bluuebunny/crossref_metadata_2025 huggingface dataset:
TOWARD A POSITIVE ECONOMIC THEORY OF ANTITRUST
Authors: GRADY MARK F.
Published: January 2010

Most economists associate antitrust policy with the Sherman and Clayton Acts. Nonetheless, there is in England and America a much older body of antitrust law, namely, the common law of restraint of trade. This regulation, like language and markets, evolved over a long period of time. This article examines whether the rules that the common law courts developed can be explained by a hypothetical wish to maximize social wealth and concludes that many of them can be. The last part of the article outlines a theory of legal evolution.
THE LEGISLATIVE HISTORY OF THE SHERMAN ACT RE‐EXAMINED
Authors: HAZLETT THOMAS W.
Published: January 2010

According to Robert Bork's influential analysis, the Sherman Act was expressly instituted by the 51st Congress to advance consumer welfare, but has often been misinterpreted by federal courts handing down anticonsumer decisions. This paper suggests that the political coalition backing the 1890 antitrust statute sought multiple social ends and did not faithfully seek to impose economic efficiency. The key evidence includes historical economic trends, congressional debate, the legislative agenda of Senator John Sherman, and the political conflict generated by the most contentious (and most electorally important) issue of the 51st Congress: the highly protectionist McKinley Tariff Act.
EMPIRICAL EVIDENCE ON FTC ENFORCEMENT OF THE MERGER GUIDELINES
Authors: COATE MALCOLM B. , MCCHESNEY FRED S.
Published: January 2010

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.
AN EFFICIENCY EXPLANATION FOR WHY FIRMS SECOND SOURCE
Authors: DICK ANDREW R.
Published: January 2010

Firms facing research costs and demand uncertainty may engage in second‐sourcing, in which potential suppliers agree to pool production facilities. I show how sellers and buyers both can benefit from the practice. Second‐sourcing allows firms to meet a wider range of possible rates of demand and often to supply a given rate of demand at a lower total cost than under non‐cooperation. Buyers benefit through a reduced probability of stock‐outs and frequently a lower purchase price. Semiconductor industry data are found to be consistent with the paper's predictions.
TAKEOVERS: MANAGERIAL INCOMPETENCE OR MANAGERIAL SHIRKING?
Authors: GRIFFIN JAMES M. , WIGGINS STEVEN N.
Published: January 2010

Agency theory identifies managerial shirking as the cause for takeovers, while other explanations focus on low ability managers. This paper formalizes Jensen's free cash flow variant of agency theory by constructing a simple two‐period game which captures the distinctive empirical implications of the two theories.

Using data for petroleum firms following the oil price shock of 1979‐80, we find that firms undergoing financial restructuring exhibited higher values of Tobin's q. Additionally, evidence of management turnover and workforce cuts emphasizes that takeovers appear primarily designed to address agency concerns.
SOME REAL EVIDENCE ON THE REAL BILLS DOCTRINE VERSUS THE QUANTITY THEORY
Authors: CUNNINGHAM THOMAS J.
Published: January 2010

Researchers interested in testing between the Real Bills doctrine and the Quantity Theory approach to inflation in the face of rapid, deficit‐financing money growth are confronted by an observation equivalence problem. This paper identifies a data set which resolves the dilemma and tests the two inflation models. The results provide clear evidence supporting the Real Bills doctrine, that the value of assets backing money determines its value, over the Quantity Theory.
DOES INDUSTRIAL DIVERSITY ALWAYS REDUCE UNEMPLOYMENT? EVIDENCE FROM THE GREAT DEPRESSION and AFTER
Authors: SIMON CURTIS J. , NARDINELLI CLARK
Published: January 2010

A portfolio model of employment predicts that cities with more diversified employment opportunities should experience lower unemployment rates than less diversified cities. Empirical analysis of the diversity‐unemployment relationship using Census data support the portfolio theory for the years 1950,1960, and 1970. During the early months of the Great Depression, however, industrially more diversified cities experienced higher, rather than lower, rates of unemployment. By combining the portfolio model of employment with the Lucas‐Phelps islands model, the anomalous effect of diversity in 1931 is explained as the result of employers' difficulty of distinguishing real from nominal shocks.
EVIDENCE ON PRICE ADJUSTMENT COSTS IN U.S. MANUFACTURING INDUSTRY
Authors: ROBERTS JOHN M.
Published: January 2010

This paper investigates the degree of rigidity in prices of manufactured products in the U.S., conditional on labor costs. I extend Rotemberg's model of quadratic price‐adjustment costs and find that prices are costly to adjust: after a year, about 40 percent of adjustment remains to be completed for aggregate manufacturing, while for some industries the adjustment is twice as slow. But manufacturing prices are less sluggish than prices in the U.S. economy as a whole. Thus, nominal rigidity in other markets, such as those for services or labor, may be important.
RULES OR POLITICS?: AN EMPIRICAL ANALYSIS OF ITC ANTI‐DUMPING DECISIONS
Authors: MOORE MICHAEL O.
Published: January 2010

