the nonnegativity of demand as is demonstrated below that no apparent attention was paid to the nonnegativity of demand in hh may be attributed to the fact that the need to do so was negated by a fortuitous assumption in the earlier work although that assumption that the errors are multiplicative and lognormally distributed was only maintained and not tested in hh i now estimate two models with the more common assumptions of linear demand and additive and normally distributed errors both with and without a modification for

an empirical survey of residential water demand modelling abstract the increased reliance on demand side management policies as an urban water consumption management tool has stimulated considerable debate among economists water utility managers regulators consumer interest groups and policymakers in turn this has fostered an increasing volume of literature aimed at providing best practice estimates of price and income elasticities quantifying the impact of non price water restrictions and gauging the impact of non discretionary environmental factors affecting residential water demand this paper provides a synoptic survey of empirical residential water demand analyses conducted in the last 25 years both model specification and estimation and the outcomes of the analyses are discussed

flexibility and the theory of the firm abstract the object of this paper is 1 to bring together and integrate the various concepts of flexibility found in the economic literature 2 to flesh out the meaning of various aspects of flexibility and their implications thereby bridging the gap between the existing highly abstract theories and the empirical facts and 3 in the process to give a rich and comprehensive enough description of an industry to stimulate further theoretical as well as empirical work the study tries to combine inductive and deductive reasoning using empirical observations based on indepth interviews with manufacturers in the metalworking industry in the united states and sweden

demand and distributional effects of water pricing policies abstract worldwide water scarcity threatens delivery of water to urban centers water pricing is often recommended to reduce demand in this paper demand and distributional effects of water pricing policies are examined in a block pricing model that is applied to the metropolitan region of sao paulo water demand functions are estimated using marginal and average price models based on monthly data for the period 1997 2002 price elasticities of water demand range between 0 45 and 0 50 and income elasticities between 0 39 and 0 42 for the current combined regressive progressive block price system the poor spend almost 4 2 to 4 7 of their income on water the rich only pay 0 4 to 0 5 of their income whereas they consume more than twice as much a progressive block price or an income dependent price system may result in a more equalized income distribution however the analysis shows that there is a trade off between a more equalized income distribution and revenues earned by the water company more pro poor pricing systems may result as well in lower revenues for the water company

factor substitution in u s manufacturing does plant size matter we use micro data for 10 412 u s manufacturing plants to estimate the degrees of factor substitution by industry and by plant size we find that 1 capital labor energy and materials are substitutes in production and 2 the degrees of substitution among inputs are quite similar across plant sizes in a majority of industries two important implications of these findings are that 1 small plants are typically as flexible as large plants in factor substitution consequently economic policies such energy conservation policies that result in rising energy prices would not cause negative effects on either large or small u s manufacturing plants and 2 since energy and capital are found to be substitutes the 1973 energy crisis is unlikely to be a significant factor contributing to the post 1973 productivity slowdown

revealing additional dimensions of preference heterogeneity in a latent class mixed multinomial logit model latent class models offer an alternative perspective to the popular mixed logit form replacing the continuous distribution with a discrete distribution in which preference heterogeneity is captured by membership of distinct classes of utility description within each class preference homogeneity is usually assumed although interactions with observed contextual effects are permissible a natural extension of the fixed parameter latent class model is a random parameter latent class model which allows for another layer of preference heterogeneity within each class this article sets out the random parameter latent class model and illustrates its applications using a stated choice data set on alternative freight distribution attribute packages pivoted around a recent trip in australia

who cares about environmental stigmas and does it matter a latent segmentation analysis of stated preferences for real estate this article uses latent segmentation analysis to estimate the benefits of contaminant cleanup in waukegan harbor illinois survey responses to attitudinal and perception questions provide significant information about the existence of distinct preference groups by comparison the predictive usefulness of demographic covariates is unclear the expected aggregate willingness to pay of waukegan homeowners for full cleanup is approximately equivalent to a 20 increase in the market value of homes the aggregate estimate is little affected by the identification of preference clusters

