On optimal scarcity prices

This article contributes to the debate of missing money (compare Joskow(2007a)). This debate has seriously questioned the desirability of limiting scarcity prices in markets with fluctuating demand by emphasizing their potentially negative impact on firms' investment decisions in the long run. A prominent example are recently liberalized electricity markets, where competition authorities have imposed price caps³ or adopted other measures to mitigate high scarcity prices.The impact of reduced scarcity prices in the long run still is only incompletely explored. We thus analyze investment of firms in base load and peak load technologies in a market with fluctuating demand under imperfect competition. We show that an appropriately chosen limitation of scarcity prices is not only beneficial in the short run but also in the long run. It leads to a strict increase of investment in peak load technologies, leaving investment in base load technologies unchanged. Furthermore, we characterize the optimal limit on scarcity prices.     

Regulatory inertia versus ICT dynamics: The case of product innovations

This article conjectures that the legacy industry-specific regulation that has governed the telecommunications sector for a long time is in basic conflict with the dynamics and product innovations that characterize the modern information and communications technology (ICT) sector. Reasons for the failure of legacy regulation to promote product innovations are explained and proposals for alternatives, such as deregulation and regulatory reform are discussed. Both regulation and competition policy are more difficult for ICT than for other sectors. Therefore both, regulation and competition policy may need reforms in order to deal with new problems. The most drastic and most realistic alternative to legacy-type regulation remains deregulation and a move to competition policy. Symmetric regulation, smart regulation, quasi-Coasean approaches and subsidies all have some limited applicability to specific situations, but are all associated with complications that have to be resolved, while competition policy is a comprehensive alternative. Last-mile access and gatekeeper access are analyzed as two main areas of legacy regulation, which are in danger of being exported to other ICT areas. Such exports may negatively affect the dynamics of the ICT industry. Rather than being exported, legacy regulations should be reduced in order to enhance product innovations.     

Price Controls and Market Structure: Evidence from Gasoline Retail Markets

In this paper we study the effect of price floor regulations on the organization and performance of markets. The standard interpretation of the effects of these policies is concerned with short‐run market distortions associated with excess supply. Since price controls prevent markets from clearing, they lead to higher prices. While this analysis may be correct in the short‐run, it does not consider the dynamic equilibrium consequences of price controls. We demonstrate that price floor regulations can have important long‐run effects on the the structure of markets by crowding them and creating endogenous barriers to entry for low‐cost retailers. Moreover, we show that these factors can indirectly lower productivity and possibly even prices. We test this in the context of an actual regulation imposed in the retail gasoline market in the Canadian province of Québec and show that the policy led to more competition between smaller/less efficient stations. This resulted in lowered sales, and, despite the reduction in efficiency, did not increase prices.     

Analytical Screens for Electricity Mergers

Electricity mergers pose distinct challenges for competition policy. Electricity demand is highly inelastic in the short run, storage is limited, and transmission constraints limit the ability to substitute generation at other locations. As a result, a merger can affect prices in many different markets and even generators with small market shares may be able to exercise market power. The U.S. Federal Energy Regulatory Commission’s approach for screening horizontal mergers, based on the concentration thresholds in the Department of Justice/Federal Trade Commission Horizontal Merger Guidelines, can fail to identify mergers that lessen competition, and mergers that fail the FERC screen may have no significant anticompetitive effect. We propose competitive residual demand (CRD) analysis, which examines the supply curves of the markets affected by a merger and considers the ability and incentive of firms to raise prices before and after a proposed merger. CRD analysis is a relatively easy way to address the incentives for generators to exercise market power and relies on data that are often available. Vertical (convergent) mergers between electricity and gas raise additional concerns, and we propose a methodology to screen vertical mergers.     

