consumption and children abstract consumption by couples rises sharply in the beginning and falls later in life the causes of the early rise are hotly contested among the suggestions are rule of thumb behavior demographics liquidity constraints the precautionary motive and nonseparabilities between consumption and labor supply we develop two tests of the extreme hypothesis that only changes in family structure matter we estimate effects of the numbers and ages of children on consumption these estimates allow us to rationalize all of the increase in consumption without recourse to any of the causal mechanisms our estimates can be interpreted either as giving upper bounds on the effects of children or as evidence that the other causes are not important

fertility risk in the life cycle in this paper i study fertility decisions of women in the u s economy with special emphasis on the timing of births and abortions over the life cycle given the policy debate regarding abortion availability along with empirical evidence on its positive impact on women outcomes understanding the fertility process in a broad sense should help guide the discussion in this paper i present a life cycle model of consumption savings and fertility decisions in an environment with uninsurable income shocks and imperfect fertility control my model presents a unified framework in which opportunity costs of child rearing as well as technological restrictions in the form of contraception effectiveness have roles to understand lifetime fertility the model extends important earlier work on contraceptive decisions by women in the sense that it allows for stochastic fertility outcomes and is able to account for the interplay between asset accumulation and fertility decisions observed in the data

a generalization of the endogenous grid method abstract this paper extends carroll s 2005 the method of endogenous gridpoints for solving dynamic stochastic optimization problems national bureau of economic research technical working paper 309 endogenous grid method to perform value function iteration in models with more than one control variable we propose to mix the endogenous grid method with standard value function iteration to achieve higher efficiency we illustrate the method using the stochastic neoclassical growth model with and without labor leisure choice we report important gains in efficiency that make value function iteration an attractive computational method in terms of both computing time and accuracy

price discrimination and investment incentives abstract we examine a model of a monopolist selling to two segments of consumers with different preferences for quality we show that if the firm is unable to price discriminate between the segments then there is less investment in quality we find that both consumer segments and society overall may suffer if the firm is unable to price discriminate we extend the model to duopoly competition and find that our results still hold

price discrimination through offers to match price in this paper a firm discriminates between two classes of customer who have a different cost of information by coupling a list price with an offer to match the pr ice of any other shop if the list price elsewhere is lower the firm will be successful in discrimination the list price of each firm is increasing in the number of sellers and the total sales are decreasi ng in the number of sellers furthermore if sellers coordinate they discriminate more efficaciously and increase their profits by increa sing their total sales copyright 1987 by the university of chicago

social security life insurance and annuities for families abstract in this paper we ask whether an aspect of social security namely its role as a provider of insurance against uncertain life spans is welfare enhancing to this end we use an olg model where agents have a bequest motive and differ in sex and marital status and where families are formed and destroyed and their characteristics evolve exogenously according to u s demographic patterns of marriage divorce fertility and mortality we compare the implications of social security under a variety of market structures that differ in the extent to which life insurance and annuities are available we find that social security is a bad idea in economies where the private sector provides annuities and life insurance it is a bad idea for the standard reason that it distorts the intertemporal margin by lowering the capital stock in the absence of such securities social security is still a very bad idea only marginally less so compared with economies with annuities and life insurance we also explore these issues in a world where people live longer and we find no differences in our answers as a by product of our analysis we find that the existence of life insurance opportunities for people is important in welfare terms while that of annuities is not

international effects of national regulations external reference pricing and price controls under external reference pricing erp the price that a government permits a firm to charge in its market depends upon the firm s prices in other countries in a two country home and foreign model where demand is asymmetric across countries we show that home s unilaterally optimal erp policy permits the home firm to engage in a threshold level of international price discrimination above which it is just willing to export if the firm faces a price control abroad or bargains over price with the foreign government an erp policy can even yield higher home welfare than a direct price control

third degree price discrimination with interdependent demands this paper analyzes the price output and welfare effects of third degree price discrimination for a monopolist who sells in two interdependent markets the case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes the economic effects of price discrimination are shown to depend on the type and strength of demand interdependence the curvature of the demands and the slope of marginal cost the circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed

consumer bankruptcy a fresh start consumer bankruptcy provides partial insurance against bad luck but by driving up interest rates makes life cycle smoothing more difficult we argue that to assess this trade off one needs a quantitative model of consumer bankruptcy with three key features life cycle component idiosyncratic earnings uncertainty and expense uncertainty exogenous negative shocks to household balance sheets we find that transitory and persistent earnings shocks have very different implications for evaluating bankruptcy rules more persistent shocks make the bankruptcy option more desirable larger transitory shocks have the opposite effect our findings suggest the current us bankruptcy system may be desirable for reasonable parameter values jel d14 d91 k35

pareto price discrimination abstract as the collection of consumer data becomes more common online merchants are better equipped to price discriminate now more than ever before while standard first degree price discrimination benefits merchants and harms consumers relative to uniform pricing i derive an alternative first degree pricing strategy that achieves efficiency and pareto improves upon the uniform pricing equilibrium furthermore i show that price ceilings can enforce these pareto price discrimination strategies making pareto price discrimination a viable option for merchants and policy makers

insider trading 2 0 the ethics of information sales the sale of faster access to financial market data has recently generated public controversy ny attorney general eric schneiderman has referred to such fast data feeds as insider trading 2 0 for example thomson reuters sold the university of michigan s consumer sentiment index to computerized trading firms 2 seconds before releasing its data to its other paying clients this paper explores the ethical issues involved in the sale of such information is selling faster access ethically the same as traditional insider trading which generally involves a breach of fiduciary duty or the use of misappropriated information such practices are extremely different from traditional insider trading as there is neither a breach of fiduciary duty nor misappropriation of inside information the ethical issues are similar to other market segmentation and price discrimination issues in which different prices are charged to different customers the ability to price discriminate across segments can actually benefit large segments of the population who may receive lower prices because others such as the high speed traders are paying more the sale of faster access to information especially by exchanges raises additional ethical issues there may be adverse effects on market quality that must be addressed the moral distaste for the practice expressed by some stems from the seeming unfairness of a modern market structure that provides advantages to a small group of computerized traders

price discrimination and patent policy patent and antitrust policy are often presumed to be in conflict as an important example there is ongoing controversy about whether price discrimination by a patent holder is an illegal or socially undesirable exploitation of monopoly power in this article we show that no conflict exists in many price discrimination cases even ignoring the dynamic effects on incentives for innovation third degree price discrimination by patent holders can raise static social welfare in fact pareto improvements may well occur welfare gains occur because price discrimination allows patent holders to open new markets and to achieve economies of scale or learning further even in cases where discrimination incurs static welfare losses it may be efficient relative to other mechanisms such as length of patent life for rewarding innovators with profits

monopoly price discrimination and demand curvature this paper presents a general analysis of the eects of monopolistic third degree price discrimination on welfare and output when all markets are served su cient conditions involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the dierent mar kets are presented for discrimination to have negative or positive eects on

life insurance and household consumption abstract using life insurance holdings by age sex and marital status we infer how individuals value consumption in different demographic stages we estimate equivalence scales and bequest motives simultaneously within a fully specified model where agents face us demographics and save and purchase life insurance our findings indicate that individuals are very caring for dependents that economies of scale are large that children are very costly or yield very high marginal utility that wives with children produce lots of home goods and that females display habits from marriage while men do not these findings contrast sharply with standard equivalence scales

price discrimination and social welfare studies the effect of price discrimination on social welfare using methods from duality theory features of the reservation model presented quasi linear utility and consumers surplus upper and lower bounds on welfare change bounds on welfare change with optimal price discrimination from ebsco

evaluating long term care policy options taking the family seriously we propose a dynamic non cooperative framework for long term care ltc decisions of families and use it to evaluate ltc policy options for the u s we first document the importance of informal caregiving and economic determinants of care arrangements we then build a heterogeneous agents model with imperfectly altruistic overlapping generations to account for the patterns we find a key innovation is the availability of informal care ic which is determined through intra family bargaining this opens up a new margin in response to policy and allows for informal insurance through home production of care our calibrated model captures the observed care arrangements well we study the implications of non means tested ic and formal care fc subsidies as well as changes to means tested medicaid we find that ic responds strongly to these policies an ic subsidy substantially reduces reliance on medicaid while the reduction of tax revenues due to lower labour supply by caregivers is modest there are large welfare gains from a combination of ic and fc subsidies even when combined with a reduction of the medicaid program