This research analyzes the International Trade Commission's anti‐dumping decisions from 1980 to 1986. The results suggest that commissioners use criteria consistent with the instructions set forth in U.S. legislation. The analysis also indicates that political variables help predict commissioner decisions. Petitions involving Senate oversight committee members' constituencies may be systematically favored in the process. Evidence of possible bias toward less‐developed‐country exports is presented as well. The methodology also yields estimates of commissioner‐specific fixed effects.
U.S. MONEY DEMAND: STRUCTURAL SHIFTS OR HETEROGENEOUS AGENTS?
Authors: LANDON STUART
Published: January 2010

This paper examines whether observed “structural shifts” in the money demand function could be the result of agent heterogeneity due to different household income levels. Following the methodology of Stoker [1986], income distribution variables are found to be significant determinants of money demand, and once changes in the distribution of income are accounted for, there is no evidence of parameter instability. A money demand function incorporating income distribution effects is shown to perform as well or better than several standard alternatives on the basis of diagnostic tests, non‐nested hypothesis tests, within‐sample prediction errors and out‐of‐sample forecasting.
FACTOR DEMAND UNDER CONDITIONS OF PRODUCT DEMAND and SUPPLY UNCERTAINTY
Authors: BALVERS RONALD J. , MILLER NORMAN C.
Published: January 2010

The paper develops a theory of factor demand under uncertainty, that encompasses neo‐classical factor demand and Keynesian effective factor demand as special cases. The model allows factor demand and output to move positively with product demand, even with a constant product price. This, in turn, permits real wages to move pro‐cyclically in response to product demand shocks. In addition the model provides a new perspective on the “adding‐up” problem (which posits that total factor payments exceed output if increasing returns to scale exist), and generates positive uncertainty profits that are similar in spirit to those of Frank Knight.
BETA, FIRM SIZE, and CONCENTRATION
Authors: BINDER JOHN J.
Published: January 2010

The asset beta of a firm is defined as the uncertainty about the firm's future value scaled by its current value. Empirically, beta is negatively related to a firm's size and concentration in its major product market. This relation has been interpreted as evidence that monopoly power affects beta. This paper shows that this empirical result is also consistent with competitive product markets where greater firm size and concentration are due to greater efficiency in production. Thus, the correlation between beta, firm size and concentration is not prima facie evidence of widespread monopoly power.
ALL‐TERRAIN VEHICLES: MARKET REACTION TO RISK INFORMATION
Authors: RODGERS GREGORY B.
Published: January 2010

This article examines the market response to new risk information implicit in a recent regulatory stop‐sale of new three‐wheeled all‐terrain vehicles. A hedonic price analysis is used to quantify the stop‐sale's impact in the secondhand market, a market segment not directly affected by the stop‐sale. The analysis shows a substantial reduction in the price of three‐wheeled all‐terrain vehicles relative to the price of less risky models. This result is consistent with rational economic behavior and suggests that providing new risk information can improve market effciency.
AN EMPIRICAL ANALYSIS OF ADOPTION
Authors: MEDOFF MARSHALL H.
Published: January 2010

This paper estimates the supply of adoptions using a decision‐making economic framework of desired fertility and family size. The empirical results show that the decision to place a child for adoption is negatively related to a woman's labor force participation, the size of Aid to Families with Dependent Children payments and the unemployment rate, and is positively related to her marital status, education, and religious affiliation. The price and availability of abortions are found to have no statistically significant effect on the adoption decision. Furthermore, state regulations designed to encourage adoptions have no impact on the adoption option.
THE NONMONETARY EFFECTS OF FINANCIAL FACTORS DURING THE INTERWAR PERIOD
Authors: RAYNOLD PROSPER , BEARD THOMAS R. , MCMILLIN W. DOUGLAS
Published: January 2010

This paper employs vector autoregressions to estimate the nonmonetary effects of financial sector shocks on output and prices during the interwar period. Variance decompositions indicate that the nonmonetary financial proxies have significant and important effects. Impulse response functions indicate that most of the significant shocks to our financial crisis proxies have negative effects on output and prices. Focusing on the depressed conditions of the 1930s, historical decompositions indicate that the nonmonetay financial crisis variables are generally more important than the monetary base in explaining macro behavior. Our findings thus support theoretical models emphasizing the important nonmonetay effects of financial variables.
PROFESSIONAL ACHIEVEMENTS AND GENDER DIFFERENCES AMONG ACADEMIC ECONOMISTS
Authors: BRODER IVY E.
Published: January 2010

This paper tests for gender differences in remuneration and professional achievement among academic economists using data on grants and grant applications to the National Science Foundation. A simultaneous equations model is used to examine the determinants of salary, rank, department affiliation and research output. In addition to confirming some long‐standing folklore about the composition of faculty in research‐oriented institutions, significant gender differences were found among older cohorts. Although the signs of the gender coefficients are consistent with a discrimination hypothesis for the sample of assistant professors, the results were not statistically significant.
ENTRY LEVEL SALARIES OF ACADEMIC ECONOMISTS: DOES GENDER OR AGE MATTER?
Authors: FORMBY JOHN P. , GUNTHER WILLIAM D. , SAKANO RYOICHI
Published: January 2010

