the pricing of durable exhaustible resources partial or total durability characterizes a large class of exhaustible resources hotelling s r percent rule will apply to a durable resource produced in a competitive market but will not apply if the resource is produced in a monopolistic market however the r percent rule does not mean that price is steadily rising it is shown that in general the competitive market price will fall initially as the stock in circulation increases and later will rise as the stock decreases and eventually depreciates toward zero after production ceases accounting for durability may thus help explain the u shaped long term price profiles observed for many resources 11 references 3 figures

name your own price at priceline com strategic bidding and lockout periods a buyer suggests prices to n sellers in a time period and buys from the seller who accepts the bid first the number of bidding rounds is determined by how frequently the buyer can make an offer we show that with no limit on the frequency and without discounting the price path is either kept flat initially with large jumps at the end or increasing steadily over time which class of path occurs in equilibrium depends on the buyer s trade off between committing to a price ceiling versus finely screening the sellers costs with discounting limiting the number of rounds mitigates the delay caused by the reluctance to raise bids in the first class of equilibrium and therefore can benefit the buyer this result suggests why in reality bargaining parties often take measures to make their offers rigid and consequently force themselves to make fewer offers copyright oxford university press

imperfect information and consumption in the united states and the united kingdom pischke 1995 has argued that imperfect information may account for the failure of hall s permanent income hypothesis to explain the behaviour of aggregate consumption we identify the restrictions that pischke s theory places on the dynamics of aggregate consumption and test them using quarterly data for the united kingdom and united states our results suggest that while pischke s model explains some features of the data which the hall model cannot it is formally rejected

the role and growth of new car leasing theory and evidence abstractthere has been substantial growth in rates of new car leasing over the last few decades building on recent theoretical research we construct a model of the leasing decision in which leasing mitigates adverse selection and reduces transaction costs but moral hazard limits its use in our model the prevalence of leasing is related to new car reliability which suggests that the recent growth in leasing is at least partly due to improvements in new car reliability we use this model to derive testable implications and then conduct an empirical analysis to investigate whether the operation of the new and used car markets is consistent with the predictions of this theoretical approach our empirical results support the theoretical predictions of our model in particular we provide direct evidence that leasing mitigates adverse selection and that an important factor in the growth in new car leasing rates has indeed been the growth of new car reliability

trade ins and introductory offers in a monopoly we model the commonly used marketing practices of offering discounts to either repeat buyers trade ins or new buyers introductory offers of a quasi durable good we analyze these practices in terms of their potential for intertemporal and third degree price discrimination in our two period model the monopolist sets a first period price that segments the second period market optimally into holders and nonholders of the good in the second period different prices are quoted to the two market segments we present three versions of the model with varying assumptions on consumers rationality

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

commitment and monopoly pricing in durable goods models this article investigates the issue of commitment by a durable goods monopolist two models of the interaction between durability recycling and market power are compared the two differ according to the ability f the seller to credibly commit to a given salec qtrn egy this article takes the standard durable goods monopoly model extends it to allow for depreciation and compares the monopoly markup with swan s predicted markup for a recycled good the difference between the two models is shown to reduce to a single parameter in the markup equation

the estimation of surprise models and the surprise consumption function in the first part of the paper we outline a method for estimating a class of models in which news or surprises appear and expectations are formed rationally the method is an extension of the errors in variables method of mccallum and wickens as a by product some of pagan s results on the circumstances under which the commonly used two step method of estimating surprise models is efficient are shown to be a consequence of well known theorems on the efficiency of sub system estimation when a subset of equations are exactly identified in the second part of the paper the method is applied to hall s random walk model of consumption which is extended to allow for stochastic interest rates and for leisure and government spending to be substitutes for private spending the extended formulation is a great deal more successful at capturing the salient features of the data we also derive approximate restrictions across the parameters of the model due to the rational expectations hypothesis but find that they are marginally rejected by the data finally we evaluate the ability of the life cycle with rational expectations model to encompass alternative models

bureaucrats or politicians comment alesina and tabellini 2007 investigate the normative criteria for allocating policy tasks to bureaucrats versus politicians while they establish criteria with respect to a number of parameters they do not give a criterion with respect to the degree of imperfect monitoring we establish an unambiguous criterion about imperfect monitoring jel d72 d73

