The efficiency costs of the postal monopoly: The case of third-class mail

This paper provides an estimate of the efficiency costs of the letter monopoly for third-class bulk advertising, the Postal Service's second largest category of mail. Using market data from private mail carriers, excess costs to mailers in 1992 are estimated to be about $2.5 billion, almost one-third of the Postal Service's third-class mail revenues. These costs are the sum of (1) the allocative efficiency loss due to reduced output ($237 million); (2) the increased production costs due to non-cost-minimizing behavior ($712 million); and (3) transfers to postal labor ($1.511 billion). Total efficiency costs-the sum of (1) and (2)—are estimated to be about $950 million.The author would like to thank Roger Sherman and an anonymous referee for helpful comments and Monica Bettendorf and Stephen McGonegal for their assistance in preparing this paper.     

Organizational choices for efficiency and market power

We examine the role of strategic consideration in the choice of organizational structures characterizing large corporations. These considerations bridge the gap between the research on transaction costs and organizational forms and the research on strategic entry deterrence and threats. An illustrative model is presented and we derive propositions which look promising for providing empirical benchmarks.     

Corporate monopoly power and risk

The relationship between monopoly power and concentration may be influenced by the ‘riskiness’ of the firm. Two related issues are considered in this paper: the impact of market structure and conduct on the risk of the firm and the impact of risk upon the relationship between profitability and concentration. An a priori relationship between risk, market structure and profitability is derived within the mean-variance framework of the Capital Asset Pricing Model.     

The quiet life of a monopolist: The efficiency losses of monopoly reconsidered

We study the efficiency losses of monopoly in a model where the firm’s total cost of production decreases with the manager’s effort to control cost. In contrast to the existing analyses of oligopolistic and monopolistically competitive markets that find an ambiguous relationship between competition intensity and managerial slack, we demonstrate that, under the same kind of cost condition, monopoly unambiguously reduces effort level and, in the case where ownership and control are separate, magnifies the effects of the moral hazard problem. Furthermore, under an alternative cost condition monopoly raises effort level rather than reducing it. In such a situation the separation of ownership and control may mitigate the productive inefficiency of monopoly.     

产业组织范式的演进:从竞争垄断到竞争合作

产业组织竞争合作范式的生成是内生变量和外生变量交互发生作用的结果。分工与专业化是孕育竞争合作范式的主要内生变量,而经济全球化和网络经济则是竞争合作范式生成的两大外生变量。我国企业应深刻认识现代产业组织范式的演化趋势,一方面要加强产业分工协作,积极融入国际产业分工体系,另一方面要主动参与并加强同跨国公司的合作,真正提升我国产业的国际竞争力。     

Asymmetric information and agenda control: The bases of monopoly power in public spending

A pervasive empirical finding, widely known as the ‘flypaper effect’, is that lump-sum intergovernmental grants generate considerably greater public spending by the recipient jurisdiction than would be predicted by equivalent shifts in personal income in that jurisdiction. Moreover, such observations are inconsistent with standard median voter models of the political process. We posit a model in which it is in the interest of suppliers of a collectively provided good not to generate full information to voters about outside aid. The empirical results are consistent with ‘flypaper’ and suggest that voters are very poorly informed about outside grants.     

Two-dimensional screening: a case of monopoly regulation

This paper deals with the optimal regulatory policy of a monopolist producing two goods and with two-dimensional private information about costs. The case of perfectly and negatively correlated cost's parameters is analyzed and a complete characterization of the optimal mechanism by means of easily interpretable conditions is obtained.     

Increasing returns and aggregate production efficiency by a monopoly

This paper considers an economy where there are many firms with increasing-returns-to-scale technologies and attempts to derive sufficient conditions ensuring that monopoly achieves aggregate production efficiency. In a setting of one output and many inputs, we obtain such sufficient conditions which can be interpreted as a nondecreasing generalized average productivity of inputs for each firm. We also show that a special class of generalized Cobb-Douglas production functions has such a property that monopoly always achieves aggregate production efficiency.     

Portfolio choice,transactions costs and monopoly power

By using optimal stochastic control, where risk can be reduced by appropriate efforts, monopoly power is shown to engender reduced efforts to lower risk. It therefore gives rise to a relatively high ratio of liquid assets to net wealth. Furthermore, a decline in demand is shown to generally elicit increased efforts to reduce risk and thus yields an augmented share of risk bearing assets in the portfolio. These predictions are corroborated by invoking empirical evidence that pertains to West German industries. It thus appears that a capitalist economy is characterized by a built-in-mechanism stabilizing macroeconomic activity. This mechanism, however, is attenuated by monopoly power. That provides an additional rationale for competition policy.     