This study uses the results of a survey of entry level economists to investigate whether gender or age influence beginning salaries once other determinants of earnings are taken into account. We consider and control for terminal degree status, the quality of Ph.D. granting and hiring departments, field of specialization, costs of living across areas, and other institutional factors that can influence academic salaries. Gender is found to have no significant effect. Age seems to matter but only in departments that have faculty who do not publish in top journals and only through interactions with other variables.
THE “PLUCKING MODEL” OF BUSINESS FLUCTUATIONS REVISITED
Authors: FRIEDMAN MILTON
Published: January 2010

Some twenty‐five years ago, I suggested a model of business fluctuations that stresses occasional events producing contractions and subsequent revivals rather than a self‐generating cyclical process. Evidence for the past quarter century, like evidence presented in my earlier paper for a longer period, supports the view that the model is a useful way to interpret business fluctuations and has sufficiently important implications to justify further empirical work for both the United States and other countries.
INTERNATIONAL EVIDENCE ON FRIEDMAN'S THEORY OF THE BUSINESS CYCLE
Authors: GOODWIN THOMAS H. , SWEENEY RICHARD J.
Published: January 2010

Milton Friedman's theory of the business cycle implies two empirical regularities tested for here. One regularity is that business cycles are asymmetric: The size of a contraction affects the size of the following expansion, but not vice versa. The second regularity is that a supply‐side ceiling to aggregate output limits the size of expansions. Friedman's correlation methods yield only very weak support for the asymmetry hypothesis when applied to real GNP data of eight OECD countries. A time series model with a ceiling component fits the data well for a majority of the countries.
INCOMPLETE CONTRACTING: A LABORATORY EXPERIMENTAL ANALYSIS
Authors: HACKETT STEVEN C.
Published: January 2010

Incomplete contracts are motivated by difficulties in specifying contingent responses to unforeseen change in long‐term trading relationships. The issues can be parsimoniously represented in a two‐period model. Parties first make transaction‐specific investment that enhances value or reduces cost. Surplus is then realized, and bargaining divides the surplus and completes the contract. The testable hypothesis is that realized surplus shares are independent of sunk investments. This is strongly rejected using laboratory experimental methods. Failure of the prediction affects the expected profitability of contracts.
SIMULATING A MULTIPRODUCT BARTER EXCHANGE ECONOMY
Authors: LEVY DANIEL , BERGEN MARK
Published: January 2010

We describe a multiproduct barter trading experiment in which students exchange real goods in an open market based on their own personal preference. The experiment is designed for simulating a pure exchange market in order to demonstrate the role of money and its functions in real economies by showing the limitations and inefficiencies of the traditional barter economy. In addition, the simulation is very effective in highlighting some of the key features that an object that serves as money needs to possess in order to function as an efficient medium of exchange, unit of account, and store of value.
CORPORATE TAX INCIDENCE AND INEFFICIENCY WHEN CORPORATE AND NONCORPORATE GOODS ARE CLOSE SUBSTITUTES
Authors: GRAVELLE JANE G. , KOTLIKOFF LAURENCE J.
Published: January 2010

An important deficiency in Harberger's [1962] model of corporate income taxation is its inability to consider both corporate and noncorporate production of the same good. Within‐industry substitution has potentially major implications for both the excess burden and incidence of the corporate tax.

We analyze this within‐industry substitution using a model in which each industry/sector contains corporate and noncorporate firms (with identical production functions) which produce goods that are close substitutes. The scope for considerable within‐industry substitution of noncorporate for corporate capital leads to a very much larger excess burden than that in the Harberger model.
ANTITRUST POLICY AND MERGERS: THE WEALTH EFFECT OF SUPREME COURT DECISIONS
Authors: MCWILLIAMS ABAGAIL , TURK THOMAS A. , ZARDKOOHI ASGHAR
Published: January 2010

Many believe that antitrust policy has had a dramatic impact on merger strategies in the United States. For this to be true, enforcement of antitrust laws must affect a wide range of firms, not just those firms whose mergers are contested. This study tests whether or not firms engaged in uncontested mergers are affected by antitrust enforcement, as signalled by Supreme Court decisions. Using event study methodology, we find that antitrust policy against mergers was binding during the 1960s and 1970s as it ulowered the value of targets in ucontested ongoing mergers.
THE PRODUCTIVITY SLOWDOWN AND THE SAVINGS SHORTFALL: A CHALLENGE TO THE PERMANENT INCOME HYPOTHESIS
Authors: VIARD ALAN D.
Published: January 2010

I argue that the saving decline following the post‐1973 productivity slowdown discredits the permanent income hypothesis. The permanent income hypothesis predicts that a reduction in expected future income growth should cause an increase in saving. I show that economic agents revised downward their expectations of future growth after 1973 but that the saving rate declined. other economic events during this period cannot explain this discrepancy.
TOWARD AN ECONOMIC THEORY OF FASHION
Authors: COELHO PHILIP R. P. , MCCLURE JAMES E.
Published: January 2010

Competition for rank within animal societies is an innate drive recognized in sociobiological and evolutionary theory. In human societies, fashion signals social rank or status. We extend standard economic theories of competitive and noncompetitive markets to analyze fashion by including the status‐seeking incentive. In the competitive case, the conditions under which fashion cycles occur are examined. In the noncompetitive case, producers of fashion services discriminate between customers intertemporally to sustain the fashionability of their services. Unlike the standard models of fashion that populate marketing textbooks, our theory of fashion does not require that demand curves slope upward.
DOES MONITORING INCREASE WORK EFFORT? THE RIVALRY WITH TRUST AND LOYALTY
Authors: FREY BRUNO S.
Published: January 2010