third degree price discrimination consumption externalities and social welfare this paper analyses monopolistic third degree price discrimination in the presence of consumption externalities within two separate markets assuming linear inverse demands we investigate an associated change in social welfare the sum of the consumers surpluses and the producer s profit with the regime change from uniform pricing to price discrimination when both markets are open under either regime it is shown that social welfare can improve even if total output is unaffected by the regime change moreover it is possible that the sum of the consumers surpluses also increases

more on marriage fertility and the distribution of income according to pareto 1896 the distribution of income depends on the nature of the people comprising a society on the organization of the latter and also in part on chance in the model developed here the nature of the people is captured by attitudes toward marriage divorce fertility and children singles search for mates in a marriage market married agents bargain about work and the quantity and quality of children they can divorce social policies such as child support requirements reflect the organization of the society finally chance is modeled by randomness in income marriage opportunities and marital bliss

rising inequality changes in the distribution of income and consumption in the 1980s this paper examines changes in the distribution of income and consumption in the united states during the 1980s using data from the current population survey income and consumer expenditure survey consumption we reach three primary conclusions first changes in the distribution of consumption parallel changes in the distribution of income the lowest quintile of the consumption distribution received 0 9 percentage points less of total consumption in 1988 than in 1980 the corresponding decline for income was 0 6 percentage points second broad conclusions concerning recent changes in the consumption distribution are not very sensitive to the exact choice of a measure of family needs under a wide variety of alternative household equivalence scales there is a widening in the consumption distribution in the 1980s third the usc of consumption measures of well being in place of measures based on current money income docs change conclusions concerning the extent of poverty in the united stales using the official federal poverty thresholds we find that the overall consumption poverty rate was three percentage points below the income poverty rate in 1988 comparisons of the poverty rates of the elderly and the non elderly are substantially affected by the choice of poverty measure the consumption poverty rare for the elderly was only 60 percent of the rate for adults and one third of the rate for children in 1988 this abstract was borrowed from another version of this item

is consumption growth consistent with intertemporal optimization evidence from the consumer expenditure survey in this paper we show that some of the predictions of models of consumer intertemporal optimization are in line with the patterns of nondurable expenditure observed in u s household level data we propose a flexible specification of preferences that allows multiple commodities and yields empirically tractable equations we estimate preference parameters using the only u s micro data set with complete consumption information we show that previous rejections can be explained by the simplifying assumptions made in previous studies we also show that results obtained using good consumption or aggregate data can be misleading

revisiting the effect of household size on consumption over the life cycle abstract although the link between household size and consumption has strong empirical support there is no consistent way in which demographics are dealt with in standard life cycle models we study the relationship between the predictions of the single agent model the standard in the literature versus a simple model extension the demographics model where deterministic changes in household size and composition affect optimal consumption decisions we show theoretically that the demographics model is conceptually preferable to the single agent model as it captures economic mechanisms ignored by the latter however our quantitative analysis demonstrates that differences in predictions for consumption are negligible across models when using standard calibration strategies this suggests that it is largely irrelevant which model specification is used

insurance and opportunities a welfare analysis of labor market risk abstract using a model with constant relative risk aversion preferences endogenous labor supply and partial insurance against idiosyncratic wage risk this paper provides an analytical characterization of three welfare effects a the welfare effect of a rise in wage dispersion b the welfare gain from completing markets and c the welfare effect from eliminating risk the analysis reveals an important trade off for these welfare calculations on the one hand higher wage uncertainty increases the cost associated with missing insurance markets on the other hand greater wage dispersion presents opportunities to raise aggregate productivity by concentrating market work among more productive workers welfare effects can be expressed in terms of the underlying parameters defining preferences and wage risk or alternatively in terms of changes in observable second moments of the joint distribution over individual wages consumption and hours

