Steven N. Wiggins

Liability and Large-Scale, Long-term Hazards

This paper analyzes the application of liability to large-scale, long-term hazards. The key features distinguishing such hazards are the long temporal separation between exposure to a hazard and disease and the large damages when injuries finally emerge. The large scale of damages creates a strong incentive to avoid liability payments, and the long temporal separation creates numerous avenues through which parties can avoid paying possible damage awards. The analysis focuses on the incentive to avoid paying damages by vertically divesting production tasks associated with serious occupational risks. Such divestiture can lower liability costs if the small firm operating the risky stage goes out of business before latent injuries emerge or has insufficient assets to pay damages and declares bankruptcy when suits are filed. The paper then presents an empirical regression analysis of small-firm entry into the U.S. economy between 1967 and 1980, the period in which liability laws were changing. The point estimate is that, ceteris paribus, liability changes appear to have led to a large increase in small corporations in hazardous sectors. Hence the empirical analysis shows widespread attempts to avoid liability by shielding assets through divestiture.

The Influence of Private Contractual Failure on Regulation: The Case of Oil Field Unitization

An analysis of the interdependence between regulation and private contractual failure reveals that the feasible range of regulation is restricted by the same forces that block private agreement. The focus of the study is oil field unitization regulation in Oklahoma, Texas, and Wyoming (federal lands) from 1948 through 1975. Despite large potential gains from unitization, private negotiations fail because of lease heterogeneities and information problems regarding lease value estimates. In response, the federal and state governments have adopted strikingly different policies to encourage unitization with different results. Only the federal governments regulations are effective because they surmount information problems. Texas has the least successful regulation. The paper argues that the policy differences are due to the political influence of small firms that benefit from nonunitized production. 25 references, 2 tables.

Airline Pricing, Price Dispersion and Ticket Characteristics On and Off the Internet

This paper uses a unique individual transactions data set to investigate the effects of internet purchase on the prices paid for individual airline tickets. The analysis also investigates the effects of changes in the percentage of online transactions on both online and offline prices and on overall price dispersion. The analysis also uses these unique data to provide a more complete analysis of the factors affecting airline price levels and price dispersion, contributing more generally to our understanding of airline pricing. Our novel data set includes detailed transaction level data the includes ticket characteristics and restrictions, carrier, estimated flight level load factors, date of issue, departure date, other hedonic factors affecting prices, whether the ticket was purchased online or offline, and the share of online purchases for the citypair. Controlling for numerous observed ticket characteristics, as well as carrier and route effects, the results show that online prices average about 13 percent less than the offline prices. The analysis also shows that a ten percent increase in the online share of tickets sold on a route decreases average prices by an additional 5 percent, with more of this effect coming in the form of lower offline prices. The results also suggest that the potential savings to the consumers from buying online in markets with lower share of internet purchases are higher than in markets where the online share is larger. The paper also finds evidence that an increase in online shares decrease price dispersion. The paper also uses these unique data to investigate the effects of hub dominance and high route shares on pricing. Due to data limitations previous investigations of these issues could not control for important ticket characteristics, load factors, and time of purchase in measuring the effects of concentration on price levels and dispersion. Our analysis controls for these factors while investigating the impact of market concentration on price levels and dispersion.

Demand systems and the true subindex of the cost of living for pharmaceuticals

This paper investigates the demand for prescription pharmaceuticals at the retail level. We use complete demand systems to investigate elasticity for major classes of pharmaceuticals. We estimate both a regular and an inverse demand system using a differential version of the Rotterdam model. We find that both systems yield negative, and statistically significant own-price elasticities. The results indicate that pharmaceutical demand curves are not perfectly inelastic as some industry commentators suggest. We use the results of the complete demand system and a variant of a formula developed by Balk (1990) to derive a cost-of-living subindex for retail pharmaceuticals. We find that retail pharmaceutical prices using our index rise faster than wholesale prices, calculated either by the BLS or by the methods developed by Berndt et al.(1993).

Adverse Selection and Long-Term Hazards: The Choice between Contract and Mandatory Liability Rules

RECENT years have been marked by a clear shift in emphasis on the type of problems that must be confronted by any system of employer liability. Traditional cases of employer injury involved classic traumatic injuries, which were discrete and sudden in time and impact. In contrast, the modern problems involve cumulative trauma cases and include the large-scale, long-term hazards that arise out of the use of occupational carcinogens, the disposal of occupational wastes, and the sale of hazardous consumer products: basic materials, such as petroleum, coal, paraffin, wood, leather, iron ore, nickel, and chromium have all been linked

Institutional Control and Large-scale, Long-term Hazards

Large-scale and long-term hazards have become increasingly prevalent in our economic system. In the workplace, recent research has linked cancer to heavy metals, as well as to such basic materials as wood and petroleum. The consumer market also offers numerous potentially carcinogenic products, such as cigarettes, saccharin, and various food additives. The extent of large-scale hazards, however, is not limited to market exchanges between firms and either workers or consumers. Significant externalities are created by many of these risks, including environmentsal disasters such as the Exxon Valdez oil spill, potential nuclear-plant accidents such as Three Mile Island, and toxic waste dumps that threaten local communities and water supplies.