AN EXTENSION OF LERNER'S MONOPOLY INDEX FOR MARKETS WITH A DISPARITY BETWEEN LONG- AND SHORT-RUN DEMAND ELASTICITIES

This paper develops a theoretical analysis of steady state monopoly pricing in markets with a disparity between long- and short-run demand elasticities, based on a separation between the long-run demand schedule and the adjustment process that underlies actual demand levels. This sheds light, in a practical context, on the impact of the speed of adjustment and the firm's discount rate on its equilibrium markup; and on the measurement of realized monopoly power. An illustrative application of the analysis to existing empirical data supplements the theoretical presentation.     

Organizational construction of intrinsic motivation

Some psychological theorists claim that the worker's level of intrinsic motivation or alienation stems from the meeting between universal drives and personality characteristics and the material attributes of job tasks. Social theorists—focusing on organizational socialization and cultural practices—emphasize the firm's capacity to manipulate the meaning of a task independent of its material qualities. This social construction of a task's meaning may shape the intrinsic rewards a worker associates with it. Little empirical evidence exists that clarifies the conditions under which the psychological or the social model holds, particularly the conditions under which socialization practices within the firm can shape the worker's level of intrinsic motivation associated with specific tasks. We argue that the intrinsic value associated with a task is determined by its centrality to and fit with the organization's normative social and technical structure. Based on a study of eighty-four staff members within a bureaucratic organization we found that workers perceived high levels of intrinsic value for tightly controlled and routine tasks when the firm's rationalized methods of organizing were seen as legitimate. This interaction operated independently of the direct (usually negative) influence of task control on intrinsic value. A contingency model of intrinsic motivation is proposed, taking into account both the material structure of a work task and its fit with the firm's social and technical structure. Here the perceived legitimacy of the organization's structure conditions whether tightly controlled and routine tasks are viewed as alienating or as intrinsically motivating.     

THE OPTIMALITY OF PARTIAL PRICE ADJUSTMENT POLICIES

This paper studies the optimal price adjustment policies of a monopolistically competitive firm whose profit-maximizing price is subject to a serially correlated random disturbance. The firm chooses its price by comparing the expected cost of present and future price changes with the expected losses occurring when price deviates from its instantaneous profit-maximizing value. Partial price adjustment often is the best way to minimize the sum of these losses. Prices tend to be more flexible both in response to large shocks to the firm's profit-maximizing price and when much uncertainty exists about the future.     

COMPOUND PRICING

Compound pricing makes the price or availability of some goods conditional on the purchase (or non-purchase) of other goods. Tie-ins and requirements contracts, two well-known examples, are analyzed here.
Contrary to some opinion, such practices need not be innocuous or benign. This analysis shows that compound pricing can produce price, output, profit, and welfare results that are practically indistinguishable from those got when a firm increases its monopoly power in more obvious and direct ways. By some standards, the requirements and exclusive dealing contracts analyzed here are predatory.     

INDUSTRIAL STRUCTURE AND MONOPOLY POWER IN THE FEDERAL BUREAUCRACY: AN EMPIRICAL ANALYSIS

Predictions of various models of public sector supply rely on the assumption of bureau monopoly power. This assumption is tested first by measuring industrial structure of the federal public sector using the concentration ratio and Herfindahl index, and second by examining the relationship between the resulting estimates and bureau monopoly power. The findings indicate that monopoly structure of the federal bureaucracy is more limited than is generally assumed. Interpretations on the basis of traditional industrial organization theory and contestable market theory suggest that bureau monopoly power is questionable and may not be the source of observed inefficiencies in bureau supply.     

ADJUSTMENT TO PRODUCTION UNCERTAINTY AND THE THEORY OF THE FIRM

This paper considers the behavior of the firm which faces uncertainty in its production process but can adjust its output once the uncertainty is resolved. Ex post adjustment, unlike previous treatments, involves a marginal cost penalty if more output is required and a lowering of price if too much is produced. With ex post adjustment allowed in this fashion, it is found that nonlinear risk preferences do not affect the sign of the firm's marginal risk premium at optimum ex ante output. The firm will produce less output than under certainty whether it is risk averse, risk neutral, or prefers risk.     

