Bachelor of Arts, Doctor of Philosophy University Colorado, 1965, 1969.
Assistant Professor, Association Professor, Professor of Economics, University British Columbia, 1969-1973, 1974-1978, 1979-1981. Professor of Economics, University Toronto, Ontario, Canada, since 1982. Editorial Board, Canadian Journal of Economics.
Choice of plant location and/or the development of differentiated products invariably involves sunk costs. Much of my research, primarily in collaboration with Richard Lispsy, has focussed on the implications of sunk costs in markets where products are differentiated, either spatially or by product characteristics. The implications for static equilibrium in such markets include non-uniqueness of equilibrium and the existence of pure profit in free-entry equilibrium.
The existence of sunk costs and the potential for pure profit imply that incumbent firms have the ability and the incentive to choose strategically among the set of possible freeentry equilibria. There are three major implications of strategic choice of product line: one must inevitably expect an oligopolistic market structure: much of the potential profit is dissipated through early, strategic introduction of new products to control entry. There is no presumption that this behaviour necessarily is anti-social. Another focus of my research, again in collaboration with Lipsey, has been the attempt to understand the gross features of the location of retail activity in space.
The facts that transportation is costly and that shoppers are indivisible create the positive demand externalities between firms selling different products and between firms selling similar products when shoppers compare goods. These demand externalities explain the gross features of agglomeration of retail activity in space. The most recent focus of my research, in collaboration with William White, has been on the role which assets play in principal-agent problems.
Assets allow individuals to enter into efficient, incentive-compatible contracts. It follows that efficiency and distribution are not separable considerations: the set of attainable allocations is determined by the distribution of assets. Further, principals may find it in their interest to augment agents’ assets by paying above market, contingent wages.