durable goods oligopoly abstract this paper models a durable goods oligopoly as a differential game two cases are treated sales where firms cannot lease but must sell the good in question and leasing where firms do not sell but only rent in the sales case firms face increasing marginal cost of production and the good in question depreciates for this case a rational expectations feedback nash equilibrium is constructed for which monopoly or oligopoly output is less than the efficient level this gap between oligopoly and competitive output diminishes as the number of firms increases when firms can only lease the good the good is assumed not to depreciate and the monopoly level of steady state output is compared with the level of steady state output for a feedback equilibrium duopoly for this case the duopoly equilibrium has steady state output that is less than the corresponding efficient level but greater than the monopoly level the leasing model is shown to be isomorphic to the adjustment cost duopoly model of driskill and mccafferty journal of economic theory 49 1989 324 338

why would a durable good monopolist also produce a cost inefficient nondurable good abstract we develop both commitment and time consistent stationary policies for a monopolist who produces a mixture of goods distinguished by production costs and degree of durability under commitment only the cost efficient durable good is produced and the monopoly output is realized each period for the time consistent stationary case there is an interval for the degree of durability where only the durable good is produced and a higher non overlapping interval where both the cost efficient durable and the cost inefficient nondurable good are produced for any period length when the degree of durability is such that both durable and nondurable goods are provided combined output is less than the competitive output and decreases in the degree of durability approaching the single period monopoly output when both goods are produced the coase conjecture does not hold

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

competition in durable goods markets the strategic consequences of leasing and selling in marketing durable goods manufacturers use varying degrees of leasing and selling to consumers e g cars photo copiers personal computers airplanes etc the question that this raises is whether the distinction between leases and sales is simply one of price or whether the proportion of leases and sales effects a firm s ability to compete in the market in this paper we use two approaches to argue that leasing and selling create strategic consequences that extend beyond prices first we develop a stylized theoretical model that shows that the optimal proportion of leases and sales depends on the competitiveness of the market and on the inherent reliability of the firm s product and second we find support for the implications of our theoretical model with data from the automobile industry the u s automobile industry has seen a large increase in leasing over the last five years however the extent to which leasing has been embraced varies widely across manufacturers for example in 1993 the sport utility segment had the following lease percentages ford explorer 29 jeep grand cherokee 24 toyota 4 runner 11 and chevrolet blazer 9 in addition manufacturers often vary lease percentages across models for example in 1993 ford leased 22 of its crown victoria model 35 of its taurus model and 42 of its probe model a popular argument for why we see these differences is that higher priced cars are leased more often because leasing makes them more affordable however this rationale is not compelling in the face of our data for example the ford probe was priced significantly lower than the crown victoria and yet it was leased almost twice as often to develop a better understanding of why we observe differences in the proportion of leasing we develop a two period model of a duopoly in which each manufacturer chooses its optimal quantity and the fraction of units it wants to lease we find that in equilibrium neither firm leases all its units either they use a mix of leasing and selling or they use only selling our analysis suggests that the fraction of leased cars decreases as the manufacturers products become more similar and the competition between them increases the intuition for this result is that a higher fraction of leases puts the firm at a competitive disadvantage in the future this occurs because unlike firms that sell their product firms that lease are at a price disadvantage another important finding in this paper is that the extent of leasing chosen by a manufacturer depends on the reliability of its product in particular all else being equal the lower a product s reliability the lower its proportion of leases within the context of the automobile industry this suggests that more expensive cars may be leased more often because they are of higher quality and not necessarily because they are more expensive finally we test the implications of our theoretical model with data from the u s automobile market in particular for 1993 model year cars we develop a measure of reliability using data from consumer reports in addition we develop a measure of the extent of competition in each segment of the automobile market we support our hypotheses by finding that the extent to which a car model is leased depends strongly on its predicted reliability and on the competitive intensity within the segment

why monopolists prefer to make their goods less durable this paper considers goods that depreciate in terms of quality over time and permits consumers to differ in their attitude concerning the usability of a durable good after it has depreciated given this it is shown that even if a monopoly can costlessly increase the durability of its product it may choose not to do so this does not happen in competition copyright 1988 by the london school of economics and political science

