efficiency growth and concentration an empirical analysis of hospital markets taking an evolutionary view of markets harold demsetz hypothesized that firms differ persistently in efficiency and that industry concentration results from growth of efficient firms at the expense of inefficient ones we test the hypothesis with high quality microdata from the us hospital industry an industry of keen policy and scientific interest we measure efficiency by firm in the early 1980s and relate it to subsequent growth of efficient firms to the persistence of profit differences and to changes in the concentration of markets initial hospital efficiency and subsequent growth and profitability are significantly and positively related also greater initial variation in hospital efficiency within local markets is positively related to subsequent growth in market concentration these findings support the logic of demsetz s evolutionary efficiency hypothesis though they cannot confirm the stronger idea that variation in firm efficiency is the dominant explanation for changes in concentration

the relevant market for production and wholesale of electricity in the nordic countries an econometric study we apply cointegration analysis to daily averages of nord pool prices covering the period 2001 2007 in order to empirically characterize the geographical dimension of the relevant market for production and wholesale of electricity we reach the following econometric conclusions i price areas finland sweden and norway 3 unambiguously belong to the same relevant market ii denmark 2 belongs to this same market except for the subsample 2004 2007 iii norway 1 and denmark 1 define separate markets on their own we find that the stochastic trends in nord pool prices originate in countries abundant in capacity to generate hydro power

the nature and extent of the market for high quality beef in japan before the abolition of import quotas it is examined whether wagyu beef produced in japan and high quality beef produced in the united states and exported to japan are components of the same product market in addressing this issue an approach is used for defining the nature and extent of a product market relying on the concept of instantaneous causality the results for selected cuts of beef suggest that the markets are in fact separate

product market competition and the industry price cost markup fluctuations abstract we examine the role played by imperfect competition in the response of markups to energy price and monetary changes we find i for concentrated industries markups increase with monetary expansion and decrease when energy prices increase the elasticity with respect to energy prices is greater than monetary changes ii for low concentration industries markups are virtually unaffected by monetary changes and the energy price elasticities are statistically insignificant iii markups are procyclical over the industry specific cycle and iv increased import competition lowers markups only in the concentrated industries the energy price increases decreases during the 1970s 1980s may have been a key factor contributing to the narrowing widening of the markup gap between high and low concentration industries we provide evidence that procyclical markups in concentrated industries are not being driven by differences in the degree of labor hoarding between low and high concentration industries

defining geographic coal markets using price data and shipments data abstract given the importance of coal in world energy supply an analysis of the relevant geographic market is essential for consumers producers as well as for competition policy the purpose of this paper is to define the relevant economic market for steam and coking coal and to test the hypothesis of single world markets for these coal products methodologically the paper relies on two different tests for defining markets using both shipments data and price data the results from both methods point in the same direction in the case of coking coal the results indicate that the market is essentially global in scope and also that the market has become more integrated over time the results for steam coal show that the market is more regional in scope and there exist no clear tendencies of increased integration over time one policy implication of the finding that the steam coal market is more regional in scope and thus that the market boundary is smaller than if the market would have been international is that a merger and acquisition in this market likely would have been of a more concern for antitrust authorities than the same activity on the coking coal market

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

a pair wise analysis of the law of one price evidence from the crude oil market abstract this paper applies a pairwise approach to investigate the validity of the law of one price in the crude oil markets price differentials appear smaller between crude oil pairs with similar physical chemical characteristics and also for pairs within opec

facilitating practices and the path dependence of collusion abstract this paper exploits major shifts in american antitrust policy during the 1930s to investigate the impact of facilitating practices on industrial profitability while the national industrial recovery act effectively legalized collusion in many industries this paper suggests only industries that adopted certain trade practices were able to overcome cartel enforcement problems consistent with previous theories of the path dependence of collusion the effects on price cost margins are found to have persisted after the act s repeal the government s pattern of granting facilitating practices is also investigated and is found to contravene the political rhetoric of the day antitrust policy implications are discussed

on the extent of the market wholesale gasoline in the northeastern united states this paper develops the classical view of the extent of markets by introducing explicitly in the analysis the concept of arbitrage costs arbitrage or transaction costs imply that market boundaries are essentially stochastic while a set of products or regions may have binding arbitrage conditions i e may be in the same market at a given point in time they may not at another thus in defining a market the probability that a set of agents or regions would h3ve binding arbitrage conditions has to be assessed this paper develops an econometric methodology to estimate the transaction costs required to arbitrage among a given set of products as well as the probability that that set of products would be bound by binding arbitrage condi tions finally the methodology is applied to wholesale gasoline in the northeastern part of the united states address for communications pablo t spiller herbert hoover memorl l bldg 9348 stanford ca 94305

resolving the impasse on hospital scale economics a new approach the existence of scale economies in hospitals in important for both public and managerial policy yet production and cost function studies have found conflicting evidence more recently more sophisticated studies have typically found scale diseconomies which is inconsistent with the views of industry participants and observers in the early 1980s california deregulated both private and public health insurance medical which provides a natural laboratory for examining hospital efficiency using stigler s original and multivariate survivor analysis we resolve the conflict in favour of scale economies and reconcile the controversy the survivorship methodology in simple to apply and a useful tool in conjunction with statistical cost and production studies

indirect competition with spatial product differentiation although two markets may appear to be separate sometimes one firm participates in both of them that firm provides a link between the two markets such a straddling firm transmits indirect competition from each market to the other since its actions reflect competitive conditions in both markets in a model of spatial product differentiation the author shows that indirect competition may make a market perform significantly better than the number of firms would indicate moreover total consumer surplus increases if two previously distinct markets are linked by a straddler finally the author considers implications of these results for antitrust analysis copyright 1989 by blackwell publishing ltd