life cycle expenditure allocations and the consumption costs of children abstract in this paper we assess whether it is changing needs or intertemporal substitution that dominate household expenditure responses to the presence of children over the life cycle we construct lifetime expenditure paths for households with different demographic profiles and consider the shape of these paths and some possible implications for welfare measures simulated expenditure paths based on consistent single period and multi period models indicate that it is indeed changing needs that dominate such paths in periods when children are present in the household however allowing for intertemporal substitution is still shown to be important since it can introduce new information relevant to the calculation of household welfare

humps and bumps in lifetime consumption in this article we argue that the life cycle model that allows demographics to affect household preferences and relaxes the assumption of certainty equivalence can generate hump shaped consumption profiles over age that are very similar to those observed in household level data sources and in particular match the differences in shape across different education groups liquidity constraints or myopia are not required to explain the empirical features of observed life cycle patterns

progressive pricing the ethical case for price personalization price discrimination is widely considered unethical unfair by consumers as has been borne out by decades of psychological research and mainstream press reporting however little academic work has been done to investigate the ethics of price discrimination the work that has been done to date concludes that while price discrimination is not unethical despite widespread lay perceptions it is at best morally neutral we argue price discrimination is more ethical than unitary pricing when done progressively meaning firms charge customers as a function of their willingness to pay we introduce this specific kind of price discrimination as progressive pricing and demonstrate it ethically outperforms a unitary pricing scheme where everyone pays the same price regardless of their willingness to pay at least within a broadly consequentialist framework we do this by comparing a unitary pricing scheme to a progressive one analyzing them through the lenses of four different consequentialist social welfare functions utilitarian egalitarian prioritarian and leximin which are used by welfare economists and philosophers to rank the distributions of different social outcomes concluding that progressive pricing is preferred regardless of which social welfare function s one finds most plausible

efficiency of uniform pricing in universal service obligations we provide an efficiency justification for the imposition of the uniform pricing constraint in universal service obligations uso where uso are defined as a set of constraints imposed on firms belonging to a network industry in addition to the uniform pricing up constraint which is an obligation to serve all consumers at an identical price constraints considered are the coverage constraint cc which is an obligation imposed on one of the firms to serve a given segment of the market and the license constraint lc which is a minimum or a maximum coverage restriction that is imposed on entrants we show that adding the up constraint to both a cc and a lc leads to an increase in welfare our contribution comes from the full recognition of the role of a lc in well designed uso and we illustrate this role with the particular case of linear demand

consumption over the life cycle facts from consumer expenditure survey data this paper uses consumer expenditure survey data and a seminonparametric statistical model to estimate life cycle profiles of consumption controlling for demographics cohort and time effects we construct age profiles for total and nondurable consumption as well as expenditure patterns for consumer durables special emphasis is placed on the comparison of different approaches to control for changes in demo graphics over the life cycle we find significant humps over the life cycle for total nondurable and durable expenditures changes in household size account for roughly half of these humps bootstrap simulations suggest that our empirical estimates are tight in that standard errors are small

consumption and labor supply with partial insurance an analytical framework we develop a model with partial insurance against idiosyncratic wage shocks to quantify risk sharing closed form solutions are obtained for equilibrium allocations and for moments of the joint distribution of consumption hours and wages we prove identification and demonstrate how labor supply data are informative about risk sharing the model estimated with us data over the period 1967 2006 implies that i 39 percent of permanent wage shocks pass through to consumption ii the share of wage risk insured increased until the early 1980s and iii preference heterogeneity is important in accounting for observed dispersion in consumption and hours jel e21 e23 e31 e52

a note on third degree price discrimination with interdependent demands by incorporating symmetric interdependency into linear demands this note shows that monopolistic third degree price discrimination can improve social welfare even if total output remains the same a result that counters one of the main results presented in layson this journal 1998 it is also shown that this positive change in social welfare benefits the monopoly side but that consumers surplus decreases as a whole

procompetitive gains from trade and comparative advantage having made the concepts of pro or anticompetitive output changes precise necessary and sufficient conditions for trade gains are derived under conditions of increasing returns to scale and imperfect competition in a general equilibrium model with any finite number of goods and factors these conditions yield generalizations of the theorems of comparative advantage in goods and implicit factor trade the factor content version of the h o theorem other generalizations can be obtained if one assumes quasihomothetic preferences and that welfare effects are dominated by price rather than income effects copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

