the effects of ownership and benchmark competition an empirical analysis of u s water systems abstract should governments or private firms own water systems can yardstick or benchmark competition effectively discipline utilities little empirical research sheds light on these issues we use a panel dataset that includes every community water system in the united states from 1997 to 2003 to test the effects of ownership and benchmark competition on regulatory compliance we find that ownership does not generally affect compliance with the safe drinking water act sdwa greater benchmark competition however is associated with fewer sdwa violations the results suggest that ownership per se may not matter much but that competition even in its weaker form of benchmarking by consumers or regulators can improve performance

the effects of human resource management practices on productivity a study of steel finishing lines the authors investigate the productivity effects of innovative employment practices using data from a sample of thirty six homogeneous steel production lines owned by seventeen companies the productivity regressions demonstrate that lines using a set of innovative work practices which include incentive pay teams flexible job assignments employment security and training achieve substantially higher levels of productivity than do lines with the more traditional approach which includes narrow job definitions strict work rules and hourly pay with close supervision their results are consistent with recent theoretical models which stress the importance of complementarities among work practices

e ztax tax salience and tax rates this paper examines whether the salience of a tax system affects equilibrium tax rates i analyze how tolls change after toll facilities adopt electronic toll collection etc drivers are substantially less aware of tolls paid electronically i estimate that in steady state tolls are 20 to 40 percent higher than they would have been without etc consistent with a salience based explanation for this toll increase i find that under etc driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar alternative explanations appear unlikely to be able to explain the findings

when ethics are compromised by ideology the global competitiveness report the global competitiveness report raises ethical issues on multiple levels the traditional high ranking accorded the us is largely attributable to fallacies poor science and ideology the ideological bias finds expression in two ways the inclusion of indices that do not provide competitive advantage but that fit the anglo us ideology and the exclusion of indices that are known to offer competitive advantage but that do not fit the anglo us ideology this flaw is compounded by methodological problems that raise further doubt as to the reliability and validity of the survey results the resultant false high ranking of the us a strong proponent of anglo us capitalism pseudo legitimizes the propensity of us dominated institutions and entities to persuade coerce and in the worst case force other countries and their constituents to adopt anglo us practices and behaviours this is ethically reprehensible because research shows that these practices and behaviours when compared with other approaches are sub optimal in the results they produce for individuals corporations and nations the report also unjustly and unnecessarily stigmatizes entire groups of countries with little conceivable benefit to anyone given the report s gravitas through the profound global influence it exerts on the decisions of top government and business leaders these are serious ethical and economic issues

the impact of the threat of bankruptcy on the structure of compensation this article builds and tests a model of the impact of a firm s bank ruptcy probability on its propensity to offer deferred compensation schemes using 1983 current population survey data we find that ceteris paribus lower failure rates raise the incidence of pensions for nonunion workers outside manufacturing further we find some evidence that among those workers with a pension a higher industry failure rate steepens tenure earnings profiles jointly controlling for union nonunion and pension no pension selectivity such a result suggests that workers discount implicit promises of future earnings increases by the likelihood that the firm will not survive

is water policy limiting residential growth evidence from california rapid population growth and increasing water costs have led western states to condition development on long term water availability using original survey data this paper examines the effects of water screening policies on california s housing supply from 1994 to 2003 panel regressions indicate that these policies significantly slowed housing growth however impact fees based on the costs of residential water connections do not have this effect and may constitute a preferred policy to enhance the social efficiency of screening policies regulators should encourage the adoption of conservation oriented water rates which are associated with significant savings in residential water use

the economics of conjunctive groundwater management with stochastic surface supplies abstract groundwater management with stochastic surface flows and artificial recharge is considered theoretical analysis characterizes the decision rules and establishes conditions for convergence of socially optimal and common property withdrawals and pumping lifts to limiting probability distributions an empirical application to kern county california finds that optimal withdrawals are generally increasing in hydraulic head and decreasing in surface flows however nonmonotone behavior is observed in some instances artificial recharge is not observed in the limiting distribution due to an interaction of several factors optimal management implies relatively small gains over unregulated groundwater use when preferences are risk neutral

