pigouvian taxes under imperfect competition if consumption depends on emissions the paper considers environmental regulation of a consumption good and an externality which influence demand and costs in a nonseparable way under monopoly two instruments are always required for first best the pigouvian tax is more complicated than anticipated

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

can capital scarcity help agency theory explain franchising revisiting the capital scarcity hypothesis we offer a rationale for a link between capital scarcity and franchising predictions respectively based on agency theory and the capital scarcity hypothesis were tested among 91 restaurant chains

capacity choice and the theory of the mine when extraction from mineral deposits is constrained byfixed capacity an r per cent rule holds this deposit specific rule however is more partial than hotelling s rule in that it is followed byprice takers and does not require price to adjust to produce equilibrium toobtain the resource rent to which the rule applies the shadow value ofcapacity must be subtracted from the usual net price i e price lessshort run marginal cost but the shadow value of capacity cannot becalculated from common depreciation formulas an alternative method ofcalculating the shadow values is derived the shadow value of reserves maybe increasing in the level of initial reserves if there are increasingreturns to installing capacity the value of the resource is not equal tothe discounted resource rent

agent compensation and the limits of bonding agents in positions of trust may engage in malfeasance which is difficult to detect this paper develops a model in which employers seek to control malfeasance by paying wages contingent on imperfect monitoring and agents may be required to pay entry fees or post bonds we conclude that entry fees which exceed agents assets are ineffective in controlling malfeasance as a result conditions exist in which it is optimal to pay agents more than their opportunity cost such conditions lead to an excess supply of applicants and allow employers to engage in discrimination at zero cost to themselves

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

the political economy of opec abstract we develop a conceptual model that captures opec pricing behavior and apply it to explain the large gap observed between domestic fuel prices in opec countries and prices in the rest of the world we model opec as a cartel of nations not firms and assume that politicians use two instruments production quotas and domestic fuel consumption subsidies the cartel of nations model suggests that introduction of alternatives to petroleum products may lead opec to reduce exports and increase domestic fuel consumption the empirical analysis suggests that when opec sets production quotas it places similar weights on consumer and producer surplus but when opec countries set domestic fuel subsidies on average 6 more weight is given to consumer surplus with some of the opec countries pursuing very aggressive domestic cheap fuel policies

control techniques and upward flow of information in franchising in distant markets conceptualization and preliminary evidence abstract information exchange between franchisees and franchisors is viewed as instrumental for the attainment of both firm specific and systemic goals within franchise systems our study investigates the issue of control and control techniques employed by franchisors to monitor the performance of their franchisees in distant markers with special focus on the role of information exchange a major assumption underlies our work even though in the language of agency theory franchise contracts attempt to align the incentives of the principal i e franchisor and the agent i e franchisee such alignment is not easy to achieve due to basic conflicts in the parties respective goals for instance while franchisees are primarily interested in achieving short term profits franchisors are more concerned about strengthening the brand equity of their systems a perfect upward flow of information i e from franchisees to franchisors therefore is not necessarily guaranteed this paper introduces and empirically evaluates four hypotheses relating franchisees willingness to provide information to their respective franchisors first it is suggested that franchisees willingness to provide information to their franchisors will be positively related to the incidence of repeat purchases since incentives to free ride are expected to be low at such units in repeat customer industries hence franchisees will have little incentive to hide information second it is argued that the greater the age of relationship between the focal franchisee and franchisor the more secure both parties are likely to feel about the projection of this relationship into the future consequently a positive relationship between the age of the franchise relationship and franchisees willingness to provide information to franchisors is proposed next we suggest that the level of competition faced by franchisees is positively related to franchisees willingness to provide information to their franchisors the latter effect is expected for two reasons foremost such franchisees are likely to see the availability of authentic market information as a necessary tool for their franchisors if franchisors are to provide them with accurate localized advice for combating competitive forces second from an agency theory perspective franchisees have an incentive to conceal information about the external environmental factors only if such information serves to explain franchisees business success in terms of forces other than their effort this would not occur in a competitive environment setting finally multi unit franchisees are hypothesized to more willingly provide information to their franchisors than their single unit counterparts given their lower incentives to free ride and the higher level of security felt in their relationships with their franchisors the empirical verification of our contentions was carried out in two stages first we studied in depth the case of lebanon to develop the initial descriptive materials second and based on the first step we surveyed u s based franchisors with franchisees in the middle east and africa to assess our hypotheses results show that while the extent of competition faced by franchisees was found to be an incentive to provide information to franchisors the age of the relationship emerged as a disincentive to sharing information with the franchisors

