Showing papers by "Ingo Vogelsang published in 1979"

A regulatory adjustment process for optimal pricing by multiproduct monopoly firms

Abstract: This paper describes an incentive mechanism that is shown to enforce the use of Ramsey prices by multiproduct monopolies. The constraint given is simple. It limits information requirements on the regulatory agency to bookkeeping data of the firm. Its implementation could be easily controlled by outside courts or auditors. The process, therefore, makes use of invisible hand properties shifting the workload of welfare optimization from the regulatory agency to the regulated firm.

The design of regulatory rules

Abstract: for helpful suggestions during earlier production stages of this paper.

Coal markets and hierarchies

Abstract: In "Markets and Hierarchies" (1975) Oliver Williamson has developed a heuristic framework (Organization Failures Framework = OFF) to attack the issue of institutional borderlines between markets and firms. Below we discuss this concept and apply it to local coal markets. Differences in larger domestic and international coal markets then cast some doubts on the practical usefulness of the approach. 1. Organizational Failure In the absence of a complete set of futures markets, economic theorists have used an array of arguments to explain the prevalence of vertical integration (and simultaneously of long-term contracts) in a competitive situation. These arguments relate to technological interdependencies, externalities, incomplete information and uncertainty. Technological interdependencies tend to create a natural bilateral monopoly situation (Von Weizscker, 1978), at least ex post. Externalities on intermediate goods markets can be internalized by more or less sophisticated methods of vertical control (Warren-Boulton, 1978). Finally, incomplete information and uncertainty could come in for at least three different reasons (EPRI, 1978). First, vertical integration may allow agents to convey information which otherwise cannot costlessly be transferred from one side of the market to the other (Arrow, 1975). Secondly, should price rigidity prevent market clearing, vertical integration could come in as a means of assuring input supplies (Green, 1974, Carlton, 1979). This relates to Weitzman's (1974) prices vs. quantities problem: if profits are more sensitive to input quantities than to input prices, it pays to secure such quantities on a long-term basis. This becomes relevant for production techniques of the putty-clay type and then especially for inputs with a low input-output coefficient. Thirdly, securing intermediate input may be a hedging strategy for buyers who face a steady demand of their own output. In this sense Oi and Hurter (1965) have interpreted vertical integration as an insurance. A combination of these arguments for vertical integration is used in the institutionally oriented "Theory of the Firm" literature dating back to Coase (1937). In its latest version represented by Williamson (1975) this