Regulatory compliance with nonlinear penalties

Previous work has shown that, when firms choose only partial compliance with a regulatory standard, tightening the standard may drive firms' behavior in the wrong direction. This note explores the potential of nonlinear penalty functions to move behavior in the socially desired direction when standards are tightened without raising the total penalty.     

Market power and output stability

The conjectural variation elasticity is used in a comparative statics analysis to show that, contrary to a long-standing tenet of industrial organization, market power may destabilize output when cost and demand are stochastic, under other assumptions similar to those of recent empirical studies.     

A first-best regulatory tax for oligopoly

This paper addresses the question of how a regulator with imperfect knowledge of costs and demand can beneficially regulate the output levels of an industry characterized by some combination of externalities and market power. A two-part specific tax is derived which attains ex post optimality and is applicable to industries of arbitrary structure and conduct. The informational requirements for the solution are no more stringent than in previous two-part tax mechanisms in conjunction with the assumption of market equilibrium.     

Cost efficiency among credit card banks

Credit card banks produce a single, relatively homogeneous output, permitting exceptionally clean empirical tests of cost efficiency. The high net interest margins and fees on credit card loans also suggests a large potential for managerial slack or expense preference behavior, possibly fostering a wider range of cost efficiency than observed for general-purpose banks. This paper presents estimates of cost efficiency for a sample of monoline credit card banks over the period 1984–1993; the findings are similar to those previously reported for general-purpose banks. We also explore empirical correlates of the estimated cost efficiency.     

Structure,conduct, performance,and welfare

This paper extends previous analysis of weaknesses of the structure-conduct-performance paradigm and of the price-cost margin as a measure of performance. Sufficient conditions are established under which monotonic linkages may not exist between virtually any two of social welfare, its individual components, structure, conduct, or performance.     

Annuities and inflation

This paper embodies the views of the author and does not represent the views or policy of the Federal Reserve Bank of New York or the Federal Reserve System.