mueller s profits in the long run mueller uses a measure of persistent or long run interfirm differences in profitability obtained by estimating a separate time series model for each firm to reexamine this question his results are quite different from those obtained from cross sections of annual profit rates and the differences shed new light on old issues moreover in describing and analyzing the separate profit series and in comparing the cross sectional with the time averaged results mueller focuses attention on the dynamics of the profit process and the relative importance of the different factors that affect it as a result the careful reader will come away from this book with a set of questions that just might lie at the heart of the debate about profitability movements among manufacturing firms and that ought at least in part to be analyzable with currently available tools and data i have divided my review into four sections first i outline mueller s model and consider its relationship to other recent work on profitability differences next i summarize mueller s empirical results both the more descriptive time series results and the estimates of his model and then i provide a brief comparison with the results schmalensee 1985 and ravenscraft 1983 obtain on the determinants of cross sectional profitability differences any ultimate reconciliation of the different findings and any more detailed analysis of their implications will require a deeper understanding of the factors causing profitability movements over time the last section of this review considers the dynamic issues on which mueller and his results focus attention and discusses the models that seem appropriate for analyzing them it is clear that further empirical work on these issues must make some allowance for mergers and acquisitions on the one hand and bankruptcies and liquidations on the other the review concludes by explaining why this is so and by considering how it might be done

tenure security and land related investment evidence from ethiopia the authors use a large data set from ethiopia that differentiates tenure security and transferability to explore determinants of different types of land related investment and its possible impact on productivity while they find some support for endogeneity of investment in trees this is not the case for terraces transfer rights are unambiguously investment enhancing the large productivity effect of terracing implies that even where households undertake investments to increase their tenure security this may not be socially efficient in ethiopia government action to increase tenure security and transferability of land rights can significantly enhance rural investment and productivity

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

deforestation and development in a small open economy abstract our economy faces world prices and starts with a large endowment of land in forest and a small endowment of land in agriculture clearing of forested land yields marketable timber and a unit of land for agriculture early the high price of agricultural land drives the clearing process later the profit from marketing timber from the cleared land drives the process dates of phase transitions are endogenous we also set out a submodel of perpetual cyclic clearing and reforesting and show that it when cyclical harvesting regrowing is optimal the extent of clearing can be relatively large

land ownership security and farm investment comment economists have long argued that increasing security of individual property rights in land leads to increased investment feder and onchan ft are among the first to empirically test this argument in a rigorous way based on data from thailand ft infer that ownership of land title increases capital accumulation and investment their analysis broadens our understanding of the linkages between capital markets and land investment and offers hypotheses for further research this comment raises two issues concerning the ft article first the empirical results are open to several interpretations because of fundamental questions about causality and the definition of ownership security a reinterpretation of the data suggests that the aggregate impact of title on investment may have been small second inference from the thailand study must be made with caution consideration of a more general model suggests other conditions which influence the impact of title on investment and productivity our comments do not diminish the importance of the ft study but raise conceptual issues that may prove useful for future land titling research

indigenous land rights in sub saharan africa appropriation security and investment demand abstract we discuss the links between rights appropriation tenure security and investment demand in sub saharan africa common assertions regarding indigenous tenure are 1 a insecurity of tenure leads to suboptimal investment incentives and 2 b appropriation of land rights in the public domain is rent dissipating we argue that land use and investment decisions among african farmers often have two motives productivity and rights appropriation the usual assertions thus seem contradictory we offer a conceptual model to show that indigenous tenure may provide equal or higher investment incentives than private rights and may promote modes of rights appropriation that are productive rather than wasteful

land tenure systems and their impacts on agricultural investments and productivity in uganda this article provides an empirical analysis of the impact of different tenure systems mailo customary and public land on agricultural investment and productivity in central uganda a major hypothesis tested is that land investments and practices may have both economic and tenure security implications the results indicate that coffee planting is used by farmers to enhance tenure security while fallowing is practised to a greater extent by farmers on more secure holdings this supports the notion that farmers consider tenure implications when making investments and that different tenure systems do not inhibit the promotion of tree planting investment tenure had no impact on the productivity of crop farming

paying for environmental services an analysis of participation in costa rica s psa program summary costa rica has long been a leader among developing countries in the design of and experimentation with innovative environmental programs since 1997 costa rica s pagos de servicios ambientales payments for environmental services program has provided payments to more than 4 400 farmers and forest owners for reforestation forest conservation and sustainable forest management activities econometric analysis of a survey of farmers and forest owners including both psa participants and nonparticipants shows that farm size human capital and household economic factors and information variables significantly influence participation in psa program alternatives large farmers and forest owners are disproportionately represented among program participants

