Knowledge that Transforms

Examines the sources of increased competition in the United States (U.S.) between 1939 to 1980. In this paper authors consider the review of related literature, trends and patterns of competitive structure in the U.S. economy, influence of antirust actions on competition.

/-3) + f32X2'+ . . + 8,/Xk k + E (2) can be specified and estimated. On occasion, neither a priori reasoning nor theory clearly dictate the correct functional form (transformation) which an additive model should assume. With the Box-Cox transformation, the functional form is dictated by the parameters, Xi, which are themselves estimated. Note that if X1 = 1 in (2), then y(l) enters the equation linearly; also, y enters (2) as In y, and y(-1) enters (2) as the reciprocal of y. Thus the estimation procedure itself chooses the transformations which best fit the data. Furthermore, hypothesis tests can be made on the estimated Ai in order to determine if alternative functional forms (transformations) are also consistent with the data. (See the appendix for a note on discriminating between functional forms.) Estimation of (2) requires the maximization of a nonlinear likelihood function which can be extremely complicated. Since computer programs for maximizing such complex functions may not be readily available, the estimation of generalized functional forms such as (2) may be impeded. It may not be generally recognized that estimation of the parameters of (2) can be accomplished in at least four different ways. This paper will look at four alternative ways of estimating the parameters f3j, Xi and o-2. Each approach can be made to yield identical parameter estimates, and identical estimates of the covariance matrix of the parameter estimates. In section II, the general problem will be addressed and the likelihood function derived. Section III will look at each estimation approach. Section IV will conclude the paper. Problems of estimation only are dealt with in this paper. Furthermore, the approximate normality of the error terms is assumed throughout. For a discussion of estimation methodology when the error terms are truncated normal, see Poirier (1978). For a discussion of the interpretation of estimated coefficients in Box-Cox models, see Poirier and Melino (1978) or Huang and Kelingos (1979).

Kenneth D. Garbade, William L. Silber, Lawrence J. White, Market Reaction to the Filing of Antitrust Suits: An Aggregate and Cross-Sectional Analysis, The Review of Economics and Statistics, Vol. 64, No. 4 (Nov., 1982), pp. 686-691

EVERYBODY talks about the relation of industries' profit rates to their markets' rates of growth, but nobody does anything about it. Specifically, researchers have confirmed the effect of the growth of nominal output on profits in many multivariate studies, without specifying closely the hypothesis under test or the measure of demand growth appropriate to test it. A profits-growth relationship could stem from several mechanisms-the lagged adaptation of capacity to unexpected changes in demand, reactions of oligopolists to disturbances in their consensus, etc. These mechanisms-how and where they work-hold their own normative interest. Therefore, knowing what behavior (and what structure, lying behind it) accounts for the profits-growth relationship should do more than improve the specifications of our studies of allocative efficiency. It should also expand our knowledge of adaptive processes that are important and hard to observe directly. In this paper we shall synthesize the available explanations of why changes in market demand should affect an industry's profits, then present a statistical test of the relative significance of the competing explanations.

This paper critically examines a number of maintained hypotheses that are necessarily being tested along with the basic notion derived from the rational expectations (RE) formulation of Lucas (1972) (19 73) that only unanticipated money matters. The trend stationary representation of secular real output of Lucas and others is replaced by a difference stationary representation found by Nelson and Plosser (1980) to be consistent with U. S. historical data. The impact of inflation uncertainty on real activity is considered. Attention is paid to possible mis-measurement of agents' ex ante -- anticipated money growth. It is found that three alternative measures of anticipated money growth produce a stable impact on growth of output and employment. Contemporaneous and lagged values of unanticipated money growth have no significant additional explanatory power in the presence of any one of the three measures of anticipated money growth. Beyond this, it is impossible to reject the hypothesis that the initial positive real impact of anticipated money is not temporary. Inflation uncertainty is found to act as a significant depressant of real economic activity in the presence of all tested combinations of anticipated and unanticipated money growth.