Ideal Market Research Articles

The (dis-)embedded firm. Complex structure and dynamics in inter-firm relations: adding institutionalisation as a Veblenian dimension to the Coase-Williamson approach

The increasing complexity of the environment of firms seems to have outgrown the traditional Coase-Williamson transaction-cost framework with its market-hierarchy dichotomy. We propose to integrate an institutional dimension to enhance the theory of the firm and the analysis of real-world organisational forms. This institutional dimension is conceptualised as an original institutional (Veblenian) dichotomy that ranges between instrumental cooperative networking and ceremonial encapsulation (lock-in), as power- and status-seeking. Thus, a more comprehensive two-dimensional organisational space is drafted, which can better map the numerous and diverse forms of production and innovation systems, and serve to address questions of their emergence as spatial clusters and corporate networks. In addition to ideal market and hierarchy, it provides the ideal solution of institutionalised network cooperation as a third vanishing point and corner. The resulting organisational triangle is considered a heuristic for inter-firm organisational research. As a check of its usefulness, this device is applied to recent developments in the global corporate economy.

Cyclicity Of Housing Markets Under The Specific Condition Of The Existence Of A Bubble In The Real Estate Market

Abstract In recent years, real estate bubbles have been commonplace in housing markets all over the world. That’s why we examine the relation between housing prices during bubbles in 101 cities located in ten different countries, aiming to explain the housing market cycle during a housing bubble, using economic and housing indicators. We obtained data on eight variables used in market cycle analysis which may be able to explain the existence of speculation and the ideal market cycle. The obtained resultsshow that many of economic and housing indicators begin to decrease while housing prices peak. Only the quantity of transactions peaks during the following year. We also observed that a housing bubble can follow three different scenarios, i.e.: the bubble does not burst, or can burst with a slow decline or sudden and rapid collapse. Finally, it is possible to determine that the same variables can provide clear insight into a bubble in the real estate cycle.

Equality of resources, risk, and the ideal market

Ronald Dworkin's theory of equality of resources makes extensive use of markets. I show that all these markets rely on one specific neoclassical conception of the ideal market in full equilibrium, as analyzed by Debreu. This market must be understood as operating under circumstances of certainty, and this is incompatible with several components of Dworkin's account. In particular, it does not allow one to hold people responsible for their option luck, and it implies a high social safety net rather than insurance schemes for addressing brute luck. I conclude by outlining an interpretation of equality of resources that takes the ideal market seriously.

Growth in international new ventures: facilitating and redundant components beyond start-up

The purpose of the paper is to identify facilitating and redundant components of core competence development during the growth of international new ventures (INVs). Through a longitudinal empirical study comparing three cases based on a large number of interviews, we describe how individual competences essential for the start–up firm (entrepreneurial, market and network) over three phases (small, youth and mature) eventually become redundant or transform into institutionalised routines. An INV built on technology competence needs to combine with market competences, preferably in parallel, for ideal market development. To expand further, the entrepreneurial competence ultimately should be reduced or omitted. To boost expansion, explicate visions and policies should be added to maintain the entrepreneurial spirit and legacy, and to guide employees.

The (claimed) growing irrelevance of employment relations

The frequent claim that employment relations have become irrelevant is not new: it has been cyclically repeated over the last 40 years. What recent times have provided is critical cases where employment relations have been actively marginalised in the pursuit of an ideal neoclassic labour market: new market economies of Central Eastern Europe, recent reforms in crisis countries in Southern Europe and global competition on labour costs. The disastrous effects of these experiments confirm, in fact, the relevance of employment relations.