monopoly production of durable exhaustible resources we examine monopoly production of a durable exhaustible resource previous authors have implicitly assumed that the monopolist is able to make binding commitments about future decisions we consider the more plausible case in which the monopolist lacks this ability and must choose from dynamically consistent plans two models are considered a discrete time model in which there is a strictly finite initial stock of the resource and a continuous time model in which costs are an increasing function of cumulative production we find that as a general result monopoly leads to overconservation the monopolist who cannot precommit produces the efficient quantity ultimately but does so too slowly by contrast the monopolist who can precommit produces less than the efficient stock even in the limit we also find that increased importance of exhaustibility hastens the extraction of the resource copyright 1990 by the london school of economics and political science

finite horizons life cycle savings and time series evidence on consumption abstract this paper develops an explicitly aggregated life cycle model which allows for finite horizons and declining individual labor supply the model can generate a common upward trend in aggregate consumption labor income and nonhuman wealth without relinquishing hall s random walk at the micro level life cycle factors are shown to imply that consumption changes should be a predictable and b smoother than in the infinite horizon model econometric evidence using postwar u s data suggests that neither consumption s predictability nor its excess smoothness can be fully accounted for by life cycle considerations

optimal best price policy abstract a best price policy bp is a promise by a seller to give her customer a refund if she reduces her price after the customer has already purchased the product we characterize the optimal bp policy as when the seller can control both the policy length when the promise expires and the refund scale what portion of the price difference is refunded we explain why the policy length is finite and varies across industries in a setting where consumers valuations decline over time we show that a finite length bp allows the seller to commit to not lowering her price too soon while at the same time letting her capture some of the benefits of intertemporal price discrimination however because the decline in consumers valuations is uncertain a bp does not allow the monopolist to achieve the profit she could earn with a full commitment

reputation in bargaining and durable goods monopoly this paper analyzes durable goods monopoly in an infinite horizon discrete time game we prove that as the time interval between successive offers approaches zero all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria this reverses a well known conjecture of coase alternatively one can interpret the model as a sequential bargaining game with one sided incomplete information in which an uninformed seller makes all the offers our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game

liquidity constraints and the substitutability between private and government consumption the role of military and non military spending i introduction using data for a number of economies we investigate i the relationship between private consumption and two types of government spending military and non military and ii the severity of liquidity constraints because of their importance for macroeconomic modeling in theory and practice 1 both issues have been the subjects of considerable theoretical and empirical investigation on the issue of liquidity constraints the most influential research has relied on hall s 1978 euler equation approach to the permanent income hypothesis in an attempt to reconcile hall s and flavin s 1981 methodologies hayashi 1982 modified hall s martingale result to allow for the possibility that a subset of consumers are liquidity constrained and showed that liquidity constraints can result in consumption s excess sensitivity to current income campbell and mankiw 1989 1990 1991 and jappelli and pagano 1989 have applied hayashi s methodology using data from the u s and several other oecd countries on the substitutability issue aschauer 1985 has modified hall s euler equation to allow for substitutability between government spending and private consumption and found that the two are substitutes for the u s karras 1994 however using a similar approach and data for 30 countries concludes that private and government consumption are better described as complementary or unrelated liquidity constraints and substitutability have been combined in studies by graham and himarios 1991 cushing 1992 and graham 1993 using u s data and by evans and karras 1996 for a number of countries a crucial limitation of most of these studies is the use of aggregate government consumption data which counterintuitively imposes a common substitutability parameter on all components of government spending 2 using recently available time series data for a large number of countries the present paper relaxes this restriction by decomposing government consumption into military and non military components enabling us to separately identify their relationship to private consumption the allocation of government consumption between military and non military functions has varied greatly across countries the appendix reports the average size of military and non military government shares in gdp as well as the military non military ratio by country over the 1970 1989 period average military expenditure as a fraction of gdp for example has ranged in our sample from 0 11 in mexico to 12 30 in jordan similarly the fraction of government consumption absorbed by military expenditure has ranged from 1 09 in mauritius to 66 82 in poland this sizable variability is promising in terms of cross sectional identification power but it also suggests that the estimated parameters must not be assumed to be common across countries the estimated model is derived in section ii which combines liquidity constraints and substitutability by nesting the approaches of hayashi 1982 and aschauer 1985 in the same section we discuss data sources and the estimation strategy which permits the estimated parameters to vary by country in a way that helps determine how they are influenced by country specific factors section iii estimates the model for a panel of the 66 countries for which annual data on all series are available for the 1970 1989 period the paper s main conclusions are given in section iv ii methodology and data we assume that consumers in economy i at time t derive utility from effective consumption c sup which we define as 1 mathematical expression omitted where c is private consumption g sup m and g sup nm are the military and non military components of government consumption the parameters theta sup m and theta sup nm measure the degree of substitutability between c and g sup m and c and g sup nm respectively