large deviations and equilibrium selection in large populations abstract this paper uses the theory of large deviations to analyse equilibrium selection in one dimensional games with large populations where the system evolves according to a jump markov process the equilibria selected maximise a quasi potential function which can be determined by solving a polynomial equation estimates of waiting times are also given it shows that the equilibria about which there is more noise are less likely to be selected and clarifies the role of the limiting deterministic dynamic in selection

evolutionary dynamics with aggregate shocks abstract we study the evolution of the continuous time replicator dynamics when payoffs are subject to aggregate shocks that take the form of a wiener process in the absence of mutation the system need not have an ergodic distribution with mutation the system does have an ergodic distribution in the limit as the mutation rate and the variance of the shocks converge to zero this distribution concentrates on the risk dominant equilibrium this result is not however robust to changes in the underlying deterministic dynamics

market opening under third degree price discrimination there are frequently regulatory and antitrust pressures for firms to cease price discrimination and practice uniform pricing such pressures however generally have negative welfare consequences when they lead to weaker markets not being served this paper derives conditions that determine when price discrimination will induce service to a market market opening that would not be served under a regime of price uniformity the factors that favor market opening under price discrimination are a large market share for the strong market profit margins in the two markets that are far apart and concave rather than convex demand curves copyright 1994 by blackwell publishing ltd

consumption retirement and social security evaluating the efficiency of reform that encourages longer careers abstract this paper proposes and analyzes a social security reform in which individuals no longer face the oasi payroll tax after say age 54 or a career of 34 years and their subsequent earnings have no bearing on their benefits we first estimate parameters of a life cycle model our specification includes non separable preferences and possible disability it predicts a consumption expenditure change at retirement we use the magnitude of the expenditure change together with households retirement age decisions to identify key structural parameters the estimated magnitude of the change in consumption expenditure depends importantly on the treatment of consumption by adult children of the household simulations indicate that the reform could increase retirement ages one year or more equivalent variations could average more than 4000 per household and income tax revenues per household could increase by more than 14 000

families as shocks in this paper we show the quantitative importance of the process that determines changes in family composition to determine the main macroeconomic magnitudes we do so by modelling family type as a stochastic process that affects households in a way similar to shocks to earnings agents respond to these process by optimally choosing savings we show that the size of savings differs dramatically depending on the details of the stochastic process the model is quantitative its fundamental parameters are estimated using u s data

estimating the household consumption function in saudi arabia an error correction approach abstractwe estimate a micro founded life cycle consumption model for saudi arabia over the period 1970 2017 using error correction model procedures dynamic adjustments are significant and both in

consumption and risk sharing over the life cycle a striking feature of u s data on income and consumption is that inequality increases with age this paper asks if individual specific earnings risk can provide a coherent explanation we find that it can we construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes earnings inequality is exogenous and is calibrated to match data from the u s panel study on income dynamics consumption inequality is endogenous and matches well data from the u s consumer expenditure survey the total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years in welfare terms the latter is found to be more important than the former

