Determination Of Fees Research Articles

Merchant Fee Determination in Unitary Networks with Price Competition Among Merchants

This paper investigates the determination of the merchant usage fee of a monopolistic unitary payment card network based on characteristics of the downstream market. Merchants engage in Bertrand price competition that allows for an observation of heterogeneous products. We find that the payment card network extracts a part of the economic rent that merchants obtain. The higher this rent, the higher the corresponding merchant usage fee. The rent, and consequently the merchant usage fee, is increasing in the downstream market size but decreasing in the price elasticity of consumer demand, as well as in the substitutability of products, and, interestingly, in the fraction of consumers preferring card payments.

The Design of Government Guarantees for Bank Bonds

In 2010 authorities have taken the first steps to end some of the public support measures put in place in response to the financial crisis, starting with government guarantees for bond issues. Financial institutions have made extensive use of this tool, which has been effective in avoiding a further tightening of funding conditions, but this type of public support has, nonetheless, raised some concerns. First, the cost of issuing guaranteed bonds has mainly reflected the characteristics of the sovereign guarantor rather than those of the issuer, thus favouring borrowers with a strong sovereign backing. This situation has the potential to distort competition and create incentives for excessive risk taking. Such effects could have been reduced by the choice of a different fee determination mechanism. Second, the continued availability in 2010 of guarantee schemes, despite a declining overall usage, may be alleviating the pressure on some weak financial institutions to address their weaknesses: the average creditworthiness of banks issuing after mid-2009, when market conditions became more favourable, has sharply declined. JEL Classification: G01, G12, G21, G28. Keywords: financial crisis, policy response to the crisis, government guaranteed bonds, competitive distortions

The Determinants of Audit Fees. Further Evidence From the UK Charity Sector

Given the lack of literature and the ever growing relevance of charities, the present paper investigates the determinants of audit fees in the UK charity sector. It proposes a theoretical framework to determine the audit fee, which is empirically tested on a dataset of 119 “largest” charities. The paper also investigates the presence of a fee premium associated with (now) Big4 audit firms and expertise in charity auditing, and compares the results with those of a leading study in the UK context (Beattie et al., 2001). Our findings basically confirm those of Beattie et al. (2001). The evidence shows that size, risk, and fees for Non-Audit Services (NAS) are the main determinants of audit fee determination, while, contrary to research in the private sector, the organisational complexity of the charity does not seem to have significant influence on audit fees. The results also show a positive association between audit fees and NAS fees, the presence of an audit fee premium between Big4 and non-Big4 auditors, as well as significant higher remuneration for the auditors’ expertise.

Multi-Party Payment Card Network Pricing Determination of Merchant and Interchange Fee

In this study, a multi-party payment card network model is constructed to explore the determination of merchant and interchange fees, thereby extending Langlet’s (2009) observation of unitary payment systems. The focus of this analysis was on the impact of consumer price elasticity, the relative frequency of card usage, and the competitive condition of merchants in the determination of network fee payments. To accomplish this, two scenarios are analyzed; first, a network with homogeneous banks that serve both sides of the payment market, therefore acquiring and issuing cards in an equal manner and second, financial institutions that exclusively serve as either issuers or acquirers. The model yielded two significant results. First, similar to the Langlet (2009) case of unitary payment networks, the consumer price elasticity, the relative frequency of card usage, and the competitive condition of merchants were found to determine the prices of the multi-party payment system. Second, limiting the interchange fee is found to be efficient in regulating the inefficiently high merchant usage fees.A summarized version of this working paper is forthcoming in Lydian Payments Journal.

CRESSE SYMPOSIUM ON COMPETITION POLICY: PROCEDURES, INSTITUTIONS, INTELLECTUAL PROPERTY RIGHTS INTRODUCTION

THE COMPETITION AND REGULATION EUROPEAN SUMMER SCHOOL AND CONFERENCE (CRESSE) is an informal network of academics and professionals with an interest in competition policy and sectoral regulation. It was initiated by Yannis Katsoulacos (Athens University of Economics and Business) in 2005 and has since grown to become an important event in the competition and regulation annual conferences calendar, with the continuous support ofMassimoMotta (EuropeanUniversity Institute, Florence), Patrick Rey (University of Toulouse) and David Ulph (University of St. Andrews). The objective is to provide a forum in which the latest research in the areas of competition and regulation is presented and discussed. CRESSE Conference themes have been ‘Abuses of Dominance’ (2006), ‘Competition and Regulation in Network Industries’ (2007), ‘Competition Policy: Procedures, Institutions, IPR’s’ (2008) and ‘Advances in the Analysis of Competition Policy’ (2009). Presentations in the two-day annual Conference include 3–5 invited papers and a limited number (typically 25%–30%) of papers selected from those submitted following a call in the major IO journals. The annual CRESSEConference is held in early July inGreece, the institution responsible for its organization being the Athens University of Economics and Business. CRESSE also organizes an annual summer school in which visiting faculty from a large number of European and U.S. universities provide high quality training topractitioners of competitionpolicy and sectoral regulationwhowish to be up to date with new economic literature and recent legal developments. It is also active in disseminating research in the areas of competition policy and regulation and in contributing, through the organization of special policy sessions and round tables, to public debates on specific policy issues. The annual CRESSE Conference typically has two keynote lectures (the Jean-Jacques Laffont Lecture and theCRESSEConference PolicyLecture),

