where do markets come from production markets have two sides producers are a fully connected clique transacting with buyers as a separate but aggregated clique each producer is a distinctive firm with a distinctive product each side continually monitors reactions of the other through the medium of a joint social construction the schedule of terms of trade each producer is guided in choice of volume by the tangible outcomes of other producers not by speculation on hypothetical reactions of buyers to its actions each producer acts purely on self interest based on observed actions of all others summarized through a feedback process the summary is the terms of trade schedule which reduces to constant price only in limiting cases the market emerges as a structure of roles with a differentiated niche for each firm explicit formulae both for firms and for market aggregates are obtained by comparative statics methods for one family of assumptions about cost structures and about buyers evaluations of differentiated products not just any set of firms can sustain terms of trade with any set of buyers there prove to be three main kinds of markets and three sorts of market failure within a parameter space that is specified in detail one sort of market paradox has a madison avenue flavor another is more conventional grind and a third crowded is a new form not included in any existing theory of markets current american industrial markets are drawn on for 20 illustrations of which three are presented in some detail inequality in firms market shares measured by gini coefficients is discussed

firm growth size age and behavior in japanese manufacturing this paper investigates the relationship between firm growth and firm size firm age and firm behavior such as r d activity and subcontracting based on the data of nearly 14 000 japanese manufacturing firms the stylized facts that firm size and age have a negative effect on firm growth are confirmed in the case of japanese manufacturing firms also a firm s survivability rises with its size and age r d expenditure per employee has a significant positive effect on firm growth which justifies the argument made by hall 1987 although subcontracting to only one company has no significant effect on firm growth it has a significant positive effect on a firm s survivability in addition subcon tracting firms depending on only one company as a customer are subject to no significant age effects this possibly suggests that the age effect itself has some relation to the extent of the trade network

the canadian border and the us dollar the impact of exchange rate changes on us retailers this paper provides a micro level investigation into the impact of changes in the uscanada nominal exchange rate on retailers in us regions lying close to the uscanada border using a large data set on product level retail prices and sales in the united states over a nine year period we explore the links between changes in exchange rates cross border travel and the price and quantity responses of us retailers this allows us to assess the importance of geography and distance in affecting the pass through of exchange rate changes into prices and quantities at the level of the consumer we develop a two stage theoretical model of cross border travel and industry equilibrium for retail sales at the border our empirical results accord well with the implications of the model

competitive tension the awareness motivation capability perspective this paper investigates competitive tension or the strain between a focal firm and a given rival that is likely to result in the firm taking action against the rival drawing on the awareness motivation capability perspective we show how perceived competitive tension as constructed from managers and industry stakeholders competitor assessments is influenced by the independent and interactive effects of three factors relative scale rival s attack volume and rival s capability to contest our results provide a new avenue for studying competitors and the relationship between competitor analysis and interfirm rivalry in science there is a steady state in which opposing forces hold each other in check until the build up of tension turns the static relationship into dynamic interplay the point when the steel cable snaps the steam chamber s pressure valve opens or one psychological force overwhelms the other in business practice a similar phenomenon exists when tension that one opponent imposes on another triggers rivalrous actions competitor analysis is central to strategy and organization research hitt ireland hoskisson 2005 porter 1980 previous research has explored a number of important issues including conjecture variation amit domowitz fershtman 1988 competitor identification porac thomas 1990 and blind spots zajac bazerman 1991 and has made advances in such areas as theoretical integration of competitor analysis and interfirm rivalry chen 1996 fundamental questions such as who a focal firm s competitors are and how much competition the firm faces from each rival have been implicitly or explicitly addressed by a variety

