Additive and Multiplicative Uncertainty Revisited: What Explains the Contrasting Biases?

above the certainty level while for additive uncertainty the price should be lower than the certainty level. This note gives an intuitive explanation for the result after first presenting a parsimonious review of the two models. We also discuss which, if either, of the two models is more realistic. Received December 14, 2001; revised version received July 16, 2002 Published online: April 30, 2003 We thank referees for helpful comments. Ciaran Driver would like to acknowledge the research facilities from ANU, Canberra for their help in writing this paper.     

Measuring the Impact of Regulation: A Study of Canadian Basic Cable Television

We evaluate the appropriateness of regulation within the Canadian cable television industry by applying both parametric and non-parametric approachesto measure scale efficiency. Although we begin with a sample offering adequatedegrees of freedom for parametric estimation, important policy issues lead us toconsider further estimation over sub-samples. Since some of these sub-samplesare small enough that parametric models cannot guarantee reliable estimates, weobtain production characteristics non-parametrically through data envelopmentanalysis. The nonparametric results for scale efficiency support the parametricresults. We find evidence against a natural monopoly argument that might havejustified continuation of the mandated monopolization of Canadian cable televisionservice. By the end of the sample period, there were no longer substantial economiesof scale in most relevant markets.     

Expenditure on different categories of meat in Greece: the influence of changing tastes

This paper employs a latent variable approach to isolate the effects of changing tastes on the share of total meat expenditure on different categories of meat products in Greece during the period 1965–1995. We find that changes in the relative expenditure on different categories of meat cannot be explained by changes in the relative prices of the different meat products and increased expenditure alone. For pork products in particular, the increase in the share of expenditure has been greater than would be expected as a result of the relative fall in their price. The increase can therefore be associated with changes in taste. This finding is of general interest to those conducting empirical research into consumer behaviour both in economies where there have been significant changes in patterns of food consumption, and where, as in the case of many less industrialised economies, rapid structural changes in food consumption patterns are still to come. It is also of importance to policy makers in assessing die effectiveness of advertising or promotional campaigns in influencing longer term changes in consumer preferences for different products.     

Tailored Regulation: Will Voluntary Site-Specific Environmental Performance Standards Improve Welfare?

Increasingly popular tailored regulation (TR) initiatives like the Environmental Protection Agency's Project XL allow industrial facilities to voluntarily substitute site-specific environmental performance standards for inefficient command-and-control regulations. TR can significantly reduce participants' costs of complying with environmental regulations, but in doing so it can also give these participants a competitive advantage. Here we develop an analytical model to show that TR can have adverse welfare effects when if enables relatively inefficient firms in oligopolistic markets to “steal” market share from more efficient firms, and we characterize the regulatory policies that give rise to such outcomes. We also show that regulators' efforts to diffuse the benefits of site-specific agreements among nonparticipating firms dampen incentives to participate in TR.     

Earnings management by the early adopters of SFAS No. 106

Statement of Financial Accounting Standard (SFAS) No. 106 on Nonpension Postretirement Benefits (NPB) provides managers with a relatively long adoption window and choice of transition methods which can be used by affected companies to manage earnings. This paper examines whether management's choice of adoption timing is motivated by the desire to manage earnings. Fisher's [1934] exact probability analysis is used to test the hypothesis regarding profitability of a sample of 200 early and late adopters of SFAS No. 106. The results indicate that the profitability of adopting the income-reducing accounting standard (SFAS No. 106) early is significantly higher for more profitable firms than for less profitable firms.     

Demarketing as a differentiation strategy

Demarketing discourages consumers from buying. This paper shows that demarketing can be a profitable alternative when differentiation through product improvements is not cost effective. The impact of differentiating demarketing on profit, market share, consumers, and total welfare is investigated.This research began while Hess was visiting MIT's Sloan School of Management and was finished while visiting University of Haifa; he thanks both for their support.     

Optimal failure rates and penalty-bonus policies in the offshore petroleum sector

We characterize optimal time profiles of risk-reducing expenditures and wreck probabilities for petroleum platforms. The input to our analysis is the development of wreck cost, direct and imputed. Particular attention is paid to the question of how private companies deviating from socially optimal standards may be induced to comply with such standards by means of a) a time-variant penalty, b) a no-wreck bonus and c) a time-invariant penalty.