This comment examines a model of the determinants of electric utility R&D activity postulated by Wilder and Stansell. One of the defects in their empirical analysis is the failure to account for corporate interrelationships among the sample observations. Wilder and Stansell include as separate and independent observations joint venture companies, operating systems of holding companies, and subsidiaries of nonutility parent companies. After adjusting the original sample for these corporate affiliations, we estimated the Wilder and Stansell model for 1970 and 1972. Our empirical results do not support the Wilder and Stansell conclusion regarding the impact of current profitability on current research and development activity. We find that the sign and significance of the profitability measure are sensitive to the composition of the sample and to the particular time frame.
{"title":"Determinants of Research and Development Activity by Electric Utilities: Comment","authors":"J. B. Delaney, T. Honeycutt","doi":"10.2307/3003286","DOIUrl":"https://doi.org/10.2307/3003286","url":null,"abstract":"This comment examines a model of the determinants of electric utility R&D activity postulated by Wilder and Stansell. One of the defects in their empirical analysis is the failure to account for corporate interrelationships among the sample observations. Wilder and Stansell include as separate and independent observations joint venture companies, operating systems of holding companies, and subsidiaries of nonutility parent companies. After adjusting the original sample for these corporate affiliations, we estimated the Wilder and Stansell model for 1970 and 1972. Our empirical results do not support the Wilder and Stansell conclusion regarding the impact of current profitability on current research and development activity. We find that the sign and significance of the profitability measure are sensitive to the composition of the sample and to the particular time frame.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116138381","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The 1970 Amendments to the Bank Holding Company Act have empowered the Federal Reserve Board to determine whether the bank holding company expansions into nonbank activities meet the "proper incident" test. This paper presents an analytical device whereby regulators applying this test can evaluate the effects that each proposed nonbank expansion has upon the holding company's probability of capital impairment and debt capacity. Several regulatory implications are derived. The procedure is simulated and the separate effects of diversification and debt financing are measured. While the holding companies studied diversified effectively, the benefits were largely thwarted by considerable debt financing.
{"title":"Bank Holding Company Diversification and the Risk of Capital Impairment","authors":"David R. Meinster, Rodney D. Johnson","doi":"10.2307/3003359","DOIUrl":"https://doi.org/10.2307/3003359","url":null,"abstract":"The 1970 Amendments to the Bank Holding Company Act have empowered the Federal Reserve Board to determine whether the bank holding company expansions into nonbank activities meet the \"proper incident\" test. This paper presents an analytical device whereby regulators applying this test can evaluate the effects that each proposed nonbank expansion has upon the holding company's probability of capital impairment and debt capacity. Several regulatory implications are derived. The procedure is simulated and the separate effects of diversification and debt financing are measured. While the holding companies studied diversified effectively, the benefits were largely thwarted by considerable debt financing.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"72 6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116392198","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As a means of avoiding the allocative distortions which might arise from pricing uniformly all units of output, industries in the regulated sector commonly utilize a variety of differential pricing practices. This paper presents empirical evidence indicating that one variant of differential pricing used in the electric power industry in itself gives rise to substantial allocative inefficiency. This finding suggests that the welfare consequences of differential pricing be examined more carefully.
{"title":"Differential Pricing and Interconsumer Efficiency in the Electric Power Industry","authors":"J. Crockett","doi":"10.2307/3003205","DOIUrl":"https://doi.org/10.2307/3003205","url":null,"abstract":"As a means of avoiding the allocative distortions which might arise from pricing uniformly all units of output, industries in the regulated sector commonly utilize a variety of differential pricing practices. This paper presents empirical evidence indicating that one variant of differential pricing used in the electric power industry in itself gives rise to substantial allocative inefficiency. This finding suggests that the welfare consequences of differential pricing be examined more carefully.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122311690","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines a welfare criterion for marginal cost pricing in the presence of metering costs. The good examined is local telephone service, which is viewed as two separate commodities: a connection to the system, and a charge for the telephone services actually used. The empirical results suggest that the rate structures of North American telephone utilities appear more consistent with rational pricing in the face of metering costs than with Averch-Johnson behavior.
