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To analyze the effects of mergers among firms facing capacity constraints, we develop a numerical model of price-setting behavior among multi-product firms differentiated by location and capacity. We perform a number of computational experiments designed to inform merger policy, with specific reference to the Central Parking-Allright merger of 1999. The experiments show that capacity constraints on merging firms attenuate merger effects by much more than capacity constraints on non-merging firms amplify them. The experiments also highlight the dependence of merger welfare effects on parking demand. In preparation for further industry consolidation, we propose estimators of parking demand to more precisely estimate the costs and benefits of future mergers. JEL classification: L41; C63; C35 Keywords: Capacity constraints; Parking; Merger; Demand estimation

This paper examines the relationship between fertility and human capital investment and its implications for economic growth, focusing on the effects of declining mortality. Unlike the existing literature, this paper stresses the role of uncertainty about the number of surviving children. If the marginal utility of a surviving child is convex, then there will be a precautionary demand for children. As the mortality rate and thus, uncertainty fall, this demand decreases. Furthermore, lower mortality encourages educational investment in children. The key result is that this empirically observed quality--quantity trade-off is realized only if uncertainty is incorporated into individual's optimization problem. JEL classification: O40; I12; J11; J13 Keywords: Uncertainty; Precautionary demand; Quality--quantity trade-off; Growth

This paper shows that demand elasticities and cost asymmetry are important determinants of strategic trade policy. In the symmetric case, the direction of intervention is critically dependent upon the elasticity of demand. Under unit elastic demand, free trade is optimal under symmetry, and a subsidy (tax) is optimal if the exporting firm has lower (higher) marginal cost than its competitor. If both the exporting governments intervene, then the conventional result that the lower cost firm gets the higher subsidy is reversed for inelastic demand. However, such an equilibrium is unstable in policy space. Key words: Strategic trade policy; Export subsidies; Stability in policy space; Existence of policy equilibrium; Multiple equilibria in policy space

The set of variables in a time series demand model in the form of the Almost Ideal Demand System are found to be I(1) with the demand equations forming a cointegrating system. The parameters of the cointegrating equations are estimated and tested using a 'triangular error correction' procedure. The null hypothesis of homogeneity with respect to prices and nominal income in the system cannot be rejected. Keywords: Conintegration; Demand system; Homogeneity

The strong underlying assumptions of the Barro/Ricardo equivalence proposition (REP) raise doubts on its validity especially for developing countries. This paper attempts to analyze the validity of the REP and the sources of deviation from REP for a large sample of developing countries. Although the results are of a mixed nature, they suggest that the presence of liquidity-constrained individuals may be the source of deviation from the REP. The analysis also indicates that public spending is a poor substitute for private consumption and hence implies that temporary increases in public spending may have some expansionary effect on aggregate demand. Keywords: Ricardian equivalence; Finite horizons; Liquidity constraints; Private vs public spending

A food demand system is proposed based on demand for energy, variety, and tastes of foods. By specifying utility as an explicit function of these characteristics, the entire matrix of demand elasticities can be derived for n foods and one non-food from prior specification of just four elasticities, while avoiding any assumption of separability between foods. This framework can explain why poorest groups often are most price-responsive, but also can account for highest price-responsiveness by middle income groups. The system is applied to published food consumption data for urban and rural populations in Pakistan. Elasticities are compared with those obtained in a published Pakistan study applying an almost ideal demand system (AIDS). Keywords: Price-response; Food characteristics; Hedonic prices; Food demand system; Calorie demand

In neoclassical structural models dealing with rationing, corner solutions, or nonlinear budget constraints, utility theory is more crucial than in traditional demand systems. If in these models negativity of the Slutsky matrix is violated, the models will in general not be coherent, in the sense that endogenous variables are not unambiguously determined. We show that not imposing coherency may yield inconsistent estimators. A general framework is sketched which allows for the analysis of the relation between coherency, regularity of preferences, and the stochastic specification of the model. We discuss sufficient conditions for regularity which can be imposed in estimation.

This paper is devoted to a general equilibrium analysis of the relationship between the inequality in asset holdings and the aggregate levels of output and employment in a developing economy. Since luxuries and basic goods compete for the use of the same scarce resources, unemployment is conceived as a mechanism whereby the market demand for basic goods can be limited to a sufficiently low level so that the high demand for luxuries can be met. The ambiguous effects of capital accumulation on employment are also examined.

This article studies the effect of input-use constraints like the domestic-content legislation (proportion constraints) and pollution rights (quantity constraints) on firms facing demand uncertainty. Comparative static effects of demand uncertainty, elasticity of substitution, factor price, and input intensity of the controlled input are also considered. Some conclusions: government ought to offer the firms a choice between the two forms of constraints instead of imposing one or the other type; firms prefer proportion constraint in a situation of increasing demand uncertainty; for the other cases, constraint preference is a function of the nature of the constrained input and parameters of the production technology. (Reprinted by permission of the publisher.)

Good marketing decisions require managers' understanding of the response function relating performance measures to variations in the marketing mix. We use unit-root techniques to address market response in evolving markets, with a focus on their response to price promotions. We distinguish between evolution at the primary-demand vs. selective-demand level, and examine four consumer product categories for which high-quality scanner records are available. We find category and brand sales to be predominantly stationary, with differences in promotional impact between national and private-label brands. Even in the rare occurrence of performance evolution, the long-term effects of price promotions are not necessarily positive. Keywords: Evolution; Long-term effectiveness; Price promotions

A basic function in the proper management of repair part inventories is the anticipation of demand. The US Navy maintains a database of univariate demand data for its repair part inventories using a quarterly time interval and a limited number of periods. Historically, the exponential smoothing procedure has been used for demand forecasting. This method is simple and robust, but it does not make use of any characteristics of the entire time series such as trend, cycles, presence of outliers or demand clustering. Sharper information may be available with the use of the Box-Jenkins system. Not all repair parts can capitalize on this and there is a problem in identifying those that do. Moreover the number of parts is quite large and the speed of identification is an issue. This paper addresses this problem. The research begins with the development of several simple, robust and dimensionless time series features. These are used to predict the suitability of Box-Jenkins (ARIMA) modeling. Two predictive models are considered: classical regression and a modern expert-system statistical package, ModelQuest[TM]. Their strengths and weaknesses are compared. The result of either is a computationally simple means for determining which repair parts time series may benefit from the Box-Jenkins methodology for purposes of inventory management. Keywords: Box-Jenkins; Statistics; Time series; Case study