causes of increased competition in the u s economy 1939 1980 examines the sources of increased competition in the united states u s between 1939 to 1980 in this paper authors consider the review of related literature trends and patterns of competitive structure in the u s economy influence of antirust actions on competition

economic success factors in spanish small retail businesses an analysis based on sector relative definitions the purpose of this study was to carry out a sectorial analysis of the strategic profile of successful small businesses in spanish retailing first a one dimensional statistical formalisation of the concept of small business was proposed based on yearly sales revenue and relative to the sector likewise some statistical formalisations of the concept of economic success were proposed based on profit margins and also relativised according to sector once a conceptual framework was established a sectorial model of strategic characterisation of successful small retailing firms was developed the results of applying these proposals to the spanish retail industry confirmed the importance of a sectorial approach as opposed to an overall analysis

the winner s curse and bidder competition in acquisitions evidence from failed bank auctions this study examines the effect of bidder competition in acquisitions we use predictions from auction theory to test whether acquirers of failed banks overpay the winner s curse when bidding in fdic sealed bid purchase and assumption p a transactions auctions the empirical results indicate that winning bids tend to increase as the number of competitors increases as predicted by theory we also find that bid levels of all bidders increase with increased competition which is consistent with bidders failing to adjust for the winner s curse in a common value auction setting however additional tests using winning bids only are consistent with both a common value and a private values model so this result should be interpreted with caution the winner s curse hypothesis states that the winner of a sealed bid auction in which the value of the object being competed for is uncertain tends to be the one who most overestimates the true value of the auctioned object as a result auction winners who fail to recognize this possibility are likely to be cursed by having paid more for the object than its true worth this hypothesis has been applied to various situations including bidding on oil and gas leases capen et al 3 and corporate takeovers roll 16 varaiya 19 support for the existence of the winner s curse has been reported primarily from laboratory experiments bazerman and samuelson 1 kagel and levin 12 testing of the winner s curse hypothesis with market data is in its early stages gilley karels and leone s 7 study of bidding for oil leases provides mixed suport brannman klein and weiss 2 examine bidding behavior in a variety of auction markets and interpret some of their results as supporting the winner s curse hypothesis our study examines the effects of bidder competition and the winner s curse hypothesis within the context of fdic auctions of failed banks our study may also have relevance for the broader corporate control literature this literature uniformly indicates that shareholders of acquired firms earn large

cointegration and the demand for gasoline since the early 1970s there has been a worldwide upsurge in the price of energy and in particular of gasoline therefore demand functions for energy and its components like gasoline have received much attention however since confidence in the estimated demand functions is important for use in policy and forecasting following amarawickrama h a hunt l c 2008 electricity demand for sri lanka a time series analysis energy economics 33 724 739 this paper estimates the demand for gasoline is estimated with five alternative time series techniques with data from fiji estimates with these alternative techniques are very close and thus increase our confidence in them we found that gasoline demand is both price and income inelastic