Payment Card Pricing - The Relationship of Consumer Price Elasticity and Merchant Fees of Unitary Networks

Even though there has been an enormous growth of literature on two-sided markets over the last decade, there remains a significant need for a deeper understanding of the determination of (i) privately and of (ii) socially optimized payment card network pricing . Thus in this paper I explore the behavior of payment card network players. I particularly aim at unveiling the determination of payment card network fees. I thereby find three determinants of the merchant discount: 1. consumer price elasticity, 2. the relative frequency of card payments, and 3. the competitive condition of merchants.

An investigation of perceptions of social equity and price acceptability judgments for campers in the U.S. national forest

In spite of the significance of social equity in determining appropriate fee levels for activities such as camping in public nature-tourism resources, there has been little understanding of the mechanisms that (a) influence the debate over scale and (b) the conditions that are used in fee determination. The main objective of this study is to investigate the decision making process that predicts social equity judgments and price acceptability of user fees for activities such as camping in protected areas (including parks) and outcome the variables. In this study of Wasatch-Cache National Forest in northeastern Utah using conjoint analysis the results indicated that the extent of public input was the most prominent predictor of social equity judgment at p < 0.01. The second highest part-worth coefficient was obtained in support of low user fees (a hypothetical scale of $3.00 vs. $8.00). The magnitude of the part-worth coefficients for price acceptability showed that the highest part-worth coefficient was a fee level of $3.00. The next highest part-worth coefficient was in support of revenue being used to maintain the quality of the site. It was also found that that “extensive public input” was an important predictor of social equity.

Determination of Fees for Local Services under the Consideration of Public and Management Objectives

Anita Dehne, Peter Friedrich und Chang Woon Nam; Bestimmung kommunaler Gebuhren unter Berucksichtigung von offentlichen Zielen und Managementzielen Bestimmung von Gebuhren; Effizienz; kommunale Leistungen; Management; Trager von kommunalen Unternehmen Meistens versuchen Autoren im Rahmen wohlfahrtsorientierter Beitrage zur Bemessung kommunaler Gebuhren, allokationseffiziente Gebuhrenhohen fur Gemeindeunternehmen zu ermitteln. Sie unterstellen, dass Faktoreffizienz in Gemeindeunternehmen herrscht und somit die Unternehmen zu Minimalkosten produzieren. Die Beziehungen zwischen dem ∗ The authors are grateful to two anonymous referees for helpful comments. Responsibility for errors remains the authors’. kommunalen Eigentumer und dem Management sowie deren Konsequenzen erfahren gewohnlich keine Beachtung. Wir untersuchen hingegen, ob sowohl Allokationseffizienz als auch Faktoreffizienz erreichbar sind, falls solche Abhangigkeiten Berucksichtigung finden. Ware dies der Fall, dann fuhrt die Wohlfahrtsmaximierung bei Vorliegen von Monopolen zur Grenzkostenpreisregel. Die Anwendung dieser Regel ruft in praxi jedoch mannigfaltige Schwierigkeiten hervor und die implizite Annahme herrschender Faktoreffizienz reflektiert die wirtschaftliche Wirklichkeit ungenugend. Dieses Ergebnis bestatigt ein Modell zur Bestimmung kommunaler Gebuhren, bei dem ein Gemeindeunternehmen mittels einer Vollkostendeckungsvorschrift reguliert wird, das Unternehmensmanagement jedoch sowohl Autonomie uber den Einsatz der Produktionsfaktoren als auch hinsichtlich der Bestimmung der Produktionsmengen besitzt und die Moglichkeiten nutzt, die von ihm praferierten Ziele zu verfolgen. Aktive Verhandlungen zwischen dem kommunalen Trager und dem Management werden ebenfalls in einem Modell analysiert. Nur in Ausnahmefallen wird Faktoreffizienz herrschen. Bernhard Hirsch, Michael Schmiedke und Stefan Reemts Anreizsysteme fur Soldaten der Bundeswehr – Theoretische Analyse und Gestaltungsempfehlungen Anreize; Anreizsysteme; Belohnungen; Bundeswehr; Leistungsmotivation; Motivation von Soldaten Dieser Beitrag verfolgt zwei Ziele. Zum einen werden die theoretischen Grundlagen und die spezifischen organisatorischen Rahmenbedingungen der Einfuhrung eines Anreizsystems fur Soldaten der Bundeswehr beschrieben. Zum anderen stellen wir eine theoriegeleitete Konzeption eines Gestaltungsansatzes fur ein langfristig orientiertes Anreizsystem innerhalb der Bundeswehr fur deren Soldaten vor. Wir empfehlen der Bundeswehr die Einfuhrung eines Anreizsystems, das sowohl der spezifischen intrinsischen Motivation von Soldaten gerecht wird als auch monetare Leistungsbelohnungen enthalt. Damit tragen wir den geanderten Anforderungen an die Soldaten der Bundeswehr Rechnung.

