RANKING MUTUALLY EXCLUSIVE PROJECTS: THE ROLE OF DURATION

This paper develops a new measure of cash-flow timing called “return duration.” Numerically quite close to Macaulay duration, return duration is a straightforward function of a project's net present value (NPV) and internal rate of return (IRR). When comparing mutually exclusive projects, differences in return duration can explain ranking conflicts between NPV and IRR. The paper also clarifies the conditions under which a manager should consider duration or generalized NPV before making investment decisions when faced with such ranking conflicts.     

THE ROLE OF SUNK COSTS IN THE DECISION TO INVEST IN R&D*

We present a dynamic empirical model of a firm's R&D decisions that is consistent with the existence of sunk R&D costs, taking into account that these costs may differ between small and large firms, and among different technological regimes. We estimate a multivariate dynamic discrete choice model using firm‐level data of Spanish manufacturing for 1990–2000. Conditional on firm heterogeneity and serially correlated unobservable factors, we find that R&D history matters. This true state dependence allows inferring the existence of sunk R&D costs associated with performing R&D. Sunk R&D costs are found to be higher for large, high‐tech firms.     

THE ROLE OF DIFFERENTIATION STRATEGY IN LOCAL TELECOMMUNICATION ENTRY AND MARKET EVOLUTION: 1999–2002*

We examine the role of differentiation among competitive local exchange carriers (CLECs) in nearly 1,200 U.S. cities in 1999 and 2002, before and after a valuation crash affecting communications firms. We test and reject the null hypothesis of homogeneous competitors. We also find strong evidence that differentiated CLECs account for both potential market demand and the business strategies of competitors when making their entry decisions. Finally, product heterogeneity in markets in 1999 helps predict how the structure of markets evolved through 2002. We conclude that the policy debate for local telecommunications regulation should account for differentiated behavior.     

THE ROLE OF COST IN DETERMINING WHEN FIRMS OFFER BUNDLES*

We model competitive bundling and tying, allowing for marginal cost savings from bundling, fixed costs of product offerings, and variation in customer preferences. Pure bundling can arise either because few people demand only one component or because, with high fixed costs, a single product efficiently satisfies customers with diverse tastes. We conclude by analyzing empirically the bundling of pain relievers with decongestants. The discount for the bundled product is large. We argue that our model provides a simpler, more compelling explanation for the size of the discount than the demand‐centered approach to bundling by a monopolist.     

THE EFFECTS OF CAPACITY ON SALES UNDER ALTERNATIVE VERTICAL CONTRACTS*

Retailer capacity decisions can impact sales for products by affecting, for example, availability and visibility. Using data from the U.S. video rental industry, we report estimates of the effect of capacity on sales under alternative vertical contracts. New monitoring technologies facilitated new supply contracts in this industry, reducing upfront costs of capacity but requiring minimum capacity purchases, strongly impacting stocking decisions. We find that larger capacity (more tapes) for a given title can substantially increase rentals of that title; and that alternative vertical contractual forms for distributing tapes from studios to retailers strongly impacts the relationship between capacity and rentals.     

TARGETED ADVERTISING: THE ROLE OF SUBSCRIBER CHARACTERISTICS IN MEDIA MARKETS*

This paper seeks to establish the importance of targeted advertising in media markets. Using zip‐code level circulation for U.S. newspapers, I show that newspapers facing more competition have lower circulation prices but higher advertising prices than similar newspapers facing little or no competition. I explain this by showing that newspapers in more competitive markets are better able to segment readers according to their location and demographics. This leads to greater homogeneity in the characteristics of subscribers and raises advertisers' willingness to pay for such readers. The results imply a substantial benefit to advertisers and media firms from targeted advertising.     

OPERATING SYSTEM PRICES IN THE HOME PC MARKET*

Because the demand for OS is a derived demand revealed through the demand for PCs and because its elasticity is relatively small, the profit‐maximizing price of DOS/WIN that would result from a static equilibrium is much higher than the observed price. We investigate this assertion empirically by fitting a differentiated‐products model of the home PC market to panel data of all PC brands sold in the G7 countries over the period 1995–1999. The results confirm that the low value of the aggregate elasticity of demand for PCs is the result of differentiation and substitution among PCs.     

