Carol Horton Tremblay

The Determinants of Horizontal Acquisitions: Evidence from the U.S. Brewing Industry

The authors analyze the motives for horzonital mergers by estimating a logit model for the U. S. brewing industry, 1950-83. Their results support D. Deweys (1961) view that failing firms avoid bankruptcy by selling to successful firms. In the absence of an antitrust constraint, large firms are more likel;y than small firms to acquire another competitor. There is no evidence that firms merge to increase market power or to attain scale e conomies. Although the Justice Department may have been too restrictive in the past, its recent acceptance of an efficiency defense in merger cases seems appropriate in light of our results. Copyright 1988 by Blackwell Publishing Ltd.

The Welfare Effect of Advertising Restrictions in the U.S. Cigarette Industry

The welfare effect of advertisingrestrictions in the U.S. cigarette industry dependsupon the impact of advertising on consumer and producer surplus, the transfer to consumers for being exposed to utility-reducing advertising, and smoking externalities. We estimate a demand equation and a supply relation simultaneously and use the parameter estimates to generate predictions of the impact of advertising restrictions on social welfare. Our results show that advertising restrictions benefit producers by limiting competition and generating higher industry profits, and such restrictions lower social welfare if the external cost of cigarette smoking is sufficiently low.

Testing for Employee Discrimination by Race and Sex

According to the theory of employee discrimination, if members of one group have a taste for discrimination against another group, they will demand a compensating wage premium for working with members of the other group. This study is the first to directly test this theory at the micro level. We find evidence that both white and nonwhite youths practice employee discrimination, although the form of this discrimination differs by race. Results hold for both the South and non-South, as well as for the country as a whole. The hypothesis of employee discrimination by sex was also examined but rejected.

Brainstorm: occupational choice, bipolar illness and creativity.

Although economists have analyzed earnings, unemployment, and labor force participation for those with bipolar illness, occupational choice has yet to be explored. Psychological and medical studies often suggest an association between bipolar illness and creative achievement, but they tend to focus on eminent figures, case studies, or small samples. We seek to examine occupational creativity of non-eminent individuals with bipolar disorder. We use Epidemiologic Catchment Area data to estimate a multinomial logit model matched to an index of occupational creativity. Those with bipolar illness appear to be disproportionately concentrated in the most creative occupational category. Nonparametric kernel density estimates reveal that the densities of the occupational creativity variable for the bipolar and non-bipolar individuals significantly differ in the ECA data, and suggest that the probability of engaging in creative activities on the job is higher for bipolar than non-bipolar workers.

Cournot and Bertrand Competition when Advertising Rotates Demand: The Case of Honda and Scion

Abstract We develop a model to explain why firm behavior differs in the market for small cars. Firms such as Honda compete in output (Cournot) and produce marketing campaigns with universal appeal, while firms such as Scion compete in price (Bertrand) and produce targeted marketing campaigns. We show that this mixture of Cournot and Bertrand behavior can occur when advertising rotates demand. When behaving as a Cournot-type firm such as Honda, it is more profitable to pursue a mass-market advertising campaign that rotates demand counterclockwise when it faces relatively low unit costs and a flat demand function. When behaving as a Bertrand-type firm such as Scion, it pays to pursue a niche-market advertising campaign that rotates demand clockwise when it faces relatively high unit costs and a steep demand.

Endogenous Timing and Strategic Choice: The Cournot‐Bertrand Model

Cournot establishes a Nash equilibrium to a duopoly game under output competition; Bertrand finds a different Nash equilibrium under price competition. Both treat the strategic choice variable (output versus price) and the timing of play as exogenous. We investigate Cournot‐Bertrand models where one firm competes in output and the other competes in price in both static and dynamic settings. We also develop a general model where both the timing of play and the strategic choice variables are endogenous. Consistent with the conduct of Honda and Scion, we show that Cournot‐Bertrand behaviour can be a Nash equilibrium outcome.

New perspectives on industrial organization

Chapter 1 Introduction.- Chapter 2 Demand, Technology, and the Theory of the Firm.- Chapter 3 Introductory Game Theory and Economic Information.- Chapter 4 Behavioral Economics.- Chapter 5 Perfect Competition and Market Imperfections.- Chapter 6 Monopoly and Monopolistic Competition.- Chapter 7 Product Differentiation.- Chapter 8 Market Structure, Industry Concentration, and Barriers to Entry.- Chapter 9 Cartels.- Chapter 10 Quantity and Price Competition in Static Oligopoly Models.- Chapter 11 Dynamic Monopoly and Oligopoly Models.- Chapter 12 Market Power.- Chapter 13 Product Design, Multiproduct Production, and Brand Proliferation.- Chapter 14 Price Discrimination and Other Marketing Strategies.- Chapter 15 Advertising.- Chapter 16 Advertising and Welfare.- Chapter 17 Technological Change, Dynamic Efficiency, and Market Structure.- Chapter 18 Horizontal, Vertical, and Conglomerate Mergers.- Chapter 19 Efficiency, Equity, and Corporate Responsibility in Imperfect Competition.- Chapter 20 Antitrust Law and Regulation.- Chapter 21 Industry and Firm Studies

Efficiency and Technological Change in the U.S. Brewing Industry

This study demonstrates that the measurement of technological change and economic efficiency are tightly linked. Efficiency measures may depend on carefully controlling for technological change, while tests of technological change may be sensitive to empirical model specifications. Moreover, the study underlines Solows (1994) and Romers (1994) admonition that econometricians should pay attention to industry and institutional evidence in building models of technological change. The empirical results presented here suggest that there has been substantial technological change in the U.S. brewing industry from 1950 to 1992. This occurred in the form of a dramatic shift in technology beginning with the introduction of super breweries in about 1972. There has also been a substantial increase in scale economies, which undoubtedly caused many inefficiently small firms to exit the industry during the 1960s and 1970s. Further results suggest that a more complete specification of technological change and the stochastic nature of the frontier production function leads to higher and more tenable estimates of efficiency.

Field publishing performance of U.S. economics departments

ConclusionThe purpose of this study is to reduce information costs in the market for graduate education in economics and the market for Ph.D. economists by providing information on research concentration in each of 19 fields for 1980–1986. Some variation in publishing performance across fields is found in highly regarded universities. Unexpected faculty strength is discovered in some middle level departments for particular fields. Among middle- and lower-ranked departments, substantial publishing diversity across fields is evident.

Industry and Firm Studies

In this chapter we use case studies to identify patterns of behavior that highlight what we have learned from studying industrial organization. We begin with an investigation of three US industries: brewing, cigarettes, and college sports. Rather than provide a comprehensive study of them, we focus on the most important forces that have shaped each industry and/or have influenced public policy. This will allow us to show how industrial organization theory is relevant and can help us understand reality.