feldstein horioka puzzles abstract the high correlation between national saving and investment rates in advanced economies the feldstein horioka puzzle has been referred to as the mother of all puzzles perhaps more puzzling is that for emerging economies saving investment correlations tend to be significantly lower though still positive this deepens the feldstein horioka puzzle because the mobility of capital is generally believed to be much lower in emerging economies than in advanced economies and a country with less mobile capital should have a tighter relationship between local saving and investment rates this paper develops a dsge model that without resorting to any real or financial friction simultaneously explains these two aspects of the feldstein horioka puzzle positive saving investment correlations in both advanced and emerging economies and significantly lower saving investment correlations in emerging economies than in advanced economies the main features of the model include long run risk an endogenous world interest rate and cross correlations of national and global shocks the findings hold for both quarterly time series and long run averages

electricity spot price dynamics beyond financial models we reveal properties of electricity spot prices that cannot be captured by the statistical models commonly used to model financial asset prices that are increasingly used to model electricity prices using more than eight years of half hourly spot price data from the new zealand electricity market we find that the half hourly trading periods fall naturally into five groups corresponding to the overnight off peak the morning peak daytime off peak evening peak and evening off peak the prices in different trading periods within each group are highly correlated with each other yet the correlations between prices in different groups are lower models adopted from the modeling of security prices that are currently applied to electricity spot prices are incapable of capturing this behavior we use a periodic autoregression to model prices instead showing that shocks in the peak periods are larger and less persistent than those in off peak periods and that they often reappear in the following peak period in contrast shocks in the off peak periods are smaller more persistent and die out perhaps temporarily during the peak periods current approaches to modeling spot prices cannot capture this behavior either

is there more than one critical concentration ratio an empirical test for the portland cement industry past attempts to estimate the critical concentration ratio maintained the hypothesis of only two structural groupings competitive versus non competitive in view of the spectrum of competitive conduct allowed by oligopoly theory the validity of the two groupings is restrictive and should be tested using data from the portland cement industry this paper conducts such a test employing a non linear switching regression technique based on the logistic function the hypothesis of two structural groupings is not rejected

the search for a critical concentration revisited this paper examines the issue of whether there is a four firm critical concentration ratio above which industries earn supranormal profits a statistical test is employed to investigate the functional stability of the estimated relationship although the initial results indicate a range in the concentration ratio of between 0 48 and 0 55 over which the functional relationship destabilizes additional analysis fails to identify a clear break in the concentration profitability relationship it can only be concluded that a critical concentration does not appear to exist

estimating the degree of market integration existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination this article proposes new measures of market integration defined directly in terms of a well known spatial price determination model and develops an econometric methodology for estimating these measures due to the intractability of the conditional density function of prices we use indirect inference to estimate the model parameters and market integration measures the methodology is illustrated with simulated data and is applied to soybean price data for the united states brazil and the eu copyright 2008 oxford university press

market delineation and demand structure this paper addresses the relationship between the cointegration approach to market delineation and the more traditional approach of analyzing the demand structure among different products in terms of degree of substitutability cointegration tests for market delineation and estimation of a dynamic system of demand equations are undertaken utilizing the same data set the data set consists of three high quality seafood products in the european union the results are encouraging as the results from the two approaches are not only compatible but are also complementary in the sense that they provide more information together than they do separately

concentration changes and large firm small firm efficiency differences evidence from us manufacturing industries 1990 concentration changes and large firm small firm efficiency differences evidence from us manufacturing industries applied economics vol 22 no 1 pp 131 142

in praise of the old i o abstract old i o is the body of empirical regularities obtained by cross section statistical methods following their introduction by bain bain 1951 relation of profit rate to industry concentration american manufacturing 1936 1940 quarterly journal of economics 65 293 324 its researchers did not seek to fit particular theoretical oligopoly models to market data apart from theoretical conditions for sustainable collusion but they did establish a large number of empirical regularities cross section associations between dimensions of performance allocative efficiency productive efficiency turnover of suppliers in markets and their structural and behavioral features these associations continue to serve a wide range of uses for economic understanding and policy formation

solving the feldstein horioka puzzle with financial frictions unlike the prediction of a frictionless open economy model long term average savings and investment rates are highly correlated across countries a puzzle first identified by feldstein and horioka 1980 we quantitatively investigate the impact of two types of financial frictions on this correlation one is limited enforcement w here contracts are enforced by the threat of default penalties the other is limited spanning where the only asset available is noncontingent bonds we find that the calibrated model with both frictions produces a savings investment correlation and a volume of capital flows close to the data to solve the puzzle the limited enforcement friction needs low default penalties under which capital flows are much lower than those in the data and the limited spanning friction needs to exogenously restrict capital flows to the observed level when combined the two frictions interact to endogenously restrict capital flows and thereby solve the feldstein horioka puzzle

safety culture in financial trading an analysis of trading misconduct investigations high profile failures in financial trading have led to interest in how the culture of the industry produces risky and unethical behaviours among traders yet there is no established theoretical framework for studying this we apply safety culture theory to examine ten recent high profile trading mishaps investigated by the uk financial regulator the results show that the dimensions of safety culture e g management commitment to safety systems and procedures used to understand organisational accidents in domains such as aviation also explain failures in risk management within financial trading organisations this counters narratives focusing on traders who are unethical rule breakers and emphasises the value of a systemic approach whereby safety culture theory is used to explain why risky behaviours in financial trading occur safety culture therefore provides a conceptual basis for further research on risky and unethical behaviours in financial trading alongside providing insights for possible intervention