Multiple Large Shareholders, Audit Committee Activity and Audit Fee Determination

Multiple Large Shareholders, Audit Committee Activity and Audit Fee Determination

When cheaper is better: Fee determination in the market for equity mutual funds

In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers’ ability is not observed by investors before making their investment decisions. Third, some investors do not make optimal use of all available information. The main results of the paper are that (1) price competition is compatible with positive mark-ups in equilibrium, and (2) worse-performing funds set fees that are greater or equal to those set by better-performing funds. These predictions are supported by available empirical evidence.

The joint determination of audit fees, non-audit fees, and abnormal accruals

Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by modeling the confluence of audit fees, fees for non-audit services and abnormal accruals in a system of simultaneous equations.

What matters in audit pricing: industry specialization or overall market leadership?

Ferguson et al. (2003) report that audit industry fee premia primarily reside with joint national and city-specific industry leadership as opposed to merely firm-wide (national) industry expertise, suggesting auditor choice among the Big 5 is best conceptualized on joint industry specialization in city-specific markets and nationally. The present study examines whether the prior results could be confounded by the presence of city-specific overall market leadership effects. Our findings reaffirm that joint local and national auditor industry expertise is valued by audit clients. Furthermore, overall city-specific leadership, by itself, also matters in fee determination and results in higher fees, although at a slightly weaker level of statistical significance.

Pricing training and development programs using stochastic CVP analysis

AbstractThis paper sets forth, analyzes and applies a stochastic cost‐volume‐profit (CVP) model specifically geared toward the determination of enrollment fees for training and development (T+D) programs. It is a simpler model than many of those developed in the research literature, but it does incorporate one advanced component: an ‘economic’ demand function relating the expected sales level to price. Price is neither a constant nor a random variable in this model but rather the decision‐maker's basic control variable. The simplicity of the model permits analytical solutions for five ‘special prices’: (1) the highest price which sets breakeven probability equal to a minimum acceptable level; (2) the price which maximizes expected profits; (3) the price which maximizes a Cobb–Douglas utility function based on expected profits and breakeven probability; (4) the price which maximizes breakeven probability; and (5) the lowest price which sets breakeven probability equal to a minimum acceptable level. The model is applied to data provided by the Center for Management and Professional Development at the authors' university. The results suggest that there could be a significant payoff to fine‐tuning a T+D provider's pricing strategy using formal analysis. Copyright © 2005 John Wiley &amp; Sons, Ltd.

When Cheaper is Better: Fee Determination in the Market for Equity Mutual Funds

In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers' ability is not observed by investors before making their investment decisions. And third, some investors do not make optimal use of all available information. The main results of the paper are that 1) price competition is compatible with positive mark-ups in equilibrium; and 2) worse-performing funds set fees that are greater or equal than those set by better-performing funds. These predictions are supported by available empirical evidence.