toward a theory of conflict in the franchise system abstract a focused review of the literature is presented in support of a definition of franchising as an interorganizational form examined from the entrepreneurship perspective then microeconomic and relational exchange theories provide guidance within a transaction cost economics theoretical framework to begin the formulation of a theory of conflict in franchising the analysis provided in this article involves business format franchising we submit that the essential core and uniqueness of business format franchising is the relationship between the franchisee and franchisor our definition of franchising requires a review of individual franchisee and franchisor organizational structures therefore our theoretical analysis begins with a fundamental look at the economic structural differences of the average franchisor and franchisee firms using microeconomic theory this review points to the potential for conflict in profit maximizing behavior between franchisee and franchisor the likelihood is that the differences in behavior will manifest in pricing promotion and new store development next because most business format franchising is contractually based and long term we investigate the theoretical support for establishing and continuing a relationship with fundamental areas of conflict relational exchange theory is used for this analysis transaction cost economics provides a perspective on the governance of the interorganizational form and guides us in the investigation of the ongoing state of the relationship a key to transaction cost analysis is shared assets in the relationship and the degree of transferability of those assets therefore building and maintaining the franchise trademark becomes the theoretical focus for governance of the relationship we propose that franchisor provided services is the principal method of franchisor contract fulfillment and is the framework for informal governance of the relationship the importance and adequacy of the transactions between the franchisee and franchisor affect the perceived value of the trademark and are key to continuing the franchise relationship finally the conflict literature is briefly reviewed to provide a context for the discussion of conflict in franchising and to illustrate that conflict can have a positive or negative effect on the relationship

capital investments and resource extraction from non identical deposits abstract taking account of necessary investments in physical capital we characterize the optimal investment and extraction program for exploiting several non identical deposits of an exhaustible resource under the given technology assumptions capital investments will be concentrated up front if deposits are identical in the case of non identical deposits it may be optimal to have investments spread out over time moreover the smallest deposit is depleted first

paradoxical consumption behavior when economic activity has environmental effects in a model where enhanced economic activity accumulation of produced capital leads to environmental eects depletion of natural capital competitive steady states corresponding to dierent discount rates are compared for positive discount rates the steady state stock of produced capital may exceed the size maximizing sustainable consumption this implies paradoxical consumption behavior that is a lower discount rate may be associated with lower steady state consumption the theoretical significance of this phenomenon for intergenerational equity is discussed and examples indicating the empirical relevance of the underlying assumptions are presented

the evolution of hyperbolic discounting implications for truly social valuation of the future abstract we explore the standard expected utility model and alternatives to it we then examine the behavioral and neurological evidence for hyperbolic discounting we discuss evidence related to the neurological and behavioral evolution of discounting in non human animals and in humans we explore new findings about the importance of sociality in human behavior and the implications for truly social time preference finally we discuss the implications of the neurological evidence on discounting for social environmental valuation in particular the implications for very long run decisions such as those involved in climate change mitigation and biodiversity preservation

do property rights promote investment but cause deforestation quasi experimental evidence from nicaragua abstract many policymakers argue that property rights decrease deforestation some theoretical papers also make this prediction arguing that property rights decrease discount rates applied to a long term investment in forestry however the effect is theoretically ambiguous the paper takes a novel instrumental variables approach based on nicaragua s agrarian reform to test for the effect using a new dataset nicaragua s 2001 agricultural census it finds that property rights significantly increase deforestation the model supported by the data suggests a likely mechanism for this relationship property rights increase investment increasing agricultural productivity and therefore the returns to deforestation

the acid rain differential game this paper considers an acid rain differential game countries emit sulphur which is partly transferred to other countries depositions above critical loads ultimately destroy the soil countries face a trade off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers because of the transboundary externalities the outcome will depend on whether the countries cooperate or not this paper presents the cooperative outcome and the open loop and markov perfect nash equilibria of the acid rain differential game it will be shown that the depositions always converge to the critical loads but the steady state levels of the buffer stocks differ the theory is used to analyse the acid rain differential game for sulphur between great britain and ireland finally some results are given for the whole of europe

the choice between joint venture and wholly owned subsidiary an institutional perspective the study of foreign entry mode choice has been based almost exclusively on transaction cost theory this theory focuses mainly on the impacts of firm and industry specific factors on the choice of entry mode taking the effects of country specific contextual factors as constant or less important in contrast the institutional perspective emphasizes the importance of the influence of both institutional forces embedded in national environments and decision makers cognitive constraints on the founding conditions of new ventures still this theoretical perspective has yet to provide insights into how institutional factors influence the choice of foreign entry mode the primary goal of the present study is to provide a unifying theoretical framework to examine this relationship we synthesize transaction cost and institutional perspectives to analyze a sample of 364 japanese overseas subsidiaries our results support the notion that institutional theory provides incremental explanatory power of foreign entry mode choice in addition to transaction cost theory in particular we found that multinational enterprises tend to conform to the regulative settings of the host country environment the normative pressures imposed by the local people and the cognitive mindsets as bounded by counterparts and multinational enterprises own entry patterns when making foreign entry mode choices

a note on mining with investment in capital one of the principal predictions of the theory of the extractive firm is that its rate of output will decline steadily throughout time recently in this journal campbell 1980 presented an interesting analysis suggesting that this behaviour may be altered if one accounts for the fact that firms must invest in some level of fixed capital which is needed in combination with variable inputs to extract the resource in the campbell analysis the fixed capital places a constraint on the maximum rate of extraction it is shown that this constraint is binding and that extraction is therefore constant over some initial period of the mine when the firm behaves optimally this note demonstrates that the campbell result is due to a fixed proportions technology assumption in particular when a neoclassical technology is assumed one finds that the constraint imposed by the level of fixed capital is never binding and that the optimal extraction rate is strictly monotonically declining as a function of time i to demonstrate this an informal argument will suffice let k be the level of fixed capital chosen by the firm let lt be the amount of the variable factor employed in period t assume that the rate of extraction et is given by the production function2