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

market analysis methods are our enriched toolkits well suited to enlivened markets the past fifteen years have brought historic reduction of government intervention in agricultural markets in the developing world most economists and policy makers believe these reforms enliven markets previously fettered by excessive government authority nonetheless the impact of market oriented reforms on the spatial and intertemporal extent and the competitiveness of markets remains an inherently empirical question meanwhile there also have been major innovations in methods used to analyze markets and prices due largely to the rapidly emerging time series econometric literature agricultural economists toolkits have changed nearly as rapidly and dramatically as have developing economy markets but can these enriched toolkits answer the

whale watching on the trading floor unravelling collusive rogue trading in banks recent history reveals a series of rogue traders jeopardizing their employers assets and reputation there have been instances of unauthorized acting in concert between traders their supervisors and or firms decision makers and executives resulting in collusive rogue trading we explore organizational misbehaviour theory and explain three major collusive rogue trading events at national australia bank jpmorgan with its london whale and the interest reference rate manipulation libor scandal through a descriptive model of organizational structural individual and group forces our model draws conclusions on how banks can set up behavioural risk management and internal control frameworks to mitigate potential collusive rogue trading

potential foreign competition in us manufacturing abstract trade barriers are falling and firms are competing in increasingly open international markets the data reveal considerable heterogeneity across industries in the intertemporal path of import shares against this backdrop we focus on an issue that is increasingly important for competition policy analysis potential foreign competition inadequate attention to this aspect could result in a biased picture of total competition leading to misguided antitrust decisions drawing on the conceptual framework outlined by landes and posner harvard law review 94 1981 937 we measure potential foreign competition by the intertemporal response of industry import share to industry specific and aggregate economic factors and our estimates indicate wide variation across industries in this dimension a particularly striking finding is that highly concentrated industries which are more likely to be subject to antitrust scrutiny have a greater degree of potential foreign competition than industries with low concentration even though the extent of actual foreign competition is similar across these groups of industries

exogeneity tests of market boundaries applied to petroleum products us antitrust law makes market definition and the calculation of marketshare statistics an integral part of the determination of the anticompetitive impact of a merger because markets frequently overlap however market definition is rarely an easy task a statistical test that can be used as an aid in defining markets is proposed here time series techniques are used to test if price in one region is exogenous to the process that determines price in another the rejection of exogeneity can be an indication that the two regions are economically linked and thus may belong to a common geographic market the test is applied to petroleumproduct prices from various regions of the united states time series techniques have long been appreciated by macroeconomists the uses to which they have been put range from testing for the exogeneity of variables used in the construction of macroeconomic models sims 1972 for example to discovering empirical regularities in macroeconomic data without imposing a priori structure on the observations ashenfelter and card 1982 for example in contrast these techniques have not been so

geographic markets causality and railroad deregulation this paper presents an approach to defining a market using the notion of instantaneous causality the market for which the approach is empirically implemented is the flour market in the united states over the period january 1979 through october 1982 one anomaly over this period was the deregulation of railroad rates in october 1980 the empirical results based on three spatially diffuse cities suggest that the market is national in scope and that after railroad deregulation the price interrelationship between cities was strengthened

accounting for choice set endogeneity in random utility models of recreation demand abstract modeling the choice among a discrete set of recreation alternatives is driven by the possible patterns of substitution among sites researchers typically assume that the individual s choice set is the same as the set of alternatives included in the recreation survey instrument our endogenous choice set model is a generalization of the standard multinomial logit random utility model which allows for the possibility of heterogeneous choice sets that are endogenously determined in the model using two examples we show that parameter and compensating variation estimates differ greatly between the endogenous choice set model and the traditional logit model

another look at the impact of the national industrial recovery act on cartel formation and maintenance costs alexander s 1994 finding that the national recovery administration s codes of fair competition led to a change in the critical concentration level during the 1930s is questioned no regime switch is detected when a common industry sample is employed also when industries with and without codes are analyzed codes appear to have no effect on price cost margins during the period this absence of effect is postulated to be a result of the unenforceability of trade practice provisions contained in many codes the empirical results of this paper suggest that the existence of codes was not sufficient to enable industries to overcome cartel formation costs only easily enforceable trade practice provisions appear to have affected the structure performance relation in the period following repeal of the national industrial recovery act

the definition of housing market areas and strategic planning the purpose of this paper is to develop the concept of a housing market area thereby provide insights into our understanding of the sub regional structures of the housing system and hence propose a framework for strategic planning research in the housing market to tackle this task it is first necessary to consider the criteria for a local housing market area the paper begins by reviewing previous definitions by both academics and planners and their underlying assumptions based on the principle of spatial arbitrage a local housing market area is defined by reference to criteria linked to migration self containment parallels are drawn with the principles that have been applied to define a system of spatial labour markets using travel to work areas this spatial arbitrage definition is tested empirically by developing a system of housing market areas for west central scotland using data derived from the land registry finally the paper draws together the empirical findings to discuss the nature of s

an anatomy of cartel contracts we study cartel contracts using data on 18 contract clauses of 109 legal finnish manufacturing cartels one third of the clauses relate to raising profits the others deal with instability through incentive compatibility cartel organization or external threats cartels use three main approaches to raise profits price market allocation and specialization these appear to be substitutes choosing one has implications on how cartels deal with instability simplifying we find that large cartels agree on prices cartels in homogenous goods industries allocate markets and small cartels avoid competition through specialization

margins concentration unions and the business cycle theory and evidence for britain abstract a number of recent studies have examined the cyclical relationship between price cost margins concentration and unions u s data has concluded that unions reduce margins margins vary over the cycle and concentration unionisation and the cycle interact in their effect on margins however there is almost no theory to account for these results we propose a simple theory that assumes only that there is overhead labour present at the firm this produces theoretical predictions that can explain these results and discriminate between existing theories we present results of our own using u k panel data and show similar findings to the u s

strategic risk taking propensity the role of ethical climate and marketing output control in the wake of the current financial crises triggered by risky mortgage backed securities the question of ethics and risk taking is once again at the front and center for both practitioners and academics although risk taking is considered an integral part of strategic decision making sometimes firms could be propelled to take risks driven by reasons other than calculated strategic choices the authors argue that a firm s risk taking propensity is impacted by its ethical climate egoistic or benevolent and its emphasis on output control to manage its marketing function the firm s long term orientation is argued to moderate the control risk propensity relationship the authors also extend research on risk and performance and argue that the association of risk taking propensity and firm performance is contingent on the ownership publicly traded versus privately held structure of the firm based on survey data from a sample of manufacturing industries in the united states the results show significant impact of ethical climate and marketing output control on a firm s risk taking propensity also risk taking propensity shows a stronger association with firm performance in privately held firms than in publicly traded firms