welfare measurement in the household production framework the household production approach to consumer behavior developed from the work of gary becker william gorman and kelvin lancaster has considerable descriptive appeal in modelling the decisions of households the approach derives from the observation that households frequently purchase market goods that do not yield utility directly but are combined to produce commodity service flows which the household values thus observed behavior is determined by household production technology as well as by tastes the advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology though we rarely possess useful a priori information regarding tastes the putative advantages of the household production approach are questioned on empirical and conceptual grounds by robert pollak and michael wachter 1975 they show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology raising serious econometric difficulties in the estimation of commodity demand functions in addition since commodity prices become functions of the commodity bundle consumed the analogy to traditional demand theory breaks down joint production occurs when a good enters several production processes simultaneously or equivalently when a good in one production process also enters directly into the individual s utility function the most common example is time which provides the context for all production processes and is often associated with the production of several commodities simultaneously since joint production in the household is likely to be pervasive the critique by pollak and wachter cannot be ignored in response to the comment by william barnett pollak and wachter 1977 suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices this approach confounds tastes and technology but it eliminates the troublesome concept of commodity prices as parameters when in fact they are likely to be endogenous in this paper we show that results from positive analysis such as the critique by pollak and wachter have implications for the use of the household production framework for welfare analysis the household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas gardner brown john charbonneau and michael hay elizabeth wilman yet traditional approaches to welfare measurement are frequently inapplicable we argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology we extend pollak and wachter s results by demonstrating that marshallian demand functions for commodities cannot be uniquely defined thus marshallian functions cannot be used to derive exact compensated functions in the manner of jerry hausman and of george mckenzie and i f pearce nor can compensating and equivalent variation measures be bounded by marshallian consumer s surplus estimates following robert willig in fact duality results that normally allow us to move between marshallian and hicksian functions are not assistant and associate professors respectively department of agricultural and resource economics university of maryland college park md 20742 this paper is scientific article no a3404 contribution no 6476 of the maryland agricultural experiment station we wish to thank darrell hueth james opaluch v kerry smith and elizabeth wilman for comments on an earlier draft

more evidence on the undercounting of small firm r d abstract drawing from the seo national survey on r d and innovation in the netherlands we argue that there must be an underrecording of small scale r d by orders of magnitude in the r d survey by the dutch central statistical office such underrecording holds for manufacturing and even more so for service firms this finding is confirmed by estimates based on records of firms receiving r d subsidies which we use as a third independent source in order to allow for international comparability of r d data the survey methods of the dutch central statistical office are similar to those in other oecd countries therefore our findings in the dutch manufacturing and service industries are likely to have an impact for the measurement of r d in other oecd countries the results have implications for our judgement about the famous schumpeterian hypotheses concerning the influence of firm size and market structure on r d

deterministic and stochastic trends in the time series models a guide for the applied economist applied economists working with time series data face a dilemma in selecting between models with deterministic and stochastic trends while models with deterministic trends are widely used models with stochastic trends are not so well known in an influential paper harvey 1997 strongly advocates a structural time series approach with stochastic trends in place of the widely used autoregressive models based on unit root tests and cointegration techniques therefore it is important to understand their relative merits this article suggests that both methodologies are useful and they may perform differently in different models this article provides a few guidelines to the applied economists to understand these alternative methods

reconsidering the economics of demand analysis with kinked budget constraints this paper has two objectives first we identify a problem with the ability of the discrete continuous choice framework and conditional demand functions to fully describe consumer preferences in the presence of kinked budget constraints second we propose and illustrate an alternative preference based method for estimating consumer responses to price changes under these conditions this framework recognizes that commitments to commodities such as pools or outdoor landscaping influence how water consumption responds to price changes as part of the long run consumption adjustments with microdata on household choices this approach could be used to design increasing block rate structures that recognize the differences in water consumption responses with these commitments

potential competition in the deregulated airlines using a new and unique data set this paper applies a systems approach to the study of potential competition prices and entry relations in airline city pair markets consistent with limit pricing models future entry is directly influenced by current prices current prices thus appear to provide an important signal to potential entrants about the probability of profitable entry while results indicate the existence of barriers to entry these barriers appear to have no independent effects on price beyond there effect on actual competition through increases in concentration copyright 1990 by mit press

small business dynamics in europe this paper examines how the firm size distribution has shifted over the last two decades across a broad spectrum of european countries the evidence suggests that a shift away from large firms and towards small business has taken place particularly is the southern regions and in the high technology indutries

the value of scarce water measuring the inefficiency of municipal regulations abstract rather than allowing urban water prices to reflect scarcity rents during periods of drought induced excess demand policy makers have mandated command and control approaches primarily rationing the use of water outdoors while such policies are ubiquitous and likely inefficient economists have not had access to sufficient data to estimate their economic impact using unique panel data on residential end uses of water in 11 north american cities we examine the welfare implications of urban water rationing in response to drought using estimates of expected marginal prices that vary both across and within markets we estimate price elasticities specific to indoor and outdoor water use our results suggest that current policies do target water uses that households themselves are most willing to forgo nevertheless we find that rationing outdoor water in cities has costly welfare implications primarily due to household heterogeneity in willingness to pay for scarce water we find that replacing rationing policies with a market clearing drought price would result in welfare gains of more than 29 of what households in the sample spend each year on water

