The Effect of Cost Heterogeneity in the Success and Failure of the New Deal''s Agricultural and Industrial Programs

The Agricultural Adjustment Act and the National Industrial Recovery Act (NIRA) were cornerstones of the early New Deal, designed to cartelize agriculture and industry. When the Supreme Court annulled both acts, agricultural regulation was reinstalled within 6 weeks, following organized lobbying by farming interests, but broad industrial regulation was not reinstated. There was no corresponding lobby effort by industry to return the NIRA. To explain these differences we analyze the effect of farm/firm cost heterogeneities within commodity programs and industries on the ability of the parties to agree to and adhere to collusive regulations. We find that in the case of agriculture, because agricultural pricing and production policies were designed and implemented by low-cost producers, they were relatively self-enforcing and long-lasting. In contrast, high-cost firms in industry played a major role in setting prices and output within many of the NRA industrial codes. Consequently, these collusive policies were not self-enforcing and failed to create an effective lobby for their reinstatement.     

The value basis of structural economic policy

Modern theoretical constructs that permit to spell out views of the goals, nature, and form of government intervention in the economy are reviewed. The authors’ conclusion is that modern approaches to pricing, far from supporting the “laissez faire” concept, clearly show the necessity of structural economic policy by the government. In elaboration of the notion of interrelation of the theories of qualitative heterogeneity of resources and specific assets it is proposed that the price formation structure (in particular, the structure of value added in the price) be studied as an objective reflection of the economic policy priority scheme.     

Government Funding Policy Towards Communicable Diseases

The paper investigates the choice of government to offer a grant to a potential entrant aimed at reducing its fixed cost of entry when a monopoly firm provides the needed pharmaceutical drug given the prevalence path of the disease in a dynamic economic framework. The results of present study suggest that government can use a grant to credibly threaten the entry of a new firm into the industry and to promote limit-output pricing by the incumbent firm. The paper therefore suggests that the government policy set includes subsidizing the potential entry of a new firm into an industry manufacturing pharmaceutical drugs for the treatment of a communicable disease. Clearly, foreign aid could also be used as a source of this credible threat. The study also extends the paper by Mechoulan (2007) through the introduction of the government’s choice into the model.

Efficient interconnection charges and capacity-based pricing

Capacity-based interconnection (CBI) prices vary exactly with the costs a network provider incurs when supplying an interconnecting party. That is, they equal incremental costs, rather than being averaged over any output measure. We argue such prices (1) are as practicable and more efficient than per minute rates based on long run incremental cost, (2) are more efficient than bill and keep, and (3) with mark-ups for cost recovery, are a practical and relatively efficient means of pricing wholesale interconnection services, being well-suited to both circuit and packet-based networks.

Japanese Regulation of Truck Transport

Since 1951 the Japanese Ministry of Transport has been vested with sweeping authority to restrict entry and set prices in commercial trucking, but the standard price schedules that it continues to publicize and periodically revise are in fact widely disregarded by commercial trucking firms. There are no economies or diseconomies of scale and firms have expanded until industry profits are exhausted. The changes in truck transport regulation introduced in 1991 were mainly directed at freeing a new activity, parcel delivery service, from regulatory constraints and spreading some of the benefits to others in the industry. J. Japan. Int. Econ., March 2001, 15(1), pp. 1–28. Department of Economics, North Carolina State University, Raleigh, North Carolina 27695-8110. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: L92, L51.     

Price Discrimination and Efficient Distribution

This paper focuses on third‐degree price discrimination by an upstream firm with some degree of monopoly power. Downstream firms fall into two categories: efficient and inefficient, according to their relative costs of transforming a unit of the upstream good into a unit of final product. Under ordinary static conditions, price discrimination favors the inefficient firms, which have more elastic demands. We consider, however, the possibility that discrimination in the opposite direction can alter the downstream market structure toward greater efficiency. Discriminatory pricing, then, involves charging a higher price to the less efficient firms. Such pricing is shown to be both potentially profitable for the upstream firm and welfare improving as average consumer prices fall.     

Teaching the coase theorem: Are we getting it right?

