a review of wta wtp studies abstract willingness to accept wta is usually substantially higher than willingness to pay wtp these constructs have been studied for roughly 30 years and with a wide variety of goods this paper reviews those studies we find that the less the good is like an ordinary market good the higher is the ratio the ratio is highest for non market goods next highest for ordinary private goods and lowest for experiments involving forms of money a generalization of this pattern holds even when we account for differences in survey design ordinary goods have lower ratios than non ordinary ones we also find that ratios in real experiments are not significantly different from hypothetical experiments and that incentive compatible elicitation yields higher ratios

competitive non linear pricing and bundling we examine the impact of multiproduct nonlinear pricing on profit consumer surplus and welfare in a duopoly when consumers buy all their products from one firm the one stop shopping model nonlinear pricing leads to higher profit and welfare but often lower consumer surplus than linear pricing by contrast in a unit demand model where consumers may buy one product from one firm and another product from another firm bundling generally acts to reduce profit and welfare and to boost consumer surplus in a more general model where consumers may buy from more than one firm and where consumers have elastic demands for each product nonlinear pricing has ambiguous effects compared with linear pricing nonlinear pricing tends to raise profit but harm consumer surplus when i demand is elastic ii there is substantial product differentiation iii there is substantial heterogeneity in consumer demand iv consumers face substantial shopping costs when visiting more than one firm and v a consumer s brand preference for one product is strongly correlated with her brand preference for another product nonlinear pricing is more likely to lead to welfare gains when i ii iv and v hold but iii does not

pricing variation within dual distribution chains the different implications of externalities and signaling for high and low quality brands within many of the multioutlet branded chains that dominate the retail and services landscape the organizational form e g company management franchising used to manage an outlet varies from site to site as do the prices charged at those sites i propose that organizational form and prices may be systematically related as a result of brand externalities in particular i develop logic that the relevant form of externality should differ for upper quality tier brands and lower tier brands using panel data on price and organizational form from more than 6 700 branded u s hotels affiliated with 40 dual distribution brands those brands that simultaneously company manage and franchise individual outlets i find that consistent with the brand externality arguments company managed locations have higher prices within high quality chains whereas franchisees price higher in the lower tiers this paper was accepted by bruno cassiman business strategy

delegation and commitment in durable goods monopolies this paper studies a simultaneous move infinite horizon delegation game in which the principal of a durable goods monopoly entrusts pricing decisions to a manager who enjoys consuming her monetary rewards but dislikes production effort the delegation contract allows for continual interference with managerial incentives in each period the principal rewards the manager according to her performance we show that when the cost of delegation is low relative to profits the principal can attain the precommitment price plan in a perfect rational expectations equilibrium the paper analyzes the robustness of this result under alternative specifications of timing and objectives we also provide a numerical characterization of the equilibrium strategies for the case of linear quadratic payoffs

the quality of employment in india s services sector exploring the heterogeneity for some observers the dramatic growth of the services sector in india reflects rapid strides made by educated professionals some others see it as the expansion of an employer of last resort given this heterogeneity the object of this article is to analyse the quality of employment being created in different sub sectors of services relative to the industrial sector where quality is defined to include wages job security and social protection analysing household survey data from india in 1993 94 and 2004 05 we find the following first sub sectors of services are generally either good or bad employers higher wages do not compensate for less job security or less job protection second the classification of most service sub sectors as good or bad employers in 2004 05 is the same as that in 1993 94 third employment expansion during the 10 year period under consideration is more in service sub sectors where quality of employment is low

differentiation and discrimination in a duopoly with two bundles abstract this paper provides a theoretical rationale for the market outcomes in which some firms practice pure tying i e sell only a bundle while others practice mixed tying i e sell a bundle and separated components in the existing literature such situations are not accounted for since only pure tying or mixed tying equilibria are exhibited using a duopoly model with two bundles and the possibility for firms to practice mixed tying we show that there exist equilibria in which one firm sells one bundle while the rival sells the second bundle and a separated component these equilibria result from a combination of discrimination and differentiation effects

induced value tests of the referendum voting mechanism abstract an induced value laboratory experiment is conducted testing the incentive compatibility of the referendum voting mechanism for eliciting willingness to pay for public goods although errors were observed at the individual level aggregate results suggest incentive compatibility in both hypothetical and real referenda

ordering effects and choice set awareness in repeat response stated preference studies we present an experiment designed to investigate the presence and nature of ordering effects within repeat response stated preference sp studies our experiment takes the form of a large sample full factorial discrete choice sp exercise investigating preferences for tap water quality improvements our study simultaneously investigates a variety of different forms of position dependent and precedent dependent ordering effect in preferences for attributes and options and in response randomness we also examine whether advanced disclosure of the choice tasks impacts on the probability of exhibiting ordering effects of those different types we analyze our data both non parametrically and parametrically and find robust evidence for ordering effects we also find that the patterns of order effect in respondents preferences are significantly changed but not eradicated by the advanced disclosure of choice tasks a finding that offers insights into the choice behaviors underpinning order effects