an empirical investigation of the welfare effects of banning wholesale price discrimination rand 054 rand2007 cls 1994 07 13 v1 2u standard latex document class rand rand 054 dispatch 12 7 2008 ce n a journal msp no no of pages 26 pe sharon rand journal of economics vol 40 no 1 spring 2009 pp 20 45 an empirical investigation of the welfare effects of banning wholesale price discrimination sofia berto villas boas economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination if downstream cost differences exist then discrimination shifts production inefficiently toward high cost retailers so a ban increases welfare if differences in price elasticity of demand across retailers exist discrimination may increase welfare if quantity sold increases so a ban reduces welfare using retail prices and quantities of coffee brands sold by german retailers i estimate a model of demand and supply and separate cost and demand differences simulating a ban on wholesale price discrimination has positive welfare effects in this market and less if downstream cost differences shrink or with less competition introduction wholesale price discrimination means that an upstream firm sets different prices for the same product for various downstream retailers wholesale price discrimination is commonly practiced in many markets examples include markets such as petroleum distribution steel heavy trucking tobacco and pharmaceuticals in several countries milk and other dairy products are sold using government administered or sanctioned discriminatory pricing schemes wholesale price discrimination practices are also used for services such as loans insurance and advertising 1 competition authorities have been concerned with wholesale price discrimination the european union treaty s article 82 c prohibits practices where a dominant firm would place trading partners at a competitive disadvantage the u s robinson patman act forbids discriminat ing in price between different purchasers where the effect may be to lessen competition unless the university of california berkeley sberto are berkeley edu i thank the editor igal hendel and two anonymous referees for many helpful comments and max auffhammer cyndi berck peter berck gal hochman silke januszewski forbes george judge kai uwe k uhn diana lazo mark muendler aviv nevo ariel pakes jeff perloff andrew sweeting miguel villas boas and participants at uc san diego university of michigan the inra idei conference in toulouse and the university of british columbia summer conference in industrial organization for their suggestions i thank daniel klapper for letting me have access to the data support from the giannini foundation and from an aes grant are gratefully appreciated see for gasoline markets texaco v hasbrouck 496 us 543 no 87 2048 1990 and the new york state motor fuel marketing practices act for steel chan hall and rust 2003 for heavy trucking volvo trucks north america inc v reeder simco gmc inc docket no 04 905 for tobacco brooke group ltd v brown and williamson tobacco corp 509 us 209 no 92 466 1993 for wholesale pharmaceuticals see http www datcp state wi us trade business unfair comp drug price jsp for dairy markets see for example gardner 1984 and for services see givens 1983 c 2009 rand copyright

on the welfare effects of regulating price discrimination in a model with linear demands and constant variable costs it is shown that a welfare gain is made by restricting the relative rather than absolute prices that a monopolist can charge for a range of products the nature of this class of restrictions is considered one application might occur if cost levels are unknown to the regulatory authority but costs are known to be linear functions of product characteristics copyright 1992 by blackwell publishing ltd

on the state of the union an overlapping generations model of marriage and divorce is constructed to analyze family structure and intergenerational mobility agents differ by sex marital status and human capital single agents meet in a marriage market and decide whether to accept or reject proposals to wed married couples must decide whether to separate or not parents invest in their children depending on their wherewithal a simulated version of the theoretical prototype can generate an equilibrium with a significant number of female headed families and a high degree of persistence in income across generations to illustrate the model s mechanics the effects of two antipoverty policies namely child support and welfare are investigated

third degree price discrimination in linear demand markets effects on number of markets served and social welfare author affiliation victor kaftal department of mathematical sciences 839 c old chemistry building university of cincinnati cincinnati oh 45221 usa victor kaftal uc edudebashis pal department of economics 1204 crosley tower university of cincinnati cincinnati oh 45221 debashis pal uc edu corresponding author acknowledgment we are grateful to rick harbaugh laura razzolini david sappington and two anonymous reviewers debashis pal is also grateful to taft research center for financial support 1 introductiondoes monopolistic third degree price discrimination reduce social welfare the question has continued to intrigue economists and policy makers for more than half a century the seminal work of robinson 1933 shows that if a monopolist with a constant marginal cost sells in two distinct and independent markets having linear demands then welfare falls with third degree price discrimination almost half a century later schmalensee 1981 reexamines robinson s result and demonstrates that for any number of markets with linear demands third degree price discrimination lowers welfare schmalensee 1981 also establishes more generally that price discrimination increases welfare only if it increases aggregate output subsequently using ingenious duality approaches varian 1985 and schwartz 1990 generalize the results for correlated demands and nonlinear marginal costs 1it is therefore well known that for linear market demands and constant marginal costs monopolistic third degree price discrimination indeed lowers welfare it is important to note however that the welfare reducing effect of third degree price discrimination is derived under a crucial assumption it is assumed that if the monopolist is forced to charge the same price in all markets uniform pricing the monopolist would sell a positive quantity in each market in a recent article cowan 2007 considers various forms of nonlinear demands and presents the necessary and sufficient and or sufficient conditions for price discrimination to reduce welfare cowan 2007 however also assumes that all markets are served under uniform pricing yet when this assumption does not hold the welfare effects of monopolistic third degree price discrimination turn out to be significantly more intricate observe that when all markets are not served under uniform pricing price discrimination may increase welfare because price discrimination may serve markets that would not be served under uniform pricing thus relative to uniform pricing price discrimination has two countervailing effects on welfare aggregate welfare goes down in those markets that are originally served under uniform pricing whereas welfare goes up in those markets that are not served under uniform pricing therefore the additional welfare from the new markets under price discrimination may offset any loss of welfare in the markets that are originally served under uniform pricing the point is strongly emphasized in schmalensee s 1981 seminal work in the context of prescription drugs an identical sentiment is recently echoed in varian 2000 in the context of two markets the possibility of price discrimination opening up new markets is first analyzed graphically by battalio and ekelund 1972 layson 1994 also considers two markets but includes nonlinear demands and presents conditions for opening of new markets based on endogenous features such as elasticities in the context of patent policy opening of new markets by price discrimination is explicitly incorporated by hausman and mackie mason 1988 using two markets they show that price discrimination by a patent holder is socially desirable in many cases because it allows the patent holder to open new markets there is a related literature in spatial economics beginning with greenhut and ohta 1972 and holahan 1975 that deals with spatial price discrimination and market opening with linear demand