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

horizontal mergers in declining industries theory and evidence abstract in a declining industry horizontal merger may allow firms to retire older capacity and to match state of the art capacity at high levels of market demand mergers may be privately profitable but socially undesirable and should be prohibited here rationalization of capacity to achieve matching economies is not a sufficient argument to support merger since at high demand levels efficiency is gained only at the expense of output suppression on the other hand once industry demand has declined to low levels relative to per firm capacity privately profitable mergers are socially desirable examples of horizontal mergers in declining industries illustrate the general implications of the model

the disintegrating canadian labour market the extent of the market then and now analysis of real wages for three occupations in 13 canadian cities for 1901 50 suggests canada had a national labour market at least until 1950 however analysis of real wages for 10 canadian cities for 1971 2000 yields little evidence favouring integration of canada s regional labour markets the apparent lack of labour market integration reflects a weakness of an approach that assumes markets are in equilibrium unemployment rates after 1970 suggest that some regional markets may be characterized by excess labour supply analysis of relative provincial unemployment rates yields evidence consistent with local labour force adjustment to changing labour market conditions jel classification e24 j61 le marche du travail en desintegration au canada l etendue du marche alors et maintenant les auteurs analysent les salaires reels pour trois occupations dans 13 villes canadiennes au cours de la periode 1901 50 et suggerent que le canada a joui d un marche du travail qui etait national tout au moins jusqu a 1950 toutefois l analyse des salaires reels dans 10 villes canadiennes au cours de la periode 1971 2000 ne fournit pas de resultats supportant l idee d integration des marches regionaux du travail on suggere que le manque apparent d integration du marche du travail est l effet d echo d une approche qui presume que les marches sont en equilibre la periode de l apres 1970 en est une ou les taux de chomage suggerent plutot que certains marches regionaux peuvent etre raisonnablement caracterises comme definis par une offre excedentaire de travail une analyse des taux de chomage provinciaux relatifs revele que la force de travail locale s ajuste aux conditions changeantes du marche du travail

assessing market dominance abstract we propose a new measure to assess market dominance contrary to concentration measures such as the herfindahl hirschman index that characterizes the concentration of an industry our dominance measure suggests an approach that classifies when an individual firm has a dominant position in our measure the criterion for dominance is relaxed as the intensity of existing competition increases or as entry barriers are lowered we apply the dominance measure to a number of well known competition cases

non monotonic effects of market concentration on prices for residential solar photovoltaics in the united states abstract emerging renewable energy markets may become more concentrated over time as the most efficient firms accumulate market share the effects of this market concentration on prices are tested using a rich dataset of residential solar photovoltaic pv systems in the united states a novel hypothesis is explored that the effects of market concentration may be non monotonic prices may decline in market concentration due to efficiency gains associated with returns to scale but increase in concentration in already concentrated markets due to increasing market power the results of an econometric model provide evidence to support the non monotonic hypothesis however the data suggest that the relationship between prices and firm scale is nuanced and that both large and small scale pv installers may wield efficiency advantages

a reappraisal of interpreting rising concentration the case of beer there has been a tremendous amount of change in the structure and conduct of the post world war ii brewing industry most important concentration has risen scale economies have increased and advertising intensity especially television advertising has changed in a recent article in this journal william j lynk 1984 attempted to determine empirically how changes in concentration and technology affected brewing industry performance between 1974 and 1980 2 he found support for the competition hypothesis that cost reductions due to cost superiority or the exploitation of scale economies have dominated the possible market power effect of rising concentration and have caused output to increase and prices to fall thus the alternative or the exclusion hypothesis that large brewers have squeezed smaller rivals out of in contrast to the finding of william j lynk that rising concentration in the u s brewing industry caused industry output to expand and by his presumption prices to fall the results of this study show that concentration had no significant direct impact on post world war ii beer prices estimates from a reduced form price equation reveal that advertising and costs have had a significant positive effect on beer prices these results provide evidence that the rising concentration scale economies and advertising expenditures in the u s brewing industry generated higher beer prices between 1950 and 1971 i would like to thank william hallagan for bringing lynk s paper to my attention and james f ragan jr carol horton tremblay and an anonymous referee for their helpful comments on earlier drafts any remaining errors are my responsibility 1 for example the number of firms declined from 386 to 37 and the five firm concentration ratio increased from 23 to 71 between 1950 and 1978 see elzinga 1973 1982 keithahn 1978 ornstein 1981 and greer 1971a 1981 for excellent industry studies 2 in this paper industry performance is evaluated from the consumer s point of view for a given level of product quality if structure and conduct changes are beneficial to consumers by causing the market price to fall then industry performance has improved

a note on the estimation of the demand for sugar in the usa in the presence of measurement error in the data inaccuracy in the measurement of the price data for the substitute sweeteners for sugar is a problem encountered in the estimation of the demand for sugar two diagnostics are introduced to assess the effect that this measurement error has on the estimated coefficients of the sugar demand relationship the regression coefficient bounds diagnostic is used to indicate a range in which the true price responsiveness of consumers to changes in the price of sugar substitutes lies the bias correction factor is computed to evaluate the magnitude of the overestimation of the responsiveness of the quantity of beverage sugar and non beverage sugar demanded to a change in the price of sugar