estimation using contingent valuation data from a dichotomous choice with follow up questionnaire reply abstract our original article proposed that the two yes no willingness to pay wtp responses produced by this survey format should be viewed as a pair of jointly distributed correlated discrete random variables the comparison model the conventional approach to estimation using these types of data contained a programming error correction alters the results from the comparison model but our original claim that estimation by conventional methods can produce misleading inferences if ours is the appropriate specification still stands this is especially true if negative wtp is precluded when e wtp is calculated

compatibility and bundling of complementary goods in a duopoly this paper presents a simple model of compatibility and bundling in industries where consumers assemble several necessary components into a system that is close to their ideal the authors show that for a wide range of parameters firms will choose to produce compatible components but will offer discounts to consumers who purchase all components from the same firm however firms would be better off if they could commit not to provide such discounts furthermore the equilibrium tends to involve socially excessive bundling finally mixed bundling strategies tend to increase the range of parameters over which socially excessive standardization occurs copyright 1992 by blackwell publishing ltd

recent advances in the valuation of ecosystem services and biodiversity recent interest in the economics of biodiversity and wider ecosystem services has been given empirical expression through a focus upon economic valuation this emphasis has been prompted by a growing recognition that the benefits and opportunity costs associated with such services are frequently given cursory consideration in policy analyses or even completely ignored the valuation of biodiversity and ecosystem services is therefore increasingly seen as a crucial element of robust decision making and this has been reflected in a growing body of related research we provide a critical review of some of this research considering the valuation methods applied to date and focussing upon their limitations in respect to certain categories of ecosystem services particularly cultural services and the applicability of the extant literature to new settings substantial questions also remain at the interface of natural science and economics and we consider the potential contribution of the conceptualization of ecosystems as assets as a response to this challenge as part of this review we also highlight the role which large scale ecosystem assessments have played as an impetus to extending the valuation evidence base and the way in which frameworks and assessments of how ecosystems contribute to human wellbeing might be translated into policy thinking and decision analyses

sex and sector differences in the dynamics of wage growth in the federal republic of germany research on wage differentials for men and women and for labor market sectors has relied largely on cross sectional analysis using data on three cohorts of west german men and women we bring a dynamic perspective to these issues by analyzing wage changes for three aspects of work histories 1 wage rate at time offirst entry into the labor market 2 wage changes when workers change jobs and 3 wage growth within jobs education affects first wages for men and women but the effect weakens sharply over time education also has a significant positive impact on wage growth within jobs over the entire period for men and a positive but not significant effect for women highly educated women do less well than other women when changing jobs consistent with the view that advancement for such women is impeded by a glass ceiling labor market segment affects initial wages and wage gains due to a job change however movement into internal labor markets skilled jobs in large firms does not confer an initial payoff in wages workers in sectors characterized by internal labor markets do not experience higher than average wage growth within jobs a result that runs counter to theories of segmented labor markets finally wages grow at a decreasing rate with duration of job for both men and women however wage growth is initially more rapid for women but also declines more sharply over time

on the existence of cournot equilibrium this paper examines the existence of n firm cournot equilibrium in a market for a single homogeneous commodity it proves that if each firm s marginal revenue declines as the aggregate output of other firms increases which is implied by concave inverse demand then a cournot equilibrium exists without assuming that firms have nondecreasing marginal cost or identical technologies also if the marginal revenue condition fails at a potential optimal point there is a set of firms such that no cournot equilibrium exists the paper also contains an example of nonexistence with two nonidentical firms each with constant returns to scale production

asymmetric preference and loss aversion for electric vehicles the reference dependent choice model capturing different preference directions abstract greenhouse emissions from internal combustion engines have become a serious social issue as of 2019 most vehicles in the south korean car market have internal combustion engines although the south korean government is adopting and implementing various policies to facilitate the penetration of battery electric vehicles evs in the car market its efforts have been in vain several studies on ev diffusion strategies have analyzed consumer preference for evs using discrete choice experiments with virtual alternatives however they do not consider that consumers choose a new product based on the properties of products they already own this aspect has a significant effect on consumer preferences and has several implications therefore this study uses a discrete choice model with a reference point to investigate asymmetric consumer preferences for the major attributes of evs and analyzes the related loss aversion parameters the results are then used to conduct a sensitivity analysis for fuel efficiency and infrastructure attribute to explore which factor is more influential to consumers evs choice probability

a test of the theory of reference dependent preferences eight alternative methods of eliciting preferences between money and a consumption good are identified two of these are standard willingness to accept and willingness to pay measures these methods differ with respect to the reference point used and the dimension in which responses are expressed the loss aversion hypothesis of tversky and kahneman s theory of reference dependent preferences predicts systematic differences between the preferences elicited by these methods these predictions are tested by eliciting individuals preferences for two private consumption goods the experimental design is incentive compatible and controls for income and substitution effects the theory s predictions are broadly confirmed

preference anomalies preference elicitation and the discovered preference hypothesis there is wide ranging evidence much of it deriving from economics experiments of anomalies in behaviour that challenge standard preference theories this paper explores the implications of these anomalies for preference elicitation methods because methods that are used to inform public policy such as contingent valuation are based on standard preference theories their validity may be called into question by the anomaly data however on a new interpretation these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments we explore the evidence for this interpretation and what implications follow for preference elicitation methodology