组织族系与产业组织演化

组织族系是产业组织演化过程中形成的特殊现象,它通过影响组织业绩、组织设立、组织成长和组织死亡等过程而影响产业组织的演化.组织族系由母体组织、后裔组织等行为主体构成,在行为主体之间存在着资源转移和行为合作,这些因素会直接影响到母体组织和后裔组织的存活概率.在组织族系中,后裔组织数量确定机理和后裔组织规模确定机理决定了组织族系对产业组织演化的影响程度.     

Monopsony power and the existence of natural monopoly in energy utilities

The justification for price and entry regulation of firms hinges on whether the firms are natural monopolies, and empirical tests have been used to determine the natural monopoly status of public utilities. However, these tests are biased if the utilities possess monopsony power - a likely case. The bias is against finding natural monopoly status, which can lead to improper policies. An alternative method of testing is proposed which eliminates the bias.     

City objectives in monopoly franchising: the case of cable television

This paper employs an approach from the labour literature to determine relative weights which cities place on alternate service proposals when selecting cable television operators. Using contract proposals for 27 franchise auctions which took place across the US between 1979 and 1981, a probit model is estimated which corrects for firm self-selection into the auctions. Cities are found to select firms with local or regional advantages, and to prefer relatively fewer unprofitable services and relatively higher basic tier prices. The results suggest that monopoly franchising may serve private interests at the average consumer's expense.     

On monopoly welfare gains,scale efficiency and the costs of decentralization

Inside the neoclassical framework a monopoly produces an unambiguous loss of social welfare. In this article some dynamic efficiency aspects of monopoly in connection with economies of scale are discussed. Two different cases of the costs of capacity expansion for a branch are compared: (1) the capacity expansion takes place with only one, multiplant, monopoly firm, (2) the capacity expansion takes place in a branch producing the same output but with two or more multiplant firms. It is argued that monopoly welfare gains are likely to arise for a centralized process of capacity expansion compared to a decentralized one.     

Financial efficiency and economic growth: The case of Spain

This paper explores the connection between financial efficiency and economic growth. First, a theoretical model is presented in which financial efficiency enhances economic growth by means of increasing the marginal productivity of a broad concept of capital. Next, some data from the Spanish economy from 1962 to 1995 are explored using cointegration techniques. The main results point to a prominent role of bank institutions in channeling funds from savings to investment. Operative inefficiency of banks has damaged economic growth by providing a smaller amount of funds to the process of development. These results also suggest the existence of imperfections in Spanish capital markets. Finally, some indicators of financial repression such as negative interest rates and inflation seem to have had a deleterious impact on economic growth.This paper is part of a broader research project financed by Fundación FIES, CECA. Comments by Caneda, Cuñado, Martínez Chacón, Pérez de Villarreal, Termes, and Villaverde are gratefully acknowledged.     

Cost efficiency of French rugby clubs

This article analyses the cost efficiency of French first-league rugby clubs using a stochastic frontier model. The frontier estimation confirmed that the model fits the data well with all coefficients correctly signed and in line with the theoretical requirements. The results show that one of the clubs is operating efficiently, with the majority of clubs clustered around 20% inefficiency. Policy implications are derived.     

Market power and efficiency

This paper introduces new measures of the mean and variance of inflation and growth expectations, based on tendency survey data from four major European economies. The expectations measures are technically ‘irrational’, but more accurate than naive alternatives; expectations errors do not persist for more than a year. Unexpected inflation, and uncertainties about inflation and growth, play the roles assigned them by New Classical macroeconomic theory, respectively raising and lowering real activity. All the expectations, uncertainties and errors appear more closely correlated across countries than experience would justify, suggesting that unpredictable disturbances typically have an internal rather than an international origin.     

Measuring environmental efficiency of industry: a case study of thermal power generation in India

Technical and environmental efficiency of some coal-fired thermal power plants in India is estimated using a methodology that accounts for firm’s efforts to increase the production of good output and reduce pollution with the given resources and technology. The methodology used is directional output distance function. Estimates of firm-specific shadow prices of pollutants (bad outputs), and elasticity of substitution between good and bad outputs are also obtained. The technical and environmental inefficiency of a representative firm is estimated as 0.06 implying that the thermal power generating industry in Andhra Pradesh state of India could increase production of electricity by 6/ while decreasing generation of pollution by 6%. This result shows that there are incentives or win–win opportunities for the firms to voluntarily comply with the environmental regulation. It is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms. This result calls for the use of economic instruments like pollution taxes instead of command and control regulation used currently in India to reduce air pollution.