environmental regulation and u s economic growth in this article we quantify the costs of pollution controls by reporting the results of simulations of the growth of the u s economy with and without regulation for this purpose we have constructed a detailed model of the economy that includes the determinants of long term growth we have also analyzed the interaction between industries in order to capture the full repercussions of environmental regulations however we have not attempted to assess the benefits resulting from a cleaner environment we find that pollution abatement has emerged as a major claimant on the resources of the u s economy the cost of emission controls is more than 10 of the total cost of government purchases of goods and services

an overview of experimental u s consumer price indexes the consumer price index cpi has come under intense scrutiny in recent years to help assess potential differences between what the cpi measures and how it is used for various purposes the bureau of labor statistics has created a series of experimental price indexes this article contrasts how the cpi is currently constructed with those experimental indexes specifically experimental cpps have been constructed for two population groups older americans and poor americans in addition experimental geometric mean and superlative indexes have been developed that move the cpi away from its traditional fixed market basket concept

using a policy mix for pollution control a review of economic literature this article provides a review of economic studies analyzing the use of multiple policies a socalled policy mix to cope with single pollution problems to guide and structure the review an analytical framework is developed and applied the framework integrates transaction costs into the analysis of pollution problems and policies to overcome them moreover it understands a pollution externality not only as a market failure but more generally as the failure of private governance structures based on this insight two rationales for using a policy mix are identified first a policy mix may help to correct for multiple reinforcing failures of private governance structures such as pollution externalities and technological spillovers second a policy mix can be employed if the implementation of single first best policies brings about high transaction costs e g when marginal pollution damages are heterogeneous or polluters are unlikely to comply with the policy for each rationale the relevant literature is presented based on the review avenues for future research are identified

feebates rebates and gas guzzler taxes a study of incentives for increased fuel economy abstract us fuel economy standards have not been changed significantly in 20 years feebates are a market based alternative in which vehicles with fuel consumption rates above a pivot point are charged fees while vehicles below receive rebates by choice of pivot points feebate systems can be made revenue neutral feebates have been analyzed before this study re examines feebates using recent data assesses how the undervaluing of fuel economy by consumers might affect their efficacy tests sensitivity to the cost of fuel economy technology and price elasticities of vehicle demand and adds assessments of gas guzzler taxes or rebates alone a feebate rate of 500 per 0 01 gallon per mile gpm produces a 16 percent increase in fuel economy while a 1000 per 0 01 gpm results in a 29 percent increase even if consumers count only the first 3 years of fuel savings unit sales decline by about 0 5 percent but sales revenues increase because the added value of fuel economy technologies outweighs the decrease in sales in all cases the vast majority of fuel economy increase is due to adoption of fuel economy technologies rather than shifts in sales

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

externality correcting taxes and regulation externality correcting taxes and regulation in much of the literature on externalities taxes and direct regulation have been considered as alternative policy instruments both instruments might be imperfect in practice reflecting informational deficiencies and other limitations we analyse the use of taxes and regulation in combination to control externalities arising from individual consumption behaviour we consider the cases either where taxes are imperfectly differentiated to reflect individual differences in externalities or where some consumption escapes taxation in both cases we characterize the optimal instrument mix and we show how changing the level of direct regulation alters the optimal externality tax

trading for the future signaling in permit markets abstract permit markets are celebrated as a policy instrument since they allow i firms to equalize marginal costs through trade and ii the regulator to distribute the burden in a politically desirable way these two concerns however may conflict in a dynamic setting anticipating the regulator s future desire to give more permits to firms that appear to need them firms purchase permits to signal their need this raises the price above marginal costs and the market becomes inefficient if the social cost of pollution is high and the government intervenes frequently in the market the distortions are greater than the gains from trade and non tradable permits are better the analysis helps to understand permit markets and how they should be designed

using tradeable permits to achieve sustainability in the world s large cities policy design issues and efficiency conditions for controlling vehicle emissions congestion and urban decentralization with an application to mexico city many large cities in the world have serious ground level ozone problems largely the product of vehicular emissions and thus the argued unsustainability of current urban growth patterns is frequently blamed on unrestricted private vehicle use this article reviews mexico city s experience with vehicle use restrictions as an emissions control program and develops the conditions for optimal quantitative restrictions on vehicle use and for complementary abatement technologies the stochastic nature of air pollution outcomes is modelled explicitly in both the static and dynamic formulations of the control problem in which for the first time in the literature the use of tradeable vehicle use permits is proposed as a cost effective complement to technological abatement for mobile emissions control this control regime gives the authorities a broader and more flexible set of instruments with which to deal more effectively with vehicle emissions and with seasonal and stochastic variation of air quality outcomes the market in tradeable vehicle use permits would be very competitive with low transactions costs this control policy would have very favorable impacts on air quality vehicle congestion and on urban form and development given the general political resistance to environmental taxes this program could constitute a workable and politically palatable set of policies for controlling greenhouse gas emissions from the transport sector

1 000 cash back the pass through of auto manufacturer promotions automobile manufacturers frequently use promotions involving cash incentives while payments are nominally directed to either customers or dealers the ultimate beneficiary of the promotion depends on the outcome of price negotiation we use program evaluation methods to compare the incidence of these two types of promotions customers obtain 70 to 90 percent of a customer rebate but only 30 to 40 percent of a dealer discount promotion a 500 difference for a typical promotion our leading hypothesis is that pass through rates differ because of information asymmetries customer rebates are well publicized to customers while dealer discount promotions are not

automatic bill payment and salience effects evidence from electricity consumption abstract the introduction of automatic bill payment abp programs in 2005 eliminated the need for consumers to view recurring bills if those enrolled in abp programs offered by utilities and other service providers forgo inspection of their recurring bills then price salience declines prices perceived by boundedly rational agents fall and consumption increases this paper considers the impact of such programs on consumer demand and welfare and empirically tests whether enrollment in such programs increases demand results show abp enrollment increases residential electricity consumption by 4 0 and commercial electricity consumption by as much as 8 1 enrollment in programs designed to smooth seasonal variation in monthly utility bills of low income customers results in 6 7 greater electricity use