bundling as a facilitating device a reinterpretation of leverage theory tying good monopolists that extract full consumer surplus from independent sales of their tying good may nevertheless choose to bundle in order to induce a favorable response by their tied market rivals in particular bundling may facilitate supracompetitive prices for the tied good copyright 1991 by the london school of economics and political science

nonmarket values of major resources in the korean dmz areas a test of distance decay the demilitarised zone dmz and its adjoining areas serve not only as a geopolitical buffering zone between north and south korea but also as rare refuges for various animals and plants this paper investigates conservation values of major dmz resources and comparatively tests distance decay between contingent valuation and choice modelling the overall conservation value for the dmz resources per person as one off payments was 9 06 or 34 97 respectively from the cvm and cm datasets research findings deny distance decay regardless of elicitation methods when the distance variable is parameterised as part of utility functions conversely a segmentation valuation approach demonstrates conflicting conclusions on distance decay and the wtp anomaly between users and non users depending on elicitation methods the cm results demonstrate that protection of the dmz resources might be less important and attractive to local populations than to those in the distant regions a direct cross method transfer of any distance effect might not be granted

enhancing the content validity of stated preference valuation the structure and function of ecological indicators stated preference surveys often provide ambiguous descriptions of ecological commodities yielding welfare estimates that have unclear interpretations and cannot be linked to measurable outcomes this paper proposes guidelines to promote ecological content validity in survey scenarios and defensible use of ecological information for welfare analysis these guidelines are illustrated through an application to migratory fish restoration content validity is evaluated vis a vis norms for communication of ecological changes in the ecological literature findings suggest that less structured treatment of ecological commodities may lead to an omission of information that is relevant to respondents and essential for valid welfare estimation

bundling as an entry barrier in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to credibly defend both products without having to price low in each the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist although price discrimination provides a reason to bundle the gains are small compared with the gains from the entry deterrent effect i introduction in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to defend both products without having to price low in each while it is still possible to compete by offering a rival bundle a monopolist can significantly lower the potential profits of a one product entrant without having to engage in limit pricing prior to entry we also show that bundling continues to be an effective pricing tool even if entry deterrence fails or if there is already an existing one product rival a company with a monopoly in product a and a duopoly in product b makes higher profits by selling an a b bundle than by selling a and b independently leveraging market power from a into b and accepting some one product competition against the bundle is better than using the monopoly power in good a all by itself since bundling mitigates the impact of competition on the incumbent an entrant can expect the bundling strategy to persist even without any commitment the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist see stigler 1968 adams and yellen

no lease is short enough to solve the time inconsistency problem the author provides a model of endogenous lease duration determination in the context of the durable goods monopolist problem he shows that infinitely many leases per finite unit of time are required to solve completely the time inconsistency problem thus suggesting that leasing may not provide a practical solution the author also provides a warning regarding the results that can be derived by exogenously setting lease durations equal to one period by resolving a paradoxical result in the literature copyright 1994 by blackwell publishing ltd

choosing a functional form for an international benefit transfer evidence from a nine country valuation experiment abstract this paper investigates the performance of common approaches in international benefit transfer using data from identical and simultaneous contingent valuation studies on marine water quality in nine european countries the environmental good is shared by the study countries but the countries differ substantially in their income levels and other characteristics we compare the performance of value transfers with or without income elasticity of willingness to pay adjustments and function transfers that include only core variables supported by economic theory our results point to a new source of uncertainty associated with function transfer choosing a particular functional form even if only theoretically relevant explanatory variables are used the theory offers no insights with respect to a functional relationship of the dependence e g linear log linear exponential polynomial we show that while different functional forms may offer improvements in model fit this does not necessarily translate to improvements in transfer errors or minimum tolerance levels in our case the value transfer with constant unit income elasticity adjustment corresponding to the log log functional relationship between willingness to pay and income performs the best including additional explanatory variables or using other functional forms worsens the quality of transfers overall our study questions the rationale for using more complicated function transfers in international benefit transfers as the relationships observed within a country or a group of countries does not necessarily translate to dependencies between countries

product bundling and incentives for mergers and strategic alliances this paper analyzes firms choice between a merger and a strategic alliance in bundling their product with other complementary product we consider a framework in which firms can improve profits only from product bundling while mixed bundling is not profitable pure bundling is because pure bundling reduces consumers choices and thus softens competition among firms firms benefit the most from this reduced competit ion if they form an alliance firms do not gain as much from a merger because internalizing the complementarity between the two products a merged firm is inclined to pursue aggressive pricing to gain market share yet firms may be motivated to choose a merger over an alliance because of foreclosure possibility as foreclosure is not possible under strategic alliance however in response unmerged rivals can use a strategic alliance to avert foreclosure hence the possibility of counter bundling via strategic alliance by rivals reduces the incentives for merger in equilibrium

further evidence of the relevance of the dual labor market hypothesis for the u k this study proposes that the earnings of career employees are influenced by a different set of parameters from the earnings of non career employees the above proposition is tested by using a matched employer employee sample within the econometric

price discrimination by a many product firm determining the optimal selling strategy for a multiproduct firm facing consumers with unknown tastes is a difficult task this paper aims to show how almost optimal nonlinear tariffs can often be found when the number of products becomes large