traditional production communal land tenure and policies for environmental preservation in the south pacific abstract instead of maximizing the expected monetary return of land usage pacific islanders manage land so that it renders an optimal mix of cash income and non monetary cultural goods evidence from cropping patterns in fiji suggests that the production of these cultural goods is linked to traditional agriculture which produces less ecological deterioration than its commercial counterpart the capacity for village land to support traditional activities is highest under a regime of communal land tenure where decision making is centralized a regime of private land tenure lowers this capacity because decentralized decision making raises the coordination costs of preserving special areas of land for traditional purposes this means that if development planners rush to replace traditional regimes of communal land tenure with modern systems of private land ownership they might also observe a correlated increase in land degradation even if new codes of private property are perfectly enforceable a two sector growth model can be used to show that the welfare neutral bribe required from the government to increase the amount of village land preserved in the steady state is lower under a regime of communal land tenure one counterintuitive result is that a high subjective discount rate does not always imply a high level of environmental degradation observations from the south pacific have application for environmental policy in other developing countries

pigouvian taxation of energy for flow and stock externalities and strategic noncompetitive energy pricing abstract the literature on energy and carbon taxes is by and large concerned about the derivation of globally efficient strategies in contrast this paper considers the dynamic interactions between cartelized energy suppliers and a consumers government that collectively taxes energy carriers for pigouvian motives two different kinds of external costs are associated with energy consumption flow e g acid rain and stock externalities e g global warming the dynamic interactions between a consumers government and a producers cartel are modeled as a differential game with a subgame perfect nash equilibrium in linear and nonlinear markov strategies the major implications are that the nonlinear solutions are pareto inferior to the linear strategies and energy suppliers may preempt energy taxation and thereby may raise the price at front however this effect diminishes over time because the producers price declines while taxes increase

governance and timber harvests resource economics theory implies that risks associated with weak governance have an ambiguous impact on extraction with the net impact depending on the relative strengths of depletion and investment effects previous empirical studies have found that improved governance tends to reduce deforestation but to raise oil production here we present evidence that the marginal impact of improved governance on timber harvests in developing countries during 1984 2006 was nonmonotonic it tended to raise harvests in countries with weaker governance but to reduce harvests in countries with stronger governance this nonmonotonic impact occurred for both an index of governmental integrity corruption bureaucracy quality law and order and an index of governmental stability a simulation of hypothetical increases in these governance indices to the maximum 2006 values observed in the sample predicted that improved governance would reduce harvests in most countries but could raise harvests in some with large increases occurring in countries with the weakest governance

tenure security private time preference and use of natural resources among lowland bolivian amerindians abstract to estimate the effect of tenure security and private time preference on the use of different types of natural resources such as old growth and fallow forests fish and game we did a survey and a psychological experiment with 443 households in 42 villages of yuracare mojeno tsimane and chiquitano indians in the bolivian lowlands results of multivariate tobit regressions suggest that 1 among the yuracare tsimane and mojeno rates of private time preference had a small economic and statistical effect on the use of natural resources and 2 tenure security proxied by residence duration in the village and by conflict with abutters only affected the consumption of wildlife principally of game results suggest that public policies to improve property rights over natural resources among indigenous people might have greater immediate impact on the conservation of wildlife than on the conservation of forest cover

vertical integration and firm boundaries the evidence since ronald h coase s 1937 seminal paper a rich set of theories has been developed that deal with firm boundaries in vertical or input output structures in the last twenty five years empirical evidence that can shed light on those theories also has been accumulating we review the findings of empirical studies that have addressed two main interrelated questions first what types of transactions are best brought within the firm and second what are the consequences of vertical integration decisions for economic outcomes such as prices quantities investment and profits throughout we highlight areas of potential cross fertilization and promising areas for future work

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

extraction capacity and the optimal order of extraction the least cost first extraction rule for deposits with different extraction costs previously has been shown to be invalid in general equilibrium this paper demonstrates that this rule also does not hold in partial equilibrium when extraction capacity is limited necessary and sufficient conditions for several surprising extraction orders are presented if extraction from a high cost resource is constrained it may be optimal to begin extraction from a high cost deposit or backstop strictly before extracting from a lower cost deposit if extraction from a low cost resource is limited it may be optimal to exhaust a high cost deposit strictly before the low cost deposit is exhausted or to abandon extraction temporarily from a high cost deposit and then to exhaust it later the analysis demonstrates how extraction constraints affect the order of extraction and shows that certain cost reversals are caused by limited extraction capacity rather than by the general equilibrium definition of extraction costs

a neo austrian five process model with resource extraction and pollution abatement abstract this paper describes a neo austrian approach to analyse long run economy environment interactions the modelling framework incorporates resource use and pollution as integral components of production processes we start our study by reviewing the neo austrian capital theoretic approach a neo austrian model is developed and presented in input output form and the corresponding accounting prices are derived by using this representation an intertemporal simulation approach is embodied by establishing the optimization of an intertemporal social welfare function results from the optimization approach are discussed and also discount rate variations are assessed in terms of their effects on the model economy