information aggregation bias aggregation in the presence of data processing lags distorts the information content of data violating orthogonality restrictions that hold at the individual level though the phenomenon is general it is illustrated here for the life cycle permanent income model cross section and pooled panel data induce information aggregation bias akin to that in aggregate time series calculations show that information aggregation can seriously bias tests of the life cycle model on aggregate time series cross section and pooled panel data copyright 1992 by american economic association

private and government consumption with liquidity constraints abstract economic theory predicts that liquidity constraints and substitutability or complementarity between private and government consumption result in excess sensitivity of private consumption to income and government consumption respectively using annual data we estimate these excess sensitivity parameters for each of 54 countries and show that they not only have sensible values but are also correlated with several variables in ways consistent with economic theory our findings imply that the degree of substitutability between government services and private consumption depends negatively on the fraction of government spending that goes to national defense we also find that liquidity constraints typically exist and they are affected positively by output variability and negatively by the saving rate

urban congestion and developer precommitments unilateral solutions to dynamic inconsistency the sale of housing creates a dynamic inconsistency problem for residential developers who find it profit maximising to overdevelop an area once ownership of the existing housing stock has been transferred to local residents rational buyers lower the prices they are willing to pay in expectation of this future congestion it is therefore in the developers interest to attract higher prices by credibly precommitting themselves unilaterally to construction plans that are optimal for each housing tract if the externalities associated with congestion affect quality of life in neighbouring tracts however development will still exceed the efficient level the introduction of master planned communities where a single development company commits future developer builders to a plan for the construction of multiple contiguous housing tracts can create the expectation of future population densities that will be optimal on a city wide level

leasing lemons and moral hazard abstract a number of recent papers have analyzed leasing in the new car market as a response to the adverse selection problem in the used car market originally explored in the seminal 1970 paper by george akerlof in this paper we consider a model characterized by both adverse selection as in these earlier papers and moral hazard concerning the maintenance choices of new car drivers we show that this approach provides explanations for a number of empirical findings concerning real world new and used car markets including that leasing has become more popular over time very high income new car drivers lease more and used cars that were leased when new sell for more than used cars that were purchased when new we also compare and contrast our approach to new car leasing with alternative approaches

incomplete information and the time series behaviour of consumption pischke 1995 uses both microeconomic and macroeconomic us data to test the idea that within an otherwise standard pih framework ignorance by agents of aggregate labour income can account for the observed degree of excess smoothness and sensitivity in consumption his tests involve only the second moments of aggregate consumption and labour income in this paper our main aim is to identify and test the restrictions his model implies for aggregate consumption dynamics using us quarterly data over the period 1959 1996 but our framework allows us also to test an earlier related model of goodfriend 1992 we find that both models can be formally rejected ignorance of aggregate labour income cannot by itself account for aggregate consumption dynamics some other relaxation of the assumptions of the standard pih is required we give an example of one possible such relaxation and present evidence indicating that pischke s version of imperfect information may within that framework have a significant role to play copyright 2000 john wiley sons ltd

optimal extraction policy when the environmental and social costs of the opencast coal mining activity are internalized mining district of the department of el cesar colombia case study abstract several articles have confirmed the social and environmental consequences of opencast coal mining the main purpose of this study is to simulate the optimal extraction policy of coal mining with and without the internalization of the environmental and social monetary costs that occur in the mining district located in the central part of the department of el cesar using discrete dynamic programming backward recursion discrete state markov decision model and bellman equation results indicate that the private optimal of the overproduction policy for the terminal phase of the resource extraction program can be reduced once the negative externalities produced by mining practices are internalized into the cost function of the mining investment companies in colombia this means that if there is an increase in the total cost of extraction to offset the environmental and social impacts generated the negative externalities would be less than or equal to the current level likewise profits would continue being positive for the mining firms at the mining district