The authors examine current textbook representations of Coase's analysis of negative externalities [Coase, 1960]. Standard treatments identify Coase's ideas with Stigler's Coase Theorem: a zero transaction cost world in which efficient solutions emerge automatically, regardless of legal rules and the initial allocation of rights. Yet Coase's seminal paper breaks from this mode of analysis. The authors use this intellectual history to distinguish two approaches to negative externalities: blackboard (Pigou, Stigler, Samuelson) and Coasean. They survey 45 microeconomics textbooks and find that 80 percent misrepresent Coase's arguments. They argue that a Coasean approach increases students' critical thinking skills by challenging them to move beyond simple laissez faire or interventionist solutions.     

Regional Mc parity: do common pricing points reduce deviations from the law of one price?

This paper analyses price differences of McDonald’s products in four different countries. I show that pricing at pricing points in different currencies may contribute to explaining deviations from the law of one price. Observing strictly equal prices is more probable if prices are set at psychological and fractional pricing points in a common currency. The latter is also found to reduce the size of price deviations. Additionally, price differences increase as transaction costs increase. Based on this data set there is no evidence that the euro has reduced price deviations.     

Transfer pricing and developing countries: Some problems of investigation

This paper reviews some of the main problems which arise for developing host countries in the investigation of transfer pricing of commodity trade by transnational corporations in manufacturing industry. The paper deals in turn with the following: the problems raised by the fact that the extent of intra-firm trade and the potential for manipulating transfer prices from case to case, especially because of the nature of technological innovation; the main handicaps faced by host developing country governments in collecting data on transfer pricing; and, the difficult conceptual issues that arise in defining the correct reference prices by which transfer prices may be judged. It concludes with the suggestion that intercountry cooperation is the most promising course of action in order to surmount these problems.     

(Anti-)Competitive effect of joint bidding: evidence from ODA procurement auctions

Using auction data on Japanese ODA procurement, I empirically examined whether joint bidding has a pro- or anti-competitive effect, particularly for local firms. In auction theory, the joint bidding effect depends on theories. If joint bidding reduces barriers to entry for potential bidders with limited financial and technical resources, it is pro-competitive. When bidders exploit collusive schemes under cover of joint bidding, the anti-competitive effect is realized. By the OLS and treatment effect models, I found that joint bidding in general does not foster competition, but it has a competitive effect on local firms in developing countries. J. Japanese Int. Economies 18 (3) (2004) 416–439.     

Small-Scale Industry in the Asian-Pacific Region

Small-scale industry has been important in the successful development of many of the economies of East and Southeast Asia, both in cases like Japan, Korea and Taiwan where import-substitution preceeded and/or accompanied the manufactured exporting phase, and in Hang Kong, the only essentially laissez faire economy in the region. An important general characteristic of the small-scale sector, and one long commented upon in the Japanese case, is the prevalence of subcontracting relationships either with larger manufacturing firms or with traders. There is considerable evidence of economic efficiency in the sector, especially perhaps in the medium-size range. Although some types of policy support appear to have paid off well, others appear not to have, so it is clear that such support must be both well thought out and carefully implemented if it is to have the hoped-for result.     

The origins of formal collusion in Australian fire insurance 1870–1920

The market for insurance has become increasingly competitive in recent years. However, it has not always been so. At the end of the nineteenth century, it was characterized by a highly concentrated and tightly controlled oligopolistic market structure. As such, the history of the fire insurance industry provides an interesting case study in the development of collusive behaviour amongst firms. Up to 1897, pricing agreements among firms were generally short-lived, and were followed by periods of intense competition. After this point, an agreement was forged, which proved very resilient to market pressures and formed the basis of premium rate setting until the 1970s. This paper investigates the difference between this agreement and previous efforts to set premium rates, and points to some of the common features of the later compact, which explain its longevity.     

On the determinants of exporters' currency pricing: History vs. expectations

The purpose of this paper is to investigate why the choice of invoice currency under exchange rate uncertainty depends not only on expectations but also on history. The analysis is motivated by the fact that the US dollar has historically been the dominant vehicle currency in developing countries. The theoretical analysis is based on an open economy model of monopolistic competition. When the market is competitive enough, the exporting firms tend to set their prices not to deviate from those of the competitors. As a result, a coordination failure can lead the third currency to be a less efficient equilibrium invoice currency. The role of expectations is important in selecting the equilibrium in the static framework. However, in the dynamic model with staggered price-setting, the role of history becomes another key determinant of the equilibrium currency pricing. The role of history may dominate the role of expectations when the firms are myopic, particularly in the competitive local market. It also becomes dominant in the staggered price setting when a fraction of the new price setters are backward-looking. The result suggests the importance of history in explaining why the firm tends to choose the US dollar as vehicle currency. J. Japanese Int. Economies 20 (4) (2006) 548–568.     