on the taxation of polluting products in a differentiated industry this paper studies the provision of environmental quality in an imperfectly competitive market it uses a vertical differentiation model in which the free entry equilibrium results in an under provision of quality the following main results are obtained first a commodity tax may have a significant impact on the market structure in this setting it tends to increase the number of active firms second through its impact on market structure a commodity tax may be welfare improving even though quality creates a positive externality third a commodity tax may bring about an equilibrium that is arbitrarily close to a pareto efficient allocation

life in a slum understanding living conditions in nairobi s slums across time and space this paper overviews the role of slums in urban africa focusing on nairobi it reveals the characteristics of slums and how these have changed over time spatially disaggregated data show that slum areas are very dense with poor quality buildings lacking access to key services such as sewage disposal and electricity however improvements to building quality public service provision and socio economic characteristics are mostly outpacing those seen in the formal sector measures such as child health and school attendance have caught up or are on pace to catch up in the near future with the formal sector while improvements in building quality and service provision are advancing more slowly we find significant heterogeneity across the city and in particular that central slums look to be stuck with low quality buildings and poor service provision though not with low socio economic indicators we explore potential explanations for why slums located on highly prized land near the centre may be stuck with poor infrastructure

the effect of organizational form on quality the case of franchising abstract the organizational form of franchising has been shown to yield higher profits and faster growth through reducing agency costs why then does anyone not franchise in this paper i argue that the diffuse residual claims of the franchise system reduce overall system quality and that this problem is inherent in the nature of franchising the theory is tested by examining evidence from both the restaurant and the hotel industries including chains that franchise and ones that own all of their units in both industries quality is negatively related to the percent franchising in the chain controlling for size growth in units monitoring costs market segment ownership structure multi chain operation and price the results suggest that the franchise contract increases free riding and decreases quality in decentralized service chains and that quality is not contractible in this setting

deforestation and seigniorage in developing countries a tradeoff abstract most of countries covered by natural forests are developing countries with limited ability to levy taxes and restrained access to international credit markets consequently they are amenable to draw heavily on two sources of government financing namely seigniorage and deforestation revenues first we develop a theoretical model emphasizing a substitution effect between seigniorage and deforestation revenues second a panel data econometric analysis over the 1990 2010 period confirms our findings consequently a tighter monetary policy hastens deforestation third we extend the theoretical model and show that international transfers dedicated to forest protection can upturn the positive link between tighter monetary policies and deforestation and then discuss the relevance of this finding with respect to recent institutional arrangements

agency and institutional influences on franchising decisions abstract while the franchising literature has typically relied on agency theory efficiency considerations may not fully explain decisions to expand through franchising or company ownership in this study i re examine franchising decisions using insights from institutional theory the key tenet of institutional theory is that decisions are influenced by isomorphic pressures arising from the environment economic rationales such as the achievement of efficiency are thought of as less pervasive concerns i begin by investigating whether institutional theory explains variance in franchising decisions beyond what is explained by agency theory then i explore the extent to which institutional considerations moderate the relationships between agency considerations and franchising decisions hypotheses are tested on a unique database of 132 french franchise chains empirical results suggest that successful competitors use of franchising explains variance in the focal chain s use of franchising beyond what is explained by the importance of local managerial inputs and the threat of franchisee opportunism in addition the threat of franchise opportunism is less strongly related to the focal chain s use of franchising when successful competitors have a high proportion of franchised outlets overall findings from this study suggest that researchers should supplement agency theory with institutional theory to adequately explain franchising decisions

entrepreneurial orientation risk and incentives the case of franchising the standard principal agent model predicts a trade off in contract design between the protection against risk and incentive motivations distinguishing two types of risks we show that contrary to this traditional view the relationship between risk and incentives can be positive in franchise contracting this implies that the royalty rate decreases with the risk faced by the franchisee on the local market using a unique panel dataset combining french franchise and financial data we address this issue empirically alongside performance outcomes the data support the hypothesis of a negative relationship between risk and the royalty rate which contradicts the prediction of the standard agency theory furthermore our estimations provide evidence that chain performance increases with an adjusted royalty rate this paper has important implications for contract design showing that with increasing local market uncertainty and low risk aversion franchisors should reduce the royalty rate

optimal pricing of environmental and natural resource use with stock externalities abstract underlying some of the most pressing environmental problems are the interlinked resource and environmental stock externalities with threshold effects using a simple dynamic model it is shown how in the face of such externalities the static market based policy instruments such as pigouvian taxes should be modified it is shown that even if for an initial period there is going to be no pollution stock damage the optimal policy still requires that abatement begins immediately and at increasing rates simulation of the model for the case of fossil fuel burning and the consequent global warming shows that the optimal carbon tax and therefore the optimal control strategy is particularly sensitive to changes in the marginal abatement cost and the level of fossil fuel demand policy simulations contrast the optimal control policy with and estimate the welfare losses from alternative policies deriving from arbitrary tax paths the latter include i a no tax policy ii a constant carbon tax rate iii the european community s proposed carbon tax path and iv a delayed optimal tax path

a qualitative characterization of the competitive nonrenewable resource extracting firm abstract using variational differential equations a systematic qualitative analysis is carried out for the competitive nonrenewable resource extracting firm the parameters of interest are the output price variable input price discount rate lease length initial resource stock and various tax rates the effects of changes in these parameters on the entire optimal time paths of the current shadow value of the stock the resource stock and the extraction rate are characterized in the perturbed phase plane