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

a stated preference valuation of the non market benefits of pollination services in the uk using a choice experiment survey this study examines the uk public s willingness to pay to conserve insect pollinators in relation to the levels of two pollination service benefits maintaining local produce supplies and the aesthetic benefits of diverse wildflower assemblages willingness to pay was estimated using a bayesian mixed logit with two contrasting controls for attribute non attendance exclusion and shrinkage the results suggest that the uk public have an extremely strong preference to avoid a status quo scenario where pollinator populations and pollination services decline total willingness to pay was high and did not significantly vary between the two pollination service outputs producing a conservative total of 379m over a sample of the tax paying population of the uk equivalent to 13 4 per uk taxpayer using a basic production function approach the marginal value of pollination services to these attributes is also extrapolated the study discusses the implications of these findings and directions for related future research into the non market value of pollination and other ecosystem services

market structure and organizational form this paper studies the determinants of a firm s organizational form in the context of an imperfectly competitive industry there are two kinds of organizational forms the multi divisional form m form and the unitary form u form an m form firm suffers from ignorance of demand externalities among different products and double marginalization is eliminated in contrast in a u form firm demand externalities are taken into consideration and double marginalization exists a firm s optimal choice of organizational form depends on the market structure

ian j bateman richard t carson brett day michael hanemann nick hanley tannis hett michael jones lee graham loomes susana mourato ece ozdemiroglu david w pearce obe robert sugden and john swanson 2000 economic valuation with stated preferences a manual

segmented labour markets and the estimation of wage functions this paper uses a stratified random sample of private sector employees to estimate wage equations for both the male labour market as a whole and six segments of the labour market segement which are defined with respect to the industry and size characteristics of the employing establishmen highly conventional results are obtained when wage equations are estimated for the male labour market as a whole or within two segements comprising almost half the survey population however one can reject conclusively the hypothesis that the same estimating equation is appropriate for modelling wage determination in all segments and if a human capital hk model is within segements tested against more appropriate alternative hypotheses for wage determination using the davidson and mackinnon 1981 methodology for the testing of non nested hypotheses the conclusion is that one should reject the hk specification and not reject the alternative it is therefore argued that the disaggregation of labour market dat

competition and outsourcing with scale economies scale economies are commonplace in operations yet because of analytical challenges relatively little is known about how firms should compete in their presence this paper presents a model of competition between two firms that face scale economies i e each firm s cost per unit of demand is decreasing in demand a general framework is used which incorporates competition between two service providers with price and time sensitive demand a queuing game and competition between two retailers with fixed ordering costs and pricesensitive consumers an economic order quantity game reasonably general conditions are provided under which there exists at most one equilibrium with both firms participating in the market we demonstrate in the context of the queuing game that the lower cost firm in equilibrium may have a higher market share and a higher price an enviable situation we also allow each firm to outsource their production process to a supplier even if the supplier s technology is no better than the firms technology and the supplier is required to establish dedicated capacity so the supplier s scale can be no greater than either firm s scale we show that the firms strictly prefer to outsource we conclude that scale economies provide a strong motivation for outsourcing that has not previously been identified in the literature

cost manipulation games in oligopoly with costs of manipulating we analyze a class of two stage games where rival firms incur real resource costs in manipulating their marginal costs so as to influence the outcome of the game they want to play in stage two marginal costs may be manipulated by various means such as redistribution of productive assets choice of location or creation of an internal input market a general formulation of the game is provided and several applications are analyzed we show that the optimal allocation of resources within an oligopoly can be asymmetric even for ex ante symmetric firms this is an additional explanation of heterogeneity in oligopoly

labour market segmentation a local labour market analysis using alternative approaches earlier studies have generally attempted to establish the presence or otherwise of labour market segmentation using a single technique using data drawn form the british social and economic life initiative sceli for six local labour markets this paper tests for segmentation using four different methods of analysis a simple career non career model cluster analysis and switching regressions the results in general suggest that explanatory power is not improved by analysing the labour market in different segments but this simple career model points to higher rewards for given characteristics in the career sector and the results of the switching regression model are consistent with duality in one of the six markets

the limits of monopolization through acquisition we address the question of whether competitive acquisition of firms by their rivals can result in complete or partial monopolization of a homogeneous product industry this question is modeled in terms of two distinct three stage noncoopera tive games analysis of subgame perfect pure strategy nash equilibria of these games discloses that under simplifying assumptions monopolization of an industry through acquisition is limited to industries with relatively few firms partial monopolization is either limited in scope or can be completely eliminated by prohibiting any owner from acquiring over 50 percent of the firms in the industry

