| This dissertation consists of two studies that examine incentive structures. The first study is theoretical, the second empirical.;The first study shows that the effect of price-cap (PC) regulation and modified price-cap (MPC) regulation on the allocative efficiency and diversification of core and non-core goods depends crucially on (i) whether core and non-core goods are complements, substitutes, or independent, and (ii) whether the non-core market is perfectly or imperfectly competitive. Under PC regulation, efficient production of the core good is impossible unless the non-core market is perfectly competitive.;Further, we show that the regulated firm may or may not supply less output in the non-core market under MPC than under PC regulation, depending upon, in part, whether the scheme of common cost allocation is based on either a monotonic method or a relative revenue method. Also, a perfectly competitive non-core market implies core-market overproduction distortion under MPC. We discuss implications for the entry of the "Baby Bells" into long-distance and cellular markets.;Using longitudinal data for economics faculty, the second study examines whether five "similar" universities share a common pay structure. For each pair of universities, the hypothesis of a common pay structure can be rejected at the 0.00005 level of significance. Despite having common goals--publishing economic research, maintaining a Ph.D. program, etc.--the reward structures differ among the five universities. We conclude that the weights assigned to these goals differ by university.;The second study also investigates the effects of sabbatical leaves and leaves without pay. Whereas the first sabbatical either has no effect or is associated with lower pay, the marginal effect of the second sabbatical is positive for four of the five universities. Leaves without pay, in most cases, are associated with lower faculty pay.;Across universities we find positive but diminishing returns to experience, rewards for quantity and especially quality of publications, compensation for serving as department chair, and pay that rises with the number of doctoral dissertations supervised. |