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

the success of mergers in the 1920s a stock market appraisal of the second merger wave abstract this paper examines the impact on acquiring firm shareholder wealth of mergers during the oligopoly merger wave of the 1920s these acquisitions were relatively unregulated the securities and exchange commission did not exist and antitrust laws were only loosely enforced although the lack of financial market controls and the possibility of monopoly gains should have permitted acquiring companies to capture large take over profits stock price data on 134 firms indicate only modest success the average profitability of an acquisition in the 1920s does not differ from the profitability resulting from mergers in the 1960s and 1970s despite vast differences in the economic environments

measuring welfare losses from interruption and pricing as responses to water shortages an application to the case of seville supply cuts and pricing policies can be used to ration water the appropriateness of a given policy depends on the losses in social welfare which it generates we find some drawbacks with the only method in the previous literature which deals with the issue of measuring welfare losses under supply cuts we propose an alternative method we compare the welfare losses under supply cuts and a pricing policy during the drought period of 1992 1996 in seville spain using both methods and find that the results vary widely from one method to the other

confronting the implications of the cournot model with industry and firm data this paper derives testable implications of the standard cournot models and confronts these implications with real world data though we cannot expect that real world may be characterized by a simple static homogeneous model it is surprising that little empirical work exists on testing the implications of this most popular model of oligopoly and non cooperative game theory

is all domestic water consumption sensitive to price control this paper presents a model of residential water demand based on the stone geary utility function which explicitly considers a threshold of water that is insensitive to price and a quantity that can adapt instantaneously to price changes first the threshold is assumed constant being then allowed to vary according to past levels of consumption a proxy for households water using equipment and habits a measure of the depreciation rate of habits is derived and the effectiveness of price and non price conservation measures are compared the results provide useful policy recommendations for the studied case of seville spain

efficiency and equity in natural resources pricing a proposal for urban water distribution service this paper focuses on the design of optimal prices for urban water distribution service in this context pricing should be aimed at achieving efficiency equity financial aspects and or public acceptability and transparency the proposed tariffs are based on the theoretical frameworks suggested by ramsey 1927 and feldstein 1972 as a prior step estimations of urban water demands and water costs are carried out for the spanish municipality of seville finally an empirical comparison in welfare terms is conducted between the proposed tariffs and those applicable in the year 2000

the development and use of machine tools in historical perspective abstract improvements and diffusion of machine tools have had a major impact on productivity in manufacturing industry since the industrial revolution the impact has been both direct and indirect the direct impact consists of rising labor productivity through the use of faster more accurate more mechanized machines and of the higher capital productivity through higher operating rates greater reliability and higher utilization rates the indirect impact arises as the use of new or improved machine tools has necessitated or facilitated organizational changes affecting both labor capital raw materials and energy the magnitude of these impacts has varied over the years with the areas of application as new production methods have made possible entirely new products or lowered the cost of existing products sufficiently to create new markets the first part of the paper contains a review of the historical development of machine tool technology since the industrial revolution paying particular attention to the role of interaction between producers and users of machine tools the second part focuses on the way in which recent development differs from that in earlier periods in particular it is found that the major changes in machine tool technology from the so called american system of manufactures in the early 19th century to the development of detroit automation in the 1950s have tended to improve mass production methods by contrast the development of numerical control beginning in 1948 has opened up the possibility of extending industrial production methods and automation to areas previously characterized more by handicraft methods even though this technology is not yet fully utilized it is clear that the economics of industrial production has been revolutionized by the cost reduction of small scale production relative to large scale and the degree of flexibility offered by the technology the third section of the paper deals with the present development trends particularly discussing the increasing importance of flexibility and the shifting emphasis from development of individual pieces of machinery to integration and control of entire manufacturing processes i a through the use of industrial robots the reasons for the need for greater flexibility in manufacturing are also identified

