Wage differentials in a dynamic theory of the firm

The behavior of a profit-maximizing firm in a market characterized by uncertain wage differentials for a homogeneous occupation is studied. The firm must make a number of interdependent decisions at every moment of time. It must choose a wage rate, a level of vacancies and the rate at which it will fill them, and the scale of production. Individual behavior plays an important role in the model. Individuals must decide whether to quit their current job to search for a better position if they are employed and whether to accept any forthcoming offers if they are unemployed. The model is set up as a dynamic optimization problem. The determinants of the firm's relative wage rate are its turnover costs, price of output, the aggregate vacancy-unemployment ratio, and other individual and market variables. It is shown that a firm faced with an excess supply of willing applicants will not lower its wage. This introduces an inflationary bias into the market when changes in the unemployment rate are considered.     

The 2010 HMGs Ten Years Later: Where Do We Go From Here?

Review of Industrial Organization - In this article, which is part of the Symposium on the Tenth Anniversary of the 2010 Horizontal Merger Guidelines, we suggest a number of improvements that...     

Deregulating Self-Regulated Shared Atm Networks

The development of shared ATM networks raises important issues of competition, cooperation and standardization. Sharing necessarily involves cooperation among competing ATM owners and card issuing financial institutions. Networks adopt rules that regulate members' pricing decisions also involve issues of standardization and competition. In particular, most networks make ATM owners sell at wholesale by mandating of interchange fees to replace retail market competition among ATM owners. Networks argue that these rules are necessary to present consumers with a standardized product instead of the chaos of the marketplace and to maintain the integrity of the complementary products offered by members. These are, of course, similar to the standardization and compatibility issues raised in other networks contexts. The paper analyzes the need for this system of fixed interchange fees and sets out a proposal to replace the current system with free market price competition by ATM owners.