Thomas W. Gilligan

Organization of Informative Committees by a Rational Legislature

This paper combines an organization theory perspective with rational choice techniques to study legislative design. The specific focus is on how a legislature assigns members and transfers resources to standing committees with the aim of motivating committees to specialize and to share the benefits of specialization. The stimulus for the study comes from organization theory and a long tradition of empirical congressional studies. The main analytical tool, however, is a game of incomplete information. Several testable propositions about legislative organization are derived.

Regulation and the Theory of Legislative Choice: The Interstate Commerce Act of 1887

This article concerns the economic incidence of the Interstate Commerce Act of 1887 (ICA). Our focus is the short-haul pricing constraint, a provision of the ICA that prohibited railroads from charging higher rates to isolated, primarily agrarian shippers than it charged to intercity shippers of similar commodities. Utilizing the event study methodology, we find that the impending passage of the ICA generated a distribution of abnormal returns to railroads and shipping firms that is consistent with the theoretical implications of our analysis of the short- haul pricing constraint (SHPC). However, early interpretations of the SHPC by the Interstate Commerce Commission reduced some of the abnormal returns to railroads in a manner that is inconsistent with the hypothesis that the short-haul pricing constraint was an important mechanism of early railroad regulation. The analysis does support a multiple-interest interpretation of the Interstate Commerce Act and has implications for the positive theory of regulation.

Lemons and Leases in the Used Business Aircraft Market

Given adverse selection, durable goods that trade infrequently depreciate quickly. Consistent with this prediction I find an inverse relationship between depreciation and trading volume for less reliable brands of used business aircraft. Additionally, recent theoretical analyses suggest that leasing, by increasing the average quality of used goods, may reduce adverse selection in durable goods markets. Indeed, I find a direct relationship between depreciation and trading volume for aircraft models with relatively high lease rates. Together these findings suggest that adverse selection is a prominent feature of the contemporary used business aircraft market and that leasing mitigates the consequences of adverse selection.

Complex Rules and Congressional Outcomes: An Event Study of Energy Tax Legislation

Based on a legislative history of energy tax legislation in the U.S. House of Representatives in the Ninety-third Congress, this article extends a spatial model of legislative politics to accommodate complex special rules. The model and extension yield two predictions regarding the effect of the assignment of rules on expected congressional outcomes. The predictions are tested by examining stock market returns to oil and gas stocks. Both predictions are supported even when alternative and competing explanations are taken into account. A concluding discussion qualifies the theoretical and empirical results by addressing two broader issues: the sources of committee power and the relationship between congressional and economic activity.

Structural constraints on partisan bias under the efficient gerrymander

Partisan bias occurs when the translation of the popular vote into legislative seats differs between competing parties. This paper contains a theoretical and empirical analysis of the consequences of an efficient gerrymander for the partisan bias of an electoral system. Under partisan apportionment, bias is shown to depend on some structural features of the electoral environment; namely, the size of the voting population and the number of single-member districts within a political jurisdiction. A statistical analysis reveals the predicted relationships in data on Congressional elections across states in the 1950–1984 period. This paper highlights the importance of some measurable features of the electoral environment for determining bias and provides an indirect test of partisan gerrymandering in congressional apportionment processes.

The economic incidence of the Interstate Commerce Act of 1887: a theoretical and empirical analysis of the short-haul pricing constraint

This article concerns the economic incidence of the Interstate Commerce Act of 1887 (ICA). Our focus is the short-haul pricing constraint, a provision of the ICA that prohibited railroads from charging higher rates to isolated, primarily agrarian shippers than it charged to intercity shippers of similar commodities. Utilizing the event study methodology, we find that the impending passage of the ICA generated a distribution of abnormal returns to railroads and shipping firms that is consistent with the theoretical implications of our analysis of the short-haul pricing constraint (SHPC). However, early interpretations of the SHPC by the Interstate Commerce Commission reduced some of the abnormal returns to railroads in a manner that is inconsistent with the hypothesis that the short-haul pricing constraint was an important mechanism of early railroad regulation. The analysis does support a multiple-interest interpretation of the Interstate Commerce Act and has implications for the positive theory of regulation.

Assortative Matching, Adverse Selection and Durable Goods: Transaction History, Safety Regulation and the Likelihood of Trade in the Business Aircraft Market

In recent years, considerable progress has occurred in modeling durable goods transactions in dynamic settings under asymmetric information. Most notable among these contributions are the works of Hendel and Lizzeri (1999, 2002), Janssen and Roy (2002), and Hendel, Lizzeri and Siniscalchi (2005). I explore registration changes for a sample of business aircraft over the period 1980-1999 to test some of the predictions of these models. The empirical regularities highlighted in this paper support these models. My results are also consistent with the view that high levels of efficiency can obtain even when information asymmetries condition the durable good trading environment.

A Signal Jamming Theory of Resale Price Maintenance

This paper contains a theoretical analysis demonstrating that a retail price floor can increase the expected profits of an upstream firm when it is asymmetrically informed about the state of product demand. The retail price floor serves to eliminate the incentives of the upstream firm to misrepresent its private information and, thus, reduces the transaction costs associated with the strategic use of information. The wholesale and retail prices (and profits) that emerge in the equilibrium with the asymmetrically informed upstream firm given a retail price floor are identical to those that obtain when prices reflect only common prior knowledge about the state of demand. In this way, the retail price floor serves to jam or block the transmission of the upstream firms private knowledge and increase, for some parameter values, its profits. When used for this purpose, the retail price floor reduces social welfare and lowers the expected retail margin, an observed empirical regularity.