The Impact of James Buchanan on My Career and the Economics Profession

[Author Affiliation]James D Gwartney, * Gus A. Stavros Center for Economic Education, Florida State University, 250 South Woodward Avenue, Tallahassee, FL 32306-4220, USA; E-mail: jdgwartney@fsu.edu[Acknowledgment]This article was prepared for presentation at a session honoring the late James Buchanan during the 83rd annual meeting of the Southern Economic Association in Tampa, Florida. The author would like to thank Randall Holcombe and Rosemarie Fike for helpful comments and assistance.1. IntroductionIn 1967, while a graduate student at the University of Washington, I took a public finance course from Thomas Borcherding, who had recently studied under James Buchanan and Gordon Tullock as a postdoctoral fellow at the Thomas Jefferson Center at the University of Virginia. The course focused on the writings of Buchanan, Tullock, and other public choice scholars. Later that same year, Professor Buchanan visited the University of Washington and gave a special set of lectures on public choice economics and its implications for the economics profession.The theme of the Buchanan lectures was straightforward: Economic analysis can enhance our knowledge of how the political process works as well as the operation of markets. Without knowledge of how alternative forms of economic organization work, sensible choice among policy options is impossible. Moreover, if we want to improve the performance of the political process, we need to reflect on how constitutional structures and rules influence outcomes.I was a third-year graduate student at the time, but Buchanan's application of economic theory to the political as well as the market process exerted a lasting imprint on my thought process. It seemed so sensible to me that I fully expected this approach to sweep the economics profession in the years immediately ahead. After completing my doctoral degree and accepting a position at Florida State University, I was assigned teaching responsibilities in large lecture principles classes in the early 1970s. I integrated public choice analysis and the comparative approach into my classes, and the student response was highly positive. But the topic was totally absent from available principles texts. I set out to change this situation. The result was Economics: Private and Public Choice , a principles text initially published in 1976.From the very beginning, Economics: Private and Public Choice used the tools of economics to analyze markets and the political process in a symmetric manner. The following passage from the preface of the first edition (Gwartney 1976, p. xviii) highlights this point and contrasts the approach with that of other texts:Most textbooks currently do three things. They tell students how an ideal market economy would work, why real world markets differ from the hypothetical ideal, and how ideal public policy could correct the failures of the market. In addition to these three basic areas of study, this book analyzes what real world public policy is likely to do. This important step drives home both the power and relevance of modern economics.Later, the assistance of coauthors was enlisted (Gwartney et al. 2012), and the text is now in the 14th edition. Many changes have occurred, but the comparative approach embodied in the work of Jim Buchanan is still a central feature of the text.2. Buchanan and the Conceptualization of GovernmentBuchanan conceptualizes the role of government as falling into two major categories: the protective and productive functions. The protective function involves the maintenance of a set of rules designed to promote the peaceful interaction of individuals with one another. Government is assigned the responsibility of protecting individuals from the actions of those who would use force, fraud, and theft to harm or seize the person or property of others. The protective function also entails the legal enforcement of contracts, a court system for the peaceful settlement of disputes, and provision of national defense. …

‘… [NO] SPOT IN THE WHOLE WORLD OFFERS THE ADVANTAGES TO THE CAPITALIST WHICH THESE COLONIES DO…’: SETTING UP A DRAPER’S SHOP IN VAN DIEMEN’S LAND DURING THE 1830s

In 1835, John Muston wrote to his brother-in-law, the Birmingham draper Joseph James, from Hobart, Van Diemen’s Land. Muston sought to convince James of the profits he might make by diversifying into trade with the other side of the world. Using this family trading network as a case study, this article will discuss the colonial drapery and clothing trades during the 1830s. Common difficulties for shopkeepers of the period will be highlighted, for instance, the necessity of quickly adapting to the reality of the commercial environment they operated within, rather than the envisaged ideal market. Pragmatic solutions for all consumer preferences needed to be ascertained and swiftly acted upon leading to variety of ways to retail to people across the social spectrum. The enterprise and opportunities for international trade created by England’s provincial retailers, particularly as part of family networks, is therefore uncovered.

Country-of-Origin and Mutual Recognition Principles – Vehicles for Regulating Market in a Multi-Level-Governance System

The author argues that in a democratic legal system internal market may not be regulated without sufficient attention being paid to national autonomy and diversity. In this light the principle of subsidiarity requires a withdrawal from the ideal internal market goal and orientation towards more workable solutions, which take into account that at the present state of integration European citizens primarily direct their legitimacy at their nation states. As the pure host-state approach, based on the principle of non-discrimination, may obstruct free movement of production factors, the author emphasises the importance of the principles of mutual recognition and state of origin. These guarantee the application of only one set of national rules for a specific product or person (hence guaranteeing free movement), while preserving national competences in the market field. As such they should present an ideal model of market regulation. However, these principles enhance the prisoners’ dilemma and horizontal competition between national legal orders. Accordingly, the author concludes that an adequate combination of decentralism and centralism is needed in market law, taking into consideration that the EU is a system of multi-level governance.

