David Gautschi

The Outputs of Retail Activities: Concepts, Measurement and Evidence from U.S. Census Data

The authors develop a new economic framework for the empirical analysis of retail margins. This framework formalizes the role of distribution services as outputs of retail activities. Their main results are the following: the measures of outputs of retail activities identified in the data perform as important and robust determinants of retail margins; variables that purport to capture oligopolistic features of market structure play a limited or no role in determining retail margins; quantity setting and price setting under the assumptions of profit maximization and monopolistic competition are categorically rejected by the data. The data base is information on 49 retail sectors from the 1982 U.S. Census of Retail Trades. Copyright 1993 by MIT Press.

Distribution services and economic power in a channel

Abstract We explore the consequences of formally acknowledging the influences of distribution services on the economic power of a retailer relative to a manufacturer in a simple channel dyad. The work is in the tradition of the analysis of successive monopolies and features the analysis of the well-known double marginalization problem. We compare two stylized cases of the provision of distribution services, the first exclusively by the downstream agent and the second by the upstream agent. In reference to a standard leader-follower model without acknowledged distribution services, the results of these two cases establish the importance of including distribution services in empirical and analytical investigations of the distribution of power in the channel. Briefly, distribution services may afford the agent that controls their provision unusual opportunities to capture economic power, and benefit consumers in a decentralized channel more than in a vertically integrated one.

Two essential characteristics of retail markets and their economic consequences

Abstract Retail firms provide customers with a variety of distribution services. Higher levels of these services cost the firms more to produce but reduce costs for their customers; these distribution services are usually not priced separately from the products purchased; in addition, some distribution services are available to all items in an assortment (common) and others are available to a few (specific). Incorporation of these characteristics into the analysis of retail markets generates novel results on the nature of pricing policies, on their interaction with the provision of distribution services, and on the effects of competitive behavior.

The demand for retail products and the household production model: New views on complementarity and substitutability

Abstract By treating the distribution services provided by retailers as fixed inputs into the households production activities, we obtain a number of new results with respect to the own and cross-price elasticities of demand for items in a retail assortment as well as with respect to a new concept the distribution services elasticity of demand for items in a retail assortment. This treatment of the household production model shows that there are pervasive tendencies toward gross complementarity among items in any given retailers assortment as well as between the items in any given retailers assortment and the distribution services offered by the retailer. These tendencies are instrumental in understanding the nature of competition among retailers and the creation of retail agglomerations.

The evolution of retailing. A suggested economic interpretation

Abstract An analytical framework, based on the concepts of house-hold production on the demand side and joint costs on the supply side, is applied to describe the nature of retail activities and the evolution of retail institutions.

Product innovation in services: A framework for analysis

Services now play a remarkably prominent role in modern economies. Not surprisingly, economists and marketing researchers have begun to turn their attention to the analysis of activities in the so-called tertiary sector. In this chapter we attempt to contribute to the effort of systematizing the analysis of service institutions by integrating perspectives from the economic analysis of institutions and property rights, on the one hand, and the economic analysis of retailing and distribution services, on the other hand In so doing, we propose a set of evaluative criteria to be applied to the assessment of the evolution of service institutions, as well as a tableau for analyzing the emergence of various institutional forms. The tableau organizes the three primitive economic activities of production, distribution, and consumption on temporal and spatial dimensions. As such, the tableau applies the notion of relational constraints that have the property of reducing uncertainty and transaction costs, thus being welfare enhancing. The tableau and the evaluative criteria enable us to explore a range of issues, such as joint-ness of production and consumption, divided ownership of property rights, and the effects of technological progress that are inherent in the process of product innovation in services.

An international comparison of the determinants of retail gross margins

In this paper we compare the results of applying a new economic framework for the analysis of retail gross margins to 1982 interindustry retail data for France, Germany, and the U.S. Use of the same theoretical framework and econometric methodology separately for each of the three bodies of data yields robust empirical regularities with respect to functional form and the role of distribution services in explaining retail gross margins. An interesting feature of these results is that they arise despite substantial differences in classification and in the retail environment of the three countries.

The world that changed the machines: A marketing perspective on the early evolution of automobiles and telephony

Abstract Market definition is the key to commercial success for new technologies. This requirement is not easily met and presents a great challenge to any enterprise. The authors use a simple framework to examine market definition and illustrate its use in a dynamic context by studying the early evolution of the markets for automobiles and telephony. They argue that businessmen, technologists, and policymakers must understand that markets are made, not born, and that the interplay of commercial product offerings and customers who extract services from products is the key to understanding initial market response to new technologies, technology evolution, and, ultimately, market evolution.

The outputs of retail activities: French evidence

A new economic framework is applied to the empirical analysis of retail margins. This framework is founded on the definition of profits and incorporates recent theoretical developments formalizing the role of distribution services as outputs of retail activities. The main results are: the measures of outputs of retail activities identified in the data perform as important and robust determinants of retail margins; variables that purport to capture the oligopolistic features of market structure have little association with the variation in retail margins; hypotheses of price setting and quantity setting under the assumptions of profit maximization and monopolistic competition are categorically rejected by the data. The data base is information on 50 retail sectors from the 1982 survey of firms in commerce and the 1983 survey of firms in services reported by INSEE.

Technological Innovation and Economic Transformation

The underlying theme of our project is that society in its quest for order in an inherently chaotic natural setting tends to think about technological innovation much too narrowly, and this causes at least two kinds of problems. The first is the narrow attitude of the naysayer—one who too quickly asserts that, whatever it is, it cannot be done. Any aspiring innovator can recount the times that an idea has run headlong into a listing of reasons why it would not work. The second problem is the dual of the first. It is the narrow attitude of the visionary, who would be fixated only on achieving the aim of a single idea without acknowledging its connections to other facets of life in the context of the moment. In this project, we seek to strike a balance between retrospective and contemporary critique to encourage careful consideration of the specific benefits to society any given technology has the potential to deliver. We would argue that in almost every case, a technology whose sponsors have succeeded in building the case for its societal benefit must also be evaluated critically in terms of the associated adjustments that certain groups would be impelled to make.