Economics Commons^™

Holdups, Standard Breach Remedies, And Optimal Investment, Aaron S. Edlin, Stefan J. Reichelstein

Aaron Edlin

In bilateral trading problems, the parties may be hesitant to make relationship-specific investments without adequate contractual protection. We postulate that the parties can sign noncontingent contracts prior to investing, and can freely renegotiate them after information about the desirability of trade is revealed. We find that such contracts can induce one party to invest efficiently when courts impose either a breach remedy of specific performance or expectation damages. Moreover, specific performance can induce both parties to invest efficiently if a separability condition holds. Expectation damages, on the other hand, is poorly suited to solve bilateral investment problems.

Looking At Market Square: Toward A Development Concept For Chicopee Center, Center For Economic Development

Center for Economic Development Technical Reports

This report presents a series of marketing and economic development strategies for the central business district in Chicopee Center known as the Market Square area. The City of Chicopee, along with the cities of Holyoke and Springfield, is part of the urban center of the Pioneer Valley region. Like many older industrial cities, and like many cities with a small downtown area, Chicopee finds its economic fortunes at an ebb. Although Chicopee is certainly not a city in distress, it is believed that steps should be taken to ensure that the Market Square area does not slip into serious decline. …

Industrial Lands Survey Worcester, Massachusetts, Center For Economic Development

Center for Economic Development Technical Reports

The purpose of this report is to provide the Worcester City Manager's Office of Planning and Community Development with an inventory of industrially zoned properties within the City's designated Economic Opportunity Areas (EOA): Southern District, Pullman Street, Greendale, and Northeast. This inventory includes a database consisting of property information for all four EOAs, as well as a more detailed analysis of the Main South Industrial Cluster of the Southern District EOA.

The first two chapters of the report provide a brief introduction to the City and the project, highlighting the economic history of Worcester and the region. As the region …

Product Differentiation, Uncertainty And The Stability Of Collusion, Michael Raith

Michael Raith

The conventional view that product heterogeneity limits the scope for collusion among oligopolists has been challenged in recent theoretical work. This paper provides an argument in support of the conventional view by emphasising the role of uncertainty. I introduce the idea that, with stochastic demand, an increase in the heterogeneity of products leads to a decrease in the correlation of the firms’ demand shocks. With imperfect monitoring, this makes collusion more difficult to sustain, as discriminating between random demand shocks and marginal deviations from the cartel strategy becomes more difficult. These effects are illustrated within a Hotelling-type duopoly model.

Spatial Retail Markets With Commuting Consumers, Michael Raith

Michael Raith

In this paper we analyse a model of spatial competition with commuting consumers due to Claycombe (1991, International Journal of Industrial Organization 9, 303-313). We show that results different from Claycombe's are obtained if a rigorous game-theoretic analysis is applied to the model. Our results provide a theoretical basis for a later study carried out by Claycombe and Mahan (1993, International Journal of Industrial Organization 11,283-291) and lead to predictions which are in line with the empirical results of that later study. For small commuting distances (relative to the distance between firms), there exists a symmetric equilibrium in which the …

A General Model Of Information Sharing In Oligopoly, Michael Raith

Michael Raith

Under which conditions do oligopolists have an incentive to share private information about a stochastic demand or stochastic costs? We present a general model which encompasses virtually all models of the existing literature on information sharing as special cases. Within this unifying framework we show that in contrast to the apparent inconclusiveness of previous results some simple principles determining the incentives to share information can be obtained. Existing results are generalized, some previous interpretations are questioned, and new explanations offered, leading to a single general theory for a large class of models. Journal of Economic Literature Classification Numbers C72, C73, …

Deficit Reduction Through Diversity: How Affirmative Action At The Fcc Increased Auction Competition, Peter Cramton, Ian Ayres

Peter Cramton

In recent auctions for paging licenses, the Federal Communications Commission has granted businesses owned by minorities and women substantial bidding credits. In this article, Professors Ayres and Cramton analyze a particular auction and argue that the affirmative action bidding preferences, by increasing competition among auction participants, increased the government’s revenue by $45 million. Subsidizing the participation of new bidders can induce established bidders to bid more aggressively. The authors conclude that this revenue-enhancing effect does not provide a sufficient constitutional justification for affirmative action—but when such justification is independently present, affirmative actions can cost the government much less than is …

Corporate Governance And Economic Efficiency: When Do Institutions Matter?, Ronald J. Gilson

Faculty Scholarship

Until the 1980s, corporate governance was largely the province of lawyers. It was a world of specific rules – more or less precise statutory requirements governing shareholder meetings, the election of directors, notice requirements and the like – that were essentially unrelated to what corporations actually do. From this perspective, the corporation's productive activity was simply a black box onto which standard governance structures were superimposed with little effect on what took place within. Corporate law was "trivial" or, as Bayless Manning so evocatively portrayed it, simply "great empty corporation statutes – towering skyscrapers of rusted girders internally welded together …

Testing The Monopsony-Inefficiency Incentive For Backward Integration, Azzeddine Azzam

Azzeddine Azzam

In theory, monopsony at one stage in a vertically related market provides an incentive for backward integration into the adjacent competitive stages. By integrating backward, a monopsonist internalizes the monopsony inefficiency due to underemployment of the factor produced upstream. However, little is known about the importance of such incentive in practice. In this paper, the author provides an empirically implementable model to test the monopsony-inefficiency incentive for vertical integration. For illustration, the model is applied to the U.S. beef slaughter industry. Findings seem to support the monopsony-inefficiency incentive for backward integration by the industry into the live cattle market.