PIRACY ON THE SILVER SCREEN*

Using survey data on movie consumption by about 500 University of Pennsylvania undergraduate students, we ask whether unpaid consumption of movies displaces paid consumption. A variety of cross‐sectional and longitudinal empirical approaches show large and statistically significant evidence of displacement. In the most appropriate empirical specification, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. Our analysis indicates that unpaid consumption, which makes up 5.2 per cent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 per cent.     

DOES INFORMATION UNDERMINE BRAND? INFORMATION INTERMEDIARY USE AND PREFERENCE FOR BRANDED WEB RETAILERS*

Investments in brand, and third‐party information, provide alternative methods for convincing potential customers that vendors will deliver as promised. This study uses a 13‐month panel dataset on 1998–99 Internet shopping behavior and use of information intermediaries by over 30,000 households to examine whether information use undermines brand. Individuals using price comparison sites substantially increase their level of shopping at unbranded retail sites, while they shop less at Amazon. The results have possible implications for both firm strategy and the evolution of market structure. If information weakens the pull of brand, then Internet retailing may grow less concentrated over time.     

BILATERAL TRADE RELATIONSHIP BETWEEN THE UNITED STATES AND CANADA: IMPLICATIONS OF THE FREE TRADE AGREEMENT

This study's primary objective is to evaluate empirically the economic effects of the U.S.-Canada Free Trade Agreement (FTA). The paper emphasizes bilateral trade flows of agricultural and industrial products between the United States and Canada, given that the FTA removes tariff and non-tariff barriers. It evaluates the FTA's impact on the two countries' trade with third countries. The paper specifies a traditional log-linear trade model consisting of import demand and export supply equations for both agricultural and industrial products. It uses quarterly time-series U.S. and Canadian trade data for 1972–1985.
The study uses the two-stage least-squares estimator to estimate the models. The models had R coefficients ranging from 0.78 to 0.99, indicating that the models' explanatory variables explain most causes of variations in the dependent variable. This study reveals that U.S. imports of agricultural and industrial products from Canada were more sensitive than were Canadian imports not only to import and domestic prices but also to world prices. This is because Canadian consumers have less domestic substitutes than do their U.S. counterparts. Also, Canada has a smaller internal market than does the United States. The study estimates that U.S. imports from Canada will increase $2.8 billion while Canadian imports from the United States will increase $1.2 billion. The impact on the two countries' trade with third-party countries will be insignificant.     

Sequential Bayesian Analysis in accounting settings*

Abstract. The familiar decision analysis setting in accounting, such as a cost-volume-profit analysis setting, is modeled as arising in a “larger” context in which subsequent choice is also contemplated. We then ask when this “larger” context decomposes in a manner such that the immediate problem of interest can be modeled as an expected utility maximization problem that is completely divorced from the subsequent choice problem. Outcome and taste independence conditions are the key ingredients in being able to model the immediate problem as having no link whatever to its successor. Résumé. Le contexte dans lequel les techniques d'analyse de décision comme par exemple l'analyse co?t-volume-profit est utilisée est un cadre d'un modèle élargi qui tient compte du choix subséquent. On se demande en quelles circonstances ce contexte élargi peut-il se décomposer de façon telle que le problème d'intérêt immédiat en soit un de maximisation complètement séparé du problème du choix subséquent. Le résultat et des conditions d'indépendance de préférence sont les ingrédients clés pour modeler le problème immédiat comme n'ayant aucun lien avec son successeur.     

A Strategy for Labor

Labor's decline is advanced, disastrous for democracy, and unlikely to be relieved by labor law reform at the national level. Unions need a strategy for revival that does not premise such relief, and that takes account of the deeper changes in social and economic organization that have undermined their strength. Such a strategy is available, but it requires a sharp break with the uncoordinated, firm-centered, and politically non-independent “service model” unionism, exclusively preoccupied with units where majority status has been achieved, still generally practiced today.     

Political Connections and the Cost of Bank Loans

This paper analyzes whether the political connections of listed firms in the United States affect the cost and terms of loan contracts. Using a hand‐collected data set of the political connections of S&P 500 companies over the 2003–2008 time period, we find that the cost of bank loans is significantly lower for companies that have board members with political ties. We consider two possible explanations for these findings: a Borrower Channel in which lenders charge lower rates because they recognize that connections enhance the borrower's credit worthiness and a Bank Channel in which banks assign greater value to connected loans to enhance their own relationships with key politicians. After employing a series of tests to distinguish between these two channels, we find strong support for the Borrower Channel but no direct evidence supporting the Bank Channel. Finally, we demonstrate that political connections reduce the likelihood of a capital expenditure restriction or liquidity requirement commanded by banks at the origination of the loan. Taken together, our results suggest that political connections increase the value of U.S. companies and reduce monitoring costs and credit risk faced by banks, which, in turn, reduces the borrower's cost of debt.     

Order Arrival,Quote Behavior,and the Return-Generating Process

This paper establishes three empirical results. We find positive autocorrelation in actual intra-day stock returns, in intra-day returns computed from quote midpoints, and in the arrival of buy and sell orders. We present a model of return generation that incorporates these features via lagged adjustment of the limit-order price and positive dependence in bid and ask transactions. The return model is observationally equivalent to an ARMA process, which is consistent with the observed return behavior.