Union rents and market structure revisited

Several recent studies give conflicting evidence on whether market power associated with industry concentration is an important source of union rents. Using a 1977 sample of 327 four-digit manufacturing industries, we re-examine the issue with a regression analysis that allows for differential union effects on price-cost margins across three levels of concentration. Large and small firm as well as industry average price-cost margins are analyzed. The results reaffirm those of Hirsch and Connolly (1987), who conclude that the effect of unions on profits is independent of market structure, and thus market power is not an important source of union rents. We find that unionization: (1) reduces industry profits in all three concentration groups with statistically insignificant differential effects, and (2) has a greater negative effect on the profits of large firms than it does on the profits of small firms, regardless of the concentration category. We benefited from the comments of an anonymous referee. Any remaining errors are our own.     

AN OPTIMAL MIDDLEMAN FIRM PRICE ADJUSTMENT POLICY: THE "SHORT-RUN INVENTORY-BASED PRICING POLICY"

This paper examines the optimum pricing policies of middleman firms who carry an inventory of goods bought for resale. Each period the firm in the theoretical model is required to post a price before it observes its realized demand. In disequilibrium situations, the firm's profit-maximizing pricing policy is shown to be a "short-run inventory-based pricing policy" which requires the firm to post a price below the long-run equilibrium price upon observing its actual beginning inventory level above its optimum level, and to post a price above the long-run equilibrium price upon observing its actual inventory level below its optimum level. The final section suggests that the use of such policies by middleman firms will lead to market price adjustments which are both consistent with the "law of supply and demand" and which are based on explicit maximizing behavor.     

The Impact of Economic Freedom and Personal Freedom on Net In-Migration in the U.S.: A State-Level Empirical Analysis, 2000 to 2010

Arguably, private enterprise flourishes under conditions of increased freedom. However, increases in economic freedom can sometimes impose costs on others (negative externalities and monopoly power being prominent examples). Nevertheless, on balance, it is typically expected that the greater the degree of economic freedom, the more successfully and efficiently markets perform and the greater the prosperity created through private enterprise. These net outcomes from greater freedom accelerate economic growth and development, which in turn creates opportunities for yet further success. From a different perspective, it can be argued that greater personal freedom promotes higher levels of utility for consumers in non-economic ways. Accordingly, the present study empirically investigates whether the prospects of greater economic freedom and/or greater personal freedom in any given state vis-à-vis other states act(s) to induce a greater net influx of migrants. This empirical study of internal U.S. migration over the study period from 2000 to 2010 finds clear evidence that migrants prefer to move to those states with greater economic freedom on the one hand and greater personal freedom on the other hand.     

Global value chains in international knowledge work: networks,stratifications and labour markets

In this article, I aim to cast light on the arguably indeterminate phenomenon of the global labour market (GLM) by placing the focus on an industry that has sometimes been perceived as epitomizing homogeneity and ‘world flatness’ in its deployment of geographically dispersed knowledge workers, that of international software development. Engaging in a sanguine analysis of this industry with reference to an empirical study of outsourcing to Ukraine it is revealed that labour markets servicing ICT (Information and communication technology) are subject to deep, if fluctuating, social stratifications. With reference to the notion of the global value chain (GVC), 1 1 ¹GVC analysis focuses on the governance patterns and relational dynamics between lead and supplier firms at the sectoral level. The GVC and its predecessor, the global commodity chain (GCC) focus on the inter‐firm linkages and especially power relations between different actors (Feuerstein 2013). The similar concept of global production network (GPN) concerns the broader set of relations of power, positionality and value capture between all relevant firm and extra firm actors within a network (Thompson 2013). For this study on sourcing in the global software industry, the term GVC will be utilized throughout.
the significance of factors such as knowledge, language, citizenship and age as labour market differentiators for knowledge work is brought to the fore.     

APPROPRIABLE RENTS FROM YELLOWSTONE PARK: A CASE OF INCOMPLETE CONTRACTING

The history of Yellowstone Park is best understood in the context of the theory of the firm as developed by Armen Alchian. In the late nineteenth century, the Northern Pacific Railroad recognized the potential amenity rents from Yellowstone and captured them by vertically integrating its monopoly on transportation to the region with the supply of tourist facilities in the park. This gave the railroad de facto ownership of the park that lasted until automobiles were allowed to enter in 1915. Thereafter the tragedy of the commons ensued and rents were dissipated instead of maximized.     

Job satisfaction and firm size: An interactionist perspective

This study used Schneider's Attraction-Selection-Attrition Framework, an interactionist approach, to examine the effects of firm size on job satisfaction. While the initial fit between individuals and their jobs had significant positive influence on job satisfaction, firm size, contrary to prevailing wisdom, only played a moderating role along with individuals' values. The joint effects of size with initial fit and intrinsic values were negative, whereas the joint effects of size with initial fit and extrinsic values were positive. These results showing firm size acting only as a moderator suggest that to ask the question “Is job satisfaction greater for larger or smaller firms?” is too simplistic.     