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

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

can payments for environmental services help reduce poverty an exploration of the issues and the evidence to date from latin america summary this paper examines the main ways in which payments for environmental services pes might affect poverty pes may reduce poverty mainly by making payments to poor natural resource managers in upper watersheds the extent of the impact depends on how many pes participants are in fact poor on the poors ability to participate and on the amounts paid although pes programs are not designed for poverty reduction there can be important synergies when program design is well thought out and local conditions are favorable possible adverse effects can occur where property rights are insecure or if pes programs encourage less labor intensive practices 2004 elsevier ltd all rights reserved

property rights regimes and natural resources a conceptual analysis the term common property resource is an example of a term repeatedly used to refer to property owned by a government or by no one it is also used for property owned by a community of resource users such usage leads to confusion in scientific study and policy analysis in this paper we develop a conceptual schema for arraying property rights regimes that distinguishes among diverse bundles of rights ranging from authorized user to claimant to proprietor and to owner we apply this conceptual schema to analyze findings from a variety of empirical settings including the maine lobster industry

land tenure security and investment incentives puzzling evidence from burkina faso abstract the commonsense logic associating higher land security and higher incentives to invest has been recently called into question in the case of african agriculture to be meaningful empirical tests have to be carefully designed so as to take account of the possible endogeneity of the land rights variable this is done in this paper by applying suitable econometric methods to the original data collected in burkina faso the results obtained cast doubt on the existence of a systematic influence of land tenure security on investment by reviewing the justifications for scepticism in the recent literature we are able to conclude that the traditional village order where it exists provides the basic land rights required to stimulate small scale investment

excess capacity and limit pricing an empirical test entry may be inhibited by expectations that incumbents have lower marginal costs incumbents may be able to use limit pricing or excess capacity to further this expectation we construct an empirical model of oligopoly capacity and pricing decisions and of entrant responses the results support the hypothesis that both lower prices and greater excess capacity inhibit entry they further support limit pricing but provide no evidence that oligopolies deliberately install excess capacity to deter entry the results suggest however that limit pricing firms may exploit the entry inhibiting effects of unintended excess capacity by raising their limit prices

how effective is potential competition abstract i examine robustness of perfect contestability a small sunk cost s causes large deviations from the results if the response lag l is even smaller there is an essential discontinuity at s 0 l i also examine what happens if incumbant not entrant exists after l

contestable markets an uprising in the theory of industry structure comment a situation traditionally identified as conducive to imperfect competition is when average costs decline and the cheapest scale of production is large relative to the size of the market however some of the more recent literature on industrial organization has emphasized a supposed distinction between fixed costs of production and sunk costs of production a point frequently made is that while the possibility of sunk costs can create genuine barriers to entry pure fixed costs per se do not inhibit competitive market performance this approach finds its logical extreme in the norm or abstraction of perfect contestability perfect contestability is essentially a theory of the polar case of frictionless entry and exit as william baumol stated a contestable market is one into which entry is absolutely free and exit is absolutely costless p 3 certainly this is the most reasonable interpretation of a situation where potential entrants feel free to disregard an incumbent s price response suppose every potential and actual producer has access to the same technology in a perfectly contestable market there are no set up or shut down losses the main result is that even with declining average costs of production the incumbent firm does not dare to post a price higher than average cost price above cost invites being undercut by a hit and run shadow entrant capable of producing at the same flow rate and at identical unit cost during just the briefest instant of time i argue that this line of reasoning is misleading perfect contestability gets around the problem of increasing returns only by in effect assuming it away a hit and run technology makes the firm behave as if it is competitive in a market precisely because the convexity preconditions for competition are de facto being met in that market this comment shows that strictly speaking there is no such thing as a pure fixed cost unless there are sunk costs located somewhere in the relevant production technology all costs are variable as a matter of formal theory you cannot have a range of decreasing average cost without sunk costs presumably there is also an approximation theorem which states that when sunk costs are close to being negligible then average production costs are practically nondecreasing perfect contestability holds approximately in a market only to the extent that production costs for the market are approximately nondecreasing my discussion will be restricted to the familiar case of a single well defined homogeneous fully divisible commodity while more general approaches are possible for the sake of simplicity the following definition is used the average cost function a c y t describes say the minimum cost per unit of output produced at a uniform flow rate y throughout the time interval 0 t especially in applications to industrial organization theory it is essential to remember that cost functions are not generally timeless and that writing ac as a function of y alone can be dangerously vague behind the free entry and exit of a hitand run technology in a perfectly contestable market is the abstraction of no sunk costs investments are fully reversible because nothing is lost in setting up or shutting down production

tenure constraints and carbon forestry in africa our analysis shows that landowners with customary tenure in africa can be efficient providers of carbon forestry if tree planting helps secure their permanent claims to the land if the farmer s tree planting can reduce the threat of eviction the amount of land allocated to carbon forestry may be greater or lesser than under private ownership but it is always more than if tenure security is completely absent our results support the view that carbon forestry schemes should accommodate traditional african customary tenure systems and if designed successfully can both promote carbon forestry and benefit the poor

institutions top down or bottom up a large research program in economics has established a persuasive link between institutions and economic development but what does this imply for development policymaking can a political leader or aid agency seeking to promote development readily change institutions this article starts off wildly general and then moves to specifics

destructive behavior in a fragile public good game a b s t r a c t socially destructive behavior in a public good environment like damaging public goods is an under exposed phenomenon in economics in an experiment we investigate whether such behavior can be in fluenced by the very nature of an environment to that purpose we use a fragile public good fpg game which puts the opportunity for destructive behavior taking on a level playing field with constructive behavior contributing we find substantial evidence of destructive decisions sometimes leading to sour relationships characterized by persistent hurtful behavior while positive framing induces fewer destruc tive decisions shifting the selfish nash towards minimal taking doubles its share to more than 20