Principal‐agent theory suggests that tighter monitoring will raise an agent's work effort and will be applied provided that transaction costs are low. However, when a psychological contract exists between principals and agents, the agents perceive increased monitoring as an indication of distrust, and this induces them to reduce work effort. This “crowding out effect” is likely to dominate when the relationship between principals and agents is personal, while the “disciplining effect” is likely to dominate when the relationship is abstract, as in a competitive market setting. Empirical evidence from neighbouring sciences and from an econometric study supports this proposition.
AN ESTIMATE OF THE RENT GENERATED BY A PREMIUM COLLEGE FOOTBALL PLAYER
Authors: BROWN ROBERT W.
Published: January 2010

The National Collegiate Athletic Association limits the payments athletes can receive for their services. Colleges are effectively monosony employers so players will not be paid their marginal revenue product. Therefore, colleges capture an economic rent from players. This paper measures these rents by estimating the marginal revenue product of a top college football player. The empirical results suggest that a premium college player generates over $500,000 in annual revenues for his team.
EMPLOYMENT AND OUTPUT EFFECTS OF GOVERNMENT SPENDING: IS GOVERNMENT SIZE IMPORTANT?
Authors: Karras Georgios
Published: January 2010

The efects of government spending on employment and output may depend on government size and the persistence of spending. The empirical results suggest that permanent (or persistent) changes in government consumption have a greater impact on output and employment than temporary (or cyclical) changes. This implies a negative wealth effect and reduces the stabilization potency of government spending. The findings also support the hypothesis that the output elasticity of government consumption is positive but declines with increases in government size. Using the estimated equations, I calculate the optimal government size for the representative country as around 20 percent of GDP.
SOME EVIDENCE ON THE ALCHIAN AND ALLEN THEOREM: THE THIRD LAW OF DEMAND?
Authors: Bertonazzi Eric P. , Maloney Michael T. , Mccormick Robert E.
Published: January 2010

This paper examines empirically the Alchian and Allen proposition that shipping charges induce consumers to opt for higher quality goods. We show in a household productions framework why this holds whether goods or buyers travel. Using a large sample of individual consumption data for football games, we find that buyers who travel the farthest, purchase the best tickets. In the end, we believe that the Alchian and Allen theorem is so broad and pervasive that it qualifies as the third law of demand.
IMPERFECT COMPETITION AND BASING‐POINT PRICING
Authors: Gilligan Thomas W.
Published: January 2010

This article investigates the relationship between imperfect competition and basing point pricing. Basing‐point pricing can emerge if firms at the base site are Bertrand competitors, firms at non‐base locations are less than perfectly competitive with each other and are von Stackleberg leaders with respect to base site production, and the products produced at the base and non‐base locations are perfect substitutes. Basing‐point pricing is associated with competitive prices by base site firms but with markups by non‐base site firms equal to their phantom freight charges.
HOW TRADING INSTITUTIONS AFFECT FINANCIAL MARKET PERFORMANCE: SOME LABORATORY EVIDENCE
Authors: Friedman Daniel
Published: January 2010

The effects of trading institutions on market efficiency and trading volume are examined. The trading institutions are computerized versions of continuous double auction and “clearinghouse” markets. Traders are experienced, profit‐motivated undergraduates. The traded good is a financial asset whose monetary value is state‐ and trader type‐contingent. Traders possess asymmetric private information on asset value. The results show that clearinghouse markets are as informationally efficient as double auction markets and almost as allocationally efficient; the double auction encourages greater trading volume but the clearinghouse provides greater depth; public orderflow information enhances double auction performance but impairs clearinghouse performance.
REDUNDANT TARIFFS AS RATIONAL ENDOGENOUS PROTECTION
Authors: Feldman David H.
Published: January 2010

Redundant protection, tariffs that exceed the domestic import‐price differential, is an important feature of nineteenth century U.S. tariff history and remains a common practice in many developing countries. This paper develops political‐economy models of the tariff setting process when the world price of the importable product is stochastic. The optimal endogenous tariff may involve redundant protection even if agents are risk neutral. These political‐economy models also permit us to assess the comparative static effects of changes in the mean‐preserving spread of the world price under differing assumptions about the political process.
A CLARIFICATION OF THE EXCESS DEMAND FOR OR EXCESS SUPPLY OF MONEY
Authors: Rabin Alan A.
Published: January 2010

One of the most misunderstood and neglected concepts in all of economics is the notion that money may be in excess supply or excess demand. The article presents several reasons why monetary disequilibrium would indeed persist, including the fact that no “money market” exists with a single price which would clear that market. Contrary to the claims of several leading textbooks, the article explains why changes in the interest rate would not immediately eliminate an excess supply of or demand for money.
VARIABLE PRICE ADJUSTMENT COSTS
Authors: Konieczny Jerzy D.
Published: January 2010