rationing can backfire a ban restricting each car from driving on a specified weekday is found to have increased total driving in mexico city because of the ban cars effectively represent driving permits and some households have bought an additional car and increased their driving greater use of old cars congestion effects and increased weekend driving may also have contributed to the disappointing results the ban has high welfare costs and does not deliver the intended benefits of reduced driving quite the contrary the experience provides an interesting lesson in applied welfare economics theory indicates that this is a costly way of reducing traffic and pollution but the finding that the strategy is counterproductive could be made only with applied quantitative analysis

unawareness and selective disclosure the effect of school quality information on property prices the australian government launched the my school website in 2010 to provide standardised information about the quality of schools to the australian public this paper combines data from this website with home sales data for the state of victoria to estimate the effect of the publication of school quality information on property prices we use a difference in difference approach to estimate the causal effect of the release of information about high quality and low quality schools relative to medium quality schools in the neighborhood and find that the release of information about high quality schools increases property prices by 3 6 percent whereas the release of information about low quality schools has no significant effect the findings indicate that many buyers are unaware of the relevance of school quality information and that real estate agents pursue a strategy of disclosing information about high quality schools to increase the sales price results from a survey of victorian real estate agents provide evidence in favor of this strategy

more on laspeyres price index abstract in a recent article selvanathan economics letters 1991 35 35 38 uses the stochastic approach to derive the laspeyres price index and its standard error in this paper we extend this approach by allowing for systematic changes in relative prices

why do manufacturers issue coupons an empirical analysis of breakfast cereals we explore the relationship between shelf prices and manufacturers coupons for 25 readyto eat breakfast cereals we find that shelf prices are lower during periods when coupons are available this result is inconsistent with static monopoly price discrimination under a broad range of assumptions we present evidence that is inconsistent with both dynamic theories of price discrimination and explanations of couponing based on the vertical relationship between manufacturers and retailers we find support for models of price discrimination in oligopoly settings as well as suggestions that firmwide incentives may induce managers to use coupons and price cuts simultaneously finally lagged coupons have a positive effect on current sales suggesting that coupons are used to induce repurchase

an experimental study of incentive contracts for short and long term employees abstract motivated by real world observations of different contract offers we conduct a lab experiment to examine a principal s contract choice and agent effort in both long and short term employment relationships implemented as one shot and repeated games we find that a piece rate contract has the strongest incentive effect on short term agents effort and is the principals dominant choice nevertheless the bonus contract works almost as well as the piece rate contract for long term relationships but not so well for short term relationships in addition the bonus contract s effect on effort is mainly driven by the bonus component suggesting that a fixed wage alone is not an effective mechanism to improve workers performance

anticipation tax avoidance and the price elasticity of gasoline demand summary least squares estimates of the response of gasoline consumption to a change in the gasoline price are biased toward zero given the endogeneity of gasoline prices a seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes but this approach tends to yield implausibly large price elasticities we demonstrate that anticipatory behavior provides an important explanation for this result gasoline buyers increase purchases before tax increases and delay purchases before tax decreases rendering the tax instrument endogenous including suitable leads and lags in the regression restores the validity of the iv estimator resulting in much lower elasticity estimates copyright 2016 john wiley sons ltd

social cost of environmental quality regulations a general equilibrium analysis the use of cost benefit analysis by federal regulatory agencies has expanded greatly in scope and sophistication unfortunately agencies continue to employ private cost rather than social cost to evaluate environmental quality regulations furthermore general equilibrium impacts and intertemporal effects of regulations are typically not included in the evaluation in this paper we estimate the social cost of environmental quality regulations mandated by the clean air and clean water acts we construct an econometric general equilibrium model of the united states to demonstrate that social cost estimates diverge sharply from private cost estimates we also demonstrate that general equilibrium impacts are significant and pervasive and that intertemporal effects of the regulations heretofore ignored are significant

modelling the impacts of a carbon emission differentiated vehicle tax system on co2 emissions intensity from new vehicle purchases in ireland abstract the increasing awareness of the effects of climate change on the environment and the economic pressure on oil supply has focused international attention on reducing co 2 emissions and energy usage across all sectors in order to meet their kyoto protocol commitments and in line with european union policy the irish government has introduced a carbon based tax system for new vehicles purchased from the 1st of july 2008 this new legislation aims to reduce carbon emissions in the transport sector a sector which is responsible for a significant proportion of both this paper presents the results of the development calibration and application of a car choice model which predicts the changes in co 2 emissions intensity from new vehicle purchases as a result of the changes in vehicle tax policy and fuel price in ireland the model also predicts the impact of such changes on tax revenue for the irish government and the changes in the split between the number of diesel and petrol vehicles purchased the investigation found that the introduction of these new carbon based taxes in ireland will result in a reduction of 3 6 3 8 in co 2 emissions intensity and a reduction in annual tax revenue of 191 m

uncertainty in currency mispricing abstractdeclaring a currency to be mispriced is fraught with uncertainties in this article these uncertainties are explicitly recognized in a model of pricing a homogeneous commodity around the world this allows for a common driver of prices due to a base currency effect and country specific factors that lead to departures from absolute ppp on account of income differences local taxes and charges etc this approach leads to estimates of currency mispricing whose significance can be tested in the usual way using big mac prices we show that the approach has advantages over the popular big mac index to currency valuation

energy demand in the transportation sector of mexico abstract this paper report results of an analysis of the demand for energy in the mexican transport sectors focusing on the railroad air transport and motor vehicle modes the approach is an econometric one with emphasis placed on the structure for each mode for two of the modes a two stage approach is employed where in the first stage demands for services from the particular mode are modeled and in the second stage demand is treated as a derived demand from these transport services for the motor vehicle mode gasoline demand is considered as the product of gasoline consumption per vehicle times the total number of vehicles and then these components are related to economic and structural variables diesel demand of motor vehicles is modeled in a more reduced from approach the principal finding is that changes in income play a more important role in affecting energy demand than do changes in energy prices especially in the railroad and air transport sectors for the gasoline and diesel fuel demand in the monitor vehicle sector however price is of substantial importance

