Harold O. Fried and Loren W. Tauer
This article explores how well an individual manages his or her own talent to achieve high performance in an individual sport. Its setting is the Ladies Professional Golf Association (LPGA). The order-m approach is explained. Additionally, the data and the empirical findings are presented. The inputs measure fundamental golfing athletic ability. The output measures success on the LPGA tour. The correlation coefficient between earnings per event and the ability to perform under pressure is 0.48. The careers of golfers occur on the front end of the age distribution. There is a classic trade-off between the inevitable deterioration in the mental ability to handle the pressure and experience gained with time. The ability to perform under pressure peaks at age 37.
Brenda A. Barnes
This article first introduces some essential airline pricing and revenue management (PRM) terms and concepts, and then briefly reviews historical events that have shaped the field of airline PRM. It discusses current PRM practices, including strategy, tactics, processes, distribution, and systems, and, finally, highlights trends that will impact the future practice of PRM. The article focuses on the current practices of the major US airlines, which include Delta Air Lines, United-Continental Airlines, American Airlines, and US Airways and account for approximately 75 per cent of US industry revenue; and the practices of the largest low-cost carriers, such as AirTran, JetBlue, and Southwest Airlines.
Ramon P. DeGennaro
This article focuses on a class of angel investors that lies between venture capitalists and the typical informal individual angel investor. It discusses why people become angel investors. It then covers angel investors in groups and discusses group traits and their advantages. The section after that discusses angel investments and the investment process. The article discusses characteristics of a good deal, the financial parameters of an investment, and the angel's exit from the investment. A review of the literature on expected returns on angel investments and the problems with measuring them follows. The final section summarizes.
David Evans and Richard Schmalensee
This chapter provides a survey of the economics literature on multisided platforms with particular focus on competition policy issues, including market definition, mergers, monopolization, and coordinated behavior. It provides a survey of the general industrial organization theory of multisided platforms and then considers various issues concerning the application of antitrust analysis to multisided platform businesses. It shows that it is not possible to know whether standard economic models, often relied on for antitrust analysis, apply to multisided platforms without explicitly considering the existence of multiple customer groups with interdependent demand. It summarizes many theoretical and empirical papers that demonstrate that a number of results for single-sided firms, which are the focus of much of the applied antitrust economics literature, do not apply directly to multisided platforms.
D. Daniel Sokol and Rosa Abrantes-Metz
Both theoretical and empirical work in a number of different fields, including economics, accounting, finance, organizational theory, and sociology provides important insights indicating that a firm is not merely a single entity in its actions. Rather, a firm is made up of a number of various components, each of which has its own incentives that shape firm behavior. This chapter reviews both the antitrust and the non-antitrust literatures on compliance and corporate governance to provide a clearer picture of the extant literature and the theoretical and empirical gaps within the antitrust literature to better inform antitrust policy on detecting cartels. This chapter explores the scholarship both within and outside of antitrust to better understand internal detection of wrongdoing and improved compliance in the antitrust cartel context.
Keith N. Hylton
Since China has modeled its antitrust regime on that of the EU, there are essentially two antitrust regime types: the United States and the EU. This chapter is a brief comparative study of the two regimes. I focus on three categories in which fundamental differences are observed: enforcement, legal standards, and procedure. Within each of the three categories, I narrow the focus to a specific illustrative feature. With respect to enforcement, the EU imposes gain-based penalties, while the United States imposes harm-based penalties. In predation law, the United States has a marginal cost standard and the EU has an average cost standard. With respect to procedure, the United States is a common law system, while the EU’s procedure is closer to the civil law system in its allocation of power between the courts and the enforcement agency. These differences have profound implications for the welfare consequences of global antitrust enforcement.
Daniel L. Rubinfield
Antitrust litigation has been experiencing a growth spurt in the past several decades as the result of expanding public enforcement worldwide, active private enforcement in the United States, and initial forays into private enforcement in other areas of the world. Given the large costs to the parties flowing from antitrust trials, it is not surprising that a vast majority of both private and public enforcement actions are resolved through settlement. This essay sketches out the conceptual framework underlying the settlement-trial decision. It also describes some of the empirical evidence on the settlement of both public and private antitrust cases and in the process offers commentary on a number of important policy issues.
