Members and guests of the NBER's Program on Industrial Organization met at the Bureau's California office on January 25 and 26. The meeting was organized by Frank Wolak, NBER and Stanford University, and Catherine Wolfram, NBER and University of California, Berkeley. The following papers were discussed:
Francine Lafontaine, NBER and University of Michigan, and Scott E. Masten, University of Michigan, "Contracting in the Absence of Specific Investments and Moral Hazard: Understanding Carrier-Driver Relations in U.S. Trucking" Discussant: Nancy L. Rose, NBER and MIT
Justine S. Hastings, Dartmouth College, "Vertical Relationships and Competition in Retail Gasoline Markets"
Discussant: Andrea Shepard, NBER and Stanford University
Jun Ishii, University of California, Irvine, and Jingming Yan, Cornerstone Research, "The 'Make or Buy' Decision in U.S. Electricity Generation Investments"
Discussant: James Bushnell, University of California Energy Institute
Austan Goolsbee and Amil Petrin, NBER and University of Chicago, "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV" (NBER Working Paper No. 8317)
Discussant: C. Lanier Benkard, NBER and Stanford University
Charles King III, Alvin J. Silk, and Niels Ketelhohn, Harvard University, "Knowledge Spillovers and Growth in the Disagglomeration of the U.S. Advertising Agency Industry"
Discussant: Scott Stern, NBER and Northwestern University
Megan Busse, Yale University, and Matthew Shum, Johns Hopkins University, "Empirical Modeling of Endogenous Quality Choice: The Case of Cable Television"
Discussant: Thomas Hubbard, NBER and University of Chicago
Raphael Thomadsen, Columbia University, "Price Competition in Industries With Geographic Differentiation: Measuring the Effect of Location on Price in the Fast Food Industry"
Discussant: Aviv Nevo, NBER and University of California, Berkeley
Lafontaine and Masten consider various functions of contracting other than the protection of relationship-specific investments and the provision of marginal incentives. They apply the theory to explain variations in the form of compensation of over-the-road truck drivers in the United States. Specifically, they argue that contracts in this industry serve to economize on the costs of price determination for different types of transactions. The actual terms of those contacts vary systematically with the nature of hauls in a way that is consistent with the theory. By contrast, the authors find that vehicle ownership, which defines a driver's status as an owner operator or company driver, depends on characteristics of the driver, but not of the haul and trailer. Hastings asks how much, if any, of the differences in retail gasoline prices between markets is attributable to differences in the composition of vertical contract types at gasoline stations in each market. ARCO's purchase of the independent retail gasol ine chain, Thrifty, provides a unique opportunity to examine the effects of changes in different vertical contact types on local retail prices. This purchase caused sharp changes in the market share of fully vertically integrated stations and independent stations, differentially affecting local markets in the Los Angeles and San Diego metropolitan areas. Using unique and detailed station-level data, Hastings asks how these changes affected local retail gasoline prices. Her results indicate that a decrease in the market share of independent stations has a significant positive effect on local retail price. However, a change in the market share of refiner-owned-and-operated branded stations does not have a significant effect on local market price. These results have important implications for policymakers who are considering the regulation of vertical contracts as a means to increase competition in gasoline markets. Hastings's research design and the detailed data also allow for inference on the underlying natur e of retail gasoline competition. …