competition and geographical integration in commercial bank lending abstract this paper tests the hypothesis that interest rates on bank commercial loans in the regions of the united states are generated in an integrated national market the tests of a joint hypothesis compounded of integration behavioral models and the absence of systematic errors in the data are applied to 60 series of data short term and long term loans in five size classes in six regions the joint hypothesis is not rejected for five of the six regions and four of the five size classes the exceptional region is the southeast the exceptional loan size class is 1 000 to 9 000 the smallest in the sample

on the dynamics of gasoline market integration in the united states evidence from a pair wise approach abstract this paper employs a pair wise approach to examine regional integration in the us gasoline market using gasoline price data at the state level over a period of more than two decades we find strong support for the view that the law of one price holds in regional markets as more than 80 of bivariate price differentials turn out to be stationary furthermore we uncover evidence that the speed at which prices converge to the long run equilibrium depends upon the distance between states asymmetries are also present in this relationship our findings suggest that the more similar are states with respect to taxation gas stations and refining capacity the faster is the speed of adjustment towards the long run equilibrium

concentration price and critical concentration ratios a potentially important parameter that has not yet been convincingly estimated is the critical concentration ratio this paper attempts to estimate it in three types of market the estimation of a critical concentration ratio if one exists seems of potentially great importance because of its implication for antitrust policy if a critical concentration ratio were found and if concentration had no effect below that level it would seem to follow that a horizontal merger in a market where concentration was below the critical level and where the merger could not increase concentration to the critical level could not substantially lessen competition or tend to create monopoly

the transmission of world maize price to south african maize market a threshold cointegration approach this article seeks to provide an explanation for the relationship between domestic maize price in south africa and world maize prices in order to evaluate comovement and transmission of world prices to domestic prices in sub sahara african countries this is done by comparing nested and nonnested models that capture different forms of nonlinearity in the price spread adopting a bayesian approach that allows for comparison of models using bayes factor we found that the relationship between south african price and world price for maize indicates the presence of nonlinearity in price transmission with three regimes that is triggered by the price spread in previous period

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

the integration of the market for soybeans and soybean products abstract this article addresses the question of whether soybeans soybean meal and soybean oil produced in the usa and exported were part of a single world geographic market during the decade of the 1980s an answer to this question is sought using an approach to defining a geographic market based on the notion of instantaneous causality the empirical results based on prices for soybeans soybean meal and soybean oil for three spatially diffuse locations suggest that there was but a single identifiable world market for these commodities over the period of study this has implications for the continued presence of soybean production subsidies and discussions on international agreements designed to reduce or eliminate these subsidies

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

the impact of the national industrial recovery act on cartel formation and maintenance costs antitrust regime shifts represented by the 1933 adoption and 1935 annulment of the national industrial recovery act are postulated to have effects analogous to temporary achievement of bradburd and over s integrative concentration level bradburd and over 1982 a level at which cartel formation and maintenance costs are outweighed by collusive spoils regime switching analysis of census of manufactures data reveals a critical concentration level of 60 percent in 1933 which disappears in 1935 and reemerges at 38 percent in 1937 the empirical results support the bradburd and over framework and suggest that temporary shifts in antitrust regimes may have lasting impacts on the ability of an industry to exercise market power copyright 1994 by mit press

market integration between wild and farmed seabream and seabass in spain abstractgilthead seabream sparus aurata and european seabass dicentrarchus labrax production from aquaculture has been increasing since the 1990s nowadays about 95 of their production comes from aquaculture in this study we analyse if the rapid growth in the aquaculture production of both species has affected the capture fisheries prices of both species in other words we investigate if there is market integration between wild and farmed gilthead seabream and european seabass in order to do this analysis we use data from the main gilthead seabream and european seabass markets in spain the results show that there is no market integration between wild and farmed gilthead seabream and european seabass this implies that capture fisheries are not affected by increases in the aquaculture production of both species but gilthead seabream and european seabass aquaculture producers face a smaller demand that explains the difficulties this aquaculture segment is facing

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a structural approach to market definition with an application to the hospital industry a structural approach to market definition market definition is essential to merger analysis because no standard approach to market definition exists opposing parties in antitrust cases often disagree about the extent of the market these differences have been particularly relevant in the hospital industry where the courts have denied seven of eight merger challenges since 1994 due largely to disagreements over geographic market definition we compare geographic markets produced using common ad hoc methodologies to a method that directly applies the ssnip test to hospitals in california using a structural model our results suggest that previously employed methods overstate hospital demand elasticities by a factor of 2 4 to 3 4 and define larger markets than would be implied by the merger guidelines s hypothetical monopolist test the use of these methods in differentiated product industries may lead to mistaken geographic market delineation and was likely a contributing factor to the permissive legal environment for hospital mergers