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

an analysis of substitution bias in measuring inflation 1959 851 we analyze the substitution bias in laspeyres type price indexes such as the cpi using 1959 1985 nipa consumption data for 101 commodities we employ two methodological approaches to calculation of the bias first we construct the tightest theoretical bounds on the col by applying nonparametric methods using algorithms developed by afriat and by varian second following diewert we construct superlative price index formulas namely tomqvist and fisher s ideal indexes under a chain as well as a fixed base specification homothetic preferences are found to be consistent with the data and sensitivity tests indicate that this result is not vacuous if the hypothesis of homotheticity is maintained the col bias has upper and lower limits of 0 22 and 0 14 percent per year respectively using the superlative indexes as the measure of the col the bias is about 0 18 percent per year for the period 1959 85 this estimate is somewhat larger than found in earlier studies our use of more disaggregated data is found to be responsible for part of the difference with the size of the estimated bias directly related to the extent of the aggregation

the stochastic approach to price index numbers an expository note abstract the present paper provides an objective basis for selecting the best among four commonly used price index numbers namely the laspeyres price index the paasche price index the simple aggregative price index and the simple arithmetic mean of price relatives the criterion is developed within a stochastic framework that also enables researchers to test hypotheses about the index numbers themselves the paper also provides nonparametric interpretations of these indices

own brand and cross brand retail pass through in this paper we describe the pass through behavior of a major u s supermarket chain for 78 products across 11 categories our data set includes retail prices and wholesale prices for stores in 15 retail price zones for a one year period for the empirical model we use a reduced form approach that focuses directly on equilibrium prices as a function of exogenous supply and demand shifting variables the reduced form approach enables us to identify the theoretical pass through rate without specific assumptions about the form of consumer demand or the conduct of a category pricing manager thus our measurements of pass through are not constrained by specific structure on the underlying economic model the empirical pricing model includes costs of all competing products in the category on the right hand side not only the cost of the focal brand and yields estimates of both own brand and cross brand pass through rates our results provide a rich picture of the retailer s pass through behavior we find that pass through varies substantially across products and across categories own brand pass through rates are on average more than 60 for 9 of 11 categories a finding that is at odds with the claims of manufacturers about retailers in general importantly we find substantial evidence of cross brand pass through effects indicating that retail prices of competing products are adjusted in response to a change in the wholesale price of any given product in the category we find that cross brand pass through rates are both positive and negative we explore determinants of own brand and cross brand pass through rates and find strong evidence in multiple categories of asymmetric retailer response to trade promotions on large versus small brands for example brands with larger market shares and brands that contribute more to retailer profits in the category receive higher pass through we also find that trade promotions on large brands are less likely than small brands to generate positive cross brand pass through i e induce the retailer to reduce the retail price of competing smaller products on the other hand small share brands are disadvantaged along three dimensions trade promotions on small brands receive low own brand pass through and generate positive cross brand pass through for larger competing brands moreover small share brands do not receive positive cross pass through from trade promotions on these larger competitors we also find that store brands are similarly disadvantaged with respect to national brands

fairness incentives and contractual choices this paper examines how the presence of a non negligible fraction of reciprocally fair actors changes the provision of incentives through contracts we provide experimental evidence that principals have a strong preference for less complete contracts although the standard self interest model predicts that they should prefer the more complete contract our theoretical analysis shows that fairness concerns can explain this preference for less completeness fair principals keep their promises which provides strong pecuniary incentives through an incomplete contract selfish principals free ride and exploit the agents counter intuitively selfish agents are induced to work by an incomplete contract while fair agents shirk

variance estimation for price indexes from a two stage sample with rotating panels estimation of price indexes in the united states is generally based on complex rotating panel surveys the sample for the consumer price index for example is selected in three stages geographic areas establishments and individual items with 20 of the sample being replaced by rotation each year at each period a time series of data is available for use in estimation this article examines how to best combine data for estimation of long term and short term changes and how to estimate the variances of the index estimators in the context of two stage sampling i extend the class of estimators introduced by valliant and miller of laspeyres indexes formed using sample data collected from the current period back to a previous base period linearization estimators of variance for indexes of long term and short term change are derived the theory is supported by an empirical simulation study using two stage sampling of establishments and items from a population derived from u s bureau of labor statistics

price reactions to rivals local channel exits in this paper we study the effect of a firm s local channel exits on prices charged by incumbents remaining in the marketplace exits could result in higher prices due to tempered competition or lower prices due to reduced colocation or agglomeration benefits the net effect of these two countervailing forces remains unknown in addition little is known about how this effect could change depending on incumbents geographic locations we address this research gap by examining new car price reactions by incumbent multiproduct automobile dealerships who experience the exit of a chrysler dealership in their local markets we find evidence that the competition effect exceeds the colocation effect prices increase by about 1 318 following an exit relative to the price change in the absence of an exit more important we find that the price increase is lower at dealerships more proximate to the exiting dealership than dealerships farther away for the same set of cars available across these locations this

greening the vehicle fleet norway s co2 differentiated registration tax abstract in 2007 norway established its vehicle registration tax linked to vehicle co2 intensities in 2009 the tax was modified to a feebate structure but maintained its link to co2 intensities using a panel dataset to exploit the quasi experimental tax reforms we estimate that a 1000 nok 125 usd tax increment reduces new vehicle sales by 1 06 1 58 this result yields an elasticity of average co2 intensity to co2 price implied by the tax of 0 06 with a pass through of the tax to car prices of 88 the resulting elasticity of average co2 intensity to average car price is 0 53 thus the tax significantly shifts consumers toward lower emission vehicles our counterfactual simulations suggest that high emission vehicle segments lose market shares and become less co2 intensive while low emission vehicle segments gain market shares

