We introduce a computational model of the evolution of a value-maximizing research-based pharmaceutical firm and parameterize it using estimates of R&D costs, profit distributions, and candidate attrition rates. We use the model to estimate how the probability of surviving and covering the costs...

Which strategies generate value in e-commerce environments? In a step towards answering this question, this paper estimates the impacts of several competitive strategies on the values of the well-known Internet retailer Amazon.com and three of its early competitors, BarnesandNoble.com, CDNOW,...

This paper estimates the nature and effects of quality and cost innovations in the early automobile, personal computer, rigid disk drive, computer monitor, and computer printer industries using industry-level data on firm numbers, price, quantity, and quality along with an equilibrium model of...

We examine conditions under which group consumption is likely to involve informal and tacit reciprocity agreements rather than formal contracts and the price system. Our model shows that informal reciprocity agreements are more likely to be used when transaction costs of formal agreements are...

Previous work on exit in declining industries has neglected mergers. This paper examines a simple model that illustrates how mergers can affect the order of exit. The model also predicts which declining industries experience horizontal mergers. Mergers are more likely if (1) the inverse demand...

Nations differ in their tolerance for costs of fighting and in their willingness to make concessions. We use a bargaining model of war to analyze these sensitivities. Incentives created by heightened sensitivity to costs often—but not always—contradict those created by heightened...

Thomas E Borcherding passed away on February 12, 2014, of congestive heart failure. He was 74. He is survived by his wife, Rhoda, and his sons Matthew and Benjamin. He made important, lasting contributions to the discipline of economics, particularly to the fields of public choice and law and...