The fixed (menu) cost approach has been criticized since administrative costs of price changes are small. This paper studies costs which depend on (i) the size or (ii) the frequency of adjustment. The optimal pricing policy is similar to that in the menu cost model which is, therefore, a simple benchmark case. While recent empirical evidence implies rejection of the fixed cost model, it is consistent with the general specification used here. The analysis strongly suggests that nominal inflexibilities at the individual level are not due to administrative costs but result from unfavourable market response to price changes.
ERRORS IN OUTPUT DEFLATORS REVISITED: UNIT VALUES AND THE PRODUCER PRICE INDEX
Authors: Siegel Donald
Published: January 2010

Output prices are mismeasured because of inadequate adjustments for changes in product quality. Thus, when quality improves, inflation will be systematically over‐stated. In this study, I find that the most commonly used indicator of the rate of inflation, the Producer Price Index, misses about 40 percent of the change in quality. However, I also find that the mismeasurement of output prices is constant over time, implying that errors of measurement are not a significant determinant of either the slowdown or recent acceleration in manufacturing productivity.
SHAPING THE INSTITUTIONAL INFRASTRUCTURE
Authors: Winiecki Jan
Published: January 2010

Certain types of laws and institutions shape economic behavior in market economies. In Eastern Europe these general rules and market institutions are often nonexistent, and a major problem is to create market economies while simultaneously building the supporting institutions. We describe the type of institutions inherited from Soviet‐style economies and show institutional reforms and macroeconomic policies may have limited effects due to the interdependence and lack of complementary market institutions. Without a “critical mass” of market institutions, the benefits of markets are slow in realization. The advantages of reforming existing but distorted institutions over building new ones is stressed.
THE METRICS OF STYLE: ADAM SMITH TEACHES EFFICIENT RHETORIC
Authors: Diamond Arthur M. , Levy David M.
Published: January 2010

Does style matter for economic writing? Several stylistic characteristics of ninety‐seven AEA presidential addresses, including word length, sentence length and percent of sentences in the passive voice, were computed and used to explain citations to these economists' work. Avoidance of the passive is an old stylistic norm given by Adam Smith. Word length and sentence length serve as modern stylistic norms. Only the percent passive matters to explain citations. Perhaps not coincidentally, while writing clarity in our data set has declined over time when measured by the new norm, it has improved when measured by the old norm.
DEALING WITH ARGUABLY LEGITIMATE EXAM GRIPES: A POSSIBLE PARETO IMPROVEMENT
Authors: Goldfarb Robert S.
Published: January 2010

Students sometimes have heart‐felt and arguably legitimate complaints about exam grading. This note suggests a strategy for dealing in a serious, judicious and seemingly fair and responsive way with such complaints. The suggested strategy allows the professor to take such complaints seriously, without giving him/her the reputation as an easy mark. Moreover, it uses a characteristic of letter‐grade systems to lower the transactions costs of dealing seriously with such complaints.
THE WELFARE IMPLICATIONS OF MORAL HAZARD AND ADVERSE SELECTION IN COMPETITIVE INSURANCE MARKETS
Authors: Stewart Jay
Published: January 2010

I model a competitive insurance market with both moral hazard and adverse selection, and analyze the effect on welfare when both problems are present simultaneously. An examination of the interaction between these two problems leads to two hypotheses. First, the nature of the equilibrium contracts is such that each problem partially offsets the welfare loss associated with the other. And second, the degree to which this occurs increases as agents become more heterogeneous. Simulation results overwhelmingly support both hypotheses.
HOW INEFFICIENT ARE MULTIPLE IN‐KIND TRANSFERS?
Authors: Murray Michael P.
Published: January 2010

The inefficiencies from multiple in‐kind transfers are smaller than one would guess from studying such programs singly, though Medicaid can give rise to average discounts as large as 60 percent. The benefits from the programs are quite large relative to recipients' incomes. Effective marginal tax rates under in‐kind transfers are appreciably lower than they would be if the programs gave cash. Poverty rates among recipients are markedly lowered if one counts the value of in‐kind transfers as income; this effect is insensitive to whether one accounts for the discounting of in‐kind transfers by recipients.
STOCHASTIC EVOLUTIONARY DYNAMICS IN THE REPEATED PRISONERS' DILEMMA
Authors: Linster Bruce G.
Published: January 2010

This paper explores boundedly rational behavior in the infinitely repeated prisoners' dilemma. Strategy choices are modeled as finite automata, and the evolution of populations through asexual reproduction with mutation is explored. Evolutionary success is based on how well the strategy does in an infinite game against randomly matched opponents, and mutation schemes based on a stylized model of these strategies are employed. The results demonstrate when either defecting or cooperating strategies tend to evolve, depending on how important the future is. Interestingly, when the strategies are allowed to become tolerant of defections, the population cycles between defecting and cooperating strategies.
TEACHING TOOLS: COOPERATIVE LEARNING IN ECONOMICS
Authors: Maier Mark H. , Keenan Diane
Published: January 2010

Cooperative learning is a structured, systematic instructional technique in which students work together in small groups toward a common goal. We demonstrate the effectiveness of cooperative learning with an illustrative example for teaching the labor supply curve. Recommendations for introducing the technique, forming groups, the instructor's role during group work, grading and extensions of cooperative learning to other topics are discussed.
POLITICAL INFLUENCE AND REGULATORY POLICY: THE 1984 DRUG LEGISLATION
Authors: Olson Mary K.
Published: January 2010

