Bundling and Menus of Two-Part Tariffs

Inducing self-selection among different segments of consumers is an important issue in pricing. Some firms induce self-selection by offering a menu of two-part tariffs (e.g., different rate plans) and letting consumers select the tariff and quantity they prefer. Other firms induce self-selection by offering a menu of price-quantity bundles (e.g., different package sizes) and letting consumers select only from among these bundles. We show that bundling is more profitable absent cost considerations. Social welfare may be higher or lower with bundling.     

Duopoly conjectures

This paper embodies the views of the author and does not necessarily represent the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.     

The Financial and Operational Impacts of FERC Order 636 on the Interstate Natural Gas Pipeline Industry

The Federal Energy Regulatory Commission's Order 636 fundamentally altered the regulatory and operational environment of the natural gas industry in 1992, as the culmination of several directives aimed at relaxing regulation and fostering competition. We hypothesize that gas pipeline firms subsequently changed their operational and financial behavior in ways consistent with reduced balkanization, increased competition, and reduced expense preference behavior. Our results indicate that these firms have become more homogeneous financially but less so operationally. We find evidence that the marginal profitability of various pipeline activities has responded more to financial market conditions than to the regulatory environment.     

Local and National Impacts from Landing North Sea Gas in Western Norway

A bstract . A simple framework is presented for the analysis of the local employment, income, sales , and local government impacts of landing North Sea gas at either of two Norwegian kommunes (municipalities). These impacts indicate the different forms of economic change arising from a major economic development event. The average annual net change in these economic measures is estimated for the operational phase of a gas terminal. The analysis indicated substantial differences in local and regional net gains. Both sites yielded positive neteconomic gains, which means noneconomic and national considerations become key decision determinates. These national issues provide the setting to judge the local/regional net gains. The unresolved questions include the national benefits and costs of the landing decision given the small scale of the Norwegian economy, potential future gas finds, and a fully employed economy.     

Monopoly rationing revisited

This paper establishes that, whenever a simple pricing strategy fails to attain to the rationing outcome, a more complex pure price strategy may yet do so. It is also shown that rising marginal cost with uncertain demand may make rationing beneficial.     

The Winner''s Curse in Banking

Theoretical studies have noted that loan applicants rejected by one bank can apply at another bank, systematically worsening the pool of applicants faced by all banks. This study presents the first empirical evidence of this effect and explores some additional ramifications, including the role of common filters—such as commercially available credit scoring models—in mitigating this adverse selection; implications forde novobanks; implications for banks' incentives to comply with fair lending laws; and macroeconomic effects. The evidence supports the simple theory regarding loan loss rates but indicates a positive association between bank structure and income growth.Journal of Economic LiteratureClassification Numbers: G21, D80, L10.     

Gender, poverty and deprivation: Evidence from the Republic of Guinea

The article examines the relationship between gender and consumption poverty and between gender and deprivation in the Republic of Guinea. National household survey data reveal that women are not more likely than men to be consumption poor or to suffer greater consumption poverty. Participatory Poverty Assessment data from the village of Kamatiguia reveal that women are “worse off” than men when deprivation includes, inter alia, excessive work load and reduced decision-making authority. When consumption poverty poorly correlates with other dimensions of deprivation, it should not be the sole guide for equity-based policy intervention.     

Endogenous screening, credit crunches, and competition in laxity

A simple model of lending with endogenous screening predicts that risk-neutral banks tend to adopt tighter lending standards under several conditions commonly seen in recessions: lower interest rates (or spreads), higher default rates, or a smaller fraction of good borrowers. Historical data support these predictions. In addition, better information about borrower types encourages tighter lending standards, and competition in laxity can arise with multiple banks. Within the class of symmetric screening decisions, endogenizing the interest rates disrupts the existence of equilibrium in pure strategies, just as when screening decisions are assumed to be exogenous.     

Correlation Tests for Competitive and Cournot Equilibria

This note derives simple correlation tests for eithercompetitive or Cournot conduct. Robustness of theprocedure is theoretically explored and a time-seriescorrection for inflation or market growth is derived.     

Contemporary Economic thought. The Contribution of Neo-Institutional Economics

This article examines the historical developments of the institutionalist theory of the business enterprise since the early 1900s in order to demonstrate its distinctive characteristics that are often overlooked or belittled by some institutional-evolutionary economists and most mainstream economists. I argue that the institutionalist theory is an evolving and emergent theory, which bears a reciprocal, evolutionary, and cumulative relationship between the business enterprise and society. The institutionalist theory is, therefore, suitable for the understanding of the real-world business enterprise as it can be modified and refined along with the evolution of capitalism. The article begins with a discussion of the present state of the institutionalist theory. The following section is devoted to the major contributions to the institutionalist theory situated in the evolution of U.S. capitalism. The penultimate section provides a critical discussion of new institutional and evolutionary approaches to the firm. The article concludes with a brief discussion as to what should be done for the further development of the institutionalist theory of the business enterprise.