Do budget maximizing public officials increase the probability of property reassessment?

County governments in Pennsylvania face non‐binding limits on their property tax rates. These are considered non‐binding because they do not place a limit on tax levies or expenditures. Assuming local public officials have monopoly power, tax rate limits can be circumvented by reassessing the property tax base. A two‐stage process was hypothesized in which the probability of reaching tax rate limits first was determined and the probability of reassessment then was determined. The effect of budget maximizing government officials at each stage was tested for 66 Pennsylvania counties over the 1970–1995 period. The empirical results showed that variables associated with budget maximizing behaviour influenced the choice in each stage. Public expenditure growth increased the probability of reaching the tax rate limit in the first stage while reaching the tax rate limit increased the probability of reassessment in the second stage. The estimates also showed that economic, fiscal and taste variables were significant determinants of these probabilities.     

The price normalization problem in imperfect competition and the objective of the firm

Summary. General equilibrium models of oligopolistic competition give rise to relative prices only without determining the price level. It is well known that the choice of a numéraire or, more generally, of a normalization rule converting relative prices into absolute prices entails drastic consequences for the resulting set of Nash equilibria when firms are assumed to maximize profits. This is due to the fact that changing the price normalization amounts to altering the objective functions of the firms. Clearly, the objective of a firm must not be based on price normalization rules void of any economic content. In this paper we propose a definition of the objective of a firm, called maximization of shareholders' real wealth, which takes shareholders' demand explicitly into account. This objective depends on relative prices only. Real wealth maxima are shown to exist under certain conditions. Moreover, we consider an oligopolistic market and prove the existence of a Nash equilibrium in which each firm maximizes the real wealth of its shareholders. Received: July 10, 1997; revised version: July 27, 1998     

Are incomplete markets able to achieve minimal efficiency?

Summary. We consider economies with incomplete markets, one good per state, two periods, t = 0,1, private ownership of initial endowments, a single firm, and no assets other than shares in this firm. In Dierker, Dierker, Grodal (2002), we give an example of such an economy in which all market equilibria are constrained inefficient. In this paper, we weaken the concept of constrained efficiency by taking away the planners right to determine consumers investments. An allocation is called minimally constrained efficient if a planner, who can only determine the production plan and the distribution of consumption at t = 0, cannot find a Pareto improvement. We present an example with arbitrarily small income effects in which no market equilibrium is minimally constrained efficient.Received: 26 November 2002, Revised: 28 May 2003, JEL Classification Numbers: D2, D52, D61, G1.We are grateful to an anonymous referee for very valuable comments. E. and H. Dierker would like to thank the Institute of Economics, University of Copenhagen, for its hospitality and its financial support.     

Maturing born globals and their acquisitive behaviour

Born globals are becoming more common in our interconnected world. While a body of knowledge exists regarding the establishment and early growth of born globals, we know less about how these companies develop. Arguing that acquiring new knowledge, technologies, and products will enable companies to survive beyond their initial success, the current study specifically aims to explore the value of technology-motivated acquisitions, and their effect on performance. To this end, the study employs a hybrid methodology; statistically studying 108 acquisitions conducted by 45 maturing, technology-based born globals in Israel over a period of 10 years, and further substantiate the findings with an in-depth case analysis of four sample companies. The results indicate that technology-motivated acquisitions are valuable in terms of both financial performance and independent survival, but that there likely exists an optimal threshold, indicating that such a strategy, though beneficial, should be carefully managed.     

The rate of convergence of the core for a purely competitive sequence of economies

The purpose of the paper is to show that for ‘most’ purely competitive sequences of economies on a compact set of agents' characteristics the core converges to the set of equilibria at least as fast as the inverse of the number of agents. It is assumed that agents have smooth, convex preferences with non-zero Gaussian curvature. This rate of convergence is obtained for a purely competitive sequence with regular limit distribution.     

Profit maximization mitigates competition

Summary We consider oligopolistic markets in which the notion of shareholders' utility is well-defined and compare the Bertrand-Nash equilibria in case of utility maximization with those under the usual profit maximization hypothesis. Our main result states that profit maximization leads to less price competition than utility maximization. Since profit maximization tends to raise prices, it may be regarded as beneficial for the owners as a whole. Moreover, if profit maximization is a good proxy for utility maximization, then there is no need for a general equilibrium analysis that takes the distribution of profits among consumers fully into account and partial equilibrium analysis suffices.We wish to thank Hildegard Dierker and Nina Maderner for many helpful comments. This research was partially supported by the Danish Social Science Research Council. E. Dierker is grateful to the Department of Economics, University of Copenhagen, for its outstanding hospitality. B. Grodal appreciates the support from the Department of Economics, University of Vienna.     

Perfect timing? Dominant category,dominant design,and the window of opportunity for firm entry

The optimal time to enter emerging industries is a key concern in strategy, yet scholars struggle to create a theoretical foundation that can integrate conflicting empirical findings. We incorporate categorical dynamics to industry life cycle theory to enhance existing entry timing theories. We introduce the concept of a dominant category—the conceptual schema that most stakeholders adhere to when referring to products that address similar needs and compete for the same market space—linking it to the dominant technological design and entry‐timing advantages. In particular, we propose the existence of a window of opportunity for firm entry that starts with the emergence of the dominant category and ends with the emergence of the dominant design. © 2013 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.     

A note on the space of preference relations

The space of irreflexive, transitive, and continuous binary relations of R^l endowed with the topology of closed convergence, and subsets of defined by various other properties of the relations are investigated. It is shown that the subsets defined by properties, which one often assumes in general equilibrium theory, have nice topological properties such as compactness or G₈-ness.     

Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences

Agri-environmental contracts are used to provide incentives for nature management on private land in, e.g. the European Union. The aim of this article is to investigate preference heterogeneity for agri-environmental contracts among farmers in order to discuss potential policy improvements utilising heterogeneity. We used a choice experiment to elicit farmers’ stated preferences for afforestation contracts. Four attributes are investigated: purpose of afforestation, option of cancelling the contract, monitoring, and compensation level. All attributes present a potential conflict between farmers’ and authorities’ interests, which emphasises the importance of knowing how to handle these interests. A random parameter logit model shows that having the option to cancel the contract decreases farmers’ required compensation level and monitoring increases it. Furthermore, farmers are willing to accept a lower compensation when the aim is to protect biodiversity and ground water relative to recreation. Latent class models with class probability variables reveal discrete heterogeneity and support a division into four groups with divergent preferences. For example, a group of farmers who already have forest areas does not find the option of cancelling the contract important, whereas another group relying on the farm for income requires higher compensation. The findings indicate potential for efficiency gains from targeting the contracts.