We examine how incumbents respond to the threat of entry by competitors (as distinct from how they respond to actual entry). We look specifically at passenger airlines, using the evolution of Southwest Airlines' route network to identify particular routes where the probability of future entry...

The neoclassical investment literature assumes that capital is homogenous, lives forever and has a constant depreciation rate. More recent theories of investment have shown that when there are distinct capital vintages with embodied technologies, depreciation and capital retirement become...

This paper estimates the micro-level costs of adjusting capital using detailed data onquot; investment decisions in the US airline industry. The data include the capital stock retirement, market values, operating costs, and utilization rates of 16 different types of capitalquot; goods for each...

Using data on the prices of capital goods, this paper shows that much of the benefit ofquot; investment tax incentives does not go to investing firms but rather to capital suppliers throughquot; higher prices. The reduction in the cost of capital from a 10 percent investment tax creditquot;...

By changing the relative gain to incorporation, corporate taxation can play an important role in a firm's choice of organizational form. General equilibrium models have shown that substantial shifting of organizational form in response to tax rates implies a large deadweight loss of taxation....

This paper shows that tax policy toward investment, by changing the relative prices of capital varieties, can have a direct effect on the quality of capital goods that firms purchase. The empirical results indicate that this impact is economically important and readily apparent in disaggregated...

In this paper we examine the importance of local spillovers such as network externalities and learning from others in the diffusion of home computers using data on 110,000 U.S. households in 1997. Controlling for many individual characteristics, we find that people are more likely to buy their...

An influential literature on the effects of marginal tax rates on the behavior of the rich has claimed that the elasticity of taxable income with respect to the net of tax share is very high possibly exceeding one. These high estimated elasticities imply that cutting taxes on the rich does not...

This paper reexamines the responsiveness of taxable income to changes in in marginal tax rates using detailed compensation data on several thousand corporate executives from 1991 to 1995. The data confirm that the higher marginal rates of 1993 led to a significant decline in taxable income. This...

With fixed costs of developing technology, taxes can generate large efficiency costs by slowing the rate of diffusion and these costs are not accounted for in conventional analyses. This paper illustrates this by analyzing the impact that taxes would have had on broadband Internet access at an...