{"title":"Metering Costs and Marginal Cost Pricing in Public Utilities","authors":"G. F. Mathewson, G. D. Quirin","doi":"10.2307/3003083","DOIUrl":"https://doi.org/10.2307/3003083","url":null,"abstract":"This paper examines a welfare criterion for marginal cost pricing in the presence of metering costs. The good examined is local telephone service, which is viewed as two separate commodities: a connection to the system, and a charge for the telephone services actually used. The empirical results suggest that the rate structures of North American telephone utilities appear more consistent with rational pricing in the face of metering costs than with Averch-Johnson behavior.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"76 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122356058","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
When effort cannot be costlessly monitored, Pareto optimal employee compensation schemes require that owners and managers deviate from perfect risk sharing to improve the work incentives facing the manager. This article investigates the implications of this misallocation of risk for the behavior of firms in which managers make decisions for owners. The presented model predicts that, from the owner's perspective, managers will exhibit excessive risk aversion and underinvest in risky projects.
{"title":"Risk Sharing and the Theory of the Firm","authors":"A. Marcus","doi":"10.2307/3003460","DOIUrl":"https://doi.org/10.2307/3003460","url":null,"abstract":"When effort cannot be costlessly monitored, Pareto optimal employee compensation schemes require that owners and managers deviate from perfect risk sharing to improve the work incentives facing the manager. This article investigates the implications of this misallocation of risk for the behavior of firms in which managers make decisions for owners. The presented model predicts that, from the owner's perspective, managers will exhibit excessive risk aversion and underinvest in risky projects.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"69 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122558799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Given the current state of technology, the existing resource supplies, and environmental constraints, we examine how much shale oil could be profitably produced in the Western United States, what processes would be used, and which constraints would be binding in long-run equilibrium. Using an activity analysis model, we show that production of over 15 million barrels of shale oil per day (five-sixths of present U.S. oil consumption) is a profitable activity when the price of oil is $18 per barrel (1975 dollars). In testing the sensitivity of our results, we find that, even under quite conservative assumptions, production of two million barrels per day is economically feasible in the long run when the selling price of oil exceeds $12 per barrel.
{"title":"The economic feasibility of shale oil: an activity analysis","authors":"Neil R. Ericsson, Peter J. Morgan","doi":"10.2307/3003593","DOIUrl":"https://doi.org/10.2307/3003593","url":null,"abstract":"Given the current state of technology, the existing resource supplies, and environmental constraints, we examine how much shale oil could be profitably produced in the Western United States, what processes would be used, and which constraints would be binding in long-run equilibrium. Using an activity analysis model, we show that production of over 15 million barrels of shale oil per day (five-sixths of present U.S. oil consumption) is a profitable activity when the price of oil is $18 per barrel (1975 dollars). In testing the sensitivity of our results, we find that, even under quite conservative assumptions, production of two million barrels per day is economically feasible in the long run when the selling price of oil exceeds $12 per barrel.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122469670","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There are definite patterns for the organization of production on agricultural land. Production of some crops tends to be organized via wage contracts, while land sown to other crops tends to be rented, and still other crops are frequently sharecropped. One popular explanation is that contractual choice in agriculture is related to the riskiness of production. Sharecropping, according to this argument, is used with the most risky crops to facilitate risk spreading in a world with incomplete insurance markets.
{"title":"Self-selection by contractual choice and the theory of sharecropping","authors":"W. Hallagan","doi":"10.2307/3003586","DOIUrl":"https://doi.org/10.2307/3003586","url":null,"abstract":"There are definite patterns for the organization of production on agricultural land. Production of some crops tends to be organized via wage contracts, while land sown to other crops tends to be rented, and still other crops are frequently sharecropped. One popular explanation is that contractual choice in agriculture is related to the riskiness of production. Sharecropping, according to this argument, is used with the most risky crops to facilitate risk spreading in a world with incomplete insurance markets.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129524467","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper the effect of allegedly manipulative activities on stock returns and the effectiveness of trading suspensions in arresting such manipulations are empirically studied. The results from conducting both a Fama-Fisher-Jensen-Roll test and a portfolio test on the error terms computed from a single factor market in periods surrounding a trading suspension are presented. The findings clearly identify regulators as having access to predominantly unfavorable new information about allegedly manipulative activities that is not "fully reflected" in stock prices prior to a trading suspension. Furthermore, since unfavorable information disclosures during a trading suspension period are found not to be fully reflected in stock prices on the date of trading reinstatement, the market is deemed to be inefficient in the semistrong form.
{"title":"Misinformation and Regulatory Actions in the Canadian Capital Markets: Some Empirical Evidence","authors":"L. Kryzanowski","doi":"10.2307/3003587","DOIUrl":"https://doi.org/10.2307/3003587","url":null,"abstract":"In this paper the effect of allegedly manipulative activities on stock returns and the effectiveness of trading suspensions in arresting such manipulations are empirically studied. The results from conducting both a Fama-Fisher-Jensen-Roll test and a portfolio test on the error terms computed from a single factor market in periods surrounding a trading suspension are presented. The findings clearly identify regulators as having access to predominantly unfavorable new information about allegedly manipulative activities that is not \"fully reflected\" in stock prices prior to a trading suspension. Furthermore, since unfavorable information disclosures during a trading suspension period are found not to be fully reflected in stock prices on the date of trading reinstatement, the market is deemed to be inefficient in the semistrong form.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129778707","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article demonstrates that the partitioning of economic activity into for-profit and nonprofit organizations can be at least partially described as the solution to an optimal contracting problem. We show that nonprofit firms may be superior to for-profit firms if the output cannot be costlessly observed.
{"title":"The Economic Role of the Nonprofit Firm","authors":"D. Easley, Maureen O'Hara","doi":"10.2307/3003654","DOIUrl":"https://doi.org/10.2307/3003654","url":null,"abstract":"This article demonstrates that the partitioning of economic activity into for-profit and nonprofit organizations can be at least partially described as the solution to an optimal contracting problem. We show that nonprofit firms may be superior to for-profit firms if the output cannot be costlessly observed.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"84 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129842561","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Federal Communications Commission, hoping "to get cable moving without jeopardizing over-the-air broadcasting," recently proposed rules that would allow cable systems in the 100 largest television markets to carry a limited number of distant signals. This paper employs a nonlinear model of cable penetration to assess the effect of the proposed rules. The model is developed using a sample of 63 cable systems located where several signals can be received over the air with no particular reception problems. Applying the model to some typical top-100 market situations, the author concludes that the proposed rules "will meet the Commission's objective. But more is necessary to keep cable moving, because the rules by themselves are probably not sufficient to make cable profitable in most of the top-100 markets. To succeed in the cities, cable must attract customers with new services in addition to the traditional package of better reception plus distant signals."
{"title":"Prospects for Cable in the 100 Largest Television Markets","authors":"R. E. Park","doi":"10.2307/3003073","DOIUrl":"https://doi.org/10.2307/3003073","url":null,"abstract":"The Federal Communications Commission, hoping \"to get cable moving without jeopardizing over-the-air broadcasting,\" recently proposed rules that would allow cable systems in the 100 largest television markets to carry a limited number of distant signals. This paper employs a nonlinear model of cable penetration to assess the effect of the proposed rules. The model is developed using a sample of 63 cable systems located where several signals can be received over the air with no particular reception problems. Applying the model to some typical top-100 market situations, the author concludes that the proposed rules \"will meet the Commission's objective. But more is necessary to keep cable moving, because the rules by themselves are probably not sufficient to make cable profitable in most of the top-100 markets. To succeed in the cities, cable must attract customers with new services in addition to the traditional package of better reception plus distant signals.\"","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128583248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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