monopoly extraction of a durable non renewable resource failure of the coase conjecture the author studies a perfect information rational expectations markov equilibrium for the situation where a monopolist extracts a nonrenewable resource that is converted to a durable good even if short run extraction costs are constant the coase conjectur e fails provided that the depreciation rate of the durable good is positive copyright 1993 by the london school of economics and political science

durable goods monopoly with limited choice of commitment strategy when should the monopolist precommit consider a firm a monopolist offering a unique product to a fixed number of potential customers suppose that no consumer desires more than one unit of the good within a given period or across periods that is there is no value to repeat purchases in addition suppose that customers vary with respect to their initial reservation prices which decline over time a natural interpretation is that the monopolist is selling a good that is durable alternatively the firm is providing an entertainment or fashion good consumers may place a premium on obtaining the product quickly before it becomes less useful less stylish or less novel coase 7 conjectured that this firm s ability to extract surplus is limited because the firm has to compete with itself across time periods high valuation customers would be unwilling to pay a high initial price because they would anticipate that over time the firm will be reducing the price in order to sell to lower valuation customers subsequent literature formalizes this as a time inconsistency problem faced by a monopolist unable to make intertemporal commitments a separate strand of the literature proceeds from the polar assumption that the monopolist can precommit to any multiperiod pricing strategy comparison to coase s monopolist is simple higher profits are obtainable under precommitment because more surplus is extracted from high valuation customers an important proposition due to stokey 22 is that it will be optimal for the monopolist to precommit to a declining intertemporal price schedule if consumers with higher initial valuations have a higher rate of time preference 2 otherwise the optimal strategy is to hold price constant at the static monopoly level and to sell no more than the static monopoly quantity 3

how effective is fiscal policy in raising national saving while fiscal adjustment is commonly viewed as the cornerstone of macroeconomic stabilization the effectiveness of alternative fiscal instruments in raising national saving is still poorly understood this paper enters the debate by estimating a private consumption function that allows for two types of agents finite horizons and liquidity constraints and nests three different consumption hypotheses using a large panel data set that includes both industrial and developing countries we reject full ricardian equivalence we also find substantial differences between industrial and developing countries regarding both the extent of ricardian offsetting and the degree to which the government budget constraint is internalized

depreciation erodes the coase conjecture if a durable good monopolist produces at constant marginal costs and the good depreciates there exists a family of strong markov perfect equilibrium smpe one member of this family entails instantaneous production of the level of stock produced in a competitive equilibrium this is consistent with the coase conjecture other smpe in the family entail steady state production at a stock level lower than in the competitive equilibrium there may be a jump to these steady states or they may be approached asymptotically monopoly profits are positive in these equilibria and the coase conjecture fails

durable goods price cycles theory and evidence from the textbook market i introduction one of the features of the market for new textbooks is that the price of new textbooks is relatively inflexible over the life of an edition in the sense that it fails to decline as the end of an edition approaches this inflexibility seems surprising because the availability of used textbooks which are a close substitute for new textbooks rises as the textbook ages furthermore the willingness to pay of a purchaser of a new textbook who plans to resell the book should decline at the end of the edition as the introduction of a new edition will destroy the resale value of the previous edition both of these factors would be expected to put downward pressure on the price of the good as the edition ages our goal of this article is to develop a model of textbook pricing that is capable of explaining this price inflexibility over the life of an edition we model the textbook pricing decision as that of a monopoly seller of a durable good over the life of an edition of the good where the life of the edition is exogenously given at two periods and the introduction of a new edition kills off the used market for the previous edition we assume that the market for the good is made up of two types of consumers high valuation buyers who will keep the good and low valuation buyers who value the option of being able to resell the good in the used market after using the services of the good in the current period the willingness to pay of high valuation buyers will thus be constant over the life of an edition while that of the low valuation buyers will decline in the second period due to the elimination of the used market we show that this model may lead to an optimal price for the durable good that may either rise or fall over the life of an edition and identify two effects that influence the monopolist s pricing decision the first we refer to as the used goods supply effect which is the impact of the quantity of goods available in the used market on the optimal price of new goods in the second period we show that if the quantity of high valuation buyers is sufficiently low the price of new goods may be increasing in the quantity of used goods in the second period this results from the fact that the increased supply of used goods may reduce the elasticity of demand for new goods making it optimal for the monopolist to sell only to high valuation buyers in the second period the second effect is the potential for resale effect which is due to the fact that the ability to sell goods in the used market will raise the willingness to pay of low valuation buyers relative to that of high valuation buyers in the first period the combination of these two effects leads to the possibility that the monopolist will choose to sell to both types of buyers in the first period of the edition but to sell only to high valuation buyers in the second period our empirical analysis tests for the presence of used goods supply and potential for resale effects on the prices of new textbooks we utilize a panel dataset from college bookshops that contains price and quantity information for economics textbooks for each semester between 1997 and 2003 we estimate simple pricing equations with textbook fixed effects instrumental variables are also used to account for the potential endogeneity of a regressor we find that textbook prices increase as the share of used textbooks increases which is consistent with the presence of a used good supply effect in which the increased presence of used goods makes the demand curve for new goods less elastic we also find evidence that prices of the goods are higher in the last period of an edition controlling for the stock of used goods in the market this is consistent with the potential for resale effect our theoretical model can be distinguished from other work that has analyzed the optimal pricing problem for a monopoly seller of a durable good