Economics, Politics, and Governance*

This paper discusses the dynamics of economics, politics, and governance and its implications for the Indian economy in general and the governance issues of educational institutions in particular. Independent India was founded on a democratic framework and an operational governance structure. The vision was to attain the specific economic and social goals that the country had set for itself. What is puzzling is the fact that despite the ideal combination of economics, politics, and civil service, the expected results were not achieved. What might have happened is the development of a substantial gap between the economically sound and the politically feasible policies, on the one hand, and the disharmony between the different levels of the administrative machinery, on the other. The author agrees with the renowned economist, Hanson, who found an answer to the problem not in the theory of planning or the people making the plans but with the unrealistic assumptions about the likely responses of the people. For instance, it was assumed that the people elected to power, the citizens of the country, and the labour and management of the public enterprises would all work selflessly to achieve the economic objectives of the country. In reality, however, regional and sectional interests dominated the political and economic decisions making the Indian economy self-centric, narrow, and wasteful. The channelization of economic benefits to the special interest groups led to the lop-sided distribution of wealth. To add to this was the political corruption which was accepted as an unavoidable feature of the electoral process. Another blow came from the public sector enterprises which, instead of generating public savings, led to the accumulation of internal public debt and lower investment. What is unfortunate is that all this continued for a long time despite the realization that they were going against the basic assumptions of the post-Independence policy framework. Taking the issue of fee determination in the case of IIMs, the author feels that it is again a complex interplay of the three elements - economics, politics, and governance. The economic issue from the public policy point of view is: why the larger subsidy from public funds and for whose benefit? While it is a popular political move to grant subsidies, it is a matter of conscious political choice as to which target group should get the benefit. Towards making India's vision a reality, the author suggests the adoption of pragmatic and flexible approaches with the contemporary realities in mind. The steps would include: simplifying administrative procedures managing fiscal deficit through fiscal policy changes ensuring accountability through legal reforms avoiding bureaucratic interference eliminating administrative discretion While a lot needs to be done in all these areas, the author is confident that with the economic potential of the country and the innate ability of the people of this country, it would definitely be possible to realize the full potential within the next two decades.

When Cheaper is Better: Fee Determination in the Market for Equity Mutual Funds

In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers' ability is not observed by investors before making their investment decisions. And third, some investors do not make optimal use of all available information. The main results of the paper are that 1) price competition is compatible with positive mark-ups in equilibrium; and 2) worse-performing funds set fees that are greater or equal than those set by better-performing funds. These predictions are supported by available empirical evidence.

Significance and Determination of Fees for Municipal Finance

The idea of fiscal decentralisation has become increasingly fashionable world-wide. But every country has unique features of the intergovernmental fiscal system. In general municipal expenditures are rapidly growing in European countries. On the other hand local tax increases are not easily enforceable at present, whereas the local fiscal autonomy is unlikely to be guaranteed as long as municipalities are strongly dependent on down-flow grants. In such a fiscal-stress situation an improvement of local fiscal capacity can be achieved from the increase of fees. Four European countries were chosen to survey the recent development of municipal finance: Britain, Germany, Poland and Switzerland. This paper firstly identifies and highlights the similarities and differences in municipal finance in an international context. Secondly it theoretically examines the possibility of enhancing fiscal autonomy of local governments through determining optimal fee level which leads to an increase of revenues from this revenue item.

An extension of the τ-value to games with coalition structures

We introduce the coalitional τ-value, which is an extension of the τ-value for TU-games to games with a coalition structure. We identify a class of TU-games that satisfy the property that for every game in this class and every coalition structure on its player set it holds that the coalitional τ-value can be defined for the corresponding game with a coalition structure. We study properties of the coalitional τ-value and provide an axiomatic characterization of this allocation rule. We use the coalitional τ-value to study bankruptcy problems and the determination of aircraft landing fees.

Evidence on the Joint Determination of Audit and Non‐Audit Fees

AbstractIn this study we investigate whether the characteristics of clients, auditors, and the auditor‐client relationship simultaneously determine audit and non‐audit fees. As done in prior studies, we maintain that fees proxy for the level of service provided and follow the physical flow of knowledge. Estimating single‐equation models of audit and non‐audit fee models, we confirm prior findings of an association between audit and non‐audit fees. Studies conclude that such evidence is consistent with knowledge spillovers between the two services. However, we document empirically that audit and non‐audit fees are simultaneously determined. Because the data indicate audit and non‐audit fees are jointly determined, we then investigate whether previously documented associations between audit and non‐audit fees are the result of biased estimation induced by using endogenous variables in single‐equation models. In contrast to results from single‐equation estimations, we find no association between audit and non‐audit fees using a simultaneous specification of the fee system, suggesting that single‐equation estimations suffer from simultaneous‐equations bias. In sum, the findings are not consistent with the existence of economies of scope from the joint performance of audit and non‐audit services after controlling for the joint behavior of audit and non‐audit fees. Given the ongoing debate over the level of allowed non‐audit services by auditors, the argument for the joint provision of audit and non‐audit services is less justified than if joint‐supply benefits had been documented.

The Theory of Interchange Fees: A Synthesis of Recent Contributions

We synthesize the results of the recent theoretical literature on the determination of interchange fees by payment card associations. We analyze in particular the conditions under which these interchange fees are excessively high, as compared with social optimum. These conditions involve several parameters: the intensity of competition between banks and between merchants; the elasticities of demand on both sides of the market, as well as the degrees of heterogeneity among merchants and among cardholders. A crucial element is the competitive edge that merchants can gain by accepting cards.