an empirical survey of residential water demand modelling abstract the increased reliance on demand side management policies as an urban water consumption management tool has stimulated considerable debate among economists water utility managers regulators consumer interest groups and policymakers in turn this has fostered an increasing volume of literature aimed at providing best practice estimates of price and income elasticities quantifying the impact of non price water restrictions and gauging the impact of non discretionary environmental factors affecting residential water demand this paper provides a synoptic survey of empirical residential water demand analyses conducted in the last 25 years both model specification and estimation and the outcomes of the analyses are discussed

pension benefits and male female wage differentials female members of defined benefit pension plans will receive greater pension benefits than males with identical work and earnings histories since females have greater longevity yet females have higher turnover rates and lower earnings both of which serve to reduce pension benefits relative to those received by males we illustrate the net effect on pension benefits in defined benefit plans of gender differences in longevity turnover and wages we conclude that females tend to receive lower pension benefits and therefore that pension benefits are more likely to exacerbate than to reduce the male female wage gap

are male female earnings differentials related to life expectancy caused pension cost differences this paper argues that employers using defined benefit pension plans are forced by competitive conditions to lower females earnings to account for more costly pension liabilities resulting from longer life expectancy a newly constructed data set containing employee salary histories and pension plan descriptions from five firms is used to calculate how much more it costs to employ a female vs a male worker identical except for life expectancy it is demonstrated that each dollar of increased pension liabilities results in a reduction in females salaries by fifty five cents implications of these findings for the 1983 supreme court ruling involving sex linked pension benefits are discussed

specification of block rate price variables in demand models using a new model formulation and data from a sample of colorado utilities we investigated the price specification controversy marginal price versus average revenue when estimating residential water demand the improved statistical fit using average

pension reform personal pensions and gender differences in pension coverage abstract the personal pension scheme introduced in chile in 1981 has acquired a paradigmatic role for pension reform in less developed and developed countries in contrast to the significant gender gap in private pension coverage observed in developed countries in chile women s participation in the personal pension scheme is marginally higher than men s using cross section data the paper analyzes the determinants of personal pension plan contribution in chile and their effects it concludes that women s strong pension propensities and pension plan design explain in large part the absence of a gender gap in private pension coverage in chile

when will the gender gap in retirement income narrow among recent retirees women receive substantially less retirement income from social security and private pensions than men increases in women s labor market attachment and earnings relative to men over the past 50 years provide some optimism for an improvement in female retirement income particularly for married women this study shows that women s income from social security and private pensions has improved only slightly relative to men over the past 25 years using data on people approaching retirement age over the next 20 years prospects for future improvement are investigated one of the main conclusions is that pension income among women particularly married women will rise sharply relative to men s over the next few decades but a substantial gap could remain even if women close the gap in experience and salaries

the gender gap in pensions and wages this study provides rationale for the underrepresentation of women in the pension sector and examines the consequences for the gender wage gap for a given set of observed characteristics a woman is 11 19 percent less likely than a man to have a pension of the unexplained portion of the gender wage gap 10 38 percent is due to unexplained differences in pension coverage finally consistent with a screening effect of pensions women are paid more equally in the pension sector copyright 1990 by mit press

gender differences in pensions the causes of gender differences in pensions are examined for retirees and employees using the 1982 newly entitled beneficiary survey and the 1979 and 1988 may current population surveys for both retirees and the employed population much of the gender gap in coverage is accounted for by gender differences in labor market characteristics while children and marriage have a negative effect on female coverage among retirees even after controlling for labor market characteristics the negative effect is not observed among more recent groups of female employees finally recent convergence of male and female labor market characteristics contributed to a decline in the coverage gap during the 1980s