empirical evidence on ftc enforcement of the merger guidelines the justice department s 1982 1984 merger guidelines identify various factors concentration entry barriers ease of collusion efficiency that would thereafter determine whether the government will challenge a merger analysts have criticized enforcement agencies however for not following the guidelines and criticize the guidelines themselves for not identifying the weights attached to the factors using a 1982 86 sample of seventy horizontal mergers we examine which factors influenced federal trade commission decisions to challenge mergers the relative importance of the guidelines and other factors in merger challenges is measured and related empirical issues are also explored i introduction the 1982 1984 merger guidelines adopted by the antitrust division of the department of justice doj and followed by the federal trade commission ftc marked important antitrust policy changes by the reagan administration the herfindahl index replaced the fourfirm ratios used in the old 1968 guidelines as the measure of concentration other non concentration factors barriers to entry ease of collusion were elevated in importance in the 1984 revision of the 1982 guidelines efficiency considerations were for the first time generally included as a relevant factor however commentators who applauded the newer guidelines have complained subsequently that the reagan administration did not apply them the objections of two veteran academic antitrusters krattenmaker and pitofsky 1988 232 are typical certainly in many respects the announced merger guidelines are a substantial accomplishment this accomplishment however has been almost completely undercut by the administration s behavior in ignoring those guidelines in practice and instead enforcing without any public explanation a merger policy that was not only exceptionally lenient but substantially at odds with professed standards in an earlier paper coate et al 1990 we along with coauthor richard higgins tested one hypothesis why merger policy at least at the ftc in 1982 86 has departed from mere enforcement of the guidelines politics we showed how external pressures imposed on the commission by congress to block mergers independent of the factors identified in the guidelines as meriting a merger challenge are a statistically significant factor in the ftc s decision whether to challenge a merger in the present paper we use the same data seventy horizontal mergers from 1982 to 1986 to examine in greater detail the charges that the ftc has not followed the guidelines plus several related issues not considered in our earlier article these include the extent to which various guidelines factors are either necessary or sufficient for the commission to vote to challenge a merger and the role of the new efficiency criterion in merger evaluation an econometric model is presented as one approach to determine how the ftc balances the various guidelines factors this allows an estimate of the relative importance and influence of lawyers and economists in the evaluation process finally the data also permit an appraisal of the extent to which a structuralist or chicago approach to competition issues dominated merger votes at the ftc during the relevant period section ii discusses briefly the factors identified in the merger guidelines and the process by which the commission determines whether to oppose a proposed merger that section also identifies several testable hypotheses concerning the commission s reliance on the guidelines variables section iii then explains the data to be used for testing section iv the bulk of the paper presents empirical evidence concerning the ftc s use of the guidelines and related issues ii evaluating mergers at the federal trade commission the merger guidelines the federal trade commission enforces along with the justice department the federal antitrust laws including those applicable to mergers

organizational culture in the financial sector evidence from a cross industry analysis of employee personal values and career success we assess the organizational culture in the finance industry in relation to the global financial crisis gfc and consider the potential of cultural change to improve the financial sector to avoid response biases we build on the person organization p o fit literature and develop a novel indirect method for assessing organizational culture that revolves around relationships between employees personal traits and their career success in the industry or organization under study we analyze personal values concerning the pursuit of private gain self enhancement values versus personal values concerning caring for others self transcendence values and consider whether employees that value self enhancement more and self transcendence less enjoy more career success relative to their peers when working in finance than when working in other industries results do not reveal any sort of cross industry differences that would implicate the finance industry s culture in the financial crisis instead we find the opposite namely that strong self enhancement values and weak self transcendence values go together with less career success in the finance industry compared to other industries hence if anything the culture in the finance industry does not seem to resonate well with professionals that seek to pursue personal gain at the expense of clients welfare implication is that cultural change has little potential to improve the financial system meanwhile the method for assessing organizational culture indirectly by analyzing relationships between employees traits and their career outcomes has wider applicability particularly when relying on scores or measures obtained directly from the people concerned is likely to render biased evidence

firm size distribution and price cost margins in dutch manufacturing industrial economists surmise a relation be tween the size distribution of firms and performance usually attention is focused on the high end of the size distribution the widely used four firm seller concentration ratio c4 ignores what happens at the low end of the size distribution we investigate to what extent the level and the growth of small business presence influence price cost margins in dutch manufacturing we use a large data set of 66 industries for a thirteen year period this allows the investigation of both small business influences within a framework in which that of many other market structure variables is also studied evi dence is shown that price cost margins are influenced by large firm dominance growth in small business presence capital intensity business cycle international trade and buyer con centration

on the sources of aggregate fluctuations in emerging economies recent research on macroeconomic fluctuations in emerging economies has advocated introducing a stochastic productivity trend or allowing for interest rate shocks and financial frictions we estimate a model that encompasses these two approaches shedding light on their relative merits and on how financial frictions affect the transmission of shocks the model accounts for aggregate fluctuations by assigning a dominant role to financial frictions in amplifying conventional temporary productivity shocks whereas trend shocks play a minor role a link between spreads and expected future productivity emerges as essential for a reasonable approximation to the data

the short and long run benefits of financial integration there is an extensive economics and finance literature that addresses the potential benefits of financial integration although theory predicts significant gains due to portfolio diversification decreased cost of equity capital and reduced financing constraints empirical models have so far yielded estimates of negligible welfare gains models used to estimate the welfare effects of financial integration do not explain both prices and quantities in order to address this point we propose a general equilibrium model that is able to simultaneously explain i the volatility of exchange rate and stochastic discount factors and both ii the volatility of net exports and iii the amount of cross country correlation and persistence of consumption growth rates in our economy agents have risk sensitive preferences in the sense of hansen and sargent 1995 this implies that investors have a preference for the timing of the resolution of uncertainty we conduct our analysis for the case in which consumption is a cobb douglas aggregation of domestic and foreign goods both of which are tradable furthermore we let the dynamics of the growth rate of the endowments of the two countries be characterized by the presence of two slowly moving predictive factors these components denoted as long run risks alter the intertemporal distribution of income risk by producing slow swings in the the short and long run benefits of financial integration

the structural determinants of union bargaining power this paper investigates the structural determinants of variation in union power across manufacturing industries using a pooled sample of unionized establishments from the expenditure on employee compensation surveys of 1968 72 the author estimates wage equations augmented with measures of product market structure bargaining structure and the size distribution of unions the results suggest that union wage gains are greatest where discretionary pricing power enhances employers ability to pay and where unions achieve high coverage practice centralized bargaining and avoid union fragmentation on the other hand centralized bargaining provides no advantage in competitive industries

cross border constraints institutional changes and integration of the dutch german gas market we evaluate the contribution of nine institutional changes to the integration of the dutch and german gas markets we analyse this contribution through the impact of bottlenecks in the cross border infrastructure on the absolute value of cross border price differences in the period 2007 2013 the absolute value of the differences in price levels between the dutch and the german ncg market decreased indicating more integration we find evidence that the improved connections within the german networks as well as between the dutch and the german network contributed to this the strengthening of the connections with the uk market and the russian supply however had a negative effect on market integration between the dutch and the german ncg market the liquidity enhancing changes within the dutch market had a negligible effect