Why Do REIT Returns Poorly Reflect Property Returns? Unrealizable Appreciation Gains due to Trading Constraints as the Solution to the Short‐Term Disparity

This study addresses the short‐term disparity between REIT returns and direct property returns, and argues that this phenomenon is due to the trading constraints in the direct property market imposed on REITs (the dealer rule). This renders REITs unable to time markets in order to realize short‐term property appreciation profits, making REITs primarily a property income investment rather than a full property investment, and explains the observed disparity. Empirically, I find that REIT returns consistently reflect property income returns, but not property appreciation returns. This makes this study the first in the literature to find a consistent link between REIT returns and any portion of direct property returns at short time horizons, in the context of a linear factor model. I then set up a natural laboratory to test the trading‐constraints explanation by examining the appreciation dependence of different types of REITs, which should be differently affected by the trading constraints. I find that returns to UPREITs, which are less affected by the constraints, have a stronger appreciation dependence than returns to regular REITs. I also perform a size test and find that large REITs, which are less affected by the constraints, have a stronger appreciation dependence than small REITs. When testing the effects of UPREIT and size characteristics simultaneously, I find a consistent UPREIT effect. I further find that Real Estate Operating Companies (REOCs), which are not subject to trading constraints, show short‐term property appreciation dependence. These findings offer strong support for the trading‐restrictions explanation.     

Do Edgeworth price cycles lead to higher or lower prices?

A recent literature seeks to understand the causes of the high-frequency, asymmetric retail price cycles observed in many retail gasoline markets. However, much less attention has been given to the effects of the cycles, in particular, whether the cycles lead to higher or lower prices and margins. The leading theory for the underlying cause of the price cycles, Edgeworth price cycles, is silent on the issue. The challenge in addressing this most important question has been the difficulty in isolating cycle effects from other confounding factors, especially market structure. In this article, I exploit a unique natural experiment to isolate the effect of cycles — a refinery fire that, in a matter of days, halted cycles that had previously persisted for decades. I find that Edgeworth price cycles lead to lower prices and lower margins. I conclude with implications for competition policy.     

Economic Policy Uncertainty and House Prices: Evidence from Geographical Regions of England and Wales

This article empirically investigates the effect of the economic policy uncertainty on house prices across 10 different geographical regions of England and Wales. The empirical study is conducted by means of the autoregressive distributed lag bounds cointegration test. Results show a stable long‐run relationship (cointegration) between house prices and its determinants (including economic policy uncertainty) in nine of the regions. Results also evince long‐ and short‐term negative effect of uncertainty to house prices. These results clearly indicate the importance of economic policy uncertainty in the determination of UK house prices and demand.     

电子货币对货币政策效果的挑战

本文介绍国外学者关于电子货币发展影响货币政策效果的观点,指出电子货币将减少公众对央行基础货币的需求,这就势必削弱以货币供给量为基础的货币政策的效果,甚至可能使其失去作用。但实际上,只要央行将调控重点转移到利率上来,货币政策仍可以有很大的用武之地。本文分析和证明我国电子货币的使用,在短期中可以提高货币政策的效果,因为,货币漏损率和超额准备率的下降,可以提高货币乘数,但长期中货币数量调控的效果也会下降,所以我们也应尽早做好向利率调控转轨的准备。     

Innovation and competition: The role of the product market

We study how competition impacts innovation (and welfare) when firms compete both in the product market and in innovation development. This relationship is complex and may lead to scenarios in which a lessening of competition increases R&D and consumer welfare in the long run. We provide conditions for when competition increases or decreases industry innovation and welfare. These conditions are based on properties of the product market payoffs. Implications for applied work and policy are discussed.     

Patent Races with Secrecy

Firms do not always patent their innovations. Instead, they often rely on secrecy to appropriate the returns of innovations. This paper endogenizes firms’ patent propensity, and shows that when the equilibrium patent propensity is small, strengthening patent protection can decrease firms’ incentive to innovate. Paradoxically, this result holds precisely when a stronger patent policy induces more patent applications. Also, these results can arise even in the simplest patent race model with independent innovations as well as with complementary innovations.     