fringe benefits and labor mobility interindustry factor mobility is a crucial determinant of the income distribution effects of exogenous changes in relative commodity prices this examination of interindustry variation in wages and profits using data from manufacturing industries from

the value of scarce water measuring the inefficiency of municipal regulations abstract rather than allowing urban water prices to reflect scarcity rents during periods of drought induced excess demand policy makers have mandated command and control approaches primarily rationing the use of water outdoors while such policies are ubiquitous and likely inefficient economists have not had access to sufficient data to estimate their economic impact using unique panel data on residential end uses of water in 11 north american cities we examine the welfare implications of urban water rationing in response to drought using estimates of expected marginal prices that vary both across and within markets we estimate price elasticities specific to indoor and outdoor water use our results suggest that current policies do target water uses that households themselves are most willing to forgo nevertheless we find that rationing outdoor water in cities has costly welfare implications primarily due to household heterogeneity in willingness to pay for scarce water we find that replacing rationing policies with a market clearing drought price would result in welfare gains of more than 29 of what households in the sample spend each year on water

evaluating the welfare effects of reforming municipal water prices abstract despite the strong criticisms by economists of water utility pricing practices and the presence of well articulated theoretical models of efficient pricing alternatives few empirical studies have documented the magnitude of the efficiency gains from altering water prices the structures of water supply costs and water demands are estimated using data from vancouver canada a simulation program uses these estimated relationships to compute the impact upon a representative water utility s output and deficit and upon aggregate consumer surplus of a move from its current practice to efficient prices simulation results show that a move to seasonally differentiated pricing with an annual charge calculated to recoup the resulting deficit raises aggregate surplus by approximately 4 this result contrasts with recent water pricing studies that found welfare improvements of approximately 1

efficiency and equity in natural resources pricing a proposal for urban water distribution service this paper focuses on the design of optimal prices for urban water distribution service in this context pricing should be aimed at achieving efficiency equity financial aspects and or public acceptability and transparency the proposed tariffs are based on the theoretical frameworks suggested by ramsey 1927 and feldstein 1972 as a prior step estimations of urban water demands and water costs are carried out for the spanish municipality of seville finally an empirical comparison in welfare terms is conducted between the proposed tariffs and those applicable in the year 2000

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

pensions and wage premia i introduction despite the widespread acceptance of the theory of compensating differences empirical efforts to estimate the magnitude of these differences have met with only mixed success 1 with the exception of fatal risks economists have not been able to consistently find a significant relationship between wages and other job characteristics the failure to find consistent evidence on compensating differentials has been attributed to either poor measures of non wage characteristics or inadequate controls for worker productivity 2 studies by gunderson hyatt and pesando 1992 montgomery shaw and benedict 1992 and moore 1987 which have been able to explicitly address these issues have had greater success in finding significant compensating differentials in this paper we focus on an alternative explanation for the variation in estimated compensating differentials that the magnitude of the compensating differential varies systematically across different sectors in the labor market the theory of compensating differentials predicts that the implicit price or cost of providing a job attribute such as pensions will be a function of firm or industry technological differences and that the value attached to that attribute will also vary across workers depending on their tastes if workers and firms are not randomly assigned to sectors this will lead to systematic variations in the size of the estimated compensating differential across sectors or markets the result of this variation is that studies using different subsamples of the labor force will yield very different estimates of the size of the compensating differential the few studies that have addressed sources of heterogeneity in compensating differentials have concentrated on testing for individual differences in tastes for risk 3 in contrast our emphasis is on firm side differences in technologies or market power we estimate the compensating differential between annual pension accruals and wage rates and let this tradeoff vary by firm size and union status with corrections for selectivity bias the implicit cost of pensions and hence the size of the compensating differential may vary by finn size or union status for a number of reasons greater ability to spread fixed administrative costs across a large work force more difficulty monitoring worker effort or the presence of market power thus the cost of fringe benefits to the firm may be lower in large or unionized firms than in small nonunion firms we find empirical evidence supporting this view the estimated wage pension compensating differentials are smaller in unionized and large firms than in small nonunion firms the results from this paper are significant for several reasons 1 they provide evidence that compensating differentials vary across markets this evidence could account for some of the differences in estimates of tradeoffs across studies that have used different nonrandom samples 4 more importantly these sectoral differences serve as a reminder that the labor market is in fact a multitude of markets and that technological differences that vary across markets should be considered when addressing issues ranging from estimating the returns to human capital investment to the impact of the minimum wage 5 2 these results also deepen our knowledge of the relationship between pensions and wages a relationship that has important implications for the shape of workers wage earnings profiles or for the mechanisms for motivating workers and for the returns to human capital and for the distribution of income regarding the latter pensions are a large component of compensation and work by even and macpherson 1990 mccarthy and turner 1983 and moore 1987 suggests that coverage rates and returns are smaller for women and blacks our analysis suggests that an element of the differences could be sectoral choices

