This paper considers the wide class of problems in which a searcher can choose his sample size and whether or not to stop search at each of a sequence of decision points. Sequential search problems are the special cases in which the sample size chosen at each decision point is unity. Several properties of the optimal sample size sequence are established, with particular attention being paid to the effects of recall, decision horizons and fallback utilities. These properties yield necessary and sufficient conditions for the optimality of sequential search strategies within the class of problems considered. 1.

This paper examines the problem of estimating the parameters of an underlying linear model using data in which the dependent variable is only observed to fall in a certain interval on a continuous scale, its actual value remaining unobserved. A Least Squares algorithm for attaining the Maximum Likelihood estimator is described, the asymptotic bias of the OLS estimator derived for the normal regressors case and a "moment" estimator presented. A "two-step estimator" based on combining the two approaches is proposed and found to perform well in both an economic illustration and simulation experiments.

This paper compares the durability of goods produced in competitive and monopolistic markets. Durability is chosen to minimize the cost of providing a given present value of flow of services over the life of the durable. As pointed out by Swan, under constant returns to scale, the cost-minimizing durability is independent of the level of output; thus competitive firms will choose the same durability as a monopolist, even though they would produce different levels of output. In this paper, we relax the assumption of constant returns to scale and derive more general conditions under which optimal durability is independent of the level of output. We also demonstrate that with a particular specification of external diseconomies of scale, the monopolist will produce goods with greater durability than would be produced by competitive firms. 1.

This study examines, month-by-month, the empirical relation between abnormal returns and market value of NYSE and AMEX common stocks. Evidence is provided that daily abnormal return distributions in January have large means relative to the remaining eleven months, and that the relation between abnormal returns and size is always negative and more pronounced in January than in any other month — even in years when, on average, large firms earn larger risk-adjusted returns than small firms. In particular, nearly fifty percent of the average magnitude of the ‘size effect’ over the period 1963–1979 is due to January abnormal returns. Further, more than fifty percent of the January premium is attributable to large abnormal returns during the first week of trading in the year, particularly on the first trading day.

In 1976, the U. S. Senate Subcommittee on Reports, Accounting, and Management (Metcalf Committee) provided data indicating that the eight largest auditing firms in the country (the Eight) are overwhelmingly the major suppliers of audit services to the largest corporations in the United States. The Subcommittee concluded from these data that monopolistic practices by the Big Eight have led to a two-tier structure in the audit industry-one tier consisting of the eight largest auditors and the second tier consisting of all other auditors, with the Big Eight dominating the industry. In the light of these findings, the committee suggested that more activist regulation of the audit industry was needed by the Securities and Exchange Commission. Dopuch and Simunic [1980] examined a wide variety of evidence that might tend to support or refute allegations of a lack of competition in the auditing profession. They (D-S) concluded that the industry was competitive, and in a subsequent paper [1982] they argued that many of the apparent monopolistic characteristics of the industry could be explained by a product-differentiation hypothesis. More specifically, they hypothesized that different auditing firms provide auditing services which are perceived by investors to be different in quality, and in particular, that the Big Eight auditors are perceived as being more credible than non-Big Eight auditors. If this is the case, the Big Eight firms would be

Earlier models of innovation under oligopolistic rivalry are modified to include a “share parameter” σ, describing the manner in which profits are divided among rivals when one firm is successful in its search for a valuable resource stock. There is a unique value of σ that maximizes expected industry profits, by “guiding” noncooperative oligopolists to choose the profit-maximizing exploration rate. Moreover, setting σ at this maximizing value—which always allocates some share of industry profits to the “losers” in the exploration race—leads to an exploration rate identical to what would be chosen by a jointly managed cartel.

Journal Article Tax Neutrality in the Presence of Adjustment Costs Get access Andrew B. Abel Andrew B. Abel Harvard University and National Bureau of Economic Research Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 4, November 1983, Pages 705–712, https://doi.org/10.2307/1881785 Published: 01 November 1983

THE DRAMATIC INCREASE in energy prices in the 1970s has stimulated interest in the effect of energy prices on the demands for various factors of production. In analyzing the choice of energy-using characteristics of capital, it is important to recognize that a firm's energy-capital ratio is much more flexible prior to undertaking a capital investment than it is after the capital is put in place. In this paper we examine factor intensity choices in a stochastic putty-clay model. Ex ante, when the firm is making investment decisions, the price of energy is unknown. The energy/capital ratio is flexible ex ante and the firm chooses the optimal energy intensity based on the probability distribution of energy prices. Ex post, the energy/capital ratio is fixed and the price of energy is known. The firm cannot adjust the energy/capital ratio but can choose not to use its capital if the realized price of energy is too high.2 Recently, Kon [3] has studied factor demands in a stochastic putty-clay model in which the price of output is random and the prices of factors of production are known with certainty. In this paper, we focus on the effects of energy prices and thus treat factor prices as random and the output price as known with certainty. This difference in the source of randomness appears to make little difference in the comparison of optimal factor intensity under certainty and under uncertainty; indeed Proposition 1 in this paper corresponds to Kon's Proposition 1. In this paper we then go on to examine the effects on optimal factor intensity of changes in the mean and variance of the price of energy.3 The option to shut down during unfavorable price regimes plays an important role in our analysis. In Section 1 we develop a stochastic putty-clay model and compare a risk-neutral firm's behavior under certainty and uncertainty. The effects on energy-intensity of changes in the mean and variance of energy prices are analyzed in Section 2.