learning mixed equilibria we study learning processes for finite strategic form games in which players use the history of past play to forecast play in the current period in a generalization of fictitious play we assume only that players asymptotically choose best responses to the historical frequencies of opponents past play this implies that if the stage game strategies converge the limit is a nash equilibrium in the basic model plays seems unlikely to converge to a mixed strategy equilibrium but such convergence is natural when the stage game is perturbed in the manner of harsanyi s purification theorem journal of economic literature classification number c72

monopolistic third degree price discrimination under vertical product differentiation this paper shows in a vertical product differentiation model with variable costs of quality that monopolistic third degree price discrimination always reduces welfare regardless of whether the quality is fixed or is endogenous the results provide rich implications for antitrust policy

direct welfare analysis of relative price regulation abstract the paper synthesizes and develops the welfare analysis of regulating relative prices for example price differences of which banning price discrimination is a special case welfare results are derived directly by convexity arguments using functions of welfare levels the method is also used to obtain results about e ects on consumer surplus

should day care be subsidized in the presence of distortionary taxes on labor can subsidies on childcare flnanced by a further increase in taxes raise welfare by encouraging women with small children to work we approach this question in two difierent ways first we consider a set of stylized models where we prove analytically that under some conditions the ramsey optimal policy consists in making childcare expenses tax deductible then we construct a calibrated stochastic dynamic life cycle model of household decision making designed to capture some facts about labor supply in germany we flnd that the welfare gains associated with subsidizing childcare are considerable and that the maximum gains are realized when childcare is subsidized to an even greater extent than what tax deductibility implies

storable good monopoly the role of commitment we study dynamic monopoly pricing of storable goods in an environment where demand changes over time the literature on durables has focused on incentives to delay purchases our analysis focuses on a different intertemporal demand incentive for consumers the key force on the consumer side is advance purchases or stockpiling this stockpiling motive can be present in the case of standard durables as well in environments unmodeled in the prior literature we show that if the monopolist cannot commit then prices are higher in all periods and social welfare is lower than in the case in which the monopolist can commit this is in contrast with the durable goods analysis in the literature on the coase conjecture

consumption over the life cycle and over the business cycle the main aim of this paper is to assess the validity of the life cycle model of consumption in particular we address an issue that has recently received much attention especially in the macroeconomic literature that of excess sensitivity of consumption growth to income growth we do this using a time series of cross sections and a novel and flexible parameterization of preferences the former allows us to address aggregation issues directly while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth the main findings can be summarized as follows i the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables this is true both at life cycle and business cycle frequencies ii estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables including the level of consumption the eis increases with the level of consumption as expected iii the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle iv we are able to reconcile our results with those reported both in the macro and micro literature v in our specification the elasticity of intertemporal substitution is not very well determined this result however should be taken with care as we have not made an effort to construct a preferred specification which would probably include additional controls for labor supply behavior the evidence presented shows that the life cycle model cannot be easily dismissed indeed we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle