Regulation, Vertical Integration and Sabotage

We consider the incentive of a dominant firm that supplies a necessary input to a Bertrand-competitive differentiated products downstream industry to: (1) vertically integrate forward, and (2) raise its downstream rivals' costs through non-price activities which we characterize generally as 'sabotage'. We examine these incentives both in the absence and presence of a regulatory constraint on the upstream price. We find that, while an incentive for vertical integration is present regardless of the existence of the regulatory constraint, the incentive for sabotage emerges only in the presence of binding input price regulation. Welfare effects are also explored.     

BP: developing excellence in the global enterprise

World-class supply management organizations like Honda of America, John Deere, Chrysler, Hewlett Packard, and Motorola all understand the power of continuous improvement in the supply base. The best supplier management and development programs help suppliers--on a long-term basis--develop their own strength and expertise in suggestion systems, new product development, and high quality production results.     

Reviews

RESTRUCTURING THE STEEL INDUSTRY.

Ray Hudson and David Sadler, 1989: The International Steel Industry: Restructuring, State Policies and Localities. London: Routledge, £30.00 cloth.

BEYOND THE INNER CITY.

Byrne, D. 1989: Beyond the Inner City. Open University Press, £9.95 paper, £27.50 cloth.

REGIONAL DEVELOPMENT.

Harris, R. I. D. 1989: The Growth and Structure of the UK Regional Economy 1963-85. Aldershot: Avebury, £35.00 cloth.     

Intraurban residential mobility: The role of transactions costs, market imperfections, and household disequilibrium

This paper presents a model of household residential search and mobility that focuses on microeconomic elements of household behavior and incorporates housing market features. The model is cast explicitly in terms of a rigorous model of housing demand, allowing the benefits from moving to be measured as the compensating income variation of the potential change in consumption. The empirical results indicate that large changes in economic variables, such as income and prices produce only small potential gains from moving and that a major factor in the moving decision is the magnitude of search and moving costs.     

Myth in design

Conclusion Like our society, design is riddled with myths. Not all are harmful. Indeed, there is often a symbiotic relationship. Myths are also useful as a learning device in which the unintelligible —randomness, is reduced to the intelligible — a pattern. However, if we are striving, as designers, to gain understanding, to have gnosis, then an awareness of the role of myth in design is essential.Myth in design is important because, in casting ideas into tangible forms, it affects the way we think and behave; it not only reflects our past and present, it can also determine our future.     

Zeitgeist leadership

Companies and leaders don't succeed or fail in a vacuum. When it comes to longterm success, the ability to understand and adapt to changing business conditions is at least as important as any particular personality trait or competency. A clear picture of how powerful the zeitgeist can be emerges from the authors' comprehensive study of the way the business landscape in the United States evolved, decade by decade, throughout the twentieth century. Six contextual factors in particular, they found, most affected the prospects for business: the level of government intervention in business, global events, demographics, shifts in social mores, developments in technology, and the strength or weakness of the labor movement. A lack of contextual sensitivity can trip up even the most brilliant executive. No less a luminary than Alfred P. Sloan was relieved of GM's day-to-day management in the 1930s because he was unwilling to meet with the new UAW. Conversely, an understanding of the zeitgeist can play a crucial but unheralded role in business performance. Jack Welch is widely credited with GE's remarkable success during the 1980s and 1990s, for example, but far less attention has been paid to his predecessor, the statesmanlike and prudent Reginald Jones, who sustained strong revenue and profit growth during the heavily regulated stagflation of the 1970s. To better understand this connection between business performance and context, the authors studied 1,000 great U.S. business leaders of the twentieth century and identified three distinct archetypes: Entrepreneurs, often ahead of their time, overcame dire challenges to build something new. Managers excelled at reading and exploiting the existing zeitgeist to grow their businesses. Leaders defied context to identify latent potential in businesses others considered mature, stagnant, or in decline. In every decade, all three archetypes were vital. It is the ongoing regeneration of this pattern in the business life cycle that ultimately sustains development and progress.     

When do auctions ensure the welfare‐maximizing allocation of scarce inputs?

We determine when an unfettered auction will ensure the welfare‐maximizing allocation of a scarce input that enhances product quality and may reduce production costs. A supplier values the input for this “use value” and for its “foreclosure value,” because once the input is acquired, it is unavailable to rivals. An unfettered auction often ensures the welfare‐maximizing allocation of an input increment. However, it can fail to do so when the input would increase relatively rapidly the competitive position of a rival with a moderate competitive disadvantage. Bidder handicapping that ensures auctions generate welfare‐maximizing input allocations differ from standard handicapping policies.