Context matters: Diversity's short‐ and long‐term effects in fortune's “best companies to work for”

Research summary: Previous research has examined the racial diversity‐productivity relationship in corporations with an evident high commitment to minority programs, Fortune's “Best Companies for Minorities.” To assess generalizability, we replicate this research using a different context of high organizational‐employee value congruence, Fortune's “Best Companies to Work For.” We are not able to find evidence for the curvilinear relationships previously found, but do uncover a linear negative relationship between racial diversity and short‐run performance. Managerial summary: Using Fortune's “Best Companies for Minorities,” previous research found that racial diversity affected both firm productivity and Tobin's q. To see if we could find these results in a different group of firms, we replicate this research using a sample drawn from Fortune's “Best Companies to Work For.” The former sample is distinguished by high commitment to minority programs, while the one used here stresses high congruence of values between the organization and all its employees. We are unable to replicate the relationships previously found, however, but do find that increasing racial diversity had a negative effect on firm productivity. Copyright © 2016 John Wiley & Sons, Ltd.     

论采油企业成本管理控制长效机制的建立

为了完成生产经营任务，采油企业内某些单位客观上还存在一些短期行为。从最终影响来看，采取短期行为，可能使得采油成本在短期内趋于下降，但会导致后期成本急剧上升，不利于企业的可持续发展。因此，需要运用法律、行政、制度、政策等多种手段，建立成本管理控制长效机制，以克服各种短期行为的发生，从而实现采油企业成本的长期效能。     

Imperfect competition law enforcement

Competition policy is a subject of often heated debate. Competition authorities, seeking to prevent or battle anticompetitive acts in complex cases to the best of their abilities, regularly find themselves advised by rival economic theories and disputed empirical analyses. As a consequence, there is a real possibility that they may occasionally err, missing true violations of competition law or finding firms liable that actually had no other intentions than good competition. In this paper, possible consequences of such imperfect competition law enforcement on firm strategies are considered. In a simple model of collusion, it is found that the incidence of anti-competitive behavior increases in both types of enforcement errors: Type II errors decrease expected fines, while Type I errors encourage industries to collude precautionary when they face the risk of a false conviction. Hence, fallible antitrust enforcement may stifle genuine competition, thus stimulating the very behavior competition policy is meant to deter. When enforcement errors are non-negligible, competition authorities run the risk of being over-zealous, in the sense that welfare is best served by an authority that is selective and conscientious in its targeting of alleged anticompetitive acts.     

Competition Policy under Laissez-Faireism: Market Power and its Treatment in Hong Kong

The paper describes the current competition policy framework in Hong Kong: how it came into existence, what business practices are prohibited, and how the enforcement system works. Recent cases in the telecommunications industry are used to illustrate the sectoral approach, a unique feature of Hong Kong's competition policy. We argue that a sectoral approach faces two fundamental drawbacks. First, due to having different ``rules of the game' for different sectors, the allocation of resources may be distorted in the long run. Second, since the relevant regulatory agencies perform dual roles both as competition policy enforcer and as traditional regulator of natural monopolies, the impartiality of their competition decisions may not be credibly conveyed to the public. We also address other specific problems associated with the sectoral approach, such as the exclusion of structural issues, narrow coverage of sectors, and the lack of public enforcement. We conclude that an overall competition law can better promote competition and economic efficiency in Hong Kong.     

Food product composition,consumer health,and public policy: Introduction and overview of special section

As efforts to improve diets in high income countries intensify, attention has turned to how policies may influence diet composition. The case studies in this special issue contribute to our understanding of how two main types of policies have influenced food product composition and dietary outcomes: (1) policies affecting food manufacturers’ input costs and (2) information policy affecting competition. Research on the first type of policy is relatively new, but suggests that US commodity policies would not be good policy instruments to influence diets, except through the long run impacts of agricultural research. Research on the impacts of information policy continues to demonstrate that it can spur food industry competition to introduce healthier products, but may not result in healthier diets. International comparisons show where the US experience may have relevance for other high income countries.     