reference dependence effects on wta and wtp value functions and their disparity in this study we investigate two reference dependence effects in a choice experiment the first is the effect of the well known distinction between gains and losses the second is the effect of changing the reference value on willingness to pay wtp and willingness to accept wta the latter has to our knowledge not been studied before we hypothesize that there are differences between wta and wtp and that both value functions and their disparity are affected by the absolute value of the reference point we test our hypotheses using a choice experiment with trade offs between changes in flood probabilities and costs the choice experiments elicit wtp and wta using two flood probability reference values yielding four separate value functions our findings show that a substantial wta wtp disparity exists and that this disparity increases when moving away from the reference point also both wta and wtp value functions are affected by the flood probability reference value and the wta wtp disparity increases when the flood probability reference point increases both findings suggest that welfare effects caused by changes in public good provision depend not only on the direction of change loss aversion but also the reference value moreover our results show that the latter effect is larger for losses than for gains we introduce the concept of reference point updating as a possible explanation for these findings

wage determination in agricultural labour markets under monopsonist labour tying arrangements there is need for a study of wage formation in agricultural labour markets which can simultaneously explain the existence of involuntary unemployment on the one hand and responsiveness to market forces on the other this paper offers an analysis and empirical study of wage determination in a typical rural agricultural setting and finds that based on the notion of efficiency wages a two tier situation explains why rural wage rates are known to vary widely among workers and across regions

how not to pay field experimental evidence on the design of redd payments abstract payments for ecosystem services pes can use many design features we investigate the impact of payment conditionality types i e different specifications when to pay and when not to pay for pes on deforestation and agricultural production in a lab in the field experiment our experiment also tests variations in contract period and payment volatility we designed a highly visual simulation game to characterize the decision situation of a cattle rancher in brazil the player can expand extensive pasture by deforestation or intensify existing pasture the model includes both a land and a capital constraint we applied the game in an economic framed lab in the field experiment in tocantins brazil payments conditional on forest carbon stock lead to slow but steady deforestation while payments conditional on forest carbon stock change suppressed deforestation more strongly but payments conditional on stock increase cattle production while payments conditional on stock change have no effect on production thus depending on the level of leakage either type of conditionality can be more cost effective in reducing global carbon emissions contracts with limited periods lead to strong deforestation after the end of the payment period payment volatility had no significant effect

perceptions versus objective measures of environmental quality in combined revealed and stated preference models of environmental valuation abstract this study examines perceptions and objective attribute measures in discrete choice models of recreation site choice behavior these forms of attribute measurement are examined in individual and combined revealed preference stated preference models our results suggest that the model based on perceptions slightly outperforms the models based on objective attribute measures however issues such as the definition of the choice set and the measurement of welfare present significant challenges when using perceptions data

divide and conquer multiple leasing in common pool oil fields a theoretic model is developed to analyse strategic leasing behaviours of u s landowners in a non exclusively owned common oil pool oil field development is modelled as a simultaneous move two stage non cooperative game the landowners choose leasing strategies in the first stage independent lease operators choose extraction strategies in the second ownership structure is distinguished from operation structure and their relationship analyzed it is shown that in a non exclusively owned oil field it is individually rational for a landowner to subdivide his landholding and delegate production rights to multiple inde pendent firms although more dispersed production control leads to heavier common pool

segmented labour markets theory and evidence this paper examines the possibility of accepting the labour market segmentation approach as a valid alternative to the classical and neo classical analysis of labour markets it consists of three main parts the urst part contains a historical analysis of both the distant and recent origins of the labour market segmentation hypothesis part two outlines the central ideas of both segmentationalists and radical theorists who attempted to explain the fragmented nature of labour markets and the importance of institutional and social inuuences upon pay employment and mobility of individual workers between different labour market sectors the third part examines the case for labour market segmentation using four alternative techniques and discusses the issue of mobility among different labour market segments it is thereby concluded that the lack of agreement among the segmented labour market theorists on both theoretical and methodological issues has prevented them from developing a consistent and convincing argument based on veriuable empirical evidence to validate their thesis

testing spanish labour market segmentation an unknown regime approach this paper studies the existence of two differentiated segments primary and secondary in the spanish labour market for this a methodology switching regression model with unknown regimes is used which on the one hand does not demand a priori demarcation of segments and on the other enables the allocation of workers to the segments to be treated as a factor endogenous to the model itself and closely connected with the wage setting mechanisms operating in the segments the empirical results show that the assignment to segments is not random and that there are substantial differences in the wage determination process between the two sectors furthermore the model estimated has allowed analysis of the ex post composition of the segments and corroboration to a large extent of the predictions of the dual labour market theory

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

job mobility wage determination and market segmentation in the presence of sample selection bias this paper tests the hypothesis that mobility between jobs is an important determinant of individual wages and that econometric estimates of wage determination should correct for sample selectivity bias in job mobility we also test the hypothesis that different patterns of job mobility produce different appropriate corrections for sample selectivity bias in different segments of the labour market we conclude that labour market segments do differ and in particular that one can identify a marginal or low wage sector with mobility patterns and pay packages which differ from the pattern one can discern in the labour market as a whole mobilite entre emplois determination des salaires et segmentation du marche quand il y a biais de selection dans l ehantillonnage ce memoire verifie l hypothese que la mobilite entre emplois est un element determinant des salaires des individus et la proposition que les calibrations econometriques du processus de determination des salaires doivent etre corrigees pour tenir compte d un biais de selection dans l echantillonnage de mouvements entre emplois les auteurs verifient aussi l hypothese que differents patterns de mobilite entre emplois commandent des corrections appropriees differentes dans differents segments du marche du travail les auteurs en arrivent a la conclusion que les divers segments du marche du travail sont differents et qu en particulier on peut reperer un secteur marginal ou de bas salaires ofu les patterns de mobilite entre emplois et les remunerations different remarquablement de ce qui se passe dans le marche du travail dans son ensemble