the evolution of manufacturing technology and its impact on industrial structure an international study this paper shows that plant and firm size in manufacturing and especially in engineering industry in several western industrial countries has declined since the early 1970s two hypotheses explaining the decline are advanced one is de glomeration or specialization the divestiture of non core businesses in order to free up scarce resources particularly management time to defend and nurture core business activities the second hypothesis is that the emergence of new computer based technology has improved the quality and productivity of small and medium scale production relative to standardized mass production techniques which dominated previously

modelling and forecasting turkish residential electricity demand abstract this research investigates the relationship between turkish residential electricity consumption household total final consumption expenditure and residential electricity prices by applying the structural time series model to annual data over the period from 1960 to 2008 household total final consumption expenditure real energy prices and an underlying energy demand trend are found to be important drivers of turkish residential electricity demand with the estimated short run and the long run total final consumption expenditure elasticities being 0 38 and 1 57 respectively and the estimated short run and long run price elasticities being 0 09 and 0 38 respectively moreover the estimated underlying energy demand trend which as far as is known has not been investigated before for the turkish residential sector should be of some benefit to turkish decision makers in terms of energy planning it provides information about the impact of past policies the influence of technical progress the impacts of changes in consumer behaviour and the effects of changes in economic structure furthermore based on the estimated equation and different forecast assumptions it is predicted that turkish residential electricity demand will be somewhere between 48 and 80 twh by 2020 compared to 40 twh in 2008

comparing residential water demand estimates under decreasing and increasing block rates using household data using a new model formulation and data from a sample of colorado utilities we investigated the price specification controversy marginal price versus average revenue when estimating residential water demand the improved statistical fit using average

assessing the profitability of growth by acquisition a premium recapture approach abstract this paper makes a case that because of the large premiums paid over the last 20 years by companies undertaking growth by acquisition this growth probably has been unprofitable the case has three parts the first develops a model designed to show for any premium paid for any acquiree the performance improvement required to recapture this premium and create value for the acquiring company the second part reports the distribution of premiums paid for a large sample of acquirees and uses this model to determine the specific performance improvements necessary to bring about value creation for the new parents of the acquirees the third part uses historical rate of return data to show that for typical acquirees these improvements call for levels of performance that are difficult to attain and sustain in u s industrial markets

reply on comment to small firms and the merger mania research on performance differences between small and large firms is booming it emerges relatively separated from the mainstream industrial organization literature inspired by levy s comment on an earlier paper we try to bridge the gap between the two areas especially we screen non cooperative game theoretical models for predictions on performance differences most of them forecast higher profits for larger firms but there exist also some models which predict the opposite for very specific circumstances

introduction economic performance and small business this paper introduces the special issue of small business economics on performance the concept of economic performance refers to the degree to which society s resources are being used as efficiently as possible where the field of industrial organization has emphasized the influence of market concentration on economic performance the papers of this special issue zoom in on the link between firm size and economic performance

dominant firms and their alleged decline abstract by way of a survey of recent literature on the theory of strategic competition this paper focuses on the question of whether dominant firms decline the traditional argument suggesting decline is found to be based on a rather unsatisfactory modelling of dominance and more acceptable conceptualizations suggest that such privileged positions will persist

