A NOTE ON THE THEORY OF BLACK MARKETS UNDER PRICE CONTROLS

In a recent article in this Journal Browning and Culbertson (hereafter B-C) extended the theoretical investigation of the predicted effects of maximum price controls to the competitive firm and deduced an excess capacity result. In this note we extend their analysis to derive long-run adjustment paths for the industry for changes in market demand or control prices. The importance of such an extension is that the relevant industry adjustment path is different depending on whether one considers changes in the control price through such mechanisms as cost pass-throughs or through changes in industry demand. To make this extension meaningful, however, we must first consider the link between the firm and market diagrams in B-C's model. Section I is devoted to the analysis. Section II offers some concluding remarks.     

ATTITUDE-BEHAVIOR CONSISTENCY: A REVIEW

Most people operate on the assumption that when a person statesthat he believes or feels a particular way about something hewill behave in a manner consistent with his statements. If thisis so, why do researchers report such a poor relationship betweenattitude and behavior? Personal, situational, and methodologicalfactors contributing to this discrepancy are examined.     

ENTREPRENEURIAL ENTERPRISES, ENDOGENOUS OWNERSHIP, AND THE LIMITS TO FIRM SIZE

This paper develops a simple model of entrepreneurial enterprises. The analysis differs from traditional work on entrepreneurship by analyzing why entrepreneurial activities are typically conducted in small firms owned by the entrepreneur. I argue that ownership incentives are an advantage of small firms. When the probability of success of an economic activity becomes small, if becomes costly for large firms to commit to strong incentives, and small worker-owned firms emerge. The paper discusses application of the theory to innovation, wild-cat oil exploration, restaurants and retail trade, professional practices, salesmen, and franchising.     

Time of Decision and Media Use During the Ford-Carter Campaign

This paper challenges the traditional belief that a full presidentialpolitical campaign can have only "limited effects" on voting,by identifying a group of voters who make their decisions duringthe campaign rather than either prior to or very late in thecampaign. In a panel study of Wisconsin voters in the 1976 election,40 percent were Campaign Deciders. These voters were low inpartisanship, but paid close attention to the campaign and theFord-Carter debates, and voted in accordance with campaign-specificperceptions. By contrast, both Pre-campaign Deciders and Last-minuteDeciders voted mainly on the basis of party identification.     

UNDERSTANDING REGRESSION VERSUS VARIANCE TESTS FOR SOCIAL INTERACTIONS

This article considers the relationship between the use of regressions and the use of variance contrast methods to uncover social interactions. We illustrate how these methods employ different identifying assumptions and are therefore complementary approaches. We also provide formal identification results that extend existing ones for the two methods. ( JEL C12, C21, C23, Z13)     

HETEROGENEITY UNDER COMPETITION

A standard prediction of neoclassical microeconomics is that with perfect competition, free entry, and atomistic firms producing a homogeneous product, equilibrium finds all firms employing that technology which has minimum average cost. That competition drives out inefficient producers and reduces heterogeneity within industries is, consequently, a commonplace rule of thumb in economic thinking. This paper demonstrates that demand uncertainty is sufficient to produce heterogeneity in the equilibrium employment of production technologies and to permit the coexistence of producers exhibiting different minimum average costs. This heterogeneity is ubiquitous because the conditions for its presence are not stringent.     

INCOMPLETE CONTRACTING: A LABORATORY EXPERIMENTAL ANALYSIS

Incomplete contracts are motivated by difficulties in specifying contingent responses to unforeseen change in long-term trading relationships. The issues can be parsimoniously represented in a two-period model. Parties first make transaction-specific investment that enhances value or reduces cost. Surplus is then realized, and bargaining divides the surplus and completes the contract. The testable hypothesis is that realized surplus shares are independent of sunk investments. This is strongly rejected using laboratory experimental methods. Failure of the prediction affects the expected profitability of contracts.     

INDUSTRIAL DYNAMICS AND THE NEOCLASSICAL GROWTH MODEL

This paper studies industry-level dynamics and demonstrates the ability of a modified neoclassical growth model to capture a range of empirical facts. The paper begins by using U.S. data to document skilled and unskilled labor trends within industry sector classifications as well as industry sector output trends. Using Current Population Survey data from 1968 to 2004, it is shown that the ratio of skilled workers to unskilled workers employed has risen in all industries. The absolute increase in this ratio was larger in the more skilled industries, while the growth rate was larger in the less skilled industries. Furthermore, using national income account data, it is shown that relatively high-skilled industries have accounted for an increasing share of output over time. A version of the neoclassical growth model is then constructed to match these observations. One important feature of this model is a structure that introduces new goods into the economy at each moment of time. The model is able to capture a rich set of labor market movements between sectors and between skill levels as well as changes in the relative output shares across industries, yet preserves many nice features of the neoclassical growth model. ( JEL E13, J20, 030)