R&D in a strategic delegation game

This paper studies how a separation of ownership and management affects firms' R&D and production decisions in Cournot quantity competition. It is found that when R&D spillovers are small, owners strategically direct their managers away from profit maximization towards sales. Consequently, managerial firms invest more in R&D and have higher output and lower prices compared to their entrepreneurial counterparts. On the other hand, when spillovers are large, owners ‘penalize’ managers for sales. In this case, managerial firms have lower R&D, lower output and higher prices. Nonetheless, managerial firms have lower profits than their entrepreneurial counterparts regardless of spillovers. This paper also examines the welfare effects of a separation of ownership and management. It is found that in terms of first-best social welfare, managerial firms are more (less) efficient than their entrepreneurial counterparts with low (high) spillovers. However, in terms of second-best social welfare, managerial firms are less efficient with all spillovers. © 1997 John Wiley & Sons, Ltd.     

Selling prices and profits: what survey data tell about firms’ rationality

This paper states that the strong biases found in survey expectations do not necessarily distort economic decisions. An econometric analysis of price and profit data suggests that Swiss manufacturers do not base their production decisions on the forecasts they supply to the surveying institution. Instead, production decisions are based on data of past prices. This suggests that in their production management, firms make adjustments for biased marketing projections of selling prices. However, the practice of these adjustments is not optimal since it neglects the valuable information contained in these price forecasts. Copyright © 1999 John Wiley & Sons, Ltd.     

Profit maximizing communities and the theory of local public expenditure

This paper examines profit maximization as a normative criterion for communities in a large metropolitan area. We develop a Tiebout-like model of residential location, define the “profits” of a community, and show that profit maximization leads to the efficient provision of public services and optimal community size. Communities do not in general act as profit maximizers, however, because individual property owners may not all share in a community's profits. Two institutional reforms are therefore suggested that would alter the distribution of profits in a way that makes the self-interested actions of property owners consonant with community profit maximization.     

Maximizing public value for subsidized non-profit firms: a mathematical economic model

In many public service industries, firms are assumed to maximize certain public goals and are not allowed to make any profits. These public service firms are financed by fixed and variable subsidies and fees-for-services paid by users. Standard economic models, such as the profit maximization and cost minimization model, are not suitable for describing the production structure and the economic behavior of these firms. Productivity and efficiency measures derived from these models therefore are not accurate. This paper derives a model that fits this type of firm and its economic context. It derives the exact mathematical relationships between public value, services delivered, (money) revenues, costs, service prices, resource prices and subsidies. In an empirical setting the model can be used as a reference to calculate productivity and efficiency scores. The usability of the model is demonstrated by an application to Social Labor Services in the Netherlands.     

The combined equilibrium of travel networks and residential location markets

The combined ‘user’ equilibrium of travel networks and residential location markets is shown to exist and to be unique in the expected allocation of households to residential locations and to the routes and links of the network, in the vacancies and rents of residential locations and in the congested travel time and cost of each network link. The formulation combines a multinomial logit model of households' location and route choices derived from utility maximization, a binary logit model of house owners' offer decisions derived from profit maximization and the standard model of network congestion. A travel disutility measure (consistent with utility maximization) replaces the standard ‘generalized cost function’. The proof utilizes a non-linear programming formulation which reproduces the simultaneous equilibrium conditions of the behavioral formulation. The stability of the unique equilibrium position is briefly discussed, a computational algorithm is proposed and hints for generalized formulations are provided.     

Are government or private enterprises more likely to engage in dumping? Some international evidence

This paper provides the first systematic evidence comparing the incidence of below-cost dumping among state and privately owned firms. Recent economic theory indicates that government enterprises, if motivated by goals such as output or revenue maximization rather than profit maximization, face higher returns to engaging in below-cost pricing than private enterprises. International data from anti-dumping investigations strongly confirm this prediction. Between 43% and 94% of initiated below-cost dumping cases and between 54% and 100% of affirmative dumping decisions against exporting firms from nonmarket economies are attributable to those firms' publicly owned status. We are able to reject the hypotheses that this result is explained by political biases against nonmarket economies in anti-dumping procedures or from possible political biases stemming from the industry composition of nonmarket exports. In fact in both cases, we find that the above results may understate the true effect of market organization on a country's propensity to engage in dumping.     

