Antony Davies

Computational intermediation and the evolution of computation as a commodity

The consumer who purchases computational power ultimately purchases a reduction in the time interval between the initiation and the completion of work. This paper looks at computation as a commodity and the nascent industry of computational intermediation, and proposes a model for the market for computational power as distinct from the market for computers. Some interesting results emerge. The model implies that the demand for computation is discontinuous and that there is a lower limit to the quantity of computation consumers will demand that is independent of the price of power. The model identifies a range of computational powers that could be supplied by computational intermediaries but which will not be supplied by computer manufacturers, and suggests a model for pricing computation.

How does the estate tax affect the number of firms

Purpose - – The purpose of this paper is to estimate the effect of the combined (Federal and state) estate, inheritance, and gift (EIG) tax burden per decedent on the number of firms in the USA. Design/methodology/approach - – Estimates are based on a longitudinal panel of 50 American states from 1988 to 2006. Findings - – The paper finds that the growth in the EIG tax burden per decedent significantly reduces the growth in the number of firms, especially small firms. The higher dissolution rate among small firms can be attributed to the asymmetric liquidity effect, which limits the ability of small business owners to raise the funds needed to pay the estate tax without liquidating their estates. Practical implications - – The estimates suggest that the reductions in EIG taxes, brought about by the passage of 2001 EGTRRA, have lead to a higher growth in the number of firms, ceteris paribus. Social implications - – As of this writing, the future of the Federal estate tax looks uncertain. Policymakers should note that the estate tax lowers competition and economic growth, which hurts both the poor and the rich. Originality/value - – This study is the first to examine the impact of the combined (Federal and state) EIG tax burden on the number of firms using state-level panel data.

Consumer Products and Consumer Behavior

This chapter argues that in many markets, consumers face a choice problem in which the marginal cost of obtaining additional information necessary to improve a purchase decision exceeds the marginal benefit of the improved decision. For example, in the United States there are over five-hundred different brands and variations on brands of breakfast cereal. It is likely that no consumer makes the best possible purchase decision, save by accident, because the cost of obtaining full information about the competing brands far exceeds the benefit of employing the information in decision-making. In this situation, the consumer knows that the best he can hope for is a satisfactory purchase decision as opposed to the optimal purchase decision. This problem is not restricted to low-price products. The number of brands of cars, combined with the number of options available for each brand of car, and the fact that many brand attributes (e.g., mileage, handling, reliability) can only be imperfectly measured without first-hand experience, means that automobile consumers also face the problem of limited information and are aware that they face limited information. As with breakfast cereals, most automobile consumers are aware that their purchase decision will not be the optimal decision but (they hope) will be satisfactory. The lack of information presents a risk to the consumer. Because the consumer is aware of the lack of information, the consumer will attempt to mitigate the risk through the use of heuristics. Using the number and positioning of observed brands relative to each other in the attribute space, consumers infer information about the unseen brands and so improve their purchase decisions.