dynamics of dyadic competitive interaction in this study of firms entries into and exits from each other s markets we link research on multipoint competition to the emerging action oriented dyadic approach to interfirm rivalry by specifying market interdependencies between pairs of firms that condition their potential for rivalry over time our dynamic analysis of competitive interactions between pairs of commuter airlines in california reveals the idiosyncratic and asymmetric market microstructures that characterize dyadic competitive relationships and helps explain why firms grapple vigorously with some of their competitors while being passive toward others we show that there is an inverted u shaped relationship between firms rates of entry into and exit from each other s markets and the level of multimarket contact in competitor dyads we also show how this basic curvilinear effect varies from dyad to dyad as a function of relative levels of multimarket contact with competitors in other dyads and the relative sizes of competitors in a focal dyad copyright 1999 john wiley sons ltd

strategic group formation and performance the case of the u s pharmaceutical industry 1963 1982 the focus of this paper is on three major questions 1 what is the theoretical rationale for the strategic group concept 2 does strategic group membership have performance implications and 3 are strategic groups and membership in strategic groups stable characteristics of industries a statistical procedure is proposed to longitudinally identify strategic groups the empirical setting is the u s pharmaceutical industry over the period 1963 82 while performance differences are found in terms of market share profitability differences between groups are not observed neither are differences found in terms of risk and risk adjusted performance these results are attributed to the existence of performance variation within each strategic group a dynamic model of competitive repositioning is proposed which helps integrate the findings from the study

firm and product life cycles and firm survival on average roughly 5 10 percent of the firms in a given market leave that market over the span of a single year at least so data for a broad range of industries in several economies tell us what is it other than random shocks that determines the probability of survival for a firm in a given market we start by decomposing the forces that affect survival into industry and firm attributes industry attributes we hypothesize encompass variables that exert their influence both over time and across markets the variables that operate over time are defined by the life cycle of the industry life cycles of the industry affect mainly the characteristics of demand and the rate and form of technical change variations across firms we hypothesize arise mainly from learning by doing darwinian survival of the fittest and the obsolescence of initial endowments these variables are linked to the life cycle of the firm how these industry and firm life cycles define patterns of survival is the story

nonresponse and delayed response to competitive moves the roles of competitor dependence and action irreversibility competitive moves that are unchallenged or to which response is delayed are important weapons in a strategist s arsenal so variables that discourage or delay response are of great interest using

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

demand and distance evidence on cross border shopping while many studies have documented deviations from the law of one price in international settings evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping we use data from 287 swedish municipalities to estimate how responsive alcohol sales are to foreign prices and relate the sensitivity to the location s distance to the border typical results suggest that the elasticity with respect to the foreign price is around 0 4 in the border region moving 200 400 kilometers inland reduces it to 0 2 0 1 given that cross country price differences for alcohol and other products are often caused by taxes our evidence has implications for the debate on tax competition harmonization

saving and growth evidence from micro data abstract this paper examines whether the observed cross country correlation between aggregate saving rates and economic growth can be explained by models in which higher growth increases saving rates rather than the other way around there are two explanations why higher growth might increase saving first life cycle theory implies that higher growth will increase the life time wealth of younger savers relative to older dissavers thereby increasing the aggregate saving rate second models of consumption with habit formation imply that consumption responds slowly to unexpected income growth so unanticipated growth can produce a higher saving rate at least in the short run i assess these explanations using time series of cross sections of household surveys from four countries the us britain taiwan and thailand i find evidence that higher growth will produce only small increases in aggregate saving rates

low demand for housing incidence causes and uk national policy implications low and falling demand for housing has come to be recognised as a fairly widespread phenomenon in late 1990s britain whilst research has tended to focus on the negative consequences of this for so

decomposition of new venture growth into firm age survey period and vintage effects firm data are accumulated on a yearly basis in view of the linear relationship of firm age foundation year survey year the fluctuations of firm data classified by age and period cannot be decomposed into age period and cohort foundation year effects three decomposition methods are briefly reviewed and applied to japanese data on new ventures founded since 1995 regarding sales and employment growth the age effect is the largest with a downward trend and the cohort effect is negligible regarding labour productivity the age effect indicates upward movements and the cohort effect is negligible the reason of the negligible cohort effect is discussed