attribute causality in environmental choice modelling when selecting attributes in environmentalchoice modelling studies preference should begiven to those attributes that aredemand relevant policy relevant andmeasurable the use of these criteria willoften result in a short list of environmentalattributes of which some are causally related the inclusion of attributes that have a cause effect relationship may stimulate somerespondents to seek to understand the causalrelations among attributes in order to assigngreater meaning to the alternatives andpotentially simplify the decision makingprocess this may have implications for theweights they assign to each of the attributeswhen identifying the preferred alternatives and subsequently for the implicit prices and orwelfare estimates a test of the impact ofincluding an attribute that causesimpacts on ecosystem health as well as anattribute relating to ecosystem health effectson parameter estimates implicitprices and welfare estimates is conducted twoquestionnaires are developed one with the causal attribute included and one without acomparison of results indicates that when the causal attribute is included in the vector ofchoice attributes the implicit value of asingle endangered species falls by 34 per centwhilst no significant difference is detected inthe parameter estimates importantly however estimates of compensating surplus for a givenpolicy package do not differsignificantly across the two treatments thisimplies that to the extent that the inclusionof a causal attribute reduces the implicitprices for one or more of the effect attributes the associated loss in utility isapproximately offset by the utility nowassociated with the new attribute

choice modelling approaches a superior alternative for environmental valuation in this paper we examine some popular choice modelling approaches to environmental valuation which can be considered as alternatives to more familiar valuation techniques based on stated preferences such as the contingent valuation method a number of choice modelling methods are consistent with consumer theory and its focus on an attribute based theory of value permits a superior representation of many environmental management contexts however choice modelling surveys can place a severe cognitive burden upon respondents and induce satisficing rather than maximising behavioural patterns in this framework we seek to identify the best available choice modelling alternative and investigate its potential to solve some of the major biases associated with standard contingent valuation we then discuss its use in the light of policy appraisal needs within the eu an application to the demand for rock climbing in scotland is provided as an illustration

valuing ecosystem services on the basis of service providing units a potential approach to address the endpoint problem and improve stated preference methods abstract standardized methods are required to measure ecosystem services in order to value them in this paper we argue that the service providing unit spu concept may help achieve this objective by promoting the systematic quantification of the key components of nature that provide services e g population density of a key pollinator and linking these with measurable outcomes for human well being we discuss and provide examples of the potential role of the spu concept in improving economic valuation of ecosystem services further we suggest the concept may contribute to addressing the endpoint problem which can be defined simply as the inability of researchers to communicate the implications of environmental change in a way that is understood by a broad cross section of society the endpoint problem is of particular relevance to stated preference approaches and we discuss the capacity of the spu concept to refine these approaches we argue that the concept enhances interdisciplinary collaboration promoting more validated well informed valuation applications it also has the potential to minimize warm glow effects and put the notion of marginal changes in the provision of ecosystem services in a new light

estimating four hicksian welfare measures for a public good a contingent valuation investigation using equivalent loss the mone tary loss equivalent to a proposed amenity reduc tion el and equivalent gain the gain equivalent to a proposed amenity increase eg alongside traditional welfare measures in a contingent valu ation study of traffic disamenity we report an ex periment designed to test theoretical explanations of the well known disparity between compensat ing surplus and equivalent surplus measures of welfare no compelling evidence is found in favor of loss aversion as a cause of the disparity mean while as valuation measures the performance of el is similar to the traditional willingness to pay for a gain while eg performs poorly jel q26

divisionalization franchising and divestiture incentives in oligopoly a two stage game is used to model firms strategic incentives to divide production among autonomous competing units through divisionalization franchising or divestiture firms simultaneously choose their number of competing units which then engage in cournot competition while it is costly to form autonomous units each firm does so in equilibrium thus reducing firm profits and increasing social welfare relative to the case where firms cannot form competing units with linear demand and costs duopolists choose the socially optimal number of competing units oligopolies with larger numbers of firms choose too many the case of nonlinear demand is also examined copyright 1996 by american economic association

retail contracting theory and practice we summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers we do this using studies of traditional and business format franchise relationships as well as studies of salesforce integration decisions some of the patterns that we uncover are consistent with a standard incentive cum insurance theory of organization while others are not we brie y review some theoretical extensions that seem promising in terms of reconciling seeming con icts between theory and practice i introduction manufacturers of retail products must decide whether to sell their products to consumers themselves vertical integration or to sell via independent retailers vertical separation when manufacturers do not perform the sales function internally but want exclusive retailers they usually choose some form of franchising 1 many theories attempt to explain the choice of retail organizational form moreover a considerable body of empirical evidence concerning this choice is accumulating we attempt to evaluate this econometric evidence and relate it to the theories to accomplish this task we assess studies of franchising arrangements as well as studies of sales force organization in industrial settings the paper is organized as follows in the next section we highlight a number of regularities that arise in the empirical literature on retail contracting in particular we nd that i risk is positively related to the use of high powered incentives vertical separation ii the importance of the agent s eiort in production is positively related to the use of high powered incentives

