Increasing Profit Margins by Substituting Species in Floral Arrangements

Capacity Constraints, Profit Margins and Stock Returns

This paper studies the e¤ects of capacity utilization on accounting pro…t margins and stock returns. Since accounting pro…t margins represent the average pro…t per unit and not the economists’ concept of unit contribution margin, the marginal/variable pro…t per unit, a …rm with idle capacity can increase its pro…t margins by increasing sales (output). However, if the …rm is operating at full ca...

Profit-increasing asymmetric entry

Area Editor: John H. Roberts Despite conventional wisdom that firm profits decrease with competitive entry, the empirical literaturefinds a number of situationswhere the entry of an equivalent-quality competitor into amarket led to higher profits for the incumbents. Our paper uses a standard linear Hotelling (1929)market to study how location choices affect the possibility that profits increase...

Profit-Increasing Consumer Exit

This paper examines the phenomenon of profit-increasing consumer exit, and the related phenomenon of profit-decreasing consumer entry. We demonstrate that firms can be better off in shrinking markets and worse off in growing markets, even in the absence of competitive entry or exit. Specifically, firms may benefit if a segment of consumers who are relatively indifferent about consuming any prod...

Improving Online Retail Margins by Increasing Search Frictions

Opportunity Costs and Non-Scale Free Capabilities: Profit Maximization, Corporate Scope, and Profit Margins

The resource-based view on firm diversification, subsequent to Penrose (1959), has focused primarily on the fungibility of resources across domains. We make a clear analytical distinction between scale-free capabilities and those that are subject to opportunity costs and must be allocated to one use or another, thereby shifting the discourse back to Penrose’s (1959) original argument regarding ...