small firms business dynamics and differential development of economic well being in recent years a growing stream of research has examined the relationships between structural characteristics of regions and their levels of new firm formation this empirical study aims at supplementing such findings with analyses that include other forms of business dynamics and also the possible well being effects of such dynamics from a unique and comprehensive data set that tracks all births deaths expansions and contractions of commercial business establishments in sweden 1985 89 six groups of regions with different patterns of dynamics are extracted by means of cluster analysis the clusters structural characteristics and their development of economic well being are also compared the results suggesta that the patterns of business dynamics are contingent on the structural characteristics of regions b that high formation and turnover of establishments are associated with a relative increase in economic well being andc that small autonomous firms have a vital role in this process

plant size and industry mix effects on uk regional productivity wage costs and operating surplus roper s 1998 plant size and industry mix effects on uk regional productivity wage costs and operating surplus reg studies 32 325 332 the ability of a region to create wealth depends both on the competitiveness of its individual firms and its industrial structure this paper examines the effect of industry mix and plant size structure on the wealth generating capacity of the uk regions from 1980 91 reflecting the findings of similar us studies the analysis suggests that in general uk regions structural disadvantages act to reinforce rather than counter plant level productivity wage cost and operating surplus profitability differentials thus lagging regions face a three fold disadvantage poorly performing plants disadvantageous industry mix and plant size structure this suggests a need for a strategic approach to policy which must aim to counter regions structural disadvantages as well as to improve the competitiveness of existing plants roper s 1998 les effets de la taille des et

corporate takeovers the efficiency arguments in recent years the tender offer takeover has been praised and damned with a ferocity suggesting that the survival of capitalism is at stake the truth as in most disputes with substantial metaphysical content is more prosaic some takeovers enhance economic efficiency some degrade it and the balance of effects though not fully known is most likely a close one in this essay i try to lay bare the debate s foundations and bring it back to earth with an injection of evidence

price and income elasticities of residential water demand a meta analysis this article presents a meta analysis of variations in price and income elasticities of residential water demand meta analysis constitutes an adequate tool to synthesize research results by means of an analysis of the variation in empirical estimates reported in the literature we link the variation in estimated elasticities to differences in theoretical microeconomic choice approaches differences in spatial and temporal dynamics as well as differences in research design of the underlying studies the occurrence of increasing or decreasing block rate systems turns out to be important with respect to price elasticities the use of the discrete continuous choice approach is relevant in explaining observed differences

effect of price information on residential water demand microeconomic theory predicts that people decrease consumption when price increases the magnitude of the effect depending on price elasticity the law of demand however implicitly assumes that consumers know prices an assumption that is not always satisfied in markets with ex post billing when prices are not transparent elasticity estimates are potentially lower than their full information potential evidence of low price elasticity abounds in residential water demand studies limiting the effectiveness and desirability of using price signals as a conservation tool it is hypothesized that resident s sluggish response to price is partly due to the absence of price information on water bills differences in the informational content of bills are documented for the first time on the basis of sample bills collected from 383 utilities across the usa a standard aggregate water demand model is augmented with qualitative variables describing differences in billing information allowing such variables to a

cooperation for monopolization an empirical analysis of cartelization this paper examines the ability of a large numbers cartel to raise price cost margins the cartel in question is a dairy cooperative associated milk producers inc ampi with more than 30 000 members we develop a model of spatial limit pricing that we test using the method of seemingly unrelated regressions adjusting for serial correlation our results suggest that the cartel successfully obtained and used market power and that its power was proportional to its market share in contrast after an antitrust consent decree margins fell significantly and were no longer related to market shares these results are robust under both pooled and market fixed effects analysis copyright 1994 by mit press

efficiency and profitability an inverse relationship according to the size of austrian firm this paper tries to shed some light on the austrian situation of the efficiency of firms according to their size class for total austria we find that large firms seem to be more efficient with respect to value added per employee but small firms are more efficient with respect to the gross residual quota and to profitability value added wages value added on the other side a similar analysis for upper austria does not show this result here firms with the size of 500 employees or more seem to be the most efficient with respect to efficiency and profitability and only the employment cost efficiency criteria reveals the picture the smaller the firm the more cost effective it seems to be hence the result obtained from most studies in europe that at least the biggest firms are not the most efficient can only be confirmed to a limited extent for upper austria