Daniel Spulber and Christopher Yoo
Network industries, including the Internet, have shown significant growth, substantial competition, and rapid innovation. This chapter examines antitrust policy towards network industries. The discussion considers the policy implications of various concepts in the economics of networks: natural monopoly, network economic effects, vertical exclusion, and dynamic efficiency. The analysis finds that antitrust policymakers should not presume that network industries are more subject to monopolization than other industries. Deregulation and the strength of competition in network industries have removed justifications for structural separation as a remedy. Also, the chapter argues that deregulation and competition have effectively eliminated support for application of the essential facilities doctrine. Antitrust policy in network industries should be guided by considerations of dynamic efficiency.
Wouter Dessein and Andrea Prat
By bringing together multiple workers, organizations can perform tasks that are outside the reach of any individual. In order to be productive, however, workers must coordinate their actions. Often this requires communicating information that is dispersed throughout the organization, but communication is time-consuming and costly. As Arrow (1974) noted, given the importance of communication both as an opportunity and as a cost, organizations will strive to optimize information flows between workers. As a result, communication patterns within an organization will not be random but will be shaped by the goals of the organization. An attention network describes how communication flows and, as a result, how decisions are made within the organization. This chapter reviews optimal and equilibrium attention networks.
This article gives some historical background on auctions and describes the different varieties of auction, such as English, Dutch, Japanese, candle, silent, sealed-bid, Vickery, and simultaneous ascending auctions. It summarizes the most important results from auction theory, including the optimality of the Vickery auction and the revelation principle. The article also describes some of the current topics in auction research, including approaches to combinatorial auctions.
R. Preston McAfee, Michael Williams, and Kenneth Hendricks
This chapter surveys the theoretical and empirical literature on bid rigging in auctions. In particular, it reviews the theory and practice of bidding rings in one-shot auctions and in repeated auctions. The main theme is how the type of auction, whether it is first-price or second-price, sealed bid or oral, affects the incentive of bidders to collude and the way in which they collude.
Availability of Credit to Small Firms Young and Old: Evidence from the Surveys of Small Business Finances
The availability of credit is one of the most important issues facing small businesses, and is especially vexing for young and fast-growing firms that need new capital to finance growth. In the United States, small businesses produce about half of the total GDP in the U.S., employ about half of all private-sector U.S. workers, and have accounted for almost two-thirds of all job growth between 1993 and 2008. Therefore, it is critically important to understand the issue of credit availability to small firms. This article analyzes data from a series of four nationally representative samples of small U.S. firms conducted by the Federal Reserve Board over two decades. It explores differences in younger and older firms, using ten years as the demarcation point between young and old businesses. Younger firms seeking to grow have different credit needs than older, more mature firms. Many distinguish entrepreneurial firms from other small firms by their age. The article briefly describes the Surveys for Small Business Finances (SSBFs); summarizes two sets of studies that use the SSBFs to analyze the use of credit by small firms; and presents new evidence from the SSBFs on differences between young and old small firms, with a focus on the availability of credit.
Roger D. Blair and Jessica S. Haynes
This chapter explores Major League Baseball (MLB)'s antitrust exemption and its current relevance, starting by presenting a brief overview of the antitrust laws in the United States. Next, MLB's anomalous antitrust exemption and its vulnerability to Congressional action are explained, and it is argued that the antitrust exemption is largely irrelevant today. The anticompetitive pooling of broadcast rights is covered by the Sports Broadcasting Act, which shields such pooling from the antitrust laws. The exemption had an enormous financial impact for over fifty years as it protected and preserved MLB's monopsonistic reserve system, which meant that the club owners obtained nearly the entire surplus generated by the business of baseball. The agreements on other labor issues, namely player drafts, age restrictions, and roster size, are considered. There is still an extremely good reason for MLB to jealously guard its antitrust exemption.
Rodney J. Paul and Andrew P. Weinbach
This article discusses the literature that uses sports gambling markets as an analogy to financial markets. It also expands the study of actual sportsbook behavior, comparing the traditional models to the Levitt hypothesis and considering alternative theories, by examining the betting market for Major League Baseball (MLB). The reverse favorite-longshot bias and home/road biases are then explored. It appears that bettors prefer road favorites by a large margin, but this is not captured by the sportsbook odds, which, likely not coincidentally, tend to map closer to actual favorite win percentages. There are no statistically significant returns to betting against the public. The findings that sportsbooks do not set prices to balance the book calls into question the source of some of the earlier findings of market efficiency in sports wagering markets and its underlying support for the forecasting power of prediction markets.