Study of relationship between ownership structure liquidity of stocks of companies accepted in Tehran Stock Exchange

According to the efficient market theory, one of the features of an efficient and ideal market is lack of trade costs and high liquidity. Regarding to the importance of liquidity, recognition of the factors affecting it can help us to improve. The goal of this research is to study the relationship between ownership structure and liquidity of stocks of companies accepted in Tehran stock exchange. Thus, effects of ownership structure were studied in two aspects of ownership type and concentration of ownership on liquidity. A sample of 74 companies, members of Tehran stock exchange, was selected for a 5 year period (2005-2009). Linear regression model with confidence level of 95% and software Excel and SPSS were used to test the assumptions and study of relationship between ownership structure (independent variable) and liquidity (dependent variable). The results show that there a reverse (negative) relationship between institutional ownership level, managerial ownership level, and ownership concentration level with liquidity. Also there is a direct (positive) relationship between corporative ownership level and liquidity.

Market Paradigm for Understanding Economic Law as an Autonomous Discipline

Inspired by knowledge of law and economics and competition law, this paper suggests an integrated framework for understanding economic law as an autonomous discipline. In developing this framework, this paper first assumes economic law to be an independent body of law comprising various branches of rules to redress market failures. Competition law is placed at its center to describe a general theory concerning the advantages and limits of an ideal market. Each branch of rules then either substitutes or complements competition law to correct market imperfections. More specifically, this paper suggests that those branches of rules be considered as solutions to improve the externalities, small number, information asymmetry, and the transaction cost problems. Based on the preliminary analysis results, this paper elaborates on the questions concerning the substitutability and complementarity between different branches of economic law and compares their effectiveness in addressing the same market failures. The implications for international economic law are considered next. The market-failure proposition provides systematic criteria for assessing whether domestic failures (ex. financial crisis) might be more effectively addressed by international mechanisms (ex. IMF). The term “international” also denotes that failures are observed in a much greater geographical area and among participants holding more divergent views regarding their gravity. This framework contributes to the debates on “regulatory competition” by incorporating into it more specific determinants to sort out the optimal institutional designs. This paper concludes by noting and responding to criticisms on this framework. For instance, the market-failure classification could be challenged as over-simplified. Economic laws are frequently enacted to address simultaneously several failures. In addition, the framework might fail to explain those laws designed to accomplish redistributive goals. This paper argues that the first critism is based upon a static view on the legislative purposes of economic law while in practice they are dynamic and sequential. Alternatively, the benefits from redistribution might be treated as a “public good” analyzable under the positive externalities hypothesis in the framework.

Understanding Economic Law Using the Methodologies of Law and Economics: A Suggested Framework and Related Implications

Inspired by knowledge of law and economics and competition law, this paper suggests an integrated framework for understanding economic law as an autonomous subject. In developing this framework, this paper first assumes economic law to be an independent body of law comprising various branches of rules to redress market failures. Competition law is placed at its center to describe a general theory concerning the advantages and limits of an ideal market. Each branch of rules then either substitutes or complements competition law to correct market imperfections. More systematically, this paper suggests that those branches of rules be considered as solutions to improve the externalities, small number, information asymmetry, and the transaction cost problems. Based on the preliminary analysis results, this paper elaborates on the questions concerning the substitutability and complementarity between different branches of economic law. It compares the effectiveness between competition law and other more market-intrusive economic laws in addressing the same market failures. This paper concludes by noting the implications from this framework and responding to some likely criticisms.

The public and its possibilities: triumphs and tragedies in the American city

The public and its possibilities: triumphs and tragedies in the American city

From the Ideal Market to the Ideal Clinic: Constructing a Normative Standard of Fairness for Human Subjects Research

Preventing exploitation in human subjects research requires a benchmark of fairness against which to judge the distribution of the benefits and burdens of a trial. This paper proposes the ideal market and its fair market price as a criterion of fairness. The ideal market approach is not new to discussions about exploitation, so this paper reviews Wertheimer's inchoate presentation of the ideal market as a principle of fairness, attempt of Emanuel and colleagues to apply the ideal market to human subjects research, and Ballantyne's criticisms of both the ideal market and the resulting benchmark of fairness. It argues that the criticism of this particular benchmark is on point, but the rejection of the ideal market is mistaken. After presenting a complete account of the ideal market, this paper proposes a new method for applying the ideal market to human subjects research and illustrates the proposal by considering a sample case.

