Economics Working Papers

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https://hdl.handle.net/1794/49

This collection contains papers in the University of Oregon Economics Department Working Papers series. Papers in this series are also available on the department's web site at: http://econpapers.repec.org/paper/oreuoecwp/

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Browsing Economics Working Papers by Author "Barron, John M."

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    Consumer and competitor reactions: Evidence from a retail-gasoline field experiment
    (University of Oregon, Dept of Economics, 2003-09) Barron, John M.; Umbeck, John R., 1945-; Waddell, Glen R.
    The standard differentiated-product model with Nash-equilibrium price setting suggests that the density of sellers in a market can affect both a seller’s price elasticity of demand and a competitor’s reaction to a price change. Using field experiment data collected around a series of exogenously imposed price changes, we are able to demonstrate that a gasoline retailer’s price elasticity of demand is directly related to seller density, where density is measured by the number of sellers within a given geographical area. This finding appears to be one potential source for observed persistent price differences. The data also allow us to examine the reaction of rivals to exogenous price changes. Consistent with the theory, we find that competitors’ price reactions are in the same direction, with the magnitude of the competitors’ reactions being inversely related to the market’s density of sellers.
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    Work hard, not smart : stock options as compensation
    (University of Oregon, Dept. of Economics, 2003-06-01) Barron, John M.; Waddell, Glen R.
    This paper examines the optimal compensation package for executives, in particular the optimal mix of stock options and stock grants, for an agent deciding whether to adopt or reject a plan of uncertain value. The compensation structure in such a setting affects not only an executive's efforts to improve the precision of signals regarding the true value of proposed plans but also the choice of a reservation signal that determines the likelihood a proposed plan is adopted. While stock options can bias an executive’s decision criteria away from first-best, we show that the leverage they provide to motivate an executive to undertake more extensive plan evaluation makes options the preferred form of equity compensation if the exercise price is freely chosen. However, there is a role for restricted stock in realigning the interests of the executive with shareholders if the firm is constrained in the choice of the exercise price, which we argue may sometimes be the case. Using extensive data on top-executive compensation, we report evidence on this tradeoff that is consistent with the theoretical predictions. We also find that the extent of option compensation among top executives at a firm is associated with an increase in the likelihood of extreme returns in subsequent periods.