search frictions and market power in negotiated price markets we provide a framework for empirical analysis of negotiated price markets using mortgage market data and a search and negotiation model we characterize the welfare impact of search frictions and

a superpopulation theory approach to the design of price index estimators with small sampling biases this article uses simple superpopulation models to examine estimators for long and short term laspeyres price relatives based on pps samples

generalized theil tornqvist indices with applications to international comparisons of prices and real output the theil tornqvist index number is widely used for binary comparisons of prices output and productivity this paper describes various generalizations of the theil tornqvist index for purposes of multilateral spatial comparisons due to caves christensen and diewert and more recent further generalizations due to prasada rao and selvanathan based on the stochastic approach to index numbers the applicability of the new index numbers is demonstrated using international comparison data on private consumption expenditure and manufacturing sector output

a class of multiplicative estimators of laspeyres price indexes publication of indexes measuring changes in prices of retail wholesale export and import items is an important part of many governmental statistics programs one form of price index that is often used is the fixed base laspeyres in which a fixed market basket of goods is priced over time this article introduces a new class of multiplicative estimators of laspeyres indexes the optimum within the class is derived for long term price change and compared with two other members of the class when used for estimating both long term and short term change theoretical properties are derived under a model in which long term relative price changes for individual items have common within stratum means and are correlated over time theory for long term and short term change estimators is tested in a simulation study in which a large number of stratified probability samples is selected from a population extracted from items priced for the u s consumer price index

biofuel subsidies versus the gas tax the carrot or the stick abstract this paper provides an analytical framework to examine the relative efficiencies of a revenue neutral biofuel subsidy and a gas tax in the presence of pre existing distortions and growing substitutability between fuels both policies are set to achieve a targeted reduction in gasoline use at the state level the model is then calibrated for a small open economy such as illinois which is one of the largest producers of biofuels such as ethanol in the u s the main result of the paper shows that raising the biofuel subsidy use reduces overall welfare by more than a higher gas tax both aimed to achieve a targeted reduction in pure gasoline the relative efficiency of the higher gas tax is primarily due to it exacerbating the pre existing distortion in the biofuel market by less than the subsidy moreover for current parameter estimates welfare improving policy combinations for achieving a targeted amount of energy security are higher gas taxes combined with lower biofuel subsidies and a lower tax on income however the preference for a gasoline labor tax swap shrinks as the elasticity of substitution between the two fuels rises

volatility and stock price indexes the stochastic approach to index numbers has been successfully applied to the estimation of inflation the world interest rate and international competitiveness one distinct advantage of this approach is that it provides the whole distribution of the index not simply one value in this article we extend the stochastic approach to the estimation of a stock market index we demonstrate how this approach can be used to identify redundant stocks that do not contribute significantly to the overall index for index tracking purposes these stocks can be safely excluded

the measurement of inflation a stochastic approach the stochastic approach to index number theory views each commodity price change as an independent observation on the underlying rate of inflation so that inflation can be estimated by averaging over all the prices this article extends the approach by a allowing for sustained changes in relative prices b showing the link with divisia index numbers and c deriving standard errors for the inflation estimates the results are illustrated with australian data

promoting urban sustainability the case for a tradable supplementary licence system for vehicle use many large cities in the world have serious regional air quality problems largely the product of vehicular emissions and one manifestation of the argued insustain ability of current urban growth patterns these problems are frequently blamed on unrestricted use of private vehicles this paper applies the concept of sustainability to urban areas by formulating an explicit ecological constraint on airshed capacity in a region within a model of cost effective emissions control solution of the model suggests that restrictions on vehicle use should play a role in achieving regional air quality targets cost effectively a tradable vehicle use permit system is described for implementing the sustainability constraint and its relationship to other demand management proposals for constraining vehicle use is discussed as well as the implications for the form and vitality of urban areas this control policy would have substantially favourable impacts on air quality vehicle congestion and uncontrolled suburban d

are the costs of reducing greenhouse gases from passenger vehicles negative energy models suggest that the costs of reducing carbon emissions from transportation are high relative to those for other sectors this paper discusses why taxes or equivalent permit systems to reduce passenger vehicle emissions produce large net benefits rather than costs when account is taken of a their impact on reducing other highway externalities besides carbon and b interactions with the broader fiscal system both of these considerations also strengthen the case for a tax based approach over fuel economy regulation while fiscal considerations strengthen the case for taxes over grandfathered emissions permits the paper also comments on the practical relevance of automobile fuel taxes or their policy equivalents to broader legislation intended to mitigate climate change

formula bias and within stratum substitution bias in the u s cpi in 1978 bls adopted an estimator for u s cpi component indexes that incorporates scientific samples of outlets and varieties and that allows the calculation of reliable standard errors consumer substitution of outlets and varieties offering better values could cause bias in these indexes a more important source of bias is however a tendency to give excessive weight to items whose initial price is temporarily low the empirical evidence is striking average price series and matched food cpis grew at almost the same rate before 1978 but between 1980 and 1992 the cpis average about 1 4 per year more growth for unleaded gasoline the discrepancy averages 0 8 per year

the world real interest rate stochastic index number perspectives abstract in a recent paper gagnon and unferth 1995 is there a real world interest rate j int money finance 14 845 855 test the hypothesis of real interest rate equality by regressing real interest rates for all major countries on dummy variables for each country and each period we show that this model can be interpreted as an application of the stochastic approach to index numbers this approach leads to estimates of and standard errors for the real rate for the world as a whole which have appealing index number interpretations and foundations we also extend gagnon and unferth s approach by weighting countries to recognise their differing importance in the world economy in terms of relative gdp and trade weighting does not lead to appreciable changes in the results however when the wpi which gives more prominence to goods entering into international trade is used as the deflator our results indicate that real rates are equalized internationally