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

heterogeneity in the tax pass through to spirit retail prices evidence from belgium abstract on 1st november 2015 the belgian government increased the excise tax on alcoholic beverages for spirits with 40 of alcohol and bottle size of 70 cl this tax change is equivalent to an amount of 2 43 per bottle of spirits this paper studies the impact of this tax reform at the store level on the posted retail price of six major brands of spirits using a difference in differences method the estimation is based on a balanced panel of scanner data from a major supermarket chain with a 33 market share and uses the retail prices of the same brands sold in france by the same supermarket chain as a control group having information on each store location we show spatial variations in the tax pass through for homogeneous products we find that these variations are strongly related to the intensity of local competition and to a lesser extent to the proximity to the borders mainly with luxembourg which is the low price country we find that the tax was quickly passed through during the first month of tax implementation and that it was mostly over shifted however we also find that both the border and the competition effects are not instantaneous but arise several months after the tax reform these findings have important implications for alcohol control policies as they highlight that the incidence of alcohol taxation can vary greatly across space and affect differently households depending on where they live

the death of firms exploring the effects of environment and birth cohort on firm survival in sweden this paper investigates the death of firms and seizes a long term perspective it investigates the life spans of nearly 2 200 firms in seven birth cohorts of swedish joint stock companies founded during seven separate years between 1899 and 1950 research has traditionally emphasized individual and micro oriented factors in explaining post entry performance or has often focused on the influence of firm specific structural factors firm age and size a less attended field recognizes environmental forces this paper focuses on the interaction between the micro and macro levels and combines structural and environmental factors employing a cohort approach it relates firm survival to firm age and size as well as to the effect of cohort affiliation and environmental change over time period effects during macroeconomic expansion the risk of death decreases cohort effects are also evident firms founded during times of economic crisis exhibit lower survival rates consequently cohort affiliation and environmental forces i e period effects can explain differences in death rates in different firm populations

austrian and industrial organization perspectives on firm level competitive activity and performance drawing on the austrian school of economics and the structure conduct performance s c p paradigm of industrial organization the authors present and test a dynamic model of competitive activity and performance they examine the model in two stages first they explore the influence of industry level and firm level cooperative mechanisms on firm level competitive activity second they examine the effect of firm and industry level competitive activity on firm performance the authors use the dynamic model of competitive activity to examine the complex linkages between the firm s environment its actions and its performance outcomes they report a longitudinal analysis of a sample of 1 903 competitive moves undertaken in the software industry hypothesis testing supports the relationships in the model argued from the austrian perspective but provides only partial support for those derived from the s c p paradigm firm level cooperative mechanisms are found to increase the firm s competitive activity a

income maximization and the selection and sorting of international migrants abstract two prominent features of international labor movements are that the more educated are more likely to emigrate positive selection and more educated migrants are more likely to settle in destination countries with high rewards to skill positive sorting using data on emigrant stocks by schooling level and source country in oecd destinations we find that a simple model of income maximization can account for both phenomena results on selection show that migrants for a source destination pair are more educated relative to non migrants the larger is the absolute skill related difference in earnings between the destination country and the source results on sorting indicate that the relative stock of more educated migrants in a destination is increasing in the absolute earnings difference between high and low skilled workers we use our framework to compare alternative specifications of international migration estimate the magnitude of migration costs by source destination pair and assess the contribution of wage differences to how migrants sort themselves across destination countries

explaining armington what determines substitutability between home and foreign goods for decades trade economists have modeled imperfect substitution between home and foreign goods in consumption often called the armington assumption with little analysis of what explains the wide variation in these substitution elasticities across sectors using a varying coefficients model the authors estimate armington elasticities between u s domestic and foreign goods across over one hundred industrial sectors from 1980 to 1988 and examine the role of product industry political and home bias factors as determinants they find strong support that the presence of foreign owned affiliates affects armington elasticities in important ways and some support that entry barriers and union presence have an effect