discount rate choice and efficiency in exhaustible resource allocation employing a simple continuous time model j rowse 1990 finds small percentage social welfare losses when using the wrong discount rate to allocate an exhaustible resource this study finds the same result using a discrete time model incorporating several important complexities including rising unit supply costs and demand functions that distinguish among short term medium term and long term price responses certain non efficiency performance measures are found to vary much more in percentage terms than social welfare as the improper rate diverages from the social rate it is argued that these results are general and their implications are briefly discussed

institutional change in large law firms a resource dependency and institutional perspective we integrate resource dependency and institutional theory to argue that resource scarcity drives and legitimacy enables institutional change building on a historical account we examine the sources and timing of innovation departing from standard human resource practices using event history analysis of over 200 principal offices of large law firms offices with human resource scarcity innovated to acquire alternative resources highly prestigious offices had the legitimacy to be first or early adopters our findings highlight the value of looking to the resource side and to the notion of legitimacy in building an institutional theory of change

slum real estate the low quality high price puzzle in nairobi s slum rental market and its implications for theory and practice summary this study of 1755 households in nairobi s slums challenges the conventional belief that slums offer low quality low cost shelter to a population that cannot afford better standards in nairobi slums provide low quality but high cost shelter although slum residents pay millions of dollars in rents annually and better quality units command higher rents very little is being re invested to upgrade quality to resolve the challenge that the nairobi puzzle poses for theory and practice we develop a new analytical framework for understanding quality of living conditions improving conditions in nairobi s slums requires we argue two simultaneous interventions alteration of the tenure mix to enhance owner occupancy and infrastructure investment

on using current information to value hard rock mineral properties we reformulate the hotelling valuation principle to take into account the special production characteristics of hard rock minerals the data requirements of the revised model are still parsimonious but the resultant valuations are some 40 below those produced by the hotelling valuation principle our valuation equations are also user friendly allowing the valuer to specify price and cost expectations that need not comply with the hotelling rule empirically our model provides estimates of market value for producing mineral properties that are more accurate than those produced by the hotelling valuation principle

the conservationist s dilemma it is typically thought that conservation of natural resources is encouraged by low interest rates however when capital goods are used to extract the resource low interest rates may discourage rather than encourage conservation using a model of a capacity constrained extractive industry in competitive equilibrium i find the relationship between the initial rate of exploitation and the interest rate if capital is so important that for sufficiently high interest rates the industry is nonviable the graph of initial quantity versus the interest rate is u shaped the traditional result holds at small interest rates but not at large ones copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effect of organizational context on entrepreneurial strategies in franchising abstract franchising systems play a vital role in the creation of new jobs and economic development although the role of the franchisor as entrepreneur is generally assumed there has been limited research on the conduct of entrepreneurial activities in the franchising system as a whole in particular researchers and practitioners need to better understand the influences of organizational context on entrepreneurial activities system wide the research reported in this article examines the influences of the organizational context of the franchisor on the entrepreneurial strategies of franchisors their innovation efforts and franchisor support of entrepreneurial activities by franchisees specifically this study examines how the organizational context variables of size age of the franchise its growth rate both absolute and relative and time in franchising affect franchisee perceptions of entrepreneurial strategies of their parent franchisor their innovation efforts and franchisor managerial support for entrepreneurial activity and innovation by the franchisee franchisee perceptions of their parent franchisors entrepreneurial strategies were assessed with respect to four dimensions identified in previous research as central to an entrepreneurial orientation low concern for stability willingness to take risks aggressiveness in competition and proactiveness in seeking new opportunities innovation by franchisors was measured with respect to introduction of new products and techniques drawing on research that emphasizes the importance of instituting special organizational devices and rewards and recognition systems for promoting entrepreneurial activity franchisor support for franchisee entrepreneurial activity and innovation e g the development of new products and services new techniques to improve customer service was measured by the importance franchisees assigned to the use of a franchise council the recognition of new ideas at the annual meeting of the franchise system and the presence at franchisor headquarters of a champion for innovation consistent with other studies examining the influence of organizational context it was hypothesized that organizational size and age would be negatively related to franchisee assessments of entrepreneurial strategies the introduction of new products and techniques and franchisor managerial support for franchisee entrepreneurial activity and innovation in contrast rapid growth was hypothesized to be positively associated with entrepreneurial strategies and support for franchisee innovation no hypotheses were proposed with respect to time in franchising results of the study showed as hypothesized that franchisor size was associated with a concern for stability and strategies that were risk averse cooperative and reactive rather than proactive however size was positively associated with the frequent introduction of new products and also positively related to franchisor support for franchisee innovation contrary to expectations age was positively associated with entrepreneurial strategies including a low concern for stability and an aggressive style of competition in addition age was positively associated with the introduction of both new products and new techniques relative growth rather than an absolute rate of growth was associated with all of the entrepreneurial strategies except risk taking as well as with the frequent introduction of new products although no hypotheses were proposed for time in franchising the findings show that it is associated with a greater concern for stability as well as the infrequent introduction of new products and techniques the findings from this study suggest that franchisors need to institute measures to counteract the potentially deleterious influences of franchise system size on the entrepreneurial orientation within their franchising systems it also suggests the resources of a large organization need to be combined with the flexibility of smaller units for competitive advantage entrepreneurial activity by franchisors and franchisees implies a partnership in adapting to the environment and can provide a competitive advantage the challenge for franchisors will be managing new ideas from the field and adapting to a competitive environment while at the same time preserving the integrity of the franchising system