how many franchises in a market abstract this paper studies how firms use their number of franchises as a strategic tool firms can commit to high output by creating many franchises however signing a single franchise contract with a low wholesale price is an equally effective way to generate output the value of granting many franchises is undercut when firms can sign contracts afterwards so firms place only a single franchise in a market this finding reverses previous results which did not model contracts the same issues arise in international competition policy where countries use anti trust policy to affect their number of exporters and use subsidies to affect the choices of exporters

the expansion of temporary help employment in the us 1982 1992 a test of alternative economic explanations employment in the temporary help supply ths industry more than tripled in the us between 1982 and 1992 during that period the variability and cyclical sensitivity of ths jobs their average weekly hours and real hourly earnings were extraordinarily high in addition changes in temporary employment levels disproportionately affect aggregate employment flows over this period one possible explanation of the dramatic rise and variability in ths jobs is demographic changes in the composition of the labour force towards groups believed to prefer impermanent job commitment or temporal flexibility in supplying labour services a contrasting view considers it part of an explicit human resource strategy increasingly adopted by firms seeking greater numerical or cost flexibility this strategy may reflect an employer response to greater volatility in demand intensifying price competition pressures in product markets and rising quasi fixed costs incurred for permanent employees such as nonwage benefits a tw

tying investment and the dynamic leverage theory the idea that an incumbent supplier may tie two complementary products to fend off potential entrants is popular among practitioners yet is not fully understood in formal economic theory this article makes sense of the argument by formally deriving a dynamic version of the old leverage doctrine we show that when an incumbent monopolist faces the threat of entry in all complementary components tying may make the prospects of successful entry less certain discouraging rivals from investing and innovating tie in sales may reduce consumer and total economic welfare copyright 2001 by the rand corporation

gaming against managers in incentive systems experimental results with chinese students and chinese managers we examine strategic interactions between firms and planners in china comparing behavior between i students and managers with field experience with this situation ii standard versus increased monetary incentives and iii sessions conducted in context making explicit reference to interactions between planners and managers and those without any such references the dynamics of play are similar across treatments with play only gradually and incompletely converging on a pooling equilibrium a fivefold increase in incentives significantly increases initial levels of strategic play games played in context generated greater levels of strategic play for managers with minimal impact on students

a strategic motivation for commodity bundling the analytical literature on commodity bundling explains the practice of selling two or more differentiated products in a single package as a surrogate for direct price discrimination in contrast this paper shows that imperfect competition creates a strategic incentive to bundle the profitability of bundling whether it adversely affects rival producers and whether it yields an overall efficiency gain depends inter alia on the nature of product market competition the role of complementarity in explaining why firms bundle is also explored copyright 1990 by blackwell publishing ltd

equilibrium vertical foreclosure the authors formulate a complete but analytically simple equilibrium model of vertical mergers to evaluate the logic of standard vertical foreclosure claims and the criticisms made of those claims the model includes incentives of the integrated firm and unintegrated input suppliers to exclude rivals and the potential holdout problem in this fully specified model vertical foreclosure can emerge in equilibrium copyright 1990 by american economic association

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

international fish wars the strategic roles for fleet licensing and effort subsidies abstract this article examines the problem of noncooperative international fishing by analyzing the strategic rent shifting roles for such well known national management policies as fleet licensing and effort subsidies it is shown that the noncooperative equilibrium in each policy takes the form of a prisoner s dilemma with dissipated rents in the fishery it is also shown that strategic effort subsidies can only lead to incomplete rent dissipation but strategic fleet licensing can lead to complete rent dissipation the models developed in this article may help to provide an explanation for the persistence of large and excessively subsidized national fleets that exploit depleted international fish stocks

equilibrium product bundling this article offers an equilibrium theory of product bundling by rival firms in several models where a primary good is produced in a duopoly market and one or more other goods is produced under perfectly competitive conditions bundling is shown to emerge as an equilibrium strategy of one or both of the duopolists for its role as a product differentiation device when the rival firms can commit to bundling sales their profits are higher but social welfare is reduced copyright 1997 by university of chicago press

reducing gain loss asymmetry a virtual reality choice experiment valuing land use change abstract in the majority of choice experiments ces the attributes of non market goods are conveyed to respondents as a table of numeric and or categorical data recent research suggests that respondents may have difficulties evaluating data in this format in the context of a ce eliciting preferences for changes in coastal land use this study uses a split sample experiment to compare standard presentations with virtual reality vr visualisations conveying objectively identical information we find that compared to the standard presentation preferences elicited in vr treatments are less variable and exhibit a significant reduction in asymmetry between willingness to pay wtp for gains and willingness to accept wta for corresponding losses we conjecture that the greater evaluability of the vr presentation reduces respondent judgement error and moderates reliance on the loss aversion heuristic