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

correcting externalities through taxes on subsidies to related goods abstract optimal corrective taxation is considered in the presence of externalities in cases where only related goods i e complements to or substitutes for externality creating goods can be taxed in the context of identical individuals and separable externalities taxing and subsidizing complements and substitutes to externalities are analyzed first the circumstances under which it is optimal to operate on one market only for a related good are examined second cases are identified where optimality requires taxes on substitutes for or subsidies to complements to a good which generates negative externalities

how responsive is saudi new vehicle fleet fuel economy to fuel and vehicle price policy levers abstract this paper investigates the drivers of recent improvements in saudi arabia s fleet fuel economy for new vehicles including passenger cars and light duty trucks vehicle choice models are estimated using both aggregate new vehicle sales data and disaggregate new vehicle buyer survey data the estimated models are used to simulate counterfactual policy scenarios simulation results suggest that the saudi gasoline price elasticity of demand for new vehicle fuel economy decreased slightly over recent years but it is still more elastic than that of the united states moreover the increase in domestic gasoline prices between 2014 and 2016 accounted for 42 of the increase in estimated new vehicle fleet fuel economy over that period finally the estimated elasticities and thus policy sensitivities vary by income and household size a revenue neutral household income and size based feebate policy could be more progressive than a gasoline price increase for improving the new vehicle fleet fuel economy

estimation of laspeyres price indexes using the prediction approach for finite population sampling estimators of chain and fixed base laspeyres price indexes are studied using the prediction approach to finite population sampling the estimators include some that are based on those used in several u s government index programs and others derived from prediction models biases and variances of the estimators are studied for a case in which the reference period index weights are unknown for nonsample items under a model for a one period price change in which items have common within stratum means unbiased estimators can be constructed but under a more general regression model special sample balance conditions are needed for unbiasedness of those estimators the theory for the estimators of fixed base indexes is illustrated in an empirical study using a population of items priced for the u s consumer price index

collusion or competition interfirm relationships in the chinese auto industry the chinese passenger vehicle industry contains a large number of manufacturers some of them are members of big corporate groups centered around state owned enterprises these corporate relationships may facilitate collusion this paper applies the non nested hypothesis test methodology to data on passenger vehicles to identify whether price collusion exists within corporate groups or across groups our empirical results support the assumption of bertrand nash competition in the chinese passenger vehicle industry we find no evidence for within or cross group price collusion our policy experiments show that indigenous brands will gain market shares and profits if within group companies merge

tax incidence with endogenous quality and costly bargaining theory and evidence from hybrid vehicle subsidies abstract endogenous quality and bargaining are important features of many markets but are typically omitted from studies of incidence we develop a model with product upgrades and costly bargaining and find that tax rate pass through only partially characterizes the welfare impact of taxation consumers may respond to a tax or subsidy by changing product quality or by changing their bargaining effort we apply the insights of our theory to the study of subsidies for green goods specifically hybrid electric vehicles in canada we utilize highly detailed transaction data and leverage panel variation in subsidies across provinces for identification our baseline estimate finds that prices rises by 570 for every 1000 increase in the subsidy but this pass through estimate substantially underestimates consumer gains because a majority of this price increase 459 80 is due to increased product quality in the form of additional options and features

new vehicle fuel economy in the uk impact of the recession and recent policies interests in vehicle fuel economy have increased in the past few years with the implementations of more stringent cafe standard in usa and mandatory carbon emission standard in the eu we seek to understand the effects of recent policies such as restructuring of vehicle excise duties and eu standard on new vehicle fuel economy in the uk in the past few years there have been substantial fluctuations in income and fuel prices offering an interesting testing ground to understand their impact on the demand for fuel economy in vehicles we use a monthly dataset to find that the emission standard is the largest driver for fuel economy improvements in recent years also contrary to some recent findings in europe and in uk we find that income has an effect and that the recession had some role in improving the fuel economy the effects of fuel prices were relatively small restructuring of the ved also improved new vehicle fuel economy in the uk but the scrappage scheme had no significant effect results indicate that both supply and demand side policies are effective in improving fuel economy although quantitatively the emission standard appears more effective due to its stringency it is also important to consider the effects of income while devising demand side policies

measuring cpi s reliability the stochastic approach to index numbers revisited the reliability measurement of the consumer price index cpi has recently drawn much attention as the index number has been criticized for its inaccuracy in accessing the degree of inflation this article centers on providing a new regression specification that can help better gauge the cpi s reliability more specifically based on the stochastic approach to index numbers we argue that the conventional treatment of the systematic changes in relative prices should be made time variant we therefore propose a more comprehensive regression specification by including additional dummies that represent different general inflation rate levels and business cycle phases under this framework we are more capable of avoiding possible misspecifications in the regression equation as was experienced by clements and izan 1987 it also allows us to better answer the keynes critic regarding the stochastic approach to index numbers the empirical results of australia and the us are used to validate the merit of

new car sales and used car stocks a model of the automobile market this article develops a short run general equilibrium model of the automobile market by combining a discrete choice model of consumer automobile demand with simple models of new automobile production and used vehicle scrappage the theoretical model allows an unlimited degree of heterogeneity of both consumers and automobiles with equilibrium defined as aggregate demand equal to supply for every vehicle type econometric estimates of the scrappage and demand functions are then used to create a simulation model of the automobile market which is used to provide forecasts of automobile sales stocks and scrappage for the 1978 1990 period