squatters or tenants the commercialization of unauthorized housing in nairobi abstract the conventional view of squatting suggests that the squatter builds his own house in this paper we shall present fieldwork data from nairobi which is totally at variance with this view we shall present data on a private rental sector albeit illegal that is operating in such squatting areas in particular we shall investigate its growth profitability and ownership together with the characteristics of the landlords and tenants involved we shall suggest that the provision of low income shelter is now a commercial activity

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

efficiency inducing taxation for polluting oligopolists abstract we show that there exists a time independent tax rule that guides polluting oligopolists to achieve the socially optimum production path the optimal tax is dependent on the current pollution stock and it may be negative when the pollution stock is low a surprising result is that the optimal tax rule may give firms a subsidy for an initial time interval even though under laissez faire their output always exceeds the socially optimal output this subsidy however induces firms to produce less than they would under laissez faire

new firm survival institutional explanations for new franchisor mortality why do some new firms succeed and others fail economists argue that new firms fail because entrepreneurs inefficiently manage production and organizational design williamson 1985 sociologists e g granovetter 1985 have typically viewed this explanation as undersocialized and argue that institutional legitimacy must also be considered to explain the survival of new firms this paper examines the survival of 1292 new franchisors established in the united states from 1979 1996 the results show that institutional legitimacy adds to economic explanations for the survival of new franchisors and suggests the importance of a properly socialized explanation

ownership risk investment and the use of natural resources the effect of insecure ownership on ordinary investment and natural resource use is examined insecure ownership is postulated to depend on the type of government regime in power and the prevalence of political violence or instability the political determinants of economy wide investment are estimated from cross country data and the results are used to form an index of ownership security when introduced into empirical models of natural resource use this index has a significant and quantitatively important effect on the use of forests and petroleum contrary to conventional wisdom ownership risk slows resource use in some circumstances

organizational choices and performance in distribution systems this article studies the performance of distribution networks as the result of a range of organizational choices the analytical part of the article surveys the vast literature devoted to franchising and dual distribution from this framework several testable propositions linking network performance to organizational choices are derived three complementary criteria of performance are taken into account the internationalization rate the expansion rate and the market share this article provides evidence for the simultaneity between these performance criteria analytically related as indicators of the network commercial performance thus the econometrical model is defined as a system of simultaneous equations free of endogeneity regarding the explanatory variables the estimations on recent french data obtained using the three stage least squares method provide robust results and show that the type of distribution network the number of company owned outlets in the network the type of sector and the

pigouvian taxation in tourism the paper studies the characteristics and the effects of a tax imposed by a local government on the land used to create new tourists accommodations first a dynamic policy game between a monopolist in a tourist area and a local government is considered in each period the former has to decide the size of land undergoing development whereas the latter has to choose the tax to levy on each newly developed area unit linear perfect markov strategies are derived for both the non cooperative and the public monopoly case in equilibrium a public monopoly would develop land more rapidly than a private monopoly furthermore the more the monopolist discounts the future the more the long run use of the natural resource is reduced second the properties of the tax are studied considering an oligopolistic market structure the tax alone does not lead to the socially optimal level of land use however its combined effect with another policy instrument such as a quota induces the optimal level of resource use

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

urbanization in developing economies the assessment urbanization is an inherent part of economic development yet its success in delivering jobs productivity and liveability varies widely this issue of the oxford review of economic policy compares the experience of different countries and analyses the causes of their different performance cities are policy intensive requiring public provision of infrastructure regulation and coordination this in turn requires authorizing environments with a sufficiently broad span of control and correspondingly powerful checks and balances to prevent abuse

an empirical analysis of a firm s decision to franchise abstract hypotheses from monitoring and search cost explanations for the existence of franchising are discussed and tested the evidence offers strong support for the search theory somewhat weaker support for the monitoring shirking theory and no support for the monitoring cheating hypothesis

the effect of the discount rate on depletion of exhaustible resources this paper argues that despite its widespread acceptance in the literature the basic proposition that a reduction an increase in the discount rate leads to greater conservation faster depletion of an exhaustible resource is not generally valid it shows that the effect of the discount rate on the rate of resource depletion depends on capital requirements for production of the substitute and extraction of the resource and on the size of the resource stock in fact it shows that there always exist at least two ranges of the resource stock size for which the effect is opposite to that conventionally believed

the economy of high wages an agency problem latitude with respect to the effort they supply and monitoring of effort and output is costly in this paper we examine the agency problem that arises in these circumstances the agent employee is assumed to maximize expected utility which depends on wages and effort a bad we assume that output is a deterministic function of effort that either effort or output can be accurately monitored and that monitoring is costly the firm s problem is to select a level of monitoring and a compensation package that will minimize the cost of obtaining a desired level of effort given the cost of monitoring the agent s preferences and the agent s opportunity cost of accepting employment with the firm his labour supply constraint the firm chooses a compensation scheme from the set in which compensation is contingent on effort if the agent is monitored and is equal to a standard

the effects of state automobile dealer entry regulation on new car prices this paper examines the impact of state regulations restricting entry into new car retailing the central hypothesis is that these regulations create artificial scarcity rents for existing dealers which are collected through higher car prices a reduced form multiple regression model is specified with retail price as the dependent variable the model is estimated using transactions price data for a sample of over 5 000 chevrolet dealers and seven car lines in 1978 the results confirm the hypothesis that entry restrictions cause higher car prices

mass tourism and the demand for protected natural areas a travel cost approach abstract this paper presents the argument that when environmental protection projects favor tourist activities the travel cost method can be used to measure the value tourists give to the recreational services these areas provide with this idea we describe a model of tourist behavior that allows us to predict whether a tourist will participate in the reactional activities the frequency of participation according to the areas attributes and the costs of producing alternatives to illustrate the model s application we consider tourist demand for and benefits from a set of protected natural areas in mallorca

when a high discount rate encourages biodiversity include land in a neoclassical growth model and introduce a standard biogeographic relation between species recliners biodiversity and land assume that species provide utility the optimal constant amount of land preserved for species is obtained from steady state conditions contrary to conventional wisdom a high discount rate preserves more land when the elasticity of substitution between goods and species exceeds unity or when this elasticity is less than unity and technology is such that the output effect of a change in the interest rate exceeds the substitution effect

should we worry about the failure of the hotelling rule abstract the continuing dependence of the global economy on fossil fuels is worrying because it imposes limits on growth due to the non renewable nature of these resources and also contributes to global climate change resource optimists believe that this is no reason to worry because the economy will always find a way to overcome these constraints their arguments however require that resource prices reflect the scarcity of non renewable resources which implies that they must obey the hotelling rule empirical analyses however show that the hotelling rule does not hold in reality which raises the question does the failure of the hotelling rule imply that social optimality is not achieved this paper argues that the answer depends on the reason for the failure if extraction and exploration costs or technological progress in these activities are the reasons for the failure a market failure is not implied and optimality may still be achieved but if the hotelling rule fails due to uncertain property rights or strategic interaction the market will surely fail to provide an optimal solution a market failure is likely to speed up resource consumption compared to the social optimum

managerial rents and outside recruitment in the coasian firm in the corporation decision making about the use of capital by managers and risk taking by the owners of capital are specialized activities various institutional mechanisms have been analyzed as forces disciplining the opportunistic behavior of management under these conditions we maintain that no single mechanism such as wage revision in the managerial labor market or an internal device that relies on influencing incentives by making executives residual claimants in the firm is sufficient to solve problems of managerial incentives instead the margins of several control devices are extended simultaneously to maximize the value of the firm net of the cost of control in this context we will emphasize one means of managerial control which has not been fully analyzed to date the impact of outside hiring on the behavior of incumbent managers

using the wrong discount rate to allocate an exhaustible resource what are the social welfare implications of using the wrong discount rate to allocate an exhaustible resource utilizing a simple numerical model it is found that over the real discount rate range of 6 to 9 the welfare losses of employing a rate no more than 3 different from the social rate are small and decline as the social rate rises even for stringent supply circumstances however substantial transfers of surplus between producers and consumers occur as the improper rate deviates from the social rate other issues such as income distribution immediately loom larger when a discount rate is chosen

the hotelling rule in non renewable resource economics a reassessment harold hotelling s 1931 contribution is known for providing a basic principle the hotelling rule to the economics of non renewable resources nearly ninety years later empirical tests conclude the rule lacks empirical validity requiring strong amendments to describe the long term aggregate behavior of its target object on the basis of hotelling s unpublished archival material this paper revisits the place given to the hotelling rule in non renewable resource economics our reconstruction shows that hotelling s 1931 paper has been misinterpreted from the outset the hotelling rule was not valid for mineral resources in contrast the consideration of two inherent geological constraints alongside exhaustibility offered the opportunity for an alternative basic framework capable to generate bell shaped and u shaped equilibrium trajectories for supplies and prices respectively inspired by this unknown aspect of hotelling s work brought to light by our archival investigation we sketch this alternative basic model enabling non renewable resource economics to circumvent the empirical shortfalls of the hotelling rule

the effect of decentralized governance on timber extraction in european russia good governance is often promoted for economic growth but its impact on natural resource use in developing and transitional economies is not well understood for example many scholars promote improved governance as a means to slow resource use whereas others have found that better governance increases extractive resource activities in this paper we use within country variation in russia to test the impact of governance on timber harvesting using a reduced form fixed effects model and satellite based estimates of forest cover we find a statistically significant and non linear effect of governance on the area of timber harvested for a marginal improvement in governance timber harvesting increases but this effect decreases at high levels of governance these results are robust to alternative specifications and when instrumenting for economic growth governance could impact timber harvesting in russia through ownership risk i e tenure security through the costs of doing business i e bribes or both nonparametric regressions and qualitative evidence suggest that both factors are at play in russia this analysis provides additional evidence that improving governance may increase natural resource extraction this has important implications for policy prescriptions that suggest good governance will slow resource use in developing and transitional economies

