For many years, there were few distinctions drawn between horizontal and vertical agreements. Both were considered anticompetitive and subject to per condemnation under the antitrust laws. Recently, however, this approach has come under attack, and what was once the conventional wisdom is no longer so. Indeed, there is growing acceptance of the view that vertical agreements can rarely have anticompetitive consequences. Per legality would then be the appropriate standard. In this paper, we investigate the competitive implications of a particular vertical agreement: the imposition of dealing requirements by a manufacturer on his distributors. However, to maintain the focus of the analysis, we do not consider ultimate welfare gains or losses. In an early application of economic analysis to this practice, Aaron Director and Edward Levi (1956) suggest that dealing would be anticompetitive if it raised entry costs for rivals. Our object, following this conjecture (see their p. 293), is to examine the market conditions under which dealing impedes entry. Howard Marvel (1982) dealt with the practice of dealing. He provides an efficiency rationale for dealing, ignores the prospect that anticompetitive effects may follow, and concludes that exclusive dealing ought therefore to be treated as legal, per se (p. 25). This paper examines the possible anticompetitive effects neglected by Marvel. I. Market Conditions for Exclusive Dealing

In 2005–2006, the PCAOB imposed restrictions on auditors' tax services in order to strengthen auditor independence and improve audit quality. The restrictions resulted in a significant drop in auditor-provided tax services (APTS). To test the impact on audit quality, I partition the sample into a treatment group (companies whose APTS purchases dropped significantly when the restrictions were introduced) and a control group (companies whose APTS purchases were relatively unaffected) and I measure audit quality using the incidence of accounting misstatements, tax-related misstatements, and auditors' going-concern opinions. Using a difference-in-differences design, I find no change in audit quality for the treatment group relative to the control group after the restrictions are imposed.

Many households display inertia in investment management over their life cycles. Our calibrated dynamic life cycle portfolio choice model can account for such an apparently ‘irrational’ outcome, by incorporating the fact that investors must forgo acquiring job-specific skills when they spend time managing their money, and their efficiency in financial decision making varies with age. Resulting inertia patterns mesh well with findings from prior studies and our own empirical results from Panel Study of Income Dynamics (PSID) data. We also analyze how people optimally choose between actively managing their assets versus delegating the task to financial advisors. Delegation proves valuable to both the young and the old. Our calibrated model quantifies welfare gains from including investment time and money costs as well as delegation in a life cycle setting.

This paper documents the existence of a CEO investment cycle, in which disinvestment decreases over a CEO's tenure, while investment increases, leading to “cyclical” firm growth in assets and employment. The estimated variation in investment rate over the CEO investment cycle is of the same order of magnitude as the differences caused by business cycles or financial constraints. Results from a number of tests generally support the view that the investment cycle is caused by agency problems, leading to increasing investment quantity and decreasing investment quality over time as the CEO gains more control over his board.

The prices of auctions on eBay often exceed eBay's fixed-price “Buy-It-Now” prices. I investigate the causes of this overbidding, focusing on the interpretation in Malmendier and Lee (2011) that the observed overbidding cannot be explained “without allowing for nonstandard preferences or beliefs” and that the “strongest direct evidence points to limited attention.” Using data from their study and new data from eBay, I provide evidence that a key condition for identifying nonstandard behavior may not have been met, and that the observed overbidding is not inconsistent with standard behavior once we allow for the likely presence of search costs.

A tax-based incomes policy (TIP) is an innovative approach to the inflation-unemployment dilemma. First proposed by Sidney Weintraub and Henry Wallich, a TIP has recently begun to receive serious attention from economists (see Weintraub and Wallich, and Arthur Okun and George Perry). A TIP would provide a tax incentive for the employer, and/or employees, at each firm to reduce the size of the firm's wage increase. Elsewhere (1978a) I have examined the issues bearing on the optimal design of a TIP. In this paper, I will attempt to clarify the role of TIP by focusing on two important aspects: 1) the micro-economic rationale for TIP and 2) the compatibility of TIP with the monetary view of inflation.

We provide a theoretical and empirical analysis of the link between financial and real health care markets. This link is important as financial returns drive investment in medical research and development (R&D), which, in turn, affects real spending growth. We document a “medical innovation premium” of 4–6% annually for equity returns of firms in the health care sector. We interpret this premium as compensating investors for government-induced profit risk, and we provide supportive evidence for this hypothesis through company filings and abnormal return patterns surrounding threats of government intervention. We quantify the implications of the premium for the growth in real health care spending by calibrating our model to match historical trends, predicting the share of gross domestic product (GDP) devoted to health care to be 32% in the long run. Policies that had removed government risk would have led to more than a doubling of medical R&D and would have increased the current share of health care spending by more than 3% of GDP.