MANAGERIAL INCENTIVES AND THE PRICE EFFECTS OF MERGERS*

Most analysis of market power assumes that managers are perfect agents for shareholders. This paper relaxes that assumption. When managers of a multi‐product firm exert unobservable effort to improve product quality, there is a trade‐off between providing adequate effort incentives and ensuring sufficient price‐coordination between the product divisions. This makes some intra‐firm price competition optimal, explaining why many multi‐product firms allow for competition between divisions. When there are effort spillovers, the optimal amount of price competition can be as great as when the products are under separate ownership. Even with some profit‐sharing, intra‐firm price competition can reduce quality‐adjusted price, which has important implications for antitrust policy.     

企业间互供石脑油价格研究

企业间互供石脑油受计划经济、相关产品价格、石脑油质量标准及供货时间的影响,供需双方存在许多矛盾,关键在于石脑油价格。根据定价原则确定企业间互供石脑油的价格。尽快制定石脑油质量标准,调节７０＾＃汽油消费税,使石脑油与７０＾＃汽油价格差别趋于合理化,才能真正发挥集团优势。     

PENNIES FROM EBAY: THE DETERMINANTS OF PRICE IN ONLINE AUCTIONS*

This paper presents an exploratory analysis of the determinants of prices in online auctions for collectible United States one‐cent coins at the eBay web site. Starting with an initial data set of 20,000 auctions, we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value. We have three major findings. First, a seller's feedback ratings, reported by other eBay users, have a measurable effect on her auction prices. Negative feedback ratings have a much greater effect than positive feedback ratings do. Second, minimum bids and reserve prices have positive effects on the final auction price. In particular, minimum bids appear only to have a significant effect when they are binding on a single bidder, as predicted by theory. Third, when a seller chooses to have her auction last for a longer period of days, this significantly increases the auction price on average.     

MARKET POWER,VERTICAL INTEGRATION AND THE WHOLESALE PRICE OF GASOLINE*

This paper examines empirically the relationship between vertical integration and wholesale gasoline prices. We use discrete and differential changes in the extent of vertical integration generated by mergers in West Coast gasoline refining and retailing markets to test for incentives to raise rivals' costs. The research design allows us to test for a relationship between vertical integration and wholesale prices, controlling for horizontal market structure, cost shocks and trends. We find evidence consistent with the strategic incentive to raise competitors' input costs. This suggests that vertical integration can have a significant impact on wholesale prices.     

POSTING MULTIPLE PRICES TO REDUCE THE EFFECTIVENESS OF CONSUMER PRICE SEARCH*

In a model of competition with imperfect consumer price information and incomplete price search, some consumers may end up comparing prices originating from the same supplier: either because one firm sets multiple prices or because a group of firms colludes. This leads to added monopoly power for these firms, and average prices in the mixed strategy equilibrium become higher. There is a shift in welfare from consumers to producers, both with exogenous and endogenous consumer search behaviour. However consumers might search more or less with multiple prices. The implications for the price‐setting equilibrium, competition policy and recent judgements are considered.     

THE PRICE EFFECT OF ELIMINATING POTENTIAL COMPETITION: EVIDENCE FROM AN AIRLINE MERGER*

This paper analyzes the gain in pricing power that a firm achieves by merging with a potential competitor in its market. Using pricing data for the merger of USAir and Piedmont, empirical analysis finds that prices rose by 5.0 to 6.0 per cent on routes that one carrier served and the other was a potential entrant. This was more than half the increase on routes where the two carriers had been direct competitors. Other important factors included carrier size, market concentration, incumbent's identity and the potential entrant's presence at one or both endpoints.     

MARKET POWER AND PRICE MOVEMENTS OVER THE BUSINESS CYCLE*

This paper develops and tests implications of an oligopoly‐pricing model. The model predicts that during a demand expansion, the short run competitive price is a pure strategy Nash equilibrium but in a recession, firms set prices above the competitive price. Thus, price markups over the competitive price are countercyclical. Prices set during a recession are more variable than prices set in expansions because firms employ mixed strategy pricing in recessions. The empirical analysis utilizes Hamilton's time series switching regime filter to test the predictions of the model. Fourteen out of fifteen industries have fluctuations consistent with this oligopoly‐pricing model.     