a theory of financing constraints and firm dynamics there is widespread evidence supporting the conjecture that borrowing constraints have important implications for firm growth and survival in this paper we model a multiperiod borrowing lending relationship with asymmetric information we show that borrowing constraints emerge as a feature of the optimal long term lending contract and that such constraints relax as the value of the borrower s claim to future cash flows increases we also show that the optimal contract has interesting implications for firm dynamics in agreement with the empirical evidence as age and size increase mean and variance of growth decrease and firm survival increases

cross country price dispersion in the euro era a case study of the european car market impact of the euro this paper investigates the effects of the european monetary union on cross country price differences in the european car market the analysis utilizes disaggregate bi annual data on the prices of almost all car models sold in the 15 countries of the european union over 1993 2003 the data refer to identical models with identical specifications and options to identify the euro s effect we exploit the fact that out of the 15 countries in our sample 12 joined euroland at the beginning of 1999 and officially adopted the euro as their national currency at the beginning of 2002 while 3 countries remained outside the monetary union we investigate whether there is a systematic difference in the evolution of cross country price dispersion between euroland members and non members after 1999 our analysis distinguishes between phase i monetary union with national currencies preserved 1999 2001 and phase ii official adoption of the euro as a national currency in 2002 we examine the evolution of both the absolute price differentials across countries and the speed with which deviations from the long term cross country differentials are eliminated we find that in the pre euro era countries that later joined euroland exhibited lower price differentials relative to the base country of the netherlands by approximately 6 the monetary union further reduced these differentials by a small but significant percentage about 1 5 between 1999 and 2001 this reduction happened while the price differentials in non euroland countries increased the price differentials in euroland countries further decreased following the official euro adoption in 2002 however we cannot attribute this decline to the euro as we witness an even faster decrease of price differentials in non euroland countries over the 2002 2003 period despite these reductions cross country price differences remain large even among members regarding the speed of convergence we find that even before 1999 the half life of price shocks was shorter in euroland countries compared to non euroland countries 0 65 versus 1 year however we do not find any evidence that the emu further affected the speed of convergence in a significant manner overall our results suggest a big role for exchange rate stability in reducing international price dispersion and a smaller role for a common currency the surprisingly high remaining international price differentials after the euro suggest the need for additional measures towards integration e g liberalization of the distribution system reduction of high registration taxes in particular countries pinelopi koujianou goldberg and frank verboven

the impact of vintage and survival on productivity evidence from cohorts of u s manufacturing plants this paper examines the evolution of productivity in u s manufacturing plants from 1963 to 1992 we define a vintage effect as the change in productivity of recent cohorts of new plants relative to earlier cohorts of new plants and a survival effect as the change in productivity of a particular cohort of surviving plants as it ages both factors contribute to industry productivity growth but play offsetting roles in determining a cohort s relative position in the productivity distribution recent cohorts enter with higher productivity than earlier entrants did whereas surviving cohorts show productivity increases as they age these two effects roughly offset each other however so there is a rough convergence in productivity across cohorts in 1992 and 1987

how far for a buck tax differences and the location of retail gasoline activity in southeast chicagoland abstract we exploit variation in gasoline and cigarettes taxes in adjacent political jurisdictions for northern illinois and indiana to examine consumers trade off between prices and travel we develop a model that relates activity in the retail gasoline industry around the tax borders to consumer locations our results indicate that the willingness of a typical chicagoland consumer to travel an additional mile to buy gasoline corresponds to about 0 065 to 0 084 per gallon according to our estimates the observed area of chicago the jurisdiction with the highest taxes is missing approximately 40 of the capacity that would exist were taxes equalized

