THE ECONOMIC EFFECTS OF THE MARATHON‐ASHLAND JOINT VENTURE: THE IMPORTANCE OF INDUSTRY SUPPLY SHOCKS AND VERTICAL MARKET STRUCTURE*

This study measures the effects of the Marathon/Ashland Petroleum (MAP) joint venture on rack and retail reformulated (RFG) gasoline prices in the four cities where both firms sold RFG before the joint venture. MAP was an early transaction in the recent era of petroleum mergers and resulted in large regional increases in concentration. While wholesale (rack) prices increased in the two cities experiencing the largest change in market structure in the year following the transaction, retail prices did not increase. Our results also highlight the importance of identifying the marginal source of supply in correctly identifying merger effects.     

Caractéristiques du secteur de la vérification au Canada*

Résumé. Les auteurs examinent certaines des questions fondamentales relatives à la concentration, à l'intensité de la concurrence et aux rendements d'échelle du secteur canadien de la vérification. Selon les résultats de leurs travaux, il pourrait être plus approprié de construire les indices de concentration en fonction des «sept grands» qu'en fonction des «huit grands» cabinets comme le veut la tradition. Les auteurs en viennent également à la conclusion que le secteur est assujetti à long terme à des rendements d'échelle constants et que le marché des services de vérification est assez concurrentiel.     

A Theory of Friendly Boards

We analyze the consequences of the board's dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade‐off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more intensively. Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, management‐friendly boards can be optimal. Using the insights from the model, we analyze the differences between sole and dual board systems. We highlight several policy implications of our analysis.     

Does the Lack of a Profit Motive Affect Hiring in Academe? Evidence from the Market for Lawyers

The comparative performance of academic and economic markets continues to be debated. One factor potentially distinguishing academic markets is the profit motive. Profit and competition have been shown to curb discrimination in markets, and the absence of profit discipline could result in myriad forms of prejudice in academic hiring. We explore the role of the profit motive in the performance of academic markets by comparing the pedigree of employees of top law schools and top law firms. Top law schools are much more likely to employ graduates of top ranked law schools than elite law firms, and the difference exists at both the junior and senior levels. We find no evidence that the graduates of top 5 law schools outperform grads of less prestigious schools in publications or citations. In the absence of a profit motive, academic hiring appears more likely to indulge a preference for pedigree, and by implication, this may explain other scholarly prejudices in the academy.     

Underpricing of Newly Issued Bonds: Evidence from the Swiss Capital Market

The pricing of newly issued bonds on the Swiss capital market is investigated over the years 1980–1982. The results reveal a slight underpricing of new bonds at the issue date that is roughly equal to the difference in transactions costs between the markets for new and seasoned bonds. Underpricing is no longer observed when the new bonds start to be traded on the stock exchange, that is, after about two days. Tests of several hypotheses show that unexpected changes in interest rates over the offering period explain part of the underpricing.     

The Impact of the Definition of Inflation on the Effectiveness of Inflation Accounting Adjustments

In tests of inflation accounting methods, inflation is generally seen as a simple phenomenon: the prices of all elements change at the same rate. The example presented here deals with a different case: inflation is characterized by changes in the structure of prices. In particular, prices of articles bought and articles sold do not vary at the same rates.
In this context, it is observed that three types of adjustments are not effective, i.e. they do not have the potential to report real or nominal rates of return. This result should be considered as a criticism of the coherence of inflation accounting methods.