This paper applies a positive theory of legislation to explain the development of the 1984 Drug Price Competition Act and the Patent Term Restoration Act. Specifically, it examines why regulatory reforms prior to 1984 were stalemated, and why the 1984 legislation was enacted. Results show that prior to 1984, members of the key congressional committees had preferences in which the proposed bills could not beat the status quo. However, changes in subcommittee membership in the House combined with a change in the majority party in the Senate created a situation in which the 1984 legislation could defeat the status quo.
VARIETY AND SUPERSTARDOM IN POPULAR MUSIC
Authors: Hamlen William A.
Published: January 2010

The recording industry for popular singers, 1955–1987, consisted of a lower‐end market for singles and a higher‐end market for albums. The singles market acted as an entry‐level quality filter for the album market. While this two‐tier market system might have led to the “superstar phenomenon” in the Marshall‐Rosen sense, other non‐quality factors, such as the singer's race or musical style, resulted in an imperfect quality filter, possibly explaining why the industry did not exhibit superstardom statistically.
DO CIGARETTE EXCISE TAX RATES MAXIMIZE REVENUE?
Authors: Merriman David
Published: January 2010

Buchanan and Lee [1982] suggest that politicians choose tax rates on the positively sloped segment of the short‐run rate‐revenue curve but the negatively sloped segment of the long‐run curve. This paper uses recent estimates of the slope of the cigarette demand curve by Becker, Grossman and Murphy [1994] to test the hypothesis. Becker, Grossman and Murphy's parameter estimates combined with state‐by‐state data on key variables yields strong evidence against the hypothesis and instead suggests that marginal revenues from cigarette excise taxes are positive in every state.
BRIDGING THE NATURAL AND THE SOCIAL: SCIENCE AND CHARACTER IN JEVONS'S POLITICAL ECONOMY
Authors: White Michael V.
Published: January 2010

A common characterization of the “marginalist revolution” is that it focused on individuals, depicted economics as the universal application of behavioral laws of choice, and made a clear distinction between the analyses of “pure” economic theory and economic policy. This characterization effaces a number of important differences between the work of W. Stanley Jevons and later supply and demand theories. Using Jevons's discussion of reductions in working hours to illustrate the analysis, the paper shows how he used the Victorian language of “civilization” and “character” to designate class and race behavior in theTheory of Political Economy.
MOVING OUT OF THE HOUSE: AN ANALYSIS OF CONGRESSIONAL QUITS
Authors: Schansberg D. Eric
Published: January 2010

Despite extensive study concerning involuntary departures by U.S. House members, little has been said about voluntary departures from the House–‐quit behavior. This paper has three primary purposes: (1) to establish a theoretical framework that models the full range of choices a representative faces in any given term, (2) to measure the impact of different variables that affect representatives' quit behavior, and (3) to explain why Republicans have been more likely to pursue higher office than their Democratic colleagues.
WHAT DOES REPUTATION REALLY ASSURE? THE RELATIONSHIP OF TRADEMARKS TO EXPECTATIONS AND LEGAL REMEDIES
Authors: Alessi Louis De , Staaf Robert J.
Published: January 2010

Theoretical and empirical considerations suggest that trademarks guarantee more than just quality: they assure specific performance, that is, fulfillment of the specific terms of the contract. The specific performance hypothesis implies that a firm's investment in trademark capital varies directly with the damages that its customers expect to bear from a breach and the legal difficulties of obtaining compensation. The hypothesis also helps to explain why competitors of firms whose products are recalled lose wealth, why some damages allowed by law intentionally provide less than full compensation, and why firms who sell only to other firms also invest in trademarks.
AN EMPIRICAL ANALYSIS OF OIL PRICE SHOCKS IN THE INTERWAR PERIOD
Authors: Mcmillin W. Douglas , Parker Randall E.
Published: January 2010

This paper presents results that indicate that oil price shocks were economically important in explaining movements in industrial production, and, to a lesser degree, movements in wholesale prices in the period between World Wars I and II. The framework for analysis is a vector autoregressive model estimated using monthly data over 1924:2–38:6 that employs a financial intermediation variable, a measure of relative oil prices, and other variables typically found in small macroeconomic models. The impact of oil price shocks is evaluated through computation of variance decompositions and an historical decomposition over the 1929:9–38:6 period.
ACQUISITION AND DISSEMINATION OF INFORMATION IN IMPERFECTLY COMPETITIVE MARKETS
Authors: Andersen Torben M. , Hviid Morten
Published: January 2010

In imperfectly competitive markets, incentives for the acquisition and dissemination of information by prices is significantly affected by strategic considerations. Since prices reveal information, firms possessing market power may choose to set prices which are either biased or not adjusted to all available information so as to distort their information content. Even when information is costlessly available strategic considerations may lead firms to remain uninformed. These results are illustrated in a simple Stackelberg model with price‐setting firms where the pricing game is preceded by an information acquisition game.
ALTERNATIVE COLLECTIVE‐GOODS MODELS OF MILITARY ALLIANCES: THEORY AND EMPIRICS
Authors: Conybeare John A.C. , Murdoch James C. , Sandler Todd
Published: January 2010