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

real exchange rate fluctuations and the dynamics of retail trade industries on the u s canada border consumers living near the u s canada border can shift their expenditures between the two countries so real exchange rate fluctuations can act as demand shocks to border areas retail trade industries using annual county level data we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries in three of the four industries we consider the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements for these industries the response of retailers average size is less pronounced the rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers costs of changing nominal prices

why good firms do bad things the effects of high aspirations high expectations and prominence on the incidence of corporate illegality recent high profile corporate scandals involving prominent high performing firms cast doubt on assertions that the costs of getting caught decrease the likelihood such high performers will act illegally we explain this paradox by using theories of loss aversion and hubris to examine a sample of s p 500 manufacturers results demonstrate that both performance above internal aspirations and performance above external expectations increase the likelihood of illegal activities the sample firms prominence enhanced the effects of performance above expectations on the likelihood of illegal actions prominent and less prominent firms displayed different patterns of behavior when their performance failed to meet aspirations

multimarket contact economies of scope and firm performance we integrate the efficiency and competitive effects of product market scope choice into a comprehensive model of economic performance and empirically test the model in the context of the u s airli

a cohort analysis of saving behavior by u s households the aim of this paper is to shed some light in the decline in personal saving rates in the united states in the 1980s for a such a purpose the paper analyses the only u s data set containing information on consumption and income at the household level the consumer expenditure surveys cex from 1980 to 1991 because the cex is not a panel most of the analysis is conducted using average cohort techniques the paper identifies a typical age profile for saving rates such a profile is hump shaped and peaks around age 57 the paper also argues that such a profile was shifted down for the cohorts born between 1920 and 1939 relative to the younger and older cohorts considered these cohorts are the parents of the baby boom generation the paper also argues that these cohort effects can account for a non neglible proportion of the decline in aggregate saving because these cohorts were during the 1980s in the ages when saving rates are typically highest the result is robust to the consideration of several controls and holds for several definitions of consumption the only exception is when durable expenditure is considered as saving rather than consumption

age period cohort decomposition of aggregate data an application to us and japanese household saving rates this paper compares two methods of analyzing aggregate data that is classified by period and age because there is a linear relationship among age period and cohort it is not possible to distinguish the separate effects without employing an identifying assumption the first method which is applied in the economics literature assumes that period effects are orthogonal to a linear time trend the second method which is applied in the statistics literature assumes that the effect parameters change gradually simulation results suggest that the performances of both methods are comparable the results of applying the second method to household saving rates suggest that period effects had a negligible influence in the united states but considerable influence in japan copyright 2006 john wiley sons ltd

the spatial interaction of housing and labour markets commuting flow analysis of north west england the consideration of housing and labour market interaction is a relatively recent development in an academic and policy debate which has traditionally considered home and work in isolation this pa

rivalry between social and private landlords in local rental housing markets social housing providers in many advanced economies have been directed towards market orientated and commercial business models whereas the scope of the private rental sector has been increasingly expanded to the provision of housing for low income households where these developments coincided the demarcation between the activities of social and private landlords has blurred with the result of increasing competitive pressure on both groups this paper sheds light on the behavioural aspects of competition by introducing the concept of inter landlord rivalry in local rental housing markets drawing on data from 36 in depth interviews with social and private landlords in coventry england and breda the netherlands this study shows that existing perceptions of rivalry among most landlords are exceptional in low income renting but pronounced in more expensive commercial rental segments the paper will demonstrate that these perceptions are highly subjective and non reciprocal moreover competitive perceptions and interactions are strongly affected by political and market structural settings and appear to be dependent on the trade off between the social mission and commercial goals of individual housing associations in the social housing sector

the economics of cross border travel abstract we model the decision to travel across an international border as a trade off between benefits derived from buying a range of products at lower prices and the costs of travel we estimate the model using microdata on canada united states travel price differences motivate cross border travel a 10 home appreciation raises the propensity to cross by 8 to 26 the larger elasticity arises when the home currency is strong a result predicted by the model distance to the border strongly inhibits crossings with an implied cost of 87 cents per mile geographic differences can partially explain why american travel is less exchange rate responsive

understanding recent trends in residential mobility in council housing in england variations in stock turnover in social housing are important for a number of reasons first they influence the supply of properties available to meet housing need secondly they have implications