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Full-Text Articles in Business
Do Profit Maximizers Take Cold Showers?, Neil Campbell, Jeffrey Kline
Do Profit Maximizers Take Cold Showers?, Neil Campbell, Jeffrey Kline
Neil Campbell
A firm takes a "cold shower" if removal of a protective subsidy induces investment in a cost-reducing technology. We show that if the investment lowers marginal cost everywhere, then profit maximizers never take cold showers. However, if the investment does not lower marginal cost everywhere, a profit maximizer may take a cold shower.
Can We Believe In Cold Showers?, Neil Campbell
Can We Believe In Cold Showers?, Neil Campbell
Neil Campbell
This paper considers the case of a firm which faces the decision as to whether to invest in a cost-reducing technology with an uncertain return. Under certain conditions the removal of protection can facilitate this investment (a 'cold shower'). It is shown, in the case of Cournot competition, that a cold shower is more likely if a quota rather than a tariff is the protective instrument. It is also shown that a cold shower is more likely if the domestic firm is a Stackelberg leader rather than a Cournot competitior. A Cournot market structure is used to consider a reduction …
The Organizational Cost Of Protection, Neil Vousden, Neil Campbell
The Organizational Cost Of Protection, Neil Vousden, Neil Campbell
Neil Campbell
This paper offers another explanation for the proposition that protection induces slack. It employs a model of a hierarchic firm in which the firm's owner cannot observe the cost type or the effort level of his manager. A production subsidy, by stimulating output, may increase the marginal information rents that have to be paid to the manager for higher effort. The resulting increase in the firm's marginal cost of effort leads to reduced managerial effort amplifying the intra-firm effort distortion if effort is initially below the optimal level and yielding an organizational cost of protection additional to the standard deadweight …