THE QUALITY OF INFORMATION AND INCENTIVES FOR EFFORT*

We study the relationship between the precision of information about the performance of an agent in a market, and the incentives this agent has for exerting effort to produce high quality. We show that this relationship can be nonmonotonic. There exists an efficient plausible equilibrium that induces a threshold beyond which any further improvement in the precision of information weakens the agent's incentive to produce high quality. Accordingly, both very accurate and very inaccurate signals about the agent's performance may destroy its incentive to exert effort. A few applications of this result are discussed.     

INCENTIVES FOR CORRUPTIBLE AUDITORS IN THE ABSENCE OF COMMITMENT*

In the absence of commitment to auditing, we study the optimal auditing contract when collusion between an agent and an auditor is possible. We show that the auditor can be totally useless if the auditor's independence can be compromised with relative ease. Even very stiff sanctions on fraud will be unable to make auditing optimal. We then derive a demand for independent external auditing. We endogenize collusion cost as the cost from the risk of future detection. We also derive a justification for the focus of the recent audit reforms on penalties on CEOs in cases of audit fraud.     

EDGEWORTH PRICE CYCLES: EVIDENCE FROM THE TORONTO RETAIL GASOLINE MARKET*

I exploit a new station‐level, twelve‐hourly price dataset to examine the strong retail price cycles in the Toronto gasoline market. The cycles appear similar to theoretical Edgeworth Cycles: strongly asymmetric, tall, rapid, and highly synchronous across stations. I test a series of predictions made by the theory about how firm behaviors would differentially evolve over the path of a cycle. The evidence is consistent with the existence of Edgeworth Cycles and inconsistent with competing hypotheses. While the cycles are an interesting phenomenon for study in their own right, the evidence has important policy and welfare implications.     

THE DETERMINANTS OF INTERNATIONAL PATENTING FOR NINE AGRICULTURAL BIOTECHNOLOGY FIRMS*

This paper examines international patent application decisions of nine agricultural biotechnology firms from 1990–2000 in Australia, Brazil, Canada, China, the European Patent Office, Japan and South Africa. The data reveal a low frequency of international applications despite an initial United States' application, indicating very low values for patents abroad. The results indicate that invention quality plays an important role in firms' decisions to patent abroad and that a single international application is a good predictor of multiple international applications. Further, significant country fixed effects suggest wide differences in business climates and patent enforcement among countries.     

A MODEL FOR DETERMINING THE AVERAGE SERVICE LIFE OF EQUIPMENT*

In summary, we might say that an attempt has been made to trace the major thinking and the major contributions in the field of inventory-control analysis, from its inception in 1912 through the present. Raymond's monumental work, which effectively rounded out the “classical” approach, but left much to be desired, has been discussed. Also noted was the renewed interest in the subject, largely under the impetus of the work of Arrow, Harris and Marschak. The intervening and subsequent work has been traced in some detail     

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.     

中国棉花谁来终结暴涨暴跌

如果你是一家棉纺企业，必然对棉价的变化极为敏感。资料显示，去年6月，中国棉花价格指数是8560元／吨，到2003年1月份是11134元／吨，2月份后。几乎是一天一个价，每天以100元幅度往上涨。仅今年1月到4月初，国内棉花价格上涨226％，比同期国际市场棉花价格涨幅高出145个百分点。棉花进口成本     

RETAIL GASOLINE PRICE DYNAMICS AND LOCAL MARKET POWER*

Using monthly data from the 48 contiguous states (except Nevada) for the 1988–2002 period, it is shown that retail gasoline prices respond faster to wholesale price increases than to equivalent wholesale price decreases. Moreover, markets with high average retail‐wholesale margins experience a slower adjustment and a more asymmetric response. Since gasoline is the only variable input, average margins in a state likely reflect the degree of retail market power. This suggests that sticky prices and response asymmetries in the gasoline market are, at least partially, a consequence of retail market power.