household responses to increased water rates during the california drought this paper explores the use of fixed effects and maximum likelihood techniques to es timate household responses to water price in creases during the california drought estimates are based on bimonthly meter readings from 599 single family households in the alameda county water district over the period 1982 1992 before and after the introduction of a steeply increasing block rate price structure i find that household and monthly fixed effects models are not success ful in modeling water demand with these data however maximum likelihood models that ex plicitly consider the household s response to the rate structure result in plausible estimates of wa ter demand jel q25

evidence of creative destruction in the u s economy schumpeter discusses the importance of innovation and new firm entry in a capitalistic economy as a means to creatively destruct oligopolies and generate new economic wealth he warns of rd schumpeter feared the obsolescence of entrepreneurship would result in an increasing concentration of wealth among large corporations and toward socialism

do residential water demand side management policies measure up an analysis of eight california water agencies abstract to assess the potential of price and alternative demand side management dsm policies as an urban water resource management tool an econometric model of residential demand is formulated and estimated this econometric model incorporates alternative dsm policy instruments such as water allocations use restrictions public education and increasing block pricing schedules the analysis relies on cross sectional monthly time series data for eight water agencies in california representing 24 of the state s population 7 1 million people results suggest that both price and alternative dsm policies were effective in reducing demand however the magnitude of the reduction in demand varied among policy instruments

assessing the impact of oil prices on firms of different sizes its tough being in the middle recent empirical research has found evidence of a relationship between oil price movements and stock prices most published research investigates the relationship between oil price movements and stock prices using either economy wide measures of stock prices or industry sector measures of stock prices an important question that has largely gone unanswered relates to the relationship between oil prices and stock prices when the size of firms is allowed to vary relative to large firms do oil price movements have larger or smaller impacts on the stock prices of small or medium sized firms the answer to this question could have important policy implications that affect economic growth and prosperity in this paper a panel of firms is followed over a 17 year period to investigate the relationship between oil price movements firm size and stock prices evidence is found that shows the relationship between oil price movements and stock prices does vary with firm size and the relationship is strongest for medium sized firms

cointegration and dynamic time series models abstract this paper provides a survey of some of the recent developments in the field of econometric modelling with cointegrated time series in particular we describe the testing and estimation procedures which have become increasingly popular in the recent applied literature in addition to the two stage procedure proposed by engle and granger we consider extensions to the modelling of dynamic models with cointegrated variables such as the estimation of models with multiple cointegration vectors simultaneous systems models with seasonally integrated and cointegrated variables furthermore we illustrate the practical application of the techniques describes in the paper by means of a tutorial data set

institutional investment mergers and the market for corporate control the increasing importance of institutional investors as shareholders in individual companies has led to an important debate on their impact on corporate performance in this paper we focus on their role in the market for corporate control this has so far been the subject of very little systematic investigation despite its theoretical and practical significance we consider the impact of financial institutions using two u k merger samples and employing both univariate and multivariate techniques of analysis in the first sample drawn from the low merger period 1981 1983 pre and post merger differences are found between merging companies with and without a significant institutional presence however in the takeover boom year of 1986 from which the second sample is drawn all such distinctions become blurred

potential for pricing policies in water resource management estimation of urban residential water demand in zaragoza spain this paper presents an empirical study to estimate the urban residential water demand in zaragoza spain this allows the testing of the short run sensitivity of water demand to changes in a set of

the deaton paradox in a long memory context with structural breaks this article contributes to the permanent income hypothesis pih and excess consumption smoothness debate in the context of fractional integration we show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work in fact the i 1 hypothesis is rejected for the income process with monthly data in favour of a fractional integration order lower than 1 moreover if a structural break is taken into account we observe a substantial reduction in the degree of consumption smoothness especially after the break found in 1975