How should the defense activities of allies be aggregated to determine the alliance‐wide level of defense? Two alternative models–best shot and weakest link–are contrasted with simple summation of defense spending or manpower for aggregating allies' defense efforts. We extend the joint product model to include these methods of aggregation, and devise an empirical procedure to test between best‐shot and weakest ‐link models. We apply this test to four alliances: Triple Alliance (1880–1914), Triple Entente (1880–1914), Warsaw Pact (1963–1987), and NATO (1961–1987). The testing procedure can be applied to other collective choice situations.
THE 1985‐86 OIL PRICE COLLAPSE AND AFTERWARDS: WHAT DOES GAME THEORY ADD?
Authors: Griffin James M. , Neilson William S.
Published: January 2010

This paper focuses on the strategies used by OPEC to generate cartel profits over the period 1983‐90. The evidence supports the hypothesis that OPEC adopted a swing producer strategy from 1983 to 1985. But when Saudi Arabia's profits fell below the level of Coumot profits in the summer of 1985, it abandoned the role of swing producer, driving prices to the Cournot level. Subsequently, Saudi Arabia appears to have adopted a tit‐for‐tat strategy designed to punish excessive cheating by other OPEC members. Based on these findings, the strengths and limitations of game theory are assessed.
EVALUATING CHANGES IN THE DISTRIBUTION OF CAPITAL WEALTH
Authors: Yunker James A.
Published: January 2010

A small‐scale general equilibrium model in which the distribution of capital wealth is a key parameter is employed to examine the potential economic consequences of greater capital wealth equality. Every performance indicator examined–aggregate income, consumption equality, social welfare in the sum‐of‐utilities sense, and aggregate saving–is improved by greater capital wealth equality. However, the bottom‐line social welfare gain, relative to the present high‐inequality situation–even from the maximum achievable level of complete equality in capital wealth distribution–would be numerically rather modest.
DO UNIONIZED FIRMS HIRE BETTER WORKERS?
Authors: Wessels Walter J.
Published: January 2010

It is a strong prior among many economists that unionized firms hire better‐quality workers to offset higher union wages. In fact, standard economic theory does not support this prior. The key insights introduced by this paper are that, first, unions will likely raise future wages to reflect improvements in worker quality and, second, that unionized firms, anticipating this, often do better by hiring lower‐quality workers. This surprising result has empirical support.
CAMPAIGN WAR CHESTS AS A BARRIER TO ENTRY IN CONGRESSIONAL RACES
Authors: Hersch Philip L , Mcdougall Gerald S.
Published: January 2010

Intimidate and overpower have been used in campaign lore to describe the effects of an incumbent's war chest on potential challengers. We argue that a war chest can deter challengers by signalling a credible commitment to mount a formidable campaign if entry occurs. Results from a trichotomous logit model indicate that a large war chest reduces both the probability of a contested race, and the quality of the challenger, where entry does occur. The effect on the efficiency of political markets is unclear, however, depending on the reasons why incumbents are able to raise large war chests.
IN‐KIND VERSUS CASH TRANSFERS IN THE PRESENCE OF DISTORTIONARY TAXES
Authors: GAHVARI FIROUZ
Published: January 2010

In‐kind transfers can Pareto‐dominate cash transfers as a means of income redistribution if in‐kind transfers and leisure are Hicks substitutes and leisure is a normal good. The result holds when redistributive instruments also include a linear income tax. The paper proves that if the poor receive more in‐kind transfers (and the rich less) than what they would choose for themselves then, compared to cash transfers, there will be a higher labor supply by the poor, a lower labor supply by the rich, and higher levels of aggregate pre‐tax income and tax revenues.
THE VERTICAL CHAIN OF RESEARCH AND DEVELOPMENT IN THE PHARMACEUTICAL INDUSTRY
Authors: WARD MICHAEL R. , DRANOVE DAVID
Published: January 2010

This paper examines the relationship between basic and applied pharmaceutical research. We focus on three stages of research and development (R & D): government‐funded basic research; publication in medical journals; and industry‐finded applied R&D. We estimate that a one percent increase in basic research in a particular therapeutic category causes a 0.76 percent increase in industry R&D in that category, and a 1.71 percent increase in other categories, mer seven years. We also find that research incentives differ across government, academic and industry researchers. For example, government funding favors diseases that are less prevalent and more debilitating than industry funding.
JAPAN'S SHIFT FROM PROCESS TO PRODUCT PATENTS IN THE PHARMACEUTICAL INDUSTRY AN EVENT STUDY OF THE IMPACT ON JAPANESE FIRMS
Authors: KAWAURA AKIHIKO , CROIX SUMNER J. LA
Published: January 2010

In 1975 Japan expanded the scope of its patent law by introducing product patents for newly developed chemical and pharmaceutical products. We use rate‐of‐return data from the Tokyo Stock Exchange for Japanese pharmaceutical companies to examine the impact of the change in the patent law. Our empirical findings indicate that the passage of the new patent law induced an excess return of approximately 26 percent to a portfolio of large pharmaceutical companies. Companies with R&D programs specializing in new product development experienced large gains, while companies with R&D programs specializing in imitative process patents experienced no gains.
HAS FEDERAL BUDGET DEFICIT POLICY CHANGED IN RECENT YEARS?
Authors: HAUG ALFRED A.
Published: January 2010

