This paper provides the first systematic evidence on how franchi‐sors adjust their royalty rates and franchise fees as they gain fran‐chising experience. This evidence comes from a unique panel data set that we assembled on these monetary contract terms for about 1,000 franchisors each year for the 1980–92 period. We find that there is much persistence, over time, in franchise contract terms within firms. We find this despite sizable across‐firm differences in royalty rates and franchise fees. In addition, franchisors do not systematically increase or decrease their royalty rates or franchise fees as they become better established, contrary to predictions from some specific theoretical models. We conclude that variation in contract terms is mostly determined by differences across firms, not by within‐firm changes over time. Finally, we find no negative relationship, within firms, between up‐front franchise fees and royalty rates.

This study compares the pre‐ and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996. We document significant increases in profitability, output, operating efficiency, and dividend payments—and significant decreases in leverage ratios—for our full sample of firms after privatization, and for most subsamples examined. Capital expenditures increase significantly in absolute terms, but not relative to sales. Employment declines, but insignificantly. Combined with results from two previous, directly comparable studies, these findings strongly suggest that privatization yields significant performance improvements.

A research tournament model with heterogeneous contestants is presented. For a large class of contests the optimal number of competitors is two. This insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants. While customary uniform‐price and discriminatory‐price auctions are intuitively appealing mechanisms for solving this adverse selection problem, in practice they generally will not be efficient mechanism for selecting contestants. Instead, we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete, regardless of the form of contestant heterogeneity.

This paper examines the relationship between population and economic growth. It analyzes the implications of the effects of higher population density on per capita incomes and other variables in different countries and other geographic regions. Several statistical models that interpolate population to cities investment in human capital and economic growth were utilized to help analyze population growth. Generally economists along with others have believed that higher population lowers per capita incomes by diminishing returns. On the contrary there are few proofs demonstrating that higher population in more developed economies reduce per capita incomes. Population may reduce productivity secondary to traditional diminishing returns from more intensive use of land and other natural resources. However large populations encourage greater specialization and increased investments in knowledge. Therefore the net relation between greater population and per capita incomes relies on whether the inducements to human capital and expansion of knowledge are stronger than diminishing returns to natural resources.

Abstract Trade credit is created whenever a supplier offers terms that allow the buyer to delay payment. In this paper we document the rich variation in interfirm credit terms and credit policies across industries. We examine empirically the firm's basic credit policy choices: whether to extend credit or to require cash payment; and, if credit is extended, whether to adopt simple net terms or terms with discounts for prompt payment. We also examine determinants of variations in two‐part terms. Results are supportive primarily of theories that explain credit terms as contractual solutions to information problems concerning product quality and buyer creditworthiness.

This study examines whether the market values financial statement data differently if it is disclosed instead of recognized in the body of the financial statements. We identify a sample of 229 SFAS No. 106 adopters who disclose an estimate of their anticipated liability for retiree benefits other than pensions (PRB) in their financial reports prior to the year of recognition. We then test whether the disclosed estimate of the PRB liability is valued differently by the market than is the subsequently recognized PRB liability. We provide modest and model-sensitive evidence that the recognized PRB liability receives more weight than the disclosed liability in market value association tests.

The Winner's Curse and Public Information in Common Value Auctions: Comment by James C. Cox, Samuel H. Dinkin and Vernon L. Smith. Published in volume 89, issue 1, pages 319-324 of American Economic Review, March 1999

Social Distance and Other-Regarding Behavior in Dictator Games: Reply by Elizabeth Hoffman, Kevin McCabe and Vernon L. Smith. Published in volume 89, issue 1, pages 340-341 of American Economic Review, March 1999