When a good or service is offered in a variety of qualities with corresponding marginal prices, a quality-based allocation of consumption units by buyers is induced. This enables a monopolist supplier to achieve partial discrimination among buyers with different consumption preferences. We...

This article tests a transactions cost theory of vertical integration with data from the U.S. automobile industry. Existing theory is first refined to take into account industrial know-how and the cost of transferring such know-how. A testable model is then developed, which is estimated by using...

Increases in the cost of fossil fuels helped make automatic fuel cost adjustment mechanisms popular institutions for regulating electric utilities. Economic intuition suggests that these clauses could distort incentives for input choice. The purpose of this article is to explore the theoretical...

This article reports estimates of a cross national model for automobile ownership, fleet fuel efficiency, driving per vehicle, and as derived from these three, gasoline consumption. The model is a recursive system of equations derived by aggregating individual behavioral equations for the choice...

This article examines the incentive structures that the negligence and strict liability systems provide for physicians. Other articles have analyzed the effects of these rules when an increase in care will reduce the probability of an accident. In a large class of decisions, a physician cannot...

This article examines the impact of reimbursement on admissions by nursing homes. Low rates of payment for Medicaid patients suggest that nursing homes should prefer non-Medicaid patients. Such preferences are observable in daily admissions data from some of a sample of 18 Southern California...

The distributions of firm size, span of control, and managerial incomes are modeled as the joint outcome of market assignments of personnel to hierarchical positions. Assigning persons of superior talent to top positions increases productivity by more than the increments of their abilities...

This article analyzes the behavior of a single firm that is engaged in R&D for a "sponsor." We show that contractual forms that provide good incentives in a static environment may introduce incentive problems in a dynamic setting. More specifically, we show that a firm engaged in a sequence of...

When effort cannot be costlessly monitored, Pareto optimal employee compensation schemes require that owners and managers deviate from perfect risk sharing to improve the work incentives facing the manager. This article investigates the implications of this misallocation of risk for the behavior...

The main results of the sustainability literature on natural monopolies (for example, Panzar and Willig (1977)), are shown to depend on the Bertrand conjecture. First, for the natural monopoly case we prove that industry configurations that are sustainable in the sense of Willig (1980) are...