ON THE ANTICOMPETITIVE EFFECT OF EXCLUSIVE DEALING WHEN ENTRY BY MERGER IS POSSIBLE*

We extend the literature on exclusive dealing by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive dealing can be used to improve the incumbent's bargaining position in the merger negotiation. Second, the incumbent finds it easier to elicit the buyer's acceptance of exclusivity. Third, despite allowing the more efficient technology to find its way into the industry, exclusive dealing reduces welfare because (i) it may trigger entry through merger whereas independent entry would be socially optimal and (ii) it may deter entry altogether.     

THE ADOPTION OF STATE ELECTRICITY REGULATION: THE ROLE OF INTEREST GROUPS*

This paper examines the adoption of state electricity regulation around the beginning of the 20th century. I model this decision as a hazard rate to determine what influenced the adoption of state regulation. I find that adoption is positively correlated with capacity shortages, greater wealth and lower residential electricity penetration rates. These results suggest that state regulation responded to regulatory inefficiencies and residential consumer interests. In addition, adoption rates were higher in states that had a strong industrial and coal mining presence. These results are consistent with the interest group and contracting theories of regulation.     

MEASURING THE BUSINESS STEALING,CANNIBALIZATION AND MARKET EXPANSION EFFECTS OF ENTRY IN THE U.S. MOTION PICTURE EXHIBITION MARKET*

Using a large and comprehensive theater level database covering over $18 billion in theater revenues over a five year period, I document the extent and nature of business stealing, revenue cannibalization and market expansion that occurred during the height of the 1990's boom in movie theater construction.     

PRODUCT VARIETY AND COMPETITION IN THE RETAIL MARKET FOR EYEGLASSES*

I use original data on eyewear retailers in a cross‐section of U.S. markets to study how firms' product range choices vary with the degree of local competition. Market level regressions show average per firm variety declining in the number of rivals. In regressions at the firm level, taking account of spatial differentiation within each market, a non‐monotonic relationship between product ranges and competition is apparent. As the number of nearby rivals increases, per firm variety may first rise before eventually declining. Explanations for this pattern are offered, in terms of a tradeoff between business stealing and clustering effects.     

国外商家觊觎中国包装机械市场

目前我国包装机械行业水平还不够高,面对国外品牌强劲冲击,国内企业应该采取积极对策.包装机械市场日趋垄断化,目前我国除了瓦楞纸箱包装机械和一些小型包装机有一定规模和优势外,其它包装机械几乎不成体系和规模,特别是市场上需求量大的一些成套包装生产线,如液体灌装生产线、饮料包装容器成套设备、无菌包装生产线等,在世界包装机械市场中均被几大家包装机械企业集团所垄断。     

NATIONAL TELEVISION AND THE MARKET FOR LOCAL PRODUCTS: THE CASE OF BEER*

Information technology lowers the cost of distributing information to dispersed consumers. Because national firms reap larger benefits from new media than firms serving only local consumers, media innovations may reduce the market for local products. This paper considers the effect of television on the market for local beer. Using market‐level data on television penetration, local breweries and brewery production from 1945–1960, results show that increases in television penetration are associated with fewer local breweries and less local beer production. The results indicate that the industrial organization of media markets can affect the structure of markets for local products.     

DO ROCKETS RISE FASTER AND FEATHERS FALL SLOWER IN AN ATMOSPHERE OF LOCAL MARKET POWER? EVIDENCE FROM THE RETAIL GASOLINE MARKET*

This study explores the possibility that local market power influences the observed asymmetric relationship between changes in wholesale gasoline costs and changes in retail gasoline prices. I exploit an original data set of weekly gas station prices in Southern California from September, 2002 to May, 2003, and take advantage of detailed station and local market level characteristics to determine the extent to which geographic and product differentiation influence price response asymmetry. I find that brand identity, proximity to rival stations and local market features and demographics each influence a station's predicted price‐response asymmetry.