water demand under alternative price structures we estimate the price elasticity of water demand with household level data structurally modeling the piecewise linear budget constraints imposed by increasing block pricing we develop a mathematical expression for the unconditional price elasticity of demand under increasing block prices and compare conditional and unconditional elasticities analytically and empirically we test the hypothesis that price elasticity may depend on price structure beyond technical differences in elasticity concepts due to the possibility of endogenous utility price structure choice observed differences in elasticity across price structures may be due either to a behavioral response to price structure or to underlying heterogeneity among water utility service areas

demand side technology standards under inefficient pricing regimes when price setting regulators haveobjectives other than maximizing socialsurplus the conservation potential ofdemand side technology standards can besignificantly diminished this paperdemonstrates this by empirically recovering thesocially sub optimal preferences of a group ofwater managers in a groundwater dependentregion of california and simulating theirinefficient price response to the mandatedadoption of low flow appliances by homeowners the resulting reduction in the conservationpotential of these appliances is quantified and a modest tax is shown to be a relativelycost effective policy tool for conservation if non price conservation policies arepreferred according to equity criteria thepaper suggests that in order to preserve theirconservation potential policy makers should berequired to continue to set prices as if notechnology standards had been introduced

the labor contract and true economic pension liabilities most pension covered workers in the united states are covered solely or primarily by defined benefit plans in these plans workers are typically promised a pension that is proportional to their years of service in the firm and their final wage depending upon how workers pay for it the existence of a pension in the labor contract may play either an important role or no role at all in the worker firm relationship this paper addresses the issue how workers pay for the cumulating pension benefit over their tenure cycle in the firm and derives several economic implications for the worker firm contract while the theory itself has ambiguous implications the data confirm the longstanding presumption that pensions offer strong incentives for the worker to complete the normal tenure cycle in the firm not to quit early but if this intuitive notion is accepted it is shown that a perhaps less intuitive notion is also true firms make workers longterm bondholders in the firm the same flow of worker pension savings that tie workers to the firm are not accounted for in the pension trust fund pension plans are significantly underfunded in a true economic sense this is a peculiar characteristic of the labor contract which raises several unanswered questions the paper also shows that the nature of the pension contract can play an important role in determining the wage service profile and the capitalized value of the firm recent contributions to the literature pose an interesting and unconventional view of pensions one which leads to the conclusion that pensions play a relatively minor role in the worker firm contract the argument has been implicitly made by burt barnow and ronald ehrenberg 1979 and william sharpe 1976 but has recently been stated more directly by jeremy bulow 1982 2 in essence their views rest on a legal interpretation of pension liabilities namely since the firm can legally terminate its pension plan anytime the firm s pension liabilities cannot exceed the present value of the nominal pension promises it would owe workers if the firm terminated the plan immediately if workers believe the firm will exercise its legal right it is intuitively apparent and easy to show that workers will deposit only that amount of compensation into the pension plan that they expect to receive upon immediate termination using this interpretation of pension plan liabilities pensions have no influence on whether the worker leaves or remains in the firm moreover it will be shown that if the pension contract is written in nominal terms reflecting the legal view workers are not bondholders in the firm pension plans are excessively overfunded an alternative view is that the pension plan is an implicit contract between the worker and the firm see for example jack treynor 1977 an implicit contract theory implies that workers anticipating careers with a firm will consider the package of wage and pension benefits they expect to collect over their life cycle it is shown that these expectations lead quite directly to several implications that the pension contract is written in real terms that firms intend to meet their pension promises and that the firm will re u s department of labor s 4521 washington d c 20210 the views expressed in this paper are my own and do not necessarily represent the views of the department of labor the paper has substantially benefited from the comments of pauline ippolito and discussions with jeremy bulow i am also indebted to robert clark gary fields alan gustman olivia mitchell james pesando john turner michael ward and participants at the labor relations workshop at cornell university and the law and economics workshop at the university of chicago for comments see my 1985a book 2 the argument is also implicit in other related papers see for example martin feldstein and randall morck 1982