TRADING UNCERTAINTY, ENFORCEMENT AND LABOR UNIONS

It is shown that when contracts can be perfectly enforced, trading uncertainty leads to discrimination among workers with the same skills and experience. In this case anti-discrimination laws lead to inefficiencies. In the absence of perfect enforcement, anti-discrimination practices may be used as enforcement devices and need not lead to inefficiencies. In particular, firms may wish to precommit to an anti-discrimination policy, say by inviting in a labor union, in order to offer credible insurance to its workers. This leads to an equilibrium in which union workers get a higher wage than non-union workers, but unions do not have monopoly power.     

LABOR MARKET SHARE CONTRACTS WHEN THE FIRM HAS TWO VARIABLE INPUTS

This paper extends Weitzman's analysis of share contracts. Firstly, a second variable input is introduced into a firm's production technology. Some share contracts give the firm an incentive to reduce worker compensation by manipulating the second variable input. This implies that contracts which possess this property cannot support the same long-run equilibrium as would be achieved with a wage contract. Secondly, a positively sloped labor supply curve is introduced. It is shown that while share contracts reduce involuntary unemployment, they may not reduce total unemployment vis-a-vis wage contracts. The paper identifies the factors which determine relative employment variability.     

RENT-SEEKING FIRMS, CONSUMER GROUPS, AND THE SOCIAL COSTS OF MONOPOLY

Do consumers' consumer-surplus (CS)–defending activities increase the social costs of monopoly compared to when consumers are inactive? Given just one rent-seeking firm, consumers ' CS-defending activities generally increase the social costs of monopoly, but given two or more rent-seeking firms, such activities generally reduce the social costs. (JEL D72, L12)     

STOCHASTIC INPUT DELIVERIES

The subject of this paper is the theory of the firm confronted with uncertain deliveries of its inputs. Examples of this form of uncertainty may be found in interruptible natural gas or electricity supply contracts, labor absenteeism and allocations of gasoline. Analyses of the firm's order quantity expansion path and order intensities are conducted. Comparisons are made between the optimal values of inputs selected under certainty and uncertainty, as well as comparisons between expected out-put and certainty output.     

LABOR QUEUES AND INVOLUNTARY UNEMPLOYMENT

This paper outlines a job search model which emphasizes the placing of applications by job searchers and the firm's use of a queue of applicants as an inventory of labor. The paper analyzes the consequences of the assumption that firms hold queues of applicants both for the decisions of a single firm and for a market composed of several such firms. The aggregate results suggest that considering such labor market queuing helps explain wage rigidity and involuntary unemployment.     

FIRM SPECIFIC TRAINING, LAYOFFS, AND UNRELIABLE WORKERS

This paper determines the optimal level of firm specific training and the optimal level of layoffs when some workers are unreliable in that they may receive and accept offers from outside the firm; more specifically, the paper determines the evolution of firm specific training and layoffs as a worker acquires a reputation for reliability with his employer. The paper shows, for example, that layoffs may be higher or lower than the level implied by the condition that a worker's value of leisure equal the value of his contribution to output.     

The Gatekeeper

Gatekeepers control access to benefits that they do not own. When granted access, their clients incur obligations that take the form of fees owed to the gatekeeper. This paper examines a variety of forms that gatekeeping has historically taken, looking closely at the network positions that gatekeepers have occupied. Not previously resolved is what determines the size of the client's obligation. The theory presented here predicts 1) the size of that obligation from the value to the client of the access sought. It also predicts that 2) to benefit, gatekeepers must monopolize their positions, or, failing monopolization, 3) must organize to form a shared monopoly. In exchange networks, gatekeeping takes the form of "ordering," a new structural power condition. Resistance equations generate exact quantitative values for hypotheses expressing the three predictions above. Experimental tests in the well-understood context of exchange networks offer strong support for the hypotheses.     

A model of monopoly and “efficient” unions with endogenous union coverage: Positive and normative implications

We present a model of a rent-maximizing union that organizes to increase its coverage of an industry and analyze monopoly and “efficient” unions in this setting. Our model is unique in that we allow for a competitive industry with free entry and find union and nonunion firms coexisting with product market equilibrium. This is achieved by incorporating the insight that firms are heterogeneous in productive characteristics. An important implication of our model is that an “efficient” union that covers a nontrivial share of the market is not efficient and may in fact be less efficient than a monopoly union.