What types of houses remain vacant? Evidence from a municipality in Tokyo,Japan

Preventing the occurrence of vacant houses and reutilizing existing vacant houses are two known ways of addressing housing vacancies. This study uses parcel-level data on single-family houses in the municipality of Toshima in Tokyo, Japan, to examine determinants of the occurrence and reutilization of vacant houses. The data reveal that, conditional on land prices, houses with restricted and costly redevelopment opportunities are more likely to become vacant. The results suggest that owners with such properties disregard the redevelopment potential and, as a result, tend to have a high reservation price relative to the market value. Consequently, owners face difficulty finding a transaction partner and even become reluctant to engage in a deal (i.e., they withdraw from the market). The results also suggest that revitalization of the neighborhood community may contribute to activating vacant houses. Local governments can use an empirical assessment such as this to implement efficient measures by targeting houses that have a high probability of becoming and remaining vacant.     

日本两部分水价制度对我国的借鉴意义研究

自来水事业既具有公用事业的性质也具有一般企业的性质，因此自来水价格的调整对社会福利和企业经营都会产生重要影响．以历史和实证的研究方法，对日本自来水价格的历史变迁和两部分水价制度进行分析，可从理论和实践两个方面，为我国的自来水定价提供借鉴。     

Competition in the Pay-TV Market

This paper discusses competition in the emerging pay-TV market. Economic features of the industry are described, and the current state of the market in the UK is summarized. Two simple formal models of the industry are analyzed: First the danger of two vertically integrated pay-TV networks entering into collusive agreements to exchange programming with each other is discussed; second, the private and social incentives for signing exclusive contracts for premium programming are analyzed. J. Japan. Int. Econ., December 1999, 13(4), pp. 257–280. Nuffield College, Oxford OX1 1NF, United Kingdom. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: D43, L13, L41, L82.     

Substitutes for legal protection: corporate governance and dividends in Victorian Britain1

Companies in Victorian Britain operated in a laissez‐faire legal environment from the perspective of outside investors, implying that such investors were not protected by the legal system. This article seeks to identify the alternative mechanisms that outside shareholders used to protect themselves by examining the dividend policy and governance of over 800 publicly traded companies at the beginning of the 1880s. We assess the importance of these mechanisms by estimating their impact on Tobin's Q. Our evidence suggests that dividends and well‐structured and incentivized boards of directors may have played a role in protecting the interests of outside investors.     

The International Transmission of Monetary Policy in a Dollar Pricing Model

This paper analyses the international transmission of monetary policy in the case where all export prices are set in US dollars. “Dollar pricing” implies that the international effects of US monetary shocks are different from those of European shocks because of an asymmetric exchange rate pass-through to import prices. A dollar pricing model can explain the observed asymmetry in the transmission of monetary policy: US monetary policy affects US output more than European monetary policy affects European output. I also show that the current account is an important channel through which monetary policy affects welfare. The paper concludes that under dollar pricing a monetary expansion is a beggar-thy-neighbour policy.     

Measuring Pricing to Market in the Eurozone: The Case of the Automobile Industry

In this paper we measure the pricing to market for the main export products in the Eurozone automobile industry. Results reveal that significant markup adjustments exist following exchange rate variations. In general, these adjustments allow a strong stabilization of prices in buyer's currency terms. Nevertheless, the degree of pricing to market is quite heterogeneous and differs highly across both product categories and destination markets.     

Competition in the electricity industry in England and Wales

When the electricity industry was privatized, the governmentmade structural changes to encourage competition in generationand in supply to consumers. The conventional power stationswere only divided between two companies, however, and we showthat duopolistic competition in an unregulated spot market mightimply undesirably high prices. Most sales are hedged in thecontract market, which makes the spot market more competitive,and a realistic threat of entry could also force generatorsto keep their prices down. In the event, a large amount of entrytook place, supported by the regional electricity companies'franchise monopoly over smaller consumers. That monopoly endsin 1998, so that further entry might become very difficult,while competition between firms already in the generation marketis still limited. Vertical integration between the major generatorsand regional electricity companies might make entry even harder,and should be blocked until the industry is more competitive.