ricardian equivalence under imperfect information abstract in the us aggregate private consumption changes are excessively sensitive not only to current and lagged changes in income but also to current and lagged changes in government expenditures i give a new theoretical interpretation to this observation i show that this excess sensitivity arises when consumers take into account the link between taxes and government expenditures i e when they are ricardian but lack exact information on the aggregate economy while the model provides a simultaneous explanation for both types of excess sensitivity the strong restrictions that it imposes on the data are not supported by the results of econometric estimation

bureaucrats or politicians part i a single policy task this paper investigates the normative criteria that guide the allocation of a policy task to an elected politician versus an independent bureaucrat the bureaucrat is preferable for technical tasks for which ability is more important than effort or if there is great uncertainty about whether the policymaker has the required abilities the optimal allocation of redistributive tasks is ambiguous and depends on how the bureaucrat can be instructed but irrespective of the normative conclusion the politician prefers not to delegate redistributive policies

quality upgrades and equilibrium in a dynamic monopoly market abstract we examine an infinite horizon model of quality growth for a durable goods monopoly the seller may offer any bundle s of current and previous quality improvements upgrades subgame perfect equilibrium seller payoffs range from capturing the full social surplus down to only the initial flow value of each good as long as the value of all future quality growth exceeds the value of a single unit each of these payoffs is realized in a markov perfect equilibrium that follows the socially efficient path however inefficient delay equilibria with bundling exist for innovation rates above a threshold

individual income incomplete information and aggregate consumption individual income is much more variable than aggregate per capita income i argue that aggregate information is therefore not very important for individual consumption decisions and study models of life cycle consumption in which individuals react optimally to their own income process but have incomplete or no information on economy wide variables since individual income is less persistent than aggregate income consumers will react too little to aggregate income variation aggregate consumption will be excessively smooth since aggregate information is slowly incorporated into consumption aggregate consumption will be autocorrelated and correlated with lagged income on the other hand the model has the same prediction for micro data as the standard permanent income model the second part of the paper provides empirical evidence on individual and aggregate income processes different models for individual income are fit to quarterly data from the survey of income and program participation making various adjustments for measurement error calibrating the consumption model using the estimated parameters for the income process yields predictions which qualitatively correspond to the empirical findings for aggregate consumption but do not match them well in magnitude

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

durability and strategic trade are there rents to be captured abstract this paper analyzes strategic trade policy when home and foreign duopolists produce a durable good that is either sold or leased in a third country durability is important for two reasons it characterizes most of the products discussed in the strategic trade literature and it also calls for explicit dynamic modeling for duopolists who sell their product in a third country market this paper finds the optimal policy to be a tax on domestic output for duopolists who lease the good in a third country market though the optimal policy is a subsidy

durable goods monopoly increasing marginal cost and depreciation this paper combines increasing marginal cost and depreciation in a continuous time model of a durable goods monopolist in contrast to the case of increasing marginal cost but no depreciation analysed by kahn and the case of depreciation with constant marginal cost analysed by bond and samuelson steady state output in this model is less than in the competitive case a turnpike result shows that choice of a long enough time horizon can make the equilibrium path of output in a finite horizon game arbitrarily close to the path of the infinite horizon game

