When do Firms go in for Growth by Acquisitions?

This paper analyses the incidence of acquisitions, and the determinants of expenditure or acquisitions, in a sample of 110 UK quoted companies, 1970–89. Financial variables, especially those related to Jensen's ‘free cash flow’ theory of acquisitions are found to be significant, notably for dominant firms. But there is little support for the inclusion of market structure variables which seek to capture the strategic role of acquisitions as an instrument of competition in oligopolistic markets.     

Prices versus quantities in the presence of a second,unpriced, externality

This paper analyzes whether the presence of a second unregulated externality influences the choice between a price and a quantity instrument to address an externality. The author studies a situation in which two goods jointly generate an externality but only one of them is regulated. The two instruments differ because of the presence of uncertainty regarding the private value of the two goods. To ignore the unregulated good and apply Weitzman's classical result on the comparison of the slopes of marginal benefit and cost could be misleading because of the randomness of the unregulated good's quantity. Beside the relative slope of the marginal damage, the substitutability and the distribution of shocks play a role in the comparison. If there is a “cocktail effect” and the regulated and unregulated goods' quantities are negatively correlated, which occurs if they are substitutes, this reinforces the appeal of a price instrument. Furthermore, if the two goods are weak substitutes with correlated demands, the variance of the quantity of the unregulated good is larger under a quota than a tax, which further reinforces the appeal of the tax instrument.     

An economic estimate of the effect of a waterside location on property values

Since the rise of the railway, and the later development of road transport, the economic value of inland waterways in the UK as freight carriers has steadily declined. The reduction in the economic importance of canals has been somewhat offset by their growing popularity as a recreational resource, and by the amenity value which they provide to that part of the population living in close proximity to them. Focussing on two case study areas, this paper uses an hedonic price model to estimate the economic benefits which residents gain from a waterside location. These benefits may have important policy implications for those bodies who own undeveloped land bordering waterways.     

Opren — Problems,solutions, and more problems

This UK paper on multiparty litigation looks at the Opren case. This concerned an anti-arthritic drug licensed in the UK between 1980 and 1982. While a number of drug users died, the most common adverse reaction was photosensitivity. The main legal action involved almost 1,500 plaintiffs and seven defendants. In the early summer of 1987 a court ruling on the funding of the action meant that 500 of the plaintiffs might have to withdraw. With the help of a multimillionaire and a media campaign, the parties reached a controversial settlement at the end of 1987. This paper focuses on the plaintiffs' case, the way the litigation proceeded through the courts and the nature of the settlement. It goes on to assess the problems the case highlighted in court procedures, legal aid and liability for defective drugs.

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Opren—Probleme, Lösungen, noch mehr Probleme

Zusammenfassung Opren, ein Anfang der 80er Jahre in Großbritannien auf den Markt gekommenes Rheumamittel, führte bei etwa 1,500 vornehmlich älteren Patienten zu teilweise schweren Nebenwirkungen. Der Versuch einer Opferentschädigung, der vom Autor ausführlich unter Berücksichtigung der Besonderheiten des englischen Haftungs- und Verfahrensrechts dargestellt wird, endete 1987 in einem mit dem Mantel des Schweigens zugedeckten Vergleich mit der Herstellerfirma. Das Verfahren hat die Mängel einer Schadensverfolgung bei Massenschäden in England deutlich gemacht und zu Reformen Anstoß gegeben.

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Guy Dehn, Barrister; Legal Officer to the National Consumer Council, 20 Grosvenor Gardens, London SW1W 0DH, England.