public versus private water delivery a hedonic cost approach automotive news 1967 almanac detroit slocum publishing co 1967 bucklin louis p competition and evolution in the distributive trades englewood cliffs new jersey prentice hall 1972 federal trade commission annual line of business report 1974 washington ftc 1981a processed annual line of business report 1975 washington ftc 1981b processed guth louis a robert a schwartz and david k whitcomb the use of buyer concentration ratios in tests of oligopoly models this review 58 nov 1976 488 491 jeifreys james b the distribution of consumer goods new york cambridge university press 1950 lilly digest indianapolis ely lilly and co 1976 martin stephen advertising concentration and profitability the simultaneity problem belljournal 10 autumn 1979 639 647 national petroleum news fact book 1976 new york mcgraw hill 1976 ncr expenses in retail business dayton ohio ncr undated but about 1966 and about 1976 strickland allyn d and leonard w weiss advertising concentration and price cost margins journal of political economy 84 oct 1976 1109 1123 u s department of commerce bureau of economic analysis the detailed input output structure of the u s economy 1972 volume 1 the use and make of commodities by industries washington d c government printing office 1979 u s treasury department internal revenue service statistics of income source book 1972 processed ward t s the distribution of consumer goods structure and performance new york cambridge university press 1973 weiss leonard w the geographic size of markets in manufacturing this review 54 aug 1972 245 257 case studies in american industry new york john wiley and sons 1980

pension portability and labor market efficiency a survey of the literature this paper reviews the theoretical and empirical literature evaluating the labor market effects of policies to enhance pension portability one perspective is that reducing the cost of job change w

the impact of pension benefits on the distribution of earned income using standard measures of income inequality and detailed pension benefit information on participants in the 1983 survey of consumer finances scf the authors investigate how pension benefits affected the distribution of earned income the results suggest that private pensions increased annual income inequality relative to inequality observed in the distribution of wage income by only about 2 among all employed individuals but by 21 among unionized workers further analysis indicates that private pensions raised annual income inequality primarily by increasing the rate of return to tenure possibly through pension backloading setting accruals to grow when earnings rise near retirement and the increasing incidence of pensions with age private pensions had little effect on estimates of the distribution of expected lifetime income but the addition to the analysis of social security benefits public pensions strongly reduced inequality in that distribution a renewed interest in the distribution of income has developed recently as new evidence suggests that income inequality has worsened over the past twenty years researchers suggest several reasons for rising inequality including an increase in the incomes of well educated men relative to other groups for example juhn murphy and pierce 1993 demographic changes resulting from the entrance of the baby boom generation into the work force lawrence 1982 and a sectoral shift away from manufacturing and toward the ser

measuring the dynamic efficiency costs of regulators preferences municipal water utilities in the arid west evidence suggests that municipal water utility administrators in the western us price water significantly below its marginal cost and in so doing inefficiently exploit aquifer stocks and induce social surplus losses this paper empirically identifies the objective function of those managers measures the deadweight losses resulting from their price discounting decisions and recovers the efficient water pricing policy function from counterfactual experiments in doing so the estimation uses a continuous butconstrained control version of a nested fixed point algorithm in order to measure the important intertemporal consequences of groundwater pricing decisions

pensions and indenture premia the implicit pension contract has provided a theoretical basis for the observed relation between pensions less quitting and earlier retirement but it also has encountered difficulty explaining why wages seem too high in pension firms this anomaly has been taken by some to imply that efficiency wages not pension capital losses explain why quitting is abnormally low in defined benefit pensions in this paper i pursue an alternative explanation that the implicit contract model is oversimplified because it ignores supply conditions facing long tenure firms i show that once an allowance is made for compensation required by workers for entering long term labor contracts numerous anomalous empirical observations in the pension market are explicable

the dynamic efficiency costs of common pool resource exploitation we conduct the first empirical investigation of common pool resource users dynamic and strategic behavior at the micro level using real world data fishermen s strategies in a fully dynamic game account for latent resource dynamics and other players actions revealing the profit structure of the fishery we compare the fishermen s actual and socially optimal exploitation paths under a time specific vessel allocation policy and find a sizable dynamic externality individual fishermen respond to other users by exerting effort above the optimal level early in the season congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies jel d24 q21 q22

the trade off between supervision cost and performance based pay does gender matter the study adds to the literature by providing new empirical evidence consistent with efficiency wage theory and by providing estimates of the average cost of supervising a worker by industry this research uses the 1996 wave of the nlsy and incorporates estimates of supervision cost computed from industry classifications we further detect presence of no gender differences neither in risk averseness nor in productivity gains associated with cost of supervision and performance based pay while the findings imply that employers should consider the incentive effects of supervision and performance based pay when constructing pay schemes there is no need for employers to devote resources to constructing gender specific payment mechanisms our evidence suggests that profit maximizing firms should treat males and females equally and develop gender neutral pay schemes

wage pension trade offs in collective agreements analyzing 98 matched collective agreements and flat benefit pension plans in ontario in 1984 the authors find evidence of a significant trade off between wages and an actuarially constructed summary measure of the expected future pension costs for employers with respect to the separate components of the pension plans they find a significant trade off between wages and the main item that is bargained over the flat benefit rate but not between wages and most of the early and postponed retirement options these results obtain when the pension variables are specified as a proportion of wages to capture the assumption that the generosity of pension plans is reflected in replacement rates and when simultaneous equation procedures are used to account for the possible endogeneity of pensions the trade off disappears however when the pension variables are specified in dollar amounts

information provision and consumer behavior a natural experiment in billing frequency abstract in this study i estimate a causal effect of increased billing frequency on consumer behavior i exploit a natural experiment in which residential water customers switched exogenously from bimonthly to monthly billing customers increase consumption by 3 5 5 in response to more frequent information this result is reconciled in models of price and quantity uncertainty where increases in billing frequency reduce the distortion in consumer perceptions using treatment effects as sufficient statistics i calculate consumer welfare gains equivalent to 0 5 1 of annual water expenditures heterogeneous treatment effects suggest increases in outdoor water use

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

long run price inflexibility and efficiency loss for municipal water supply abstract a marginal cost pricing mcp policy for a publicly produced good leads to politically unacceptable price fluctuations when economies of scale exist in plant construction a partial equilibrium analysis of water supply defines a general optimal constant price for water which is a weighted average of the annual marginal short run and capacity expansion costs for special cases of arithmetic or geometric growth in demand the demand growth rate and the discount rate determine the fraction of capital costs which a constant price will recover under conditions which favor the mcp policy the constant pricing policy produces 98 5 of the net benefits produced by the mcp policy