firm dynamics and industrialization in the chinese economy in transition implications for small business policy abstract this article first presents a review of the development of different types of domestic enterprises state owned enterprise soes collectiveowned enterprises coes and other enterprises oes which include mainly private enterprises compared with other transition economies coes are actually an important source of china s rapid economic growth they are vaguely defined cooperative without a well defined ownership structure there is no equivalent organizational structure similar to coes in western economies the purpose of this article is to study the empirical relationship between the size of domestic enterprises including state owned enterprises collective owned enterprises and other enterprises and their firm dynamics growth by investigating whether they grow according to gibrat s law the majority of coes and oes were formed after the economic reform the rapid growth of these non state enterprises especially coes is actually the driving force behind the rapid development of the industrial sector our empirical results suggest that gibrat s law does not hold for all types of enterprises the rejection is especially strong for coes moreover small enterprises are growing faster than their larger counterparts in terms of employment and output this conclusion leads to at least three implications 1 there has been little research into the dynamics of soes and coes in an economy in transition our results not only help stimulate further research in this area but also provide information for designing policies to speed up the economic reforms 2 until now the chinese government has not had a comprehensive small business policy given our empirical results there is an implication for government policy prescription to achieve china s development targets of rapid industrialization and lower unemployment or underemployment the chinese economy can reap more dynamic benefits by breaking up a giant and inefficient enterprise especially inefficient soe into a number of smaller enterprises in addition more small enterprises also improve competition in the marketplace and force other inefficient soes to improve their performance further research should be undertaken to examine the viability of this policy 3 because coes are the majority of small manufacturing enterprises the rapid growth of coes after their formation that are simply the opposite of the type of private organizations the center of the central and east european reforms is rather surprising to academics although some hypotheses like cooperative culture and moral framework for rights are put forward to explain their superior performance the validity of such hypotheses has not been empirically tested yet this is a fruitful area for further research

comment on small firms and merger mania considering its importance to the field of industrial organization our understanding of the determinants of firm size has some major gaps this becomes quite clear upon reading aiginger and tichy s recent review hereafter a t 1991 of the many empirical studies of firm size they critically examine the separate literatures on the performance of large and small firms and on the efficiency of mergers they find inconsistencies within each of these literatures more interesting they discuss a glaring inconsistency between the evidence in the literature and actual behavior while much of the performance literature indicates that small firms have average or superior performance large firms typically takeover smaller firms efficiency and survival would seem to dictate against this merger mania a t provide a number of interesting insights they offer six hypotheses on why small firms might outperform large firms and challenge the industrial organization view that economies of scale and scope require large firm size they stop short however of arguing that large firms are inefficient recognizing that they may simply perform different roles than small firms their discussion or mergers is more critical of large firms while they do not entirely dismiss the possibility that mergers may yield efficiencies they offer six alternative hypotheses they suggest that mergers tend to r ieci tnance stotiniaierormanagenteili optimism nonprofit maximizing behavior and other unproductive tendencies this comment focuses on the role of firmspecific capital product life cycles and product niches the relative performance of large vs small firms is reconsidered in this light followed by an examination of the merger literature and the practice of takeovers by large firms large firms are viewed less skeptically here than by a t nevertheless the purpose of this note is less to challenge a t than to elaborate on some of their points and suggest additional possibilities the questions raised by a t are central to the field of industrial organization and worthy of further attention

latent class model or mixed logit model a comparison by transport mode choice data this article applies two recently stated choice survey datasets of japan to investigate the difference between the latent class model lcm and the mixed logit model mlm for transport mode choice a detailed comparison is carried out focusing on comparing values of time savings direct choice elasticities predicted choice probabilities and prediction success indices furthermore a test on nonnested model is also utilized to help determine which model is superior to another one the results suggest that the lcm performs better than the mlm in both datasets