Howard P. Marvel

Demand Uncertainty, Inventories, and Resale Price Maintenance

We show that a manufacturer facing uncertain demand and selling through a competitive retail market may wish to support adequate retail inventories by preventing the emergence of discount retailers. In our model, discounters offer low prices made possible by low probability of being saddled with unsold inventories in the event of slack demand. Full-price retailers are compensated for a higher probability of unsold inventories by a higher retail price when they sell. We show that preventing discounting increases the manufacturers wholesale demand and profits, and we delineate demand conditions under which equilibrium inventory holding and consumer welfare increase.

Factory Regulaton: A Reinterpretation of Early English Experience

THE passage of Lord Althorps Factory Act of 18331 to regulate the employment of children in the textile factories of Great Britain was a landmark event both in British social history and in the development of modern industrial organization. The act placed controls on the employment of children in Englands burgeoning textile industry, banning employment of those under nine years of age and restricting hours and conditions of work for those under eighteen years of age. This intervention into the market system was to be policed with an innovative administrative technique: a system of factory inspectors reporting to and controlled by the Home Office.2 The importance of the Act is emphasized in a textbook treatment of British social policy as follows:

The Pattern of Protection in the Industrialized World

Using four-digit manufacturing data from 1975 on nominal and effective tariff protection and nontariff barriers to trade (NTBs), we estimate the structural determinants of protection imposed by the United States, Japan, the European Community and Canada in the Post-Kennedy Round period. We provide evidence that NTBs were used to undercut Kennedy Round liberalization in general and to supplement tariff protection of consumer goods, agricultural manufactures and textiles. Industrialized country NTBs discriminate against manufactured exports from developing countries. We explain that discrimination and the pervasive use of NTBs in the EC in terms of our regulatory theory of trade.

Intraindustry Trade: Sources and Effects on Protection

This paper provides an empirical analysis of the determinants of intraindustry trade. We demonstrate that two-way trade flows occur where conditions are favorable to international specialization consistent with the Stigler-Williamson analysis of the division of labor. The results are inconsistent with the prevailing product differentiationcum-scale economies model of intraindustry trade. In addition, we show that intraindustry trade has a significant impact on protectionist pressures. Exports of closely related products have the effect of mitigating the tariff-raising effects that imports would otherwise exert.

Competition and Price Levels in the Retail Gasoline Market

Retail gasoline prices in 22 cities were surveyed to identify the effects of competition on price during the 1964-1971 period, when gasoline supplies were relatively normal and price wars were common. The informational theory of oligarchy is used to derive regression results and determine their market relevance. The 1965 price restoration move led by Texaco effectively eliminated small marketers selling at supra-competitive levels. The findings support the conclusion that collusive pricing was practiced to some extent during the period until competitive pricing returned in 1970. 8 references.

When Do Consumers Search

This paper provides empirical evidence relating search to price movements. We measure consumer search directly from traffic statistics for web sites that report gasoline prices. We show empirically that consumers search more as prices rise than they do when prices fall. Asymmetric search patterns have consequences for price behavior. Our findings indicate that retail margins are squeezed by increased search. In addition, we show that there is more price dispersion when prices are falling than when prices are either stable or rising. Our results provide a search‐based explanation for the ‘rockets and feathers’ phenomenon of asymmetric price adjustment.

An Economic Analysis of the Operation of Social Security Disability Insurance

Social Security Disability Insurance (DI) is federally financed but state administered. States vary widely both in benefit application rates and the rates at which applications are denied. Since the decision to apply depends on the likelihood of qualifying for benefits and since denial rates are influenced by a states applicant pool, a simultaneous model of application and denial rates is developed in this paper. In addition, recent DI funding problems have induced substantial tightening of applicant screening, at least in some states. Estimates are presented which suggest that while this change may have eliminated some unqualified applicants, it is also likely to have increased cross-state inequities in screening.

Government-to-Government Contracting: Stewardship, Agency, and Substitution

ABSTRACT This paper provides empirical evidence detailing the distinctive nature of service delivery provided through contracts with other governments. The results of a survey of Ohio city and county managers both confirm and stand in contrast to implications derived from stewardship theory. Consistent with stewardship, our data demonstrate that contracts with public sector service partners generate less intensive monitoring by contracting governments than do services contracted with private entities. In contrast to stewardship theory, we find that contracting governments do not use other governments for services requiring intensive monitoring. In an era of accountability and results-oriented management, reliance on trust may not satisfy constituents who seek evidence of effective service delivery. The inability of the contracting government to affect another governments service delivery reduces the attractiveness of that government as a contracting partner. If the tools of stewardship prove to be inadequate, the imposition of carrots and sticks appropriate for a principal-agent relationship could undermine the trust central to stewardship. Given these tensions, it is not surprising that governments are contracting less with other governments.

Shaping the Provision of Outsourced Public Services

Local governments that contract out services are faced with a complex problem of developing an appropriate mix of incentives to elicit performance from a diverse set of service providers, including networks of other local governments, mission-driven nonprofit organizations, and profit-maximizing firms. This paper employs agency and stewardship theory to motivate an analysis of rewards and sanctions used in service delivery relationships. Our findings, consistent with principal-agent theory, indicate that a significant proportion of local governments in our sample employ high-powered incentives with for-profit firms. It is interesting to note, however, that governments with short-term relationships with for-profit firms do not utilize high-powered incentives. These incentives are found in longer duration contracts. In line with the predictions of stewardship theory, governments in our sample do not use high-powered incentives with other governments or nonprofit service providers. Low-powered incentives, primarily informal discussions with those providers, constitute the primary means by which the contracting government ensures that the necessary adjustments to service delivery are made. The efficacy of informal discussion with nonprofits and other governments diminished significantly with longer term contracts, leaving contracting governments with few tools to influence the behavior of their contracting partners. Trust, value congruence, and mission compatibility can explain the initiation of relationships with nonprofits and other governments but do not yet inform government officials about how such relationships can be maintained and enhanced.

Trademark Sales, Entry, and the Value of Reputation

We develop an infinite-horizon, overlapping-generations model of reputation in which consumers base willingness to pay for agent services on past performance summarized by a trademark. We show that when trademarks can be sold, successful firms capture the full value of their reputations upon sale but receive smaller premia for good performance while active as service providers. With discounting, all agents are worse off with trademark trade. Taking entry cost into account, we show that trademark trade typically reduces entry. When entry costs are high, welfare is increased by prohibiting such trade.