Arnold A. Heggestad

The Impact of Uncertainty upon the Multiproduct Firm

Casual empiricism strongly suggests that businesses are predominantly of the multiproduct variety. This phenomenon has not escaped the attention of economists who have addressed the decision problem of such a firm in a variety of ways. The standard references to the long-run decision calculus of the multiproduct firm are Hicks [7] and Henderson and Quandt [6]. These classics were generalized to admit conditions of monopoly in the product market and/or monopsony in the factor market by Mauer and Naylor [10]. Pfouts [13] added another important contribution by considering the presence of fixed factors of production which could be transferred to different employments within the firm. Building upon the analysis contained in Pfouts [13], Dhrymes [4] considered a multiproduct monopolist facing random demand functions. Due to the complexities of that problem, Dhrymes found it convenient to assume that the monopolist had a concave and quadratic von Neumann-Morgenstern risk preference function.

Factors influencing the decisions of bank managers: The evidence from investment portfolios

Abstract This study evaluates the investment function of the 500 largest US commercial banks. Investment returns are compared to the returns that would have been earned from following a variety of investment strategies. We conclude that commercial banks do not appear on average to outperform the market. We also present evidence which suggests that many banks view the investment portfolio as a vehicle for offsetting interest rate risk developed elsewhere in the balance sheet. During the 1984–1988 time period, they did so at the cost of realizing lower returns in their investment portfolio.

An analysis of changes in bank market structure

ConclusionSeveral conclusions may be derived from this study. First, there is a great deal of randomness in the determination of market structure. Thus, regulatory authorities also need to look to performance variables directly, as well as structural variables. Second, merger policy at present seems to be effective; at least, mergers do not lead to increases in concentration. Third, the results with respect to the holding company and branching variables suggest that statewide banking in the short run leads to increased concentration in local markets.These results may, however, be only true in the short run. Long run effects may strengthen the short run effects or may work in the opposite direction. Further research should be devoted to the long run determinants of market structure.