Entrepreneurship,innovation, and political competition: How the public sector helps the sharing economy create value

Research Summary: With the recent growth of the sharing economy, regulators must frequently strike the right balance between private and public interests to maximize value creation. In this article, we argue that political competition is a critical ingredient that explains whether cities accommodate or ban ridesharing platforms and that this relationship is moderated in more populous cities and in cities with higher unemployment rates. We test our arguments using archival data covering ridesharing bans in various U.S. cities during the 2011–2015 period. We supplement these data with semistructured interviews. We find broad support for our arguments while mitigating potential endogeneity concerns. Our study has important implications for nonmarket strategy, entrepreneurship and innovation, and public-private partnership literatures. In addition, our findings inform policy debates on the sharing economy. Managerial Summary: Entrepreneurs and businesses oftentimes face severe regulatory barriers when commercializing innovative products and services even if the innovations are generally beneficial for consumers and the broader society. This research focuses on the political determinants of regulation to provide a better understanding of why some markets are more receptive to innovative products while other markets are more hostile to them. Using the banning of ridesharing companies (e.g., Uber and Lyft) in various U.S. cities during the 2011–2015 period, we find that elected politicians facing less political competition (i.e., not easily replaceable, serving multiple terms, longer tenure in office) were more likely to ban ridesharing companies and favor, potentially displaceable, local taxicab companies. Our research has implications for navigating the political barriers to entry.     

Global integration and innovation: Multicountry knowledge generation within MNCs

This paper examines both conditions that can enable collaborative and combinative knowledge generation within multinational corporations (MNCs) and benefits that firms can achieve from these types of innovations. I posit that more basic relationships that have been established through manufacturing integration can enable multicountry collaborative innovations and that these innovations will bring together diverse knowledge that is likely to spawn further innovation within firms. Empirical analysis of a panel that includes comprehensive and confidential data on the worldwide operations of U.S. MNCs and their worldwide patents reveals robust support for these arguments. Overall, this paper broadens extant research on knowledge generation within MNCs by exploring both the antecedents and benefits of multicountry collaborative innovations. Copyright © 2013 John Wiley & Sons, Ltd.     

On the role of empirical industrial organization in competition policy

In this paper I consider the role of empirical industrial organization (IO) in competition policy. In particular, I consider the effect of the institutional setting in which competition policy is developed on the diffusion of ideas and techniques emerging from the empirical IO literature. In doing so my aims are two fold. First, I aim to understand the areas of competition policy most likely to provide fertile ground for future work, and those which are less likely to have an impact. And second, I hope to make a small step towards ensuring that the important potential synergies between competition policy and empirical IO are more fully developed — to the benefit of both communities and, more importantly, the public. This paper necessarily draws heavily on my experience in the UK, but many remarks may resonate more generally.     

Going short‐term or long‐term? CEO stock options and temporal orientation in the presence of slack

Research summary: We draw on behavioral agency theory to explain how decision heuristics associated with CEO stock options interact with firm slack to shape the CEO's preference for short‐ or long‐term strategies (temporal orientation). Our findings suggest CEO current option wealth substitutes for the influence of slack resources in encouraging a long‐term orientation, while prospective option wealth enhances the positive effect of slack on temporal orientation. Our theory offers explanations for non‐findings in previous analysis of the relationship between CEO equity based pay and temporal orientation and provides the insights that CEO incentives created by stock options (1) enhance the effect of available slack upon temporal orientation and (2) can both incentivize and de‐incentivize destructive short‐termism, depending upon the values of current and prospective option wealth. Managerial summary: We explore how compensation design can play a role in affecting the CEO's preference for short‐ or long‐term strategic projects. When the CEOs have accumulated option wealth, they are more likely to invest in the long term. Yet when they have a large number of recently granted options with the potential to generate significant wealth in the event of successful risk taking, the CEO is more likely to prefer the short term in order to achieve personal wealth gains more quickly. The more liquid assets the firm holds, the weaker both of the aforementioned effects. An implication for boards is that they should anticipate CEO short‐termism if the CEO has been granted new options, underlining the potential negative consequences of option compensation. Copyright © 2015 John Wiley & Sons, Ltd.     

Getting consumers to eat more whole-grains: The role of policy, information, and food manufacturers

The 2005 Dietary Guidelines were unique because they offered quantitative recommendations for consumption of whole-grains. This case study examines the hypothesis that the changed recommendations were responsible for the recent increase in retail sales and consumption of whole-grain food products. We find that release of the Dietary Guidelines and related media attention did increase availability and sales of whole-grain foods. A large impact on consumption occurred through reformulation of existing products, induced by competition among food suppliers. This study reveals the key role product reformulation plays in inter-firm competition and in realization of dietary changes recommended by public policy.