John L. Solow

Group Identity and Gender in Public Goods Experiments

This paper explores the effects of group identity and gender in a public goods experiment. We compare the behavior of participants who can be expected to have a pre-existing sense of group identity to that of randomly selected participants, and to that of participants who have undertaken community-building pre-experiment activities. While statistically significant differences were observed, our results suggest that the effects of group identity and gender on behavior are complicated, involving the nature of the groups involved. In particular, the claim that women are less likely to free-ride on others with whom they have a relationship is not supported.

The Dynamics of Performance over the Duration of Major League Baseball Long-Term Contracts *

We re-examine incentives in Major League Baseball contracts by considering performance over the duration of the contract. We consider both the incentive to perform in order to maximize the subsequent contract and the disincentive of a fixed salary. We isolate the effect of the latter by controlling for the probability that the contract is the players last. We find that players who are less likely to sign a subsequent contract have a large and statistically significant reduction in performance compared to expectations. The incentive to perform well in anticipation of signing the next contract is equally large and offsetting so that players who expect to sign another contract largely perform to expectations.

A Note on Welfare in the Durable-Goods Monopoly

Depending upon the shape of the rental demand curve facing a durable-goods monopolist, social welfare may be raised or lowered by requiring the monopolist to sell, rather than rent, its output. Indeed, the equilibrium under rentals may Pareto-dominate the equilibrium under sales. Copyright 1989 by The London School of Economics and Political Science.

An Economic Analysis of the Droit de Suite

The droit de suite, or resale royalty right, entitles an artist to a percentage of either the price received when her works are resold by their owners. This paper analyzes the effect of this law on the artists production when early and late works are either substitutes or complements. By giving the artist an interest in the resale price of early works, the royalty provides a credible incentive to maintain value when later production decisions are made. Since the initial sales price capitalizes the stream of future values, the benefit of higher resale prices accrues to the artist.

Monopoly Production of Durable Exhaustible Resources

We examine monopoly production of a durable exhaustible resource. Previous authors have implicitly assumed that the monopolist is able to make binding commitments about future decisions. We consider the more plausible case in which the monopolist lacks this ability and must choose from dynamically consistent plans. Two models are considered: a discrete-time model, in which there is a strictly finite initial stock of the resource, and a continuous-time model, in which costs are an increasing function of cumulative production. We find that, as a general result, monopoly leads to overconservation. The monopolist who cannot precommit produces the efficient quantity ultimately, but does so too slowly. By contrast, the monopolist who can precommit produces less than the efficient stock even in the limit. We also find that increased importance of exhaustibility hastens the extraction of the resource. Copyright 1990 by The London School of Economics and Political Science.

Exorcising the Ghost of Cigarette Advertising Past: Collusion, Regulation, and Fear Advertising

Cigarette advertising from 1952 through 1954 that made remarkable claims of protection for the smoker’s health were in part responsible for unprecedented declines in per capita cigarette consumption in 1953 and 1954. It has long been held that the Federal Trade Commission (FTC) brought this competitive episode to a sudden halt by circulating a draft set of Cigarette Advertising Guides and subsequently enforcing those guidelines. Using a combination of documentary evidence and an analysis of cigarette advertising content, the author shows here that it was collusion on the part of the tobacco industry and not the actions of the FTC that brought the fear advertising of the early 1950s to an abrupt end.

On requiring the durable goods monopolist to sell

Abstract Requiring a monopolist to sell its output (rather than renting it) my lead to beneficial output adjustments or harmful quality adjustments. In a durable goods model, we show that requiring sales decreases welfare in only a small fraction of cases, but it strictly increases welfare in a majority of cases.

A Nash Bargaining Model of the Salaries of Elite Free Agents

In this paper, we focus on how rents are divided between an elite free agent and a team in a Nash bargaining framework. In order to find the Nash bargaining solution, we identify the threat points of the player and the team as the best alternative bargains that the player and the team could reach with another team and another player, respectively. We then extend the analysis to include a consideration of multiple teams potentially bidding for the free agent’s services. In this section of the paper, we show that the player’s ultimate location and salary are determined by his marginal value over his replacement.

Nuclear power plant performance: the post Three Mile Island era

Abstract This paper examines the relationship between US nuclear plant performance and age in the post-TMI era. Our analysis indicates significant differences across technologies and over time. The boiling water reactors in our sample appear to be on the declining side of their age-performance curve while the pressurized water reactors have shown little of the improvement that was evident in the pre-TMI years. While age-related improvements were once thought to hold the promise of improved reliability and associated unit cost reductions, our analysis of more recent data suggests this is not to be.

Forecasting nuclear power supply with Bayesian autoregression

Abstract We explore the possibility of forecasting the quarterly US generation of electricity from nuclear power using a Bayesian autoregression model. In terms of forecasting accuracy, this approach compares favorably with both the Department of Energys current forecasting methodology and their more recent efforts using ARIMA models, and it is extremely easy and inexpensive to implement.