interest rate caps smile too but can the libor market models capture the smile using 3 years of interest rate caps price data we provide a comprehensive documentation of volatility smiles in the caps market to capture the volatility smiles we develop a multifactor term structure model with stochastic volatility and jumps that yields a closed form formula for cap prices we show that although a three factor stochastic volatility model can price at the money caps well significant negative jumps in interest rates are needed to capture the smile the volatility smile contains information

best policy response to environmental shocks applying a stochastic framework abstract the paper develops a general framework for the analysis of environmental shocks in growing economies endogenous capital investments allow identifying the dual role of capital as a buffer against shocks and a source of pollution we study the effects of recurring natural disasters on optimal growth and efficient environmental policies emissions may cause continuous fluctuations entail discrete and recurring jumps or trigger so called tipping points with large costs to the economy closed form solutions are provided for all the model variants we discuss possible applications in environmental economics and identify current research gaps

the impact of bse on the demand for beef and other meats in great britain indices of media coverage of bse are incorporated in a dynamic aids model of meat demand the publicity which bse has received is found to have had significant effects on the allocation of consumer expenditure among the meats a short run impact has been identified which accounts in large part for the discernible drop in the market share of beef in the early 1990s and more important there also appears to be a significant long run impact of bse which by the end of 1993 has reduced the beef market share by 4 5

renewable resource management with stochastic recharge and environmental threats abstract exploitation diminishes the capacity of renewable resources to withstand environmental stress increasing their vulnerability to extreme conditions that may trigger abrupt changes the onset of such events depends on the coincidence of extreme environmental conditions and on the resource state determining its resilience when the former is uncertain and the latter evolves stochastically the uncertainty regarding the event occurrence is the result of the combined effect of these two uncertain components we study optimal management in this setting the environmental threat renders the single period discount factor policy dependent and as a result the compound discount factor becomes history dependent existence of an optimal markovian deterministic stationary policy is established and the optimal state process is shown to converge to a steady state distribution

consumer preferences before and after a food safety scare an experimental analysis of the 2010 egg recall in august 2010 more than half a billion eggs were recalled in the u s because of a salmonella outbreak this study examines the effect of the recall with a unique pair of auction experiments investigating willingness to pay wtp for conventional and organic eggs one conducted shortly before and one right after the recall with the same participants in addition to the before and after bids participants bid again after a negative information or balanced information treatment about the event accompanying surveys showed consumers had a high level of awareness of the recall but less knowledge of specific details and viewed information on egg farm conditions as very important in their wtp while there were no significant before and after differences wtp for organic eggs significantly increased in the negative information treatment and balanced information had a positive effect on consumer wtp for conventional eggs

welfare measurement under threats of environmental catastrophes abstract welfare measures under threats of environmental catastrophes are studied using the parable apparatus of weitzman and lofgren on the welfare significance of green accounting as taught by parable j environ econ manage 32 1997 139 153 the occurrence probability of the catastrophic events is driven at least partly by anthropogenic activities such as natural resource exploitation without external effects the green nnp is a genuine welfare measure vis a vis a particular parable economy often however the occurrence hazard constitutes a public bad treated as an externality by agents who ignore their own contribution to its accumulation in such cases the green nnp although accounting for the event hazard rate per se fails to properly internalize future effects on the hazard rate of current economic activities and as a result overestimates welfare the bias term associated with the green nnp is derived and expressed in a simple and interpretable form

bond pricing and the term structure of interest rates a new methodology for contingent claims valuation this paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates the methodology based on the equivalent martingale measure technique takes as given an initial forward rate curve and a family of potential stochastic processee for its subsequent movements a no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk examples are provided to illustrate the key results in relation to the term structure of interest rates arbitrage pricing theory has two purposes the first is to price all zero coupon default free bonds of varying maturities from a finite number of economic fundamentals called state variables the second is to price all interest rate sensitive contingent claims taking as given the prices of the zero coupon bonds this paper presents a general theory and a unifying framework for understanding arbitrage pricing theory in this context of which all existing arbitrage pricing models are special cases in particular vasicek 1977 brennan and schwartz 1979 langetieg 1980 ball and torous 1983 ho and lee 1986 schaefer and schwartz 1987 and artzner and delbaen 1988 the primary contribution of this paper however is a new methodology for solving the second problem i e the pricing of interest rate sensitive contingent claims given the prices of all zero coupon bonds the methodology is new because i it imposes its stochastic structure directly on the evolution of the forward rate curve ii it does not require an inversion of the term structure to eliminate the market prices of risk from contingent claim values and iii it has a stochastic spot rate process with multiple stochastic factors influencing the term structure the model can be used to consistently price and hedge all contingent claims american or european on the term structure and it is derived from necessary and more importantly sufficient conditions for the absence of arbitrage the arbitrage pricing models of vasicek 1977 brennan and schwartz 1979 langetieg 1980 and artzner and delbaen 1988 all require an iformerly titled bond pricing and the term structure of interest rates a new methodology

units of measurement and the stone index in demand system estimation the stone index typically used in estimating linear almost ideal demand systems is not invariant to changes in units of measurement which may seriously affect the approximation properties of the model a modification to the stone index or use of a regular price index instead are both desirable practices in estimating linear ai models

consumer acceptance valuation of and attitudes towards genetically modified food review and implications for food policy abstract an increasing set of evidence has been reported on how consumers could potentially react to the introduction of genetically modified food studies typically contain some empirical evidence and some theoretical explanations of the data however to date limited effort has been posed on systematically reviewing the existing evidence and its implications for policy this paper contributes to the literature by bringing together the published evidence on the behavioural frameworks and evidence on the process leading to the public acceptance of genetically modified gm food and organisms gmos in doing so we employ a set of clearly defined search tools and a limited number of comprehensive key words the study attempts to gather an understanding of the published findings on the determinants of the valuation of gm food both in terms of willingness to accept and the willing to pay a premium for non gm food trust with information sources on the safety and public health and ultimate attitudes underpinning such evidence furthermore in the light of such evidence we formulate some policy strategies to deal with public uncertainly regarding to gmos and especially gm food

a structural time series approach to modelling multiple and resurgent meat scares in italy this paper exploits a structural time series approach to model the time pattern of multiple and resurgent food scares and their direct and cross product impacts on consumer response a structural time series almost ideal demand system sts aids is embedded in a vector error correction framework to allow for dynamic effects vec sts aids italian aggregate household data on meat demand is used to assess the time varying impact of a resurgent bse crisis 1996 and 2000 and the 1999 dioxin crisis the vec sts aids model monitors the short run impacts and performs satisfactorily in terms of residuals diagnostics overcoming the major problems encountered by the customary vector error correction approach

consumer welfare and gm food labeling a simulation using an adjusted kumaraswamy distribution genetically modified gm food products and their labeling have become a major policy issue with impassioned public debates we explore the impact of different labeling regimes on consumer attitudes towards gm products and consumer welfare our experimental results illustrate that these consumer attitudes do not follow the uniform distribution as has often been assumed in the literature but instead fit an adjusted kumaraswamy distribution if a uniform distribution is assumed the advantage of mandatory labeling would be exaggerated using an adjusted kumaraswamy distribution our simulation results demonstrate that voluntary labeling is superior to mandatory labeling with the higher separation cost while mandatory labeling is not necessarily better with lower separation