durable goods monopoly with discrete demand we analyze a dynamic game between consumers and the sole seller of a durable good unlike previous analyses we assume that there exists a finite collection of buyers rather than a continuum none of the main conclusions of the literature on durable goods monopoly survives this change in assumption coase s conjecture that a durable goods monopolist cannot earn supracompetitive profits in the continuous time limit bulow s proposition that renting a durable is always more profitable than selling it and stokey s proposition that precommitting to a time path of prices is always optimal are all false when the set of buyers is finite thus the assumption of a continuum of consumers so innocuous and useful a simplification in other contexts has proved misleading in the context of durable goods monopoly

monopoly and oligopoly provision of addictive goods this article investigates monopoly and oligopoly provision of an addictive good consumer preferences are modeled as in becker and murphy 1988 addictive goods have characteristics that create interesting strategic issues when suppliers are noncompetitive we characterize the perfect markov equilibrium of a market with noncompetitive supply of an addictive good and compare it with the efficient solution depending on particular parameter values we find a wide variety of possible steady state outcomes including ones with output above the efficient level and price below marginal cost we also find that market power can be disadvantageous

durable good monopolies with rational expectations and replacement sales a monopoly producer of a durable good is examined under the previously uninvoked assumption that the good depreciates and hence that replacement sales must occur if a fixed stock of the good is to be maintained we find two ways in which the no depreciation result that the monopoly will always at least eventually produce a stock equal to that produced by a competitive market may not hold if the length of the trading period is nonzero the limiting stock produced by the firm will be lower than the competitive stock to ensure the profitability of future replacement sales if the firm is able to constrain its production capacity it may choose a constraint that always binds in the sense that it will be impossible for the firm to achieve a stock equal to the competitive stock

an empirical analysis on the substitutability between private consumption and government purchases abstract this paper estimates substitutability of government purchases for private consumption using an optimal consumption model the utility function features several types of nonseparabilities the paper finds that gmm estimates are affected by the specification of nonseparability between private consumption and government purchases by the restriction of time separability and by the measurement of real interest rates

imperfect durability and the coase conjecture this article considers a market served by a monopolist who sells a durable good that depreciates stochastically over time we show that there exist three types of stationary equilibria a coase conjecture equilibrium a monopoly equilibrium and a reputational equilibrium when the depreciation rate is low the coase conjecture equilibrium is the unique equilibrium for intermediate values of the depreciation rate all three equilibrium types coexist when the depreciation rate is high the monopoly equilibrium is the unique equilibrium consequently when selling a good of sufficiently low durability the monopolist does not lose any of her monopoly power furthermore the steady state output in the reputational equilibrium falls below the monopoly quantity hence in durable goods markets welfare losses due to monopoly power may be larger than in markets for perishables

the permanent income hypothesis and consumption durability analysis based on japanese panel data the permanent income hypothesis with durability of commodities is tested on a panel of about 2 000 japanese households for several commodity groups under static expectations about real interest rates and for some class of utility functions consumption which is a distributed lag function of current and past expenditure follows a martingale main empirical results are i the durability of commodities usually classified as services is substantial ii the hypothesis applies to about 85 percent of the population consisting of wage earners and iii income changes explain only a small fraction of the movements in expenditure

coase and hotelling a meeting of the minds in this paper we tie together the two literatures of durable goods monopoly and exhaustible resource pricing we show that the intertemporal no arbitrage condition that arises if the durable good monopolist seller can commit to a price path mirrors the intertemporal no arbitrage condition if the monopsonist buyer of an exhaustible resource can commit to a price path the intuition is that the durable good monopolist initially announces high future prices to get high valuation buyers to buy early and subsequently lowers the price to attract additional buyers on the other hand the monopsonist buyer of the exhaustible resource initially announces low future prices to encourage sellers to supply their units early and subsequently as the stock of the resource declines raises the price to call forth additional supply as the period of commitment shrinks to zero the durable good s price drops to its marginal cost and the exhaustible resource s price jumps to its choke level all in a twinkling of the eye a