Asset Demands and Consumption with Longevity Risk

In this paper we study asset demands and consumption of an individual at the end of her life cycle. We present an ideal market where complete insurance against longevity risk is available: the market consists of original assets, e.g., stocks and bonds, and annuities and life-insurance contracts linked to these assets. We also study asset demand and consumption for the other two cases: the no insurance case where there is no insurance available against longevity risk, and the partial insurance case where only bond-linked annuities exist for longevity insurance. We express asset demands in each case by using state price densities, and the expressions admit intuitive explanations. We derive consumption in analytic form and conduct comparative statics. Afterwards, we extend the model to multiple periods and show results of numerical simulation. We find the proportion of wealth invested in risky assets to total savings in the complete market case is similar to the proportion in the no insurance case. It is, however, in general larger in the complete market case than in the partial insurance case. Under reasonable conditions the optimal consumption to wealth ratio is the highest in the complete insurance market, followed by the ratio in the partial insurance case, and the smallest in the no insurance case. Furthermore, simulation results show that asset demands can change quite dramatically as the prices of annuity products change. Thus, innovations in the insurance industry which lower costs of providing personalized insurance may result in a significant shift in asset demands, particularly in the demand for risky assets. We also show that the time-old proposition that an increased mortality rate is equivalent to an increased subjective discount rate does not necessarily follow if we relax the assumption of the time-separable utility function. For a fixed relative risk aversion coefficient, comparative statics of optimal consumption yield different results depending on whether the EIS is greater or less than 1.

Percobaan Ekonomi untuk Mengkaji Pengaruh Informasi serta Jumlah Penjual dan Pembeli dalam Transaksi Pasar

Perfect competition (PPS) is the most ideal market structure because this market system is considered will ensure the realization of activities producing goods and services with very high efficiency compared to other market structures such as monopoly. Due to its benefits for sellers and buyers, economists often wish for the creation of perfect competition. In the pattern of transactions in everyday life, there are many market transactions commonly encountered, such as decentralized systems (DT), and Double Auction (DA). This paper presents the use of experimental methods to study the characteristics of both systems the transaction is in a "perfect competition” (5 sellers and 5 buyers' and market monopoly (with 1 seller and 5 buyers). Responses observed are Contract Price (CP), market efficiency, CP diversity coefficient on the price balance, buyer surplus and seller surplus. From the experimental results can be seen that the average Contract Price (CP) during 5 experimental periods that the value of CP at Perfect Competition Market is smaller than the monopoly market. From efficiency levels between transactions type it can be seen that the Double Auction type of transaction is more efficient than with the Decentralization type of transaction.

Fiscal Home Rule

Local governments often enjoy rule, in the sense that they are able to initiate legislation concerning municipal affairs without obtaining the prior consent of the state legislature. At the same time, these localities often are able to exercise limited discretion over revenue raising. In theory, at least, the inability to raise funds constrains the exercise of substantive home rule authority. Moreover, the specific restrictions that states often impose on municipalities instantiates a particular, non-redistributive view of local government and, by restricting the set of fiscal tools that are available to the locality, arguably causes deviations from an ideal market for residence. This Article discusses the constraints that localities often face with respect to imposing taxes on residents and issuing debt to pay for capital projects. While there are plausible explanations for these limitations, restrictions on fiscal home rule must ultimately be weighed against the distortions that they cause when localities seek to circumvent them. Reliance on market mechanisms to select a locality's taxing and debt structure may produce superior results.

Valuation at the Time of Crisis: Methodological Issues

These slides presented at the International Conference of the Ukranian Property Expertize and Management Institute (Odessa, Sept. 7-9, 2009) look into current valuation predicaments (specifically, with respect to the Professional Valuation) and discern the lack of vision among its practitioners. This seriously compromises the role of valuation as the public interest profession. The contention is made that the role of valuers in the pricing processes is non-neutral, that to some extent it is true that Valuation profession in aggregate not merely reflects but creates prices and seriously influences pricing processes on many markets. That is why it is of primary importance to understand that valuers should fulfill their aspirations to work in public interest and towards the sustainable development of markets, and to realize that their current practices are highly procyclical, or, worse, tautological. Yet their existing methodology based on methodological individualism and the transference of notions from the 'ideal market setting' seriously handicaps them in these efforts and perpetuates current troubles. The plea is made to create the International Multidisciplinary Committee on Economic Measurements (including representation from Professional valuation, Investment-Financial Valuation, Accounting Measurements etc) to inquire into the root causes of defects in existing valuation methodology which is grounded in the unsustainable neoclassic-modernist- positivist ideological synthesis. Of the inferences made are the following: -The pricing authority and power of Professional Valuation is on the wane, as suggested by RICS/IPD Valuation 'accuracy' indices. -The methodological grounds of Economic Measurements are neglected (and there has been very little development here since 1970th, despite the veritable flowering of complex valuation techniques) - Various types of Economic Measurements are too disjointed to offer any coherent perspective into the future or see the benefits of interdisciplinary dialogue. - The not-so-negligible role of Valuers (of different stripes) as the party implicated in the fomentation of the current economic crisis is explored and put into context. -The Professional Valuation fails to perceive real foundations of its methodology and has much to gain by looking back into its original works written during the time of its institutionalization in US of 1930th and even to the thought of antiquity. -There is going to be more acute understanding of the effects of liquidity pricing and more distrust of fundamental pricing as currently practiced. -Public value considerations need to become the integral part of all commercial valuations, yet existing methods to elicit it are seriously deficient in point of underlying methodology. - Existing Economic Measurements Standards (such as SFAS 157, IVSs, PEVG) are in need of serious revision and their redevelopment needs to incorporate macro-economic perspectives of the impact of the respective professions on the markets.

