THE PERFORMANCE OF AN ELECTRICITY UTILITY: THE CASE OF THE STATE ELECTRICITY COMMISSION OF VICTORIA, 1925–93

One of the most important microeconomic policy reforms of the 1990s was the restructuring of the Australian electricity supply industry. This process was encouraged by the perception that the state-owned electricity authorities performed poorly in the 1970s and 1980s. This article observes the long-term performance of the State Electricity Commission of Victoria over the course of most of its life. In particular the growth in demand for electricity in Victoria, the productivity growth of the State Electricity Commission of Victoria, as well as electricity prices, profits and debt levels are presented over the longer term.     

A Cointegration Analysis of Car Advertising and Sales Data in the Presence of Structural Change

This paper examines whether there is a long‐run stable equilibrium relationship between advertising and sales across the market segments of the UK car industry over the period 1971–2001. In order to achieve this goal, we allow for structural breaks in the series using cointegration techniques. The results show the existence of long‐run equilibrium relationships in all six market segments, although in four of them the relationship is not stable. In general, one structural change is detected in the late 1970s and another in the early 1990s, coinciding with two economic recessions. When we do not account for structural changes, the estimated long‐run elasticities of advertising on sales are seen to be substantially downwardly biased. Finally, a noticeable increase is observed in long‐run elasticities in most car market segments during the nineties with respect to previous decades.     

Firm Growth and Failure in Increasingly Competitive Markets Theory and Application to Hospital Markets

Recent models of firm failure and growth have ignored demand factors. In this paper, we generalize these theoretical analyses to include demand factors in explaining failure and growth for heterogeneous firms in local markets facing imperfect but increasing competition. The model is then applied empirically to the hospital industry in California over the 1980s, during which time competition did intensify. We model the closure decision based on expectations of future growth, explicitly accounting for self selection and simultaneity. We find that both size and demand factors are important determinants of survival and growth     

US Antidumping Law and Competition in International Trade

It is usual to argue that the US antidumping code and legal practice have become a substitute for tariffs now severely limited by GATT and, somewhat like these displaced tariffs, they are intended to limit the extent of price competition by foreign sellers. However, there is one set of conditions under which the regulations and duties, and the accompanying increase in market price they bring about, increases domestic producer surplus more than they decrease consumer surplus and therefore increase domestic welfare. As is shown, these conditions require antidumping duties to exclude foreign manufacturers from the domestic market in a specific inverse relationship to the prevailing market price. While the duties imposed with an antidumping violation implicitly set out an exclusion rate for foreign manufacturers, there is little in the US code or legal practice which suggests that the duties and exclusion rates are established with this specific rule in mind.     

Profit sharing regulation and repeated bargaining with a shut-down option

We analyze the behavior of a firm where workers share profits with shareholders by using a model cast in an Aoki framework. There are two sorts of uncertainties: one relates to the market price, assumed to follow a random path in continuous time, while the other concerns internal organization, i.e. the share of profits to be distributed between workers and shareholders. In the institutional setting we adopt the firm is flexible, since it has the possibility of shutting down, by paying laid off workers a bonus, which represents a sunk cost. The distributive share is determined in the firm's internal labor market through a bargaining that takes place at two occasions: at the beginning of the firm's life and when profits reach a threshold level. The second bargaining is endogenized according to a procedure imposed upon shareholders and workers by a regulator who may use profit distribution as a way to intervene in the firm's internal labor market. Specificities make this market highly imperfect. Different share parameter patterns result, owing to a shut down option, according to whether (a) the regulator calls for renegotiation when profits are increasing or decreasing, (b) the regulator's rule is announced in advance or is discretionally set.     

Competition in the Canadian Personal Finance Sector

This paper employs cross-section continuous time series data to examine competition in the Canadian personal finance sector for the period 1987–90. Using a generalised linear pricing model, firm entry is found to be significant in the setting of deposit and mortgage rates, suggesting the presence an incontestable market structure consistent with Cournot oligopoly. There is also evidence of price-making behaviour and relative bargainlripoff products. For three of the four products studied, a ‘fifth column’ consisting of the 12 major banks and trust companies best explain pricing in these markets     

The Economics of Business Process Design: Motivation,Information and Coordination Within the Firm

This paper presents a transaction cost analysis of the internal business processes of firms. Business processes are collections of activities which are technologically or managerially linked so that they jointly affect value added. Their organisation is characterised by their ‘architecture’—the allocation of responsibilities amongst individuals and groups and communication between them for information and coordination—and their incentive structure. The overall costs of organisation are determined by losses due to imperfect motivation of process members, which flows from the incentive structure, and imperfect information and coordination, which flow from the architecture, together with the resource costs associated with incentives and architecture. Perfect motivation corresponds to ‘team behaviour’ and a quantitative model, based on team theory, indicates how the best architecture depends on the degree interaction between activities comprising the business process.     

A market index futures contract and portfolio selection

This paper shows that if security returns are generated according to the market model and there is a futures market in the market index, then optimal portfolios can be selected in three steps: 1) select the optimal combination of firm unique characteristics; 2) select the optimal investment in the market; and 3) select the optimal investment in the risk-free asset. The futures market contract separates the choice of firm and market exposure and thus both simplifies the mathematics involved and increases the mean/variance efficiency of the optimal portfolio.     

Product market competition and boundaries of the firm

Abstract .  This paper studies the effects of product market competition on firm boundaries. In a duopoly setting, each retailer is associated with a manufacturer who must decide how to allocate property rights over a retail asset. Delegating property rights over the retail asset to an indepedent retailer ('disintegration') transfers incentives from the manufacturer to the retailer and has the benefit of increasing product quality and profits, owing to the retailer's superior efficiency. However, it also forces the manufacturer to forfeit part of the profits. Competition increases the net benefit from delegation and leads to more efficient, vertically disintegrated structures.     

COMPETITION, PARALLEL IMPORTS AND COST-REDUCING INNOVATION

Incorporating parallel imports (PI), we develop a two‐country two‐firm model which relates to the incentives for cost‐reducing innovation. We show that PI may facilitate or inhibit the manufacturers' incentives to innovate. In particular, PI could encourage both firms' innovations. The difference between the manufacturer's profits under successful innovation and failed innovation is either a U‐shaped curve or an inverted U‐shaped curve in terms of the cost of engaging in PI. As these differences reflect the manufacturers' incentive to innovate, the variations in R&D investment depend on transportation cost, and firms' marginal costs before and after successful innovations.