on intrabrand and interbrand competition the strategic role of fees and royalties abstract we examine oligopolistic markets with both intrabrand and interbrand competition we characterize equilibrium contracts involving a royalty or wholesale price and a fee when each upstream firm contracts with multiple downstream firms royalties control competition between own downstream firms at the expense of making them passive against rivals when the number of downstream firms is endogenous each upstream firm chooses to have only one downstream firm this result is in sharp contrast to previous literature where competitors benefit by having a larger number of independent downstream firms under only fixed fee payments we discuss why allowing upstream firms to charge per unit payments in addition to fixed fees dramatically alters their strategic incentives

rivalry between strategic alliances abstract rivalry between strategic alliances is investigated in a model where each alliance member maximizes its own profit and some share of its partner s profit a complementary alliance confers a strategic advantage by allowing the partners to credibly commit to greater output owing to both within alliance complementarities and cross alliance substitutabilities although rivalry between different alliances can sometimes lead to a prisoners dilemma for firms it tends to improve economic welfare on the other hand an alliance that arises due purely to the threat of entry may reduce welfare

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

increasing the profits of a subset of firms in oligopoly models with strategic substitutes consider an industry composed of n firms in a symmetric equilibrium designate a subset of s n firms and marginally reduce the strategic variables of the firms in the subset if the remaining firms simultaneously make the best reply to this exogenous displacement under what circumstances will profits of the firms in the designated subset increase we show that in the case of cournot competition among producers of perfect substitutes a marginal contraction is strictly beneficial strictly harmful if and only if the number of firms in the designated subset exceeds the adjusted number of firms outside it by strictly more strictly less than one the adjustment factor is unity when cost and demand functions are linear but more generally depends on the convexity of the cost and demand curves thus a marginal contraction of two firms in a triopoly has no effect on the profits of firms in the subset if cost and demand functions are linear if instead cost is linear but the inverse demand function is strictly concave strictly convex a marginal contraction will strictly decrease strictly increase profits the analysis is extended to the effects of nonmarginal exogenous changes in the outputs of the constrained firms this extension has implications for the relationship of stackelberg sequential move and nash simultaneous move equilibria our analysis has broad application to illustrate we show that it unifies results in the literature on export subsidies horizontal mergers and strikes the paper is organized as follows in section i our comparative static result is derived in section ii we present a wide range of applications in the conclusion and the appendix we generalize our analysis to other situations involving strategic substitutes

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

family labour supply and labour market segmentation this paper examines the differences in individuals labour supply decisions in different segments of the labour market it tests one of the main hypotheses of the dual labour market theory that the labour market can be divided into at least two segments and also whether the family labour supply decisions of individuals differ in the two segments the possibility of individuals wage rates depending on the number of hours worked is recognized and a model is developed in which both the wage rates and hours of work of individuals are jointly determined with the personal income tax system as an intervening variable since hours of labour supply depend on the post tax wage rate whereas if the marginal product of labour is a positive function of hours worked this affects the pre tax wage rates other alternative wage functions are specified and a simultaneous equations labour supply model using three stage least squares 3sls procedure is estimated the results indicate that there was sample selectivity bias

divisionalization and strategic managerial incentives in oligopoly under uncertainty abstract this paper argues that divisionalization and incentive contracting are complementary rent shifting tools in the presence of demand uncertainty the role for divisionalization arises if managers know the state of demand prior to making output decisions and if incentive contracts are linear and non state contingent in this context incentive contracts achieve expected stackelberg outcomes but have no impact on the firm s responsiveness to demand shocks divisionalization on the other hand has the strategically beneficial effect of making the firm more responsive to demand shocks

segmented labour markets in australia the concept and measurement of segmented labour markets has received little attention in australia here a method for establishing a taxonomy of occupaions according to characteristics associated with the segmented labour market hypothesis is presented using this taxonomy the distribution of workers in australia according to gender migrant status and trade union membershipis examined

divisionalization and entry deterrence this paper assumes that incumbent firms can create new independent divisions more cheaply than potential entrants who must incur the additional overhead costs of new entry the main theoretical result is that such divisionalization ability leads perfectly informed incumbents to preempt all rational entry into their industries in contrast existing models of entry deterrence imply that informed incumbents even those with steadily decreasing average costs will often allow rational entry our result may explain why successful large scale entry by firms with no informational advantage is extremely rare the use of divisions to preempt entry may also explain why large firms in high profit oligopolies often divisionalize allowing their divisions to compete freely despite the negative pecuniary externality that each division imposes on others

a comparison of stated preference methods for environmental valuation this paper presents an empirical comparison of contingent valuation cvm and choice experiments which are used to value environmental quality changes both of these methods require individuals to state their preferences for environmental qualities however choice experiments differ from cvm in that environmental attributes are varied in an experimental design which requires respondents to make repeated choices between bundles of attributes the empirical application involved the effect of environmental quality changes arising from forest management practices on recreational moose hunting values significant differences were found between the values derived from the two methods however detailed examination of the implied choice behaviour suggested that respondents ignored substitute recreation areas in the cvm question restricting the choice experiment model to consider only the one site where quality was varied resulted in welfare estimates similar to the cvm model this highlights the importance of substitutes in environmental valuation and suggests that choice experiments may be more appropriate than cvm in some cases