Stochastic optimal growth with risky labor supply

Production takes time, and labor supply and profit maximization decisions that relate to current production are typically made before all shocks affecting that production have been realized. In this paper we re-examine the problem of stochastic optimal growth with aggregate risk where the timing of the model conforms to this information structure. We provide a set of conditions under which the economy has a unique, nontrivial and stable stationary distribution. In addition, we verify key optimality properties in the presence of unbounded shocks and rewards, and provide the sample path laws necessary for consistent estimation and simulation.     

The response of prices,sales, and output to temporary changes in demand

We determine empirically how automakers accommodate shocks to demand. Using data on production, sales, and transaction prices, we estimate a dynamic profit maximization model of the firm. We demonstrate that when an automaker is hit with a vehicle‐specific demand shock, sales respond immediately and prices respond very modestly. Further, when accounting for non‐convexities in the cost function, production responds with a delay. Over time, shocks are absorbed almost entirely through adjustments in sales and production rather than prices. We examine two recent demand shocks: the Ford Explorer/Firestone tire recall of 2000, and the 11 September 2001 terrorist attacks. Copyright © 2009 John Wiley & Sons, Ltd.     

房地产商与购房者的博弈分析

房价是一个关系社会民生的问题,而作为市场经济中的一部分,房地产商与消费者之间进行的是买卖交易,从而存在双方买卖博弈。从2007年至今的房价下调,是在政府干预下的房地产商与消费者的博弈结果。在继续对峙的时期,房地产商与购房者各自该如何决策,怎样达到双赢及社会福利的最大化,文中采用买卖博弈,找出纳什均衡策略。     

Strategic Delegation and Vertical Integration

This paper proposes a game‐theoretic model to analyze owners' vertical integration choices if they delegate pricing decisions to their managers. We find that all three vertical structures are possible Nash equilibrium outcomes. If the products are weak substitutes, then the outcome is that both owners adopt vertical integration. When the products are close substitutes, both owners adopt vertical separation in equilibrium. When substitution between the products is medium, the coexistence of vertical integration and vertical separation is the equilibrium outcome, and the owner corresponding to vertical separation offers exactly a profit‐maximization contract to his or her manager under this situation. Copyright © 2014 John Wiley & Sons, Ltd.     

Nonparametric tests for optimizing behavior in production: Extensions to unobservable factors and superadditive technology

This paper develops two new nonparametric tests for optimizing behavior in production. The first is a test for consistency of observed data with cost minimization from a superadditive technology. Superadditivity of technology plays a key role in the theory of industry structure and natural monopoly. The second is an extension of Varian's profit maximization test. When the data fails Varian's test, one possible explanation is technical/allocative inefficiency. However, another possibility is the presence of unobservable, untradeable, and varying endowments of some factor of production. This paper develops a test that allows for such an ordinally measurable factor and notes its correspondence to the Afriat Theorem for utility maximization in demand analysis.The refereeing process of this paper was handled through R. Banker.     

Experimental Study of Firm Bounded Rationality and the Pattern of Trade

This paper describes an experiment and simulation with features of a spatially explicit trading environment. Decision makers repeatedly make decisions about firm headquarters, input demands, and export patterns. A goal of this research is to determine if subjects’ management decisions reflect profit maximization, learning, or heuristic decision making. It also considers what impact decision makers’ bounded rationality has on the aggregate pattern of trade. Results indicate that bounded rationality in the form of learning and heuristic decision making are ubiquitous features of subjects’ decisions. This manifests as under‐reaction to trade‐driver stimuli and produces Trefler's missing trade, suggesting a behavioral basis for this anomaly.     

A general-equilibrium analysis of airport pricing,capacity, and regulation

Using a general-equilibrium model that includes consumers, airlines, and an airport with both aeronautical services and non-aeronautical services, this study investigates the airport's decisions on its aeronautical charge and capacity, as well as the size of its non-aeronautical services. In contrast to the existing literature, we formally model an airport's non-aeronautical services by taking into account the endogenous determination of the size of the airport's non-aeronautical services. First, we characterize the results for welfare maximization, and find that the self-financing property does not hold. Apart from carriers’ market power as a source of the failure for the self-financing property, we identify the presence of non-aeronautical services as a new source. Further, we show that the common practice of cross-subsidizing from the non-aeronautical to aeronautical services is incompatible with welfare maximization because welfare maximization requires exact self-financing within the non-aeronautical sector. Second, we derive the results for profit maximization by a monopolistic airport, and demonstrate that the imposition of two taxes, one on the airport's aeronautical services and the other on its capacity investment, can recover the welfare-maximization results. Third, we analyze the two types of regulation, single till and dual till, which are often used in practice, and show that dual-till regulation yields higher welfare than single-till regulation, as long as the profit from non-aeronautical services is positive. This result is in contrast to the prevailing wisdom in the literature, which in general favors single-till regulation.     