the simple economics of motor vehicle pollution a case for fuel tax the volume of pollution produced by an automobile is determined by driver s behavior along three margins i vehicle selection ii kilometers driven and iii on road fuel economy the first two margins have been studied extensively however the third has received scant attention how significant is this intensive margin what would be the optimal policies when it is taken into account the paper develops and analyzes a simple model of the technical and behavioral mechanisms that determine the volume emissions produced by a car the results show that an optimal fuel tax would provide drivers with appropriate incentives along all three margins and that only public information is needed for a fuel tax to be set optimally in contrast an optimal distance tax would require private information lastly relative to the optimal fuel tax a simple uniform fuel tax is shown to be progressive thus being already deployed worldwide a uniform fuel tax is an attractive second best policy these findings should be accounted for when designing new mechanisms to alleviate motor vehicle pollution

inventories and the automobile market this article studies the within model year pricing production and inventory management of new automobiles using new monthly data on u s transaction prices we document that for the typical vehicle prices fall over the model year at a 9 0 annual rate concurrently both sales and inventories are hump shaped to explain these time series we formulate an industry model for new automobiles in which inventory and pricing decisions are made simultaneously the model predicts that automakers build to stock inventory management policy substantially influences the time series of prices and sales accounting for four tenths of the price decline observed over the model year

the comparative advantages of firms markets and contracts a unified theory the most efficient labour market mechanism depends on the advantages of specialization workers costs of switching between entrepreneurs and the frequency with which needs change multilateral mechanisms are more efficient when specialization is more advantageous when it is cheap for workers to switch between entrepreneurs and when individual entrepreneurs cannot occupy a worker on a full time basis given a bilateral mechanism employment a firm is more efficient than contracts when in process adjustments arise more frequently there exist three regions in which firms markets and sequences of bilateral contracts are weakly more efficient than all other mechanisms in a big class

a meta analysis of the price elasticity of gasoline demand a sur approach abstract automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency mileage per car and car ownership this implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency mileage per car and car ownership in this meta analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand a methodological novelty is that we use the linear relationship between the elasticities to develop a meta analytical estimation approach based on a seemingly unrelated regression sur model with cross equation restrictions this approach enables us to combine observations of different elasticities and thus increase our sample size furthermore it allows for a more detailed interpretation of our meta regression results the empirical results of the study demonstrate that the sur approach leads to more precise results i e lower standard errors than a standard meta analytical approach we find that with mean short run and long run price elasticities of 0 34 and 0 84 respectively the demand for gasoline is not very price sensitive both in the short and the long run the impact of a change in the gasoline price on demand is mainly driven by responses in fuel efficiency and mileage per car and to a slightly lesser degree by changes in car ownership furthermore we find that study characteristics relating to the geographic area studied the year of the study the type of data used the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand

how much do incentives affect car purchase agent based microsimulation of consumer choice of new cars part ii forecasting effects of feebates based on energy efficiency abstract in this paper we simulate the car market in order to forecast the effects of feebate systems based on an energy labeling scheme using categories a to g very fuel efficient a cars receive a cash incentive highly inefficient g cars pay additional fees consumers have different price elasticities and behavioral options to react to feebates they can switch to a smaller sized car but as energy efficiency varies widely within size segments they can also stick to the preferred size class and choose a more efficient smaller engine in addition previously owned cars influence the next car to be chosen we use an agent based microsimulation approach particularly suited to predict environmental and market effects of feebates heteorogenous agents choose from a choice set drawn from a detailed fleet of new cars incentives of 2000 for a labeled cars induce an additional rated co 2 emission decrease of new car registrations between 3 4 and 4 3 with co 2 abatement costs between 6 and 13 per ton and otherwise little undesired market disturbance the risk of rebound effects is estimated to be low after adopting the frequencies of consumer segments to a given country the model presented is applicable to all european car markets

aggregation of price risk over commodities an economic index number approach this article extends the economic theory of index numbers to the aggregation of price risk over commodities in production superlative indexes of aggregate price risk are related to tornqvist and fisher type output quantity indexes an application to major crops in manitoba illustrates the empirical importance of the analysis

evaluating contingent and actual contributions to a local public good tsetse control in the yale agro pastoral zone burkina faso abstract in this case study of the yale agro pastoral zone in southern burkina faso the sustainability of tsetse control as a local public good was shown to depend upon farmers contributions to establish and maintain the traps and targets that attract and kill tsetse flies contingent valuation cv techniques were used to generate estimates of farmers willingness to pay for tsetse control in money labour or both forms of payment of the 261 households that participated in the cv survey these proportions were 23 37 and 40 respectively indicating differentiation among the population and an overall preference for labour contribution a comparison of predicted versus actual contribution of labour indicated that only 56 of households that said they would contribute actually contributed 3 of households that said they would not contribute actually contributed major factors affecting contingent contributions of labour in discrete choice models were identified as well as those to account for in any successful scheme for actual labour contribution these factors include the age of household head offtake of cattle involvement in secondary activities membership in rural organizations current expenditure on drug therapy and cash on hand the results also indicate that full cost recovery of the investment in targets about us 8000 could not be achieved in the short run with the proposed contribution of us 0 90 1 00 per month per household contingent contributions of money were interpreted as maximum donations to expect of beneficiaries as part of the total cost of providing tsetse control

practice prize winner a nested logit model of product and transaction type choice for planning automakers pricing and promotions we develop a consumer response model to evaluate and plan pricing and promotions in durable good markets we discuss its implementation in the u s automotive industry which spends about 45 billion each year in price promotions the approach is based on a random effects multinomial nested logit model of product e g a vehicle model such as hyundai tucson and transaction type choice transaction types include combinations of acquisition types e g purchase versus lease and pricing instruments cash rebates reduced apr financing lease payment discounts we estimate the model using hierarchical bayes methods to capture response heterogeneity at the local market level we find key characteristics unique to durable good markets first consumers are heterogeneous in both their brand and transaction type preferences second consumers differ in their overall price sensitivity as well as in their relative sensitivity to alternative pricing instruments e g cash discounts reduced monthly payments third the most effective pricing programs tend to be those in which automakers offer consumers a menu of options to choose from e g a choice among a cash discount reduced interest rate financing or a lease payment discount we illustrate the model through an empirical application to a sample of data drawn from j d power transaction records in the entry suv segment and discuss examples of actual implementations