trade with polluting nonrenewable resources abstract the paper considers nonrenewable resource extraction in a situation where the resource buyers have formed a government which applies emission taxation for slowing pollution accumulation and the sellers are competitive or a resource cartel the noncompetitive situation is studied as a stackelberg differential game which the cartel leads it is first assumed that extraction costs do not depend on the resource stock level and that the pollution stock does not decay in the time consistent and markov perfect equilibrium the sellers monopoly power vanishes asymptotically the sellers market power reduces the buyers emission tax at each point in time in the stackelberg equilibrium the emission tax is below the marginal present value of pollution damage if pollution decays and extraction costs depend on the resource stock level buyers have monopsony power and the ability of sellers to receive emission tax revenues is weakened when the rate of pollution decay is high the producer price falls below the pareto optimal level

energy backstop endogeneity and the optimal use of groundwater to meet the growing demand for freshwater many regions have increased groundwater pumping in recent years resulting in declining groundwater levels worldwide a promising development to address these declines is technical change regarding groundwater substitutes such as desalination and wastewater recycling however because these technologies are energy intensive optimal implementation also depends on future energy price trends we provide an operational model for the case of reverse osmosis seawater desalination in an application to the pearl harbor aquifer in hawaii we find that allowing the cost of desalination to increase at an average annual rate of 2 4 over the next century results in a substantially steeper efficiency price path for water the higher prices decrease optimal groundwater extraction and induce a slower head drawdown over a longer period of time thereby delaying the transition to desalination by over 30 years because the rise in energy costs exacerbates efficiency losses from under pricing any delay in implementing efficiency pricing will cause either a greater future increase in prices or the need for rationing reforming prices sooner rather than later may be more politically feasible given that consumers may be more amenable to a gradual rise in prices today than a sudden doubling or tripling of prices ten years from now using this as a foundation we outline a research agenda for extending the framework to other groundwater substitutes and for adapting to climate change

when patience leads to destruction the curious case of individual time preferences and the adoption of destructive fishing gears abstract the use of destructive fishing methods is a serious problem especially for tropical and developing countries due to inter temporal nature of fisheries extraction activities standard economic theory suggests that an individual s time preference can play a major role in determining the gear choice decision based on earlier theoretical work we identify two ways in which individual time preferences can impact the adoption of destructive extraction methods i the conservation effect which posits that patient individuals as indicated by relatively high discount factor are less likely to use destructive extraction methods since they are more likely to account for the loss of future income that is accompanied by using these methods ii the disinvestment effect which argues that patient individuals are more likely to use destructive extraction methods since they have greater investment capability using an agent based model we clarify the conditions under which one of these effects is more dominant than the other one our model suggests that the nature of destructive gear along with the level of social dilemma determines whether patient or impatient individuals relatively lower discount factor are more likely to adopt such a gear additionally agent s beliefs regarding future resource condition and other agent s extraction level can have a major influence in some cases

investment in tourism market a dynamic model of differentiated oligopoly we present a theoretical dynamic model in tourism economics assuming that the market for tourism is an oligopoly with differentiated products destinations can invest in order to improve their stock of physical natural or cultural resources tourism flows yield current revenues but they are usually detrimental for the stock of resources we find the solution of the dynamic model and in particular we find the open loop nash equilibrium of the game among destinations under alternative settings depending on whether the degree of differentiation among destinations is exogenous or endogenous in particular under the latter case an increase of the number of destinations leads to a higher degree of product differentiation in steady state

the conditions for achieving environmentally sustainable development this paper is interested in the narrower interpretation the relationship between environmental quality and sustainable economic activity the latter is interpreted as that level of economic activity which leaves the environmental quality level intact with the policy objective corresponding to this notion being the maximization of net benefits of economic development subject to maintaining the services and quality of natural resources over time 3

optimal saving policy for exhaustible resource economies abstract the paper examines the optimal saving policy for a small exhaustible resource exporting economy ere that has an exhaustible asset and a reproducible capital stock it shows that both in magnitude and time profile the optimal saving policy for an ere sharply differs from a that of a nonextractive economy and b that derived from the conventional models of growth with exhaustible resources these differences arise from the specific economic features that distinguish the small resource exporting developing economies both from other developing economies and from mature industrial ones for a wide range of plausible parameter values comparisons of computed optimal saving paths with actual savings rates of selected eres suggest substantial deficiencies in their savings rates

the economics of franchise contracts as an organizational arrangement the franchise contract lies between anonymous price mediated exchange and centralized intrafirm employment in contrast to conventional market exchange franchise contracts typically impose on franchisees retail quality standards common hours of business price controls and nonlinear payment schedules for example fixed initial royalty fees plus a percentage of gross retail revenues while franchisors typically provide national advertising and training programs monitor and inspect the franchisees performance with varying intensity across industries and hold the residual power to terminate the franchise agreement observations of actual terminations indicate that franchisors sometimes exclude this power franchisors sometimes face persistent queues of potential franchisees in contrast to simple employment contracts franchise agreements provide for sharing of profits through royalties on revenue or output and considerable freedom for independent decisions by local franchisees 1 why do these franchise contracts exist