Product-Line Competition: Customization vs. Proliferation

We study a market with customers who have heterogeneous preferences for product attributes. We consider two types of firms that compete on price and product variety: A traditional firm, which chooses a limited set of product configurations, and a customizing firm, which can produce any configuration to order. The traditional firm carries product inventories and experiences a lead-time delay. The customizing firm does not carry inventory, and its customers incur waiting costs until they receive their orders. We assume that the customizing firm has limited capacity in the short run (e.g., when it does not outsource production to high-volume manufacturers). We derive the equilibrium for a duopoly competition between the customizing firm and the traditional firm, study its characteristics, and compare it to a monopoly. We characterize conditions that favor customization under competition. We find that the customizing firm's profit is not monotone in the market size and its ease of customization. Similarly, a decline in the traditional firm's holding cost may increase or decrease its profit. We show that the unit cost differential between the firms crucially affects the customizing firm's ideal market size, its returns from expanding capacity, its product variety, and the way operational improvements affect its performance.

Disentangling Pioneering Cost Advantages and Disadvantages

Existing literature discusses a number of possible pioneering cost advantages and disadvantages. In this paper, we empirically test three different sources of long-term pioneering cost advantage—experience curve effects, preemption of input factors, and preemption of ideal market space—and three different sources of pioneering cost disadvantage—imitation, vintage effects, and demand orientation. We disentangle these sources by breaking total cost of a business unit into three different components—purchasing, production, and selling, general, and administrative (SG&A) costs—and identifying conditions that intensify or reduce the effect of the proposed source. Using two samples of business units, one for consumer goods and one for industrial goods, we find support for five of the six sources of pioneering cost advantage and disadvantage in both samples, while the advantage due to preemption of ideal market space is limited to the consumer goods sample. The unconditional analysis shows a pioneering purchasing cost advantage but even larger pioneering production and SG&A cost disadvantages. The complexity of our obtained findings suggests that managers need to think carefully about their particular conditions before making assumptions about the cost and, therefore, profit implications of a pioneering strategy.

White Certificates for energy efficiency improvement with energy taxes: A theoretical economic model

In this paper we analyze interactions of two energy policy instruments, namely a White Certificates (WhC) scheme as an innovative policy instrument for energy efficiency improvement and energy taxation. These policy instruments differ in terms of objectives and final impacts on the price of electricity. We examine the effect of these policy instruments in the electricity sector, focusing on electricity producers and suppliers in a competitive market. Using microeconomic theory, we identify synergies between market players and demonstrate the total effect on the electricity price when suppliers internalize the behaviour of producers in their decisions. This model refers to an ideal market situation of full liberalization. The cases we examine consist of electricity producers with and without a carbon tax, electricity suppliers with and without an electricity tax, and with WhC obligations. Furthermore, we present a parallel implementation of WhC for electricity suppliers with carbon tax on electricity producers and an electricity tax with WhC obligations to electricity suppliers. We demonstrate differences in optimization behaviour of producers and suppliers. Based on a couple of cases of WhC with carbon and electricity taxes, various positive and negative effects of both schemes in terms of target achievement and efficiency are present, which can lead to an added value of such schemes in the policy mix, although uncertainties of outcomes are quite high. A basic finding is that in a merit order several parameters can increase final electricity price after the implementation of different policies: demand for electricity and electricity supply cost at a large scale and then follow the level of level of obligation for energy saving, level of penalty, and price of WhC (representing the marginal costs of energy saving projects). The impact magnitude of parameters depends on the values chosen and on the initial position of suppliers (i.e. if their actual behaviour deviates from full compliance with targets).