the substitution bias of the laspeyres price index an analysis using estimated cost of living indexes the most commonly used measure of the cost of living the consumer price index cpi published by the bureau of labor statistics is essentially a laspeyres price index it is well known however that a laspeyres price index provides an upward biased estimate of the cost of living because in keeping the same base period basket of goods as weights it does not take into account substitution among commodities induced by relative price changes the magnitude of the bias is an empirical question which is the focus of this study an estimate of the substitution bias may be obtained by taking the difference between the laspeyres price index and an estimated true cost of living index the true cost of living index cli is based on the theory of consumer demand it is the ratio of the minimum expenditures under two different price regimes necessary to maintain a constant level of utility as opposed to the constant basket of goods in the laspeyres index the size of the bias depends on two factors 1 the size of consumption substitution elasticities if there is no commodity substitution then the cli and laspeyres index coincide regardless of changes in relative prices and 2 the magnitude of relative price changes if all prices move together then the cli and laspeyres index again coincide regardless of the size of substitution elasticities in order to compute a true cli it is necessary to specify a particular utility function and estimate the parameters of the resulting system of demand equations see for example louis phlips p 135 several estimates of the magnitude of the substitution bias have appeared in the literature but all previous studies suffer from a common weakness they are all based on a very small number of commodities essentially because of econometric problems involved in estimating large systems of demand equations in one group of studies demand models have been estimated using highly aggregated data in which total consumption is grouped into four to nine aggregate commodites such as housing durables or clothing arthur goldberger and theodore gamaletsos for example estimate the linear expenditure system les demand model using data on five aggregate goods for several european countries and compare the resulting cli for one of the countries greece to the corresponding laspeyres price index tran van hoa estimates costof living indexes for six australian provinces using data on nine aggregate goods phlips cites work by r sanz ferrer who computed a cli for belgium from data on eight aggregate commodities in such studies using highly aggregated data the estimate of the substitution bias may be understated because the aggregation obscures substitution in consumption within categories which is perhaps more prevalent than substitution between gross aggregates another shortcoming of these three aggregate studies is the fact that they use only a single demand system and hence do not explore the sensitivity of the cli to a priori u s bureau of labor statistics the groundwork for this study was my dissertation i would like to thank the chairman and members of my committee r robert russell llad phillips and robert deacon for their support and helpful suggestions and jack triplett robert pollak richard j mcdonald and a referee for valuable comments on an earlier version the views expressed are my own and do not necessarily reflect the policies of the bureau of labor statistics for a theoretical discussion of cost of living indexes see robert pollak 1971b and paul samuelson and subramanian swamy

a survey of measurement biases in price indexes abstract this paper reviews the literature on measurement error in the major us price indexes the consumer price index cpi the producer price index rpi and the gross domestic product gdp deflators we take as our point of departure triplett s 1975 survey and focus on the studies of measurement error that have appeared since then we review the problems of substitution bias quality bias new goods bias and outlet substitution bias that are generally considered to be the main sources of error in price indexes the bulk of the paper is devoted to problems in the cpi and ppi as the gdp deflators tend to be based mainly on the components of these series we find that there has been surprisingly little work on the problem of overall measurement error in any of these price indexes and we conclude that there is very little scientific basis for the commonly accepted notion that measured inflation at 2 to 3 percent a year is consistent with price stability

information and the coase theorem abstract some economists think the coase theorem implies a lot about the proper scope of government intervention in the economy and about the welfare consequences of laissez faire others see it as a mere tautology that if people negotiate efficiently then every outcome will be efficient the coase theorem is important only if we believe that efficient negotiation is likely of course we can attribute inefficiencies to bargaining imperfection but it may not be useful to do so such attitudes sometimes seem to depend more on ideology than on reason this article gives one economist s reasoned view it discusses the coase theorem as a decentralization result and why decentralization results are interesting it considers mechanism design for revealing private information and describes the problems of centralization should the coase theorem should be viewed as a second best result property rights are more efficient than some reasonable alternative does the coase theorem recommend an institution or make

the impact of tax reform on new car purchases in ireland we examine the impact of recent tax reforms in ireland on private car transport and its greenhouse gas emissions a carbon tax was introduced on fuels and purchase vehicle registration and ownership motor taxes were switched from engine size to potential emissions we use a demographic model of the car stock by age size and fuel and a car purchase model that reflects the heterogeneous distribution of mileage and usage costs across various engine sizes the model shows a dramatic shift from petrol to diesel cars particularly for large engines the same pattern is observed in the latest data on car sales this has a substantial impact on tax revenue as car owners shift to the lower tax rates the tax burden has shifted from car ownership to car use and that the overall tax burden on private car transport falls as diesel engines are more fuel efficient than petrol engines carbon dioxide emissions fall modestly or if we consider the rebound effect of travel costs on mileage minimally from the perspective of the revenue the costs per tonne of carbon dioxide avoided are very high

rationing can backfire the day without a car in mexico city a ban restricting each car from driving on a specified weekday is found to have increased total driving in mexico city because of the ban cars effectively represent driving permits and some households have bought an additional car and increased their driving greater use of old cars congestion effects and increased weekend driving may also have contributed to the disappointing results the ban has high welfare costs and does not deliver the intended benefits of reduced driving quite the contrary the experience provides an interesting lesson in applied welfare economics theory indicates that this is a costly way of reducing traffic and pollution but the finding that the strategy is counterproductive could be made only with applied quantitative analysis in november 1989 the mexico city administration imposed a regulation banning each car from driving a specific day of the week called hoy no circula this one does not circulate today the day without a car regulation specifies that cars with license plate numbers ending with digits 0 or 1 do not drive on monday 2 or 3 do not drive on tuesday and so on restrictions do not apply on weekends the regulation applies to all cars except those of the fire department and thus to firms as well as households we use the term household for simplicity compliance is generally believed to be high the police are visible and fines are heavy the regulation has been both popular and controversial some people argue that it places a reasonable burden on car owners in order to alleviate congestion and pollution problems others argue that it is inefficient and unfair inefficient in the way most rationing devices are inefficient unfair because it is more easily avoided or accommodated by some than by others finally some people are arguing that the regulation is counterproductive actually increasing the levels of congestion and pollution because many households have purchased additional cars to circumvent the ban this article analyzes the policy pragmatically section i shows how the results of rationing can be compared with those that would be obtained using market

