Identifying and characterising price leadership in British supermarkets

Price leadership is a concept that lacks precision. We propose a deliberately narrow, falsifiable, definition then develop it, illustrate its feasibility and test it using the two leading British supermarket chains. We find both firms engaging in leading prices upward over a range of products, with the larger being initially more dominant but the smaller increasing leadership activity to take overall leadership over time. However, more price leadership events are price reductions than price increases, consistently led by the smaller firm. Nevertheless, the increases are of larger monetary amounts than the falls, so average basket price increases over time

Management control in the transfer pricing tax compliant multinational enterprise

This paper studies the impact of transfer pricing tax compliance on management control system (MCS) design and use within one multinational enterprise (MNE) which employed the same transfer prices for tax compliance and internal management purposes. Our analysis shows immediate effects of tax compliance on the design of organising controls with subsequent effects on planning, evaluating and rewarding controls which reveal a more coercive use of the MCS overall. We argue that modifications to the MCS cannot be understood without an appreciation of the MNEs’ fiscal transfer pricing compliance process

Tradability, Productivity, and Understanding International Economic Integration

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially along the extensive margin of goods previously not traded, price dispersion has not decreased and may even have increased. These observations challenge the usual understanding of integration in the literature. We propose a way of reconciling these price and quantity observations in a macroeconomic model where the decision of heterogeneous firms to trade internationally is endogenous. Trade is shaped both by the nature of heterogeneity -- trade costs versus productivity -- and by the nature of trade policies -- cuts in fixed costs versus cuts in per unit costs like tariffs. For example, in contrast to tariff cuts, trade policies that work mainly by lowering various fixed costs of trade may have large effects on entry decisions at the extensive margin without having direct effects on price-setting decisions. Whether this entry raises or lowers price dispersion depends on the type of heterogeneity that distinguishes the new entrants from incumbent traders.tariff cuts, trade policies,

Market driven network neutrality and the fallacies of Internet traffic quality regulation

In the U.S. paying for priority arrangements between Internet access service providers and Internet application providers to favor some traffic over other traf-fic is considered unreasonable discrimination. In Europe the focus is on mini-mum traffic quality requirements. It can be shown that neither market power nor universal service arguments can justify traffic quality regulation. In particular, heterogeneous demand for traffic quality for delay sensitive versus delay insen-sitive applications requires traffic quality differentiation, priority pricing and evolutionary development of minimal traffic qualities. --

Macroeconomic Consequences of Outsourcing. An Analysis of Growth, Welfare and Product Variety

Outsourcing of non-core activities by firms is nowadays a common business strategy. This paper provides a theoretical framework for analyzing a firms’ incentive to follow such a strategy and its consequences for macroeconomic variables like growth and product variety. We divide production activities into core and non-core activities. Non-core activities can be performed within the firm or can be mediated by the market. We will derive conditions under which outsourcing will occur, and under which outsourcing will be socially desirable. These conditions do not necessarily coincide due to two externalities. Outsourcing may hence be a profitable strategy for firms, while it is socially suboptimal. Crucial parameters in the model are the relative scale of core versus non-core activities, traditional management costs, transaction costs and taste for variety of consumers. This paper suggests that declining transaction costs are a crucial factor in explaining the observed increase in outsourcing.outsourcing;endogenous growth;product variety;transaction costs;welfare