Mark Armstrong and Steffen Huck
This survey chapter discusses nonstandard, or “behavioral,” approaches to firm behavior. It presents evidence that firms (or experimental subjects playing the role of firms) sometimes depart from the profit-maximizing paradigm. Section 9.2 discusses the related issues of imitative behavior by firms and concerns for relative (not absolute) profit, which can make an oligopolistic market more competitive than the orthodox theory suggests. Other forms of social preferences—a desire for vengeance if a rival cheats on a collusive agreement, say—are presented in section 9.3, which argues that they may help sustain collusive agreements. Various kinds of satisficing behavior are discussed in section 9.4, which shows how imperfectly optimizing firms may end up with greater profits than their profit-maximizing counterparts. Section 9.5 discusses the impact of overoptimism by entrepreneurs and managers, the imitation of irrational behavior by profit-maximizing firms, and the benefits of including fixed costs in pricing decisions.
Özalp Özer and Yanchong Zheng
This article demonstrates how human deviations affect pricing management in both areas of consumer pricing and pricing contracts among firms. It is organized as follows. Section 20.2 discusses some important theories regarding human decision making and social preferences, including the well-known ‘prospect theory’. Section 20.3 focuses on consumer pricing and investigates how different behavioural regularities affect a firm's marketing and pricing decisions. Section 20.4 discusses critical behavioural issues that impact the design and performance of pricing contracts among firms. Section 20.5 summarizes the discussion and concludes by suggesting future research that considers behavioural issues in pricing management.
Roger D. Blair and Christina DePasquale
This chapter examines the antitrust implications of bilateral monopoly. Section 16.2 presents the economic model of bilateral monopoly. This section compares monopoly, monopsony, and bilateral monopoly. In particular, it focuses on price, output, and social welfare. Section 16.3 examines some complications for antitrust policy. In particular, unlawful monopoly may lead to monopsony and unlawful monopsony may lead to monopoly. This has serious implications for antitrust policy in Section 1 Sherman Act cases and Section 7 Clayton Act cases, which are examined in section 16.4. The chapter closes with some concluding remarks in section 16.5.
The Russian economy relies on the freight railways to an extraordinary degree. In 2001, after years of debate, the Russian government adopted an ambitious plan to transform this vertically integrated monopoly into a system that would rely more on private investment and competition and less on government ownership and regulation. This chapter examines the state of the industry after ten years of reforms, focusing on competition, tariffs, and private sector participation. Much remains to be decided, in particular the question of whether Russia will move in the direction of one of the three standard models seen in other countries—vertical separation, third-party access, or horizontal separation—or whether it will continue in the direction pursued in Kazakhstan and under discussion in Ukraine—vertical separation, but with locomotives and operations included with the network and competition limited to rolling stock ownership and freight forwarding.
John Goddard, Peter J. Sloane, and John O. S. Wilson
This chapter reviews the historical development of free agency in professional football, using the English leagues as representative of what has happened in Europe, and then summarizes work that has been undertaken to unravel the effects of the Bosman ruling. Some data on changes in the patterns of employment of professional footballers in the English leagues since the mid-1980s, which enable several effects of the Bosman ruling to be identified, are also presented. A number of potential direct effects of the Bosman ruling on the market for playing talent were identified by Simmons. There have been significant changes in employment opportunities in the Premier League and Football League for players born in England and Wales. The influx of foreign players is one of the most visible post-Bosman developments. Although there is evidence that Bosman increased the average duration of players' employment contracts, employment turnover has also risen.
This chapter examines the development of Brazil’s inward-oriented industrialization strategy, commonly termed “import-substitution industrialization” (ISI). Originating in the 1930s under the corporatist administration of Getúlio Vargas, by the 1960s the strategy had succeeded in transforming the structure of the Brazilian economy, turning it into a major industrial powerhouse. Successful though the strategy initially was in promoting growth and structural change, it nevertheless suffered from inherent flaws, notably its heavy reliance on imported inputs and a failure to produce and export efficient industrial sector. This chapter considers the achievements and failings of ISI in some detail and also discusses the results of attempts to reintroduce the strategy on a limited scale in the first decade of the 2000s.