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

the two part instrument in a second best world abstract standard pigovian tax theory has been extended in two directions first many polluting activities are difficult to tax because they are not market transactions and so recent papers have shown that the same effects can be achieved by use of a two part instrument 2pi a tax on output or income and a subsidy for clean alternatives to pollution it is a generalization of a deposit refund system drs second a different literature concerns the second best pollution tax in the presence of other tax distortions here we combine the two extensions by looking at the second best 2pi when government needs revenue is the deposit larger and the rebate smaller we find explicit solutions for each tax and subsidy in a general equilibrium model with other tax distortions and we compare these to the rates in a first best model the tax subsidy combination is explained in terms of a tax effect an environmental effect and a revenue effect the model allows for flexible interpretation to show various applications of the 2pi we also discuss important caveats

nonlinear pricing under inequity aversion abstract we consider a monopoly which practices nonlinear pricing where buyers may have inequity averse preferences each buyer has a valuation for the good drawn from a distribution the monopoly knows the distribution but not the realizations we introduce the possibility that any buyer can be inequity averse fair types or not neutral types in addition to different demand types fair types get a disutility from inequity captured through a utility function in the spirit of the one introduced by fehr and schmidt 1999 we characterize the optimal nonlinear pricing and show that the degree of suboptimality increases and the monopoly profit decreases as the degree of the inequity aversion increases we also show that some or all of the neutral types with low demand are strictly better off when there are inequity averse types in the environment

the market impact and the cost of environmental policy evidence from the swedish green car rebate we quantify the effects of the swedish gcr a program to reduce oil dependence and greenhouse gas emissions in the automobile industry we find the gcr to increase the market shares of green cars and its cost to be 109 tonco2 saved thus 5 times the price of an emission permit since the main green cars in sweden are ffvs flexible fuel vehicles which can switch between petrol gasoline and ethanol we also account for fuel choice which increases the cost of the program finally we show that consumers would have purchased ffvs regardless of the rebate provided by the gcr

using scanner data to construct cp1 basic component indexes this article considers how scanner data could be used in constructing component indexes for the u s consumer price index one product coffee in two cities generates over 1 8 million observations in just over two years so coping with the sheer volume of data would be a challenge some other findings are 1 some aggregation of prices into unit value averages is necessary for practical reasons and to avoid bias 2 chained laspeyres indexes are very high 3 modified laspeyres indexes have some upward bias but much less than a true laspeyres index 4 fisher ideal or modified edgeworth indexes perform well and 5 aggregating prices across outlets to form city level unit values reduces the discrepancies between index number formulas

estimating the effect of salience in wholesale and retail car markets we investigate whether the first digit of an odometer reading is more salient to consumers than subsequent digits we find that retail transaction prices and volumes of used vehicles drop discontinuously at 10 000 mile odometer thresholds echoing effects found in the wholesale market by lacetera pope and sydnor 2012 our results reveal that retail consumers devote limited attention to evaluating vehicle mileage and that this drives effects in the wholesale market we estimate the inattention parameter implied by the price discontinuities in addition our results suggest that estimating consumer level structural parameters using data from an intermediate market can give misleading results

computation of standard errors for geary khamis parities and international prices a stochastic approach one of the areas receiving little attention in the past in index number theory is providing standard errors for the index number estimates recently clements and izan and selvanathan used the stochastic approach to index numbers to derive standard errors for the rate of inflation and laspeyres and paasche index numbers in this article we use this approach to compute standard errors associated with purchasing power parities computed using geary khamis aggregation procedure in the international comparisons project of the united nations we assess the quality of the standard errors using efron s bootstrap technique

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

a presumptive pigovian tax complementing regulation to mimic an emissions fee if regulations are used to make cars and fuels cleaner should gasoline taxes be used to manage demand for trips that pollute anaysis of a well composed program for mexico city indicates that the emission reductions would cost 24 percent more if a tax on gasoline was not introduced a simple analytical framework is developed to analyze the use of abatement requirements to make cars cleaner and a gasoline tax to economize on the use of cars the two instruments should be combined to mimic the incentives that would have beeen provided by an emissions fee thus cleaner cars and fewer trips are analogous to competing suppliers of emission reductions the planner should buy from both so that marginal costs are equal applying that rule the marginal cost of emission reductions is simply the gasoline tax rate divided by emissions per liter

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

attention in games an experimental study abstract a common assumption in game theory is that players concentrate on one game at a time however in everyday life we play many games and make many decisions at the same time and have to decide how best to divide our limited attention across these settings in this paper we ask how players solve this attention allocation problem we find that players attention is attracted to particular features of the games they play and how much attention a subject gives to a given game depends on the other game that the person is simultaneously attending to

purchasing power parity and relative price variability evidence from the 1970s abstract one curious fact to emerge from the return to flexible exchange rates in the 1970s was the failure of empirical tests of simple versions of the purchasing power parity ppp doctrine this paper seeks to establish whether that observed poor performance of ppp can be attributed to uncertainty regarding the rate of inflation due to the large variations in relative prices experienced during the 1970s the evidence is found to be unsupportive of the notion