organizational costs sticky equilibria and critical levels of concentration jn the thirty years since joe bain s seminal i study 1951 many economists have attempted to determine whether or not there exists a critical level of market concentration at which a discontinuity occurs in the relation between industry concentration and profitability in this paper we develop and test a more general model based on organizational costs which posits the existence of two critical levels of market concentration one at which an existing cooperative equilibrium will break down as concentration declines and one at which a cooperative equilibrium will become attainable as concentration increases we show that the standard model of the critical level of concentration can be regarded as a special case of our more general model and also that the more general model attains a statistically superior fit in section ii we briefly review some of the previous literature in this area we develop our model in section iii and specify and estimate it in sections iv and v in sections vi and vii we summarize and interpret our results and present some policy implications of our findings

antitrust and merger policy a review and critique a ny antitrust policy that tries to put some restrictions on mergers must have a conceptual basis one such framework might be a populist approach in which only absolute or relative size of the merger partners and or the resulting entity would be the criterion political rhetoric often embodies this approach an alternative approach the one that underlies the 1982 department of justice merger guidelines concerns itself with the possible exercise of market power 1 i believe this second approach is more consistent with the language of section 7 of the clayton act itself which instructs the department of justice and the federal trade commission to prevent those mergers the effects of which may be substantially to lessen competition or to tend to create a monopoly this market power approach also places merger policy in a realm that is susceptible to economic analysis for this reason as well this approach appeals to me the merger guidelines are firmly rooted in the standard oligopoly theory developed by chamberlin 1933 fellner 1949 and stigler 1964 and strengthened

on the internal contradictions of the law of one price as stated originally the venerable law of one price succinctly describes long run equilibrium in a perfectly competitive market the law was later amended defining a market as the geographic area within which the same thing sells for the same price at the same time allowance being made for transportation costs modified in that way the law has two plausible interpretations by one interpretation every production site is a market by the other prices in fact do not differ by transportation costs the transportation cost amendment thus introduces internal contradictions that render the revised law of one price either useless or wrong jel d40 l10 a market according to the masters is the area within which the price of a commodity tends to uniformity allowance being made for transportation costs that is two places are in the same market for a good if the prices at the two places differ by transportation costs stigler 1987 77 economic terms seem to pass in their historical development through a series of stages which without pretension to rigidness may be described as follows first no definition is given but it is assumed that every one has a sufficiently clear idea of the subject to make a formal definition unnecessary second a definition is attempted and a number of exceptional forms are noted third with the further increase of data the relative importance of the various forms changes confusion in discussion is introduced logomachy takes the place of constructive investigation fourth a complete classification of the forms embraced under the original term is made and problems are investigated with reference to these classes the bewildering vagueness of economic theory is largely due to the fact that the terms used are in all of these stages of development moore 1906 211 i introduction delineating the boundaries of markets engaged economists attention early on many product attributes are important to consumers but price is an objectively measurable margin along which rivalry is sharply engaged market prices transmit information about changing demand and supply conditions to buyers and sellers and widening price cost margins signal profit opportunities to which alert entrepreneurs respond price consequently has held center stage in economists attempts to define markets augustin cournot 1927 51 for instance wrote that a market is the entire territory of which the parts are so united by the relations of unrestricted commerce that prices take the same level throughout with ease and rapidity alfred marshall 1930 325 supplied a similar definition in his celebrated declaration that the more nearly perfect a market is the stronger is the tendency for the same price to be paid for the same thing at the same time in all parts of the market more recently joseph stiglitz 1993 19 summarized what he called the law of the single price stating that under this law there is a uniform price in the market and price differences are quickly eliminated by arbitrage 1 marshall 1930 325 introduced an important qualification however when he observed that but of course if the market is large allowance must be made for the expense of delivering the goods to different purchasers each of whom must be supposed to pay in addition to the market price a special charge on account of delivery that qualification subsequently found its way into stigler s price theory textbook quoted in the epigraph intentionally or not the law of one price was thereby converted into a law of different prices other economists subsequently added transaction costs and information costs to the list of caveats culminating in a multiplicity of prices nevertheless claimed to be consistent with the law of one price economics has few laws

the profitability concentration relation market power or efficiency industrial economists have been studying the relationship between profitability and concentration using cross industry samples for many years now however as sometimes happens once it appeared that some consensus had been achieved with few exceptions market concentration and industry profitability are positively correlated peltzman i977 p 229 people began to question the interpretation of those results in particular demsetz e g i973 i974 and others suggested that rather than concentration market power leading to higher prices and profits the causal direction in fact ran from greater efficiency to both higher profits and incidentally to higher concentration our purpose here is to subject these conflicting hypotheses to cross industry empirical test using u k data in order to do this we first develop a model which is sufficiently general to allow for both alternative explanations of a positive concentration profitability correlation in the light of this model we then examine the implications for the within industry relation between market share and firm level profitability more specifically we explore demsetz s claim that the empirical form of this relationship should signal which of the alternative hypotheses is consistent with the between industry profitability concentration correlation our model suggests that in certain special circumstances this claim is partly justified in that it should be possible to assess the relative strengths of the market power and efficiency effects from the within industry relation more generally however factors such as product differentiation and scale economies may seriously impair the information content of the relation with at least a strong suspicion that the estimates will tend to exaggerate the evidence in favour of the efficiency hypothesis in the event our results tend to confirm that for most industries the within industry data offer little conclusive support for either hypothesis but for a not insignificant minority of industries the evidence suggests some support for the view that both efficiency and market power are at work simultaneously our model is detailed in section ii and estimated on u k data in section iii after which we offer a few comments in section iv first however we drovide a backcloth to the later analysis