This paper applies new tests for parameter instability in cointegrated regression models to the U.S. Federal government's intertemporal budget constraint in order to detect whether there has been a regime change in spending and taxing policies. Some researchers have argued that fiscal policy under Presidents Reagan and Bush moved the U.S. deficit onto an unsustainable path. My results suggest that government deficit policy in the 1980s was not significantly different from policies during the three earlier decades. However, a diverging debt‐GNP ratio suggests that the government will run into problems marketing its debt if current policy continues.
ASYMMETRIC VALUATION OF GAINS AND LOSSES AND PREFERENCE ORDER ASSUMPTIONS
Authors: KNFTSCH JACK L.
Published: January 2010

Recent findings of large differences between people's valuations of gains and losses imply that the common preference order axioms of completeness, transitivity, and dominance, on which economic analyses and predictions of consumer behavior are largely based, may not be consistent with actual choices. This paper reports the results of an experimental test of the preference order assumptions using real exchanges of two goods and money. The findings show consistent differences in the valuation placed on goods and money depending on whether the entitlements are being acquired or given up, and provide direct evidence of preference assumption violations.
INPUT CHOICES UNDER PRICE UNCERTAINTY
Authors: GHOSAL VIVEK
Published: January 2010

Theory shows that, depending on risk preferences and technological parameters, price uncertainty may alter firms' choice of capital intensity. This paper presents an empirical analysis of the effect of price uncertainty on firms' choices of capital and labor stocks. Empirical results from a cross‐section of manufacturing industries, as well as within‐industries over time, show that greater price uncertainty increases an industry's capital‐labor ratio. It appears that risk aversion does not dominate firms' decision making. These empirical findings have implications for the analysis of factor demand and productivity, and capacity utilization rates.
TEACHING TOOLS EXPERIENTIAL LEARNING IN THE UNDERGRADUATE CLASSROOM: TWO EXERCISES
Authors: NERAL JOHN , RAY MARGARET
Published: January 2010

We describe two classroom exercises which can be used to reinforce undergraduate students' understanding of (1) production and cost concepts and (2) the concept of economic scarcity. In the first exercise, students use their experience in producing “widgets” in a single variable input environment to derive a wide range of production and cost data. In the second exercise, students use their experience in producing two goods under various allocations of a fixed set of resources to generate a production possibilities frontier. The resulting links between concept and experience enhance students' understanding of these important concepts.
TESTING FOR EFFICIENCY IN LOTTO MARKETS
Authors: SCOTT FRANK A. , GULLEY O. DAVID
Published: January 2010

State‐sponsored lotto games, because they are pari‐mutuel and because jackpots with no winner are rolled over into the next drawing, present an excellent opportunity to test for market efficiency. Using data from Massachusetts, Kentucky, and Ohio, we investigate bettors' responses and test for weak‐form efficiency. Lotto bets do not have positive net expected returns, thus weak‐form efficiency exists. To evaluate strong‐form efficiency we utilize the concept of a rational expectations equilibrium. We find that in general lotto bettors' decisions to play generate a level of sales that conform to their original forecasts of expected value.
THE CHANGING INFLUENCE OF MONEY AND MONETARY POLICY ON EXCHANGE RATES
Authors: KEARNEY ADRIENNE A.
Published: January 2010

This paper focuses on an old issue—the linkage between money announcements and the exchange rate. It shows that the magnitude of the time‐varying response of the spot exchange rate to an unanticipated money announcement is mainly driven by agents' expectations of the Federal Reserve's time‐varying response to the deviation of the actual money supply from a prespecified target. The inference is, the magnitude of the exchange rate's response to economic announcements depends on market participants' expectations about the announcements and the Fed's probable monetary policy response.
THE BIASES OF FEDERAL RESERVE BANK PRESIDENTS
Authors: HAVRILESKY THOMAS , GILDEA JOHN
Published: January 2010

This paper develops statistical tests which show that in Federal Open Market Committee voting, Federal Reserve bank presidents, as a group, prefer less expansionary monetary policy than Federal Reserve board members. Further tests show that a subset of Federal Reserve bank presidents vote in a manner which is consistent with the partisanship of the U.S. president during whose term they were appointed. Membership in this subset is highly correlated with a career as an economist. These results have implications for reforms which would alter the voting power of bank presidents on the FOMC.
CONSUMER CONFIDENCE AND ECONOMIC FLUCTUATIONS
Authors: MATSUSAKA JOHN G. , SBORDONE ARGIA M.
Published: January 2010

If consumers become pessimistic about the state of the economy, can there be a slowdown in output, even if their pessimism is not based on economic fundamentals? Recent macroeconomic models show the answer is yes, if there are “strategic complementarities” and multiple equilibria. We investigate the link between consumer confidence and economic fluctuations using vector autoregressions. In all models, after controlling for economic fundamentals, the hypothesis that consumer sentiment does not cause GNP (in the Granger sense) can be rejected. Variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of GNP.