Competing Research Joint Ventures

Research and development (R&D) competition among firms has recently been extended to R&D competition involving research joint ventures. It was previously shown that in an industry conducting cost-reducing R&D followed by competition in the product market, if all firms both fully share R&D information and coordinate investments to maximize pint profits, final products prices are lower, and firms' profits are higher than with information shriving alone, joint profit maximization alone, or no cooperation. In this paper we question whether a single research joint venture (RJV) cartel is the best form of industry R&D coordination. We show that there are circumstances in which splitting a single RJV cartel into several competing ones yields lower product prices. Moreover, we show that in these circumstances, splitting the industry into exactly two competing RJV cartels would be best.     

Corporate takeovers,stockholder returns and executive rewards

Various motives for making corporate acquisitions have been forwarded in the managerial economics literature. Two that have received a lot of attention are the maximization of stockholder wealth and the maximization of senior management's utility. These two alternative views can lead to different acquisition decisions. The paper examines the returns to senior management and the returns to stockholders following corporate takeovers in the United Kingdom. The evidence suggests that if shareholders profit from takeovers then so do the senior' management. Of more interest, however, is the finding that if acquisitions result in a reduction in stock market value for the acquiring firm, their senior management appear to gain. In particular, senior management remuneration increases substantially after an acquisition. This evidence is consistent with the maximization of senior management's utility being an important motive in many corporate-acquisition decisions.     

The empirical determination of technology and expectations: A simplified procedure

This paper makes three principal contributions to the growing body of empirically oriented research on dynamic factor demand systems that are based on the adjustment cost model of the firm. First, a simplified procedure is described for deriving demand and supply functions which are amenable to empirical estimation and which are consistent with intertemporal expected profit maximization and a general expectations formation process for future prices. Second, it is pointed out that estimation of a complete system of demand and supply functions permits the empirical identification of both the firm's technology and its expectations formation process. Finally, the procedure is applied to aggregate annual U.S. manufacturing data for the 1947-1977 period and the consistency of the data with the theoretical framework is investigated.     

Social optimal pricing in a spatial market

This paper investigates optimal spatial price patterns derived on the basis of welfare maximization (in terms of consumer surplus plus profit) under alternative spatial pricing policies, including discriminatory, fo.b., and c.i.f. pricing. It shows that under all forms of spatial pricing policies, optimal spatial prices should equate marginal costs of production with the mill price, and that transportation costs incurred are always charged to consumers, even in the case of c.i.f. pricing. In addition, it shows that society never prefers c.i.f. to any other pricing policies, and is always indifferent between discriminatory and Lo.b. pricing. Some additional properties of optimal spatial prices are also presented.     

浅析“企业利润最大化”

企业存在的目的就是盈利,确保企业利润是企业生存的绝对必要条件。本文从企业财务目标出发,讨论了"利润最大化"目标的缺陷,并对其进行了修正。在此基础上分析了影响利润的因素,并运用数学方法演算了"利润最大化"的实现途径。     

Measuring the effects of mixed land uses on housing values

Mixing land uses has become one of the key planning principles of the Smart Growth movement and other land use planning strategies. This article analyzes the impact on the prices of single family houses when mixed land uses are included in neighborhoods. We first develop several quantitative measures of mixed land uses through the use of Geographic Information System (GIS) data and compute these measures for various neighborhoods in Washington County, OR. We then incorporate those measures in a hedonic price analysis. We conclude from this research that housing prices increase with their proximity to—or with increasing amount of—public parks or neighborhood commercial land uses. We also find, however, that housing prices are higher in neighborhoods dominated by single-family residential land use, where non-residential land uses were evenly distributed, and where more service jobs are available. Finally, we find that housing prices tended to fall with proximity to multi-family residential units.     

Production theory with profit-constrained revenue-maximization: The duality approach

This paper derives a general version of Baumol's production theory, where the main behavioral assumption is ‘revenue maximization subject to a profit constraint’ instead of ‘profit maximization’. This theory turns out to be analogous to the neoclassical (competitive) production and consumption theories. Employing the fruitful duality approach it is presented here in a unified and very economical form that provides a complete and general analysis of the comparative static behavior of Baumol's firm.