competition in interrelated markets an empirical study abstract this paper studies competition in small concentrated and interrelated markets our data set consists of price information from 486 driving schools in 235 local markets in sweden which gives a large sample to test hypotheses on how market structure influences competition the results show that the price in a market is lower if prices in nearby markets are low and the distances to them are short as suggested in models of spatial competition moreover we find that prices in closely located markets are interdependent it is also shown that prices are increasing in firm concentration within a market as most theories of oligopoly predict

market definition in antitrust analysis a regression based approach alleged violations of either sherman 2 s antimonopoly strictures or clayton 7 s proscriptions against anticompetitive mergers necessarily involve a particular product and must occur in a particular place that is the plaintiff in either a 2 or 7 suit must define a relevant market within which the violation alleged has occurred even in the most mundane antitrust analysis however market definition is rarely readily accomplished and unaccompanied by a series of caveats and the possibility of the opposing parties in an antitrust suit failing to contest each other s proffered definition is virtually nil 2 because economists from

corporate environmental citizenship variation in developing countries an institutional framework this study focuses on why some companies in developing countries go beyond environmental regulations when implementing their corporate environmental social responsibilities or citizenship behavior drawing mainly upon the new institutional theory this study develops a conceptual framework to explain three institutional factors companies market orientations industrial characteristics and corporate identities accordingly we suggest that companies from developing countries that are oriented to markets in developed countries operate in highly concentrated industries and have missionary identities adopt corporate environmental citizenship behavior by going beyond environmental regulations the study also discusses the theoretical policy and managerial implications of the conceptual framework

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

the critical choice between the concentration ratio and the h index in assessing industry performance the paper shows that in addition to the theoretical relevance of choosing between the hirschman herfindahl index and the concentration ratio both measures may provide empirically very different information to assess industry performance it is shown that the correspondence between the two measures can be represented by a horn shaped figure the implications of this horn shaped relationship are investigated in the context of specifying empirical profitability concentration models among different specification effects tested it is shown that the neglect of the hornrelationship may bias the results towards the identification of a critical concentration ratio

the extent of the market examines the classical theory of the market in this paper authors consider the role of price market determination price movement in competitive and monopolistic markets extension of commodity markets

a closer look at the effect of market growth on industries profits everybody talks about the relation of industries profit rates to their markets rates of growth but nobody does anything about it specifically researchers have confirmed the effect of the growth of nominal output on profits in many multivariate studies without specifying closely the hypothesis under test or the measure of demand growth appropriate to test it a profits growth relationship could stem from several mechanisms the lagged adaptation of capacity to unexpected changes in demand reactions of oligopolists to disturbances in their consensus etc these mechanisms how and where they work hold their own normative interest therefore knowing what behavior and what structure lying behind it accounts for the profits growth relationship should do more than improve the specifications of our studies of allocative efficiency it should also expand our knowledge of adaptive processes that are important and hard to observe directly in this paper we shall synthesize the available explanations of why changes in market demand should affect an industry s profits then present a statistical test of the relative significance of the competing explanations

the extent of european power markets abstract there is an ongoing debate on the degree of integration of european wholesale power markets a major task of the european union is the creation of a common market in europe and a common power market is an important part of this goal the literature analyzing the degree of integration of european energy markets is growing and provides mixed results we add to this literature by using national holidays as exogenous demand shocks to measure integration of european energy markets our main findings indicate that integration of european wholesale energy markets has increased with regard to germany and austria as well as belgium and the netherlands

the persistence of market leadership evidence from japan this article explores the persistence of market leadership in japanese manufacturing industries over the period 1975 2004 by applying survival data techniques we examine how long market leadership persists and how the duration of market leadership varies according to industry specific characteristics our findings indicate that market leaders maintain their leadership positions for on average 20 years from 1975 in japanese manufacturing industries we provide evidence that market leadership tends to persist in capital intensive and legally cartelized industries whereas it is less likely to persist in demand volatile r d intensive and import intensive industries copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

open access and the evolution of the u s spot market for natural gas federal regulations promoting open access transportation dramatically altered the organizational structure of the u s market for natural gas in the 1980s generally unbundling the merchant and transport functions of interstate pipelines an empirical analysis of wellhead spot prices is undertaken to examine the effect of open access on the geographic scope of the spot market using monthly spot price data from 1984 91 three statistical tests are applied and compared price correlations granger causality and cointegration we find that open access integrated the regional wellhead markets into a national competitive market for natural gas the effects of unbundling on contracts for natural gas are then investigated incentives for long term contracts between pipelines and producers are shown to be effectively removed by the introduction of competitive buying and selling of gas at the wellhead through open access

thinking creatively about markets abstract the paper takes a broad view of how economists identify market boundaries three types of definition are distinguished trading markets anti trust markets and strategic markets the first is based on the familiar law of one price while the second follows us dij guidelines and is designed to identify positions of market power neither of these definitions suits the needs of one of the more recent and fastest growing users of economics namely those responsible for corporate strategy decisions inside firms the paper reviews why market definitions are a fundamental part of strategy decisions and identifies several ways that such users might define market boundaries

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

advertising price and welfare evidence from the u s brewing industry the welfare effect of advertising has been a subject of controversy among economists for some time one obvious concern is simply the cost of advertising in 1990 for example americans spent 130 1 billion on advertising to put this figure into perspective this amounted to 523 per capita 2 35 percent of gross national product and roughly 80 percent of the national deficit 1 much of the early debate regarding the social desirability of advertising stems from different preconceptions regarding its purpose 13 14 8 49 for example according to the kaldor 29 hypothesis advertising is primarily persuasive or deceptive in nature it changes consumer preferences creates brand loyalty and persuades consumers to favor commodities that they did not previously desire an opinion survey by bauer and greyser 5 indicates that consumers believe that much of advertising is persuasive and greyser and reece 27 158 find that 85 percent of the over 2 700 harvard business review subscribers surveyed believe that advertising persuades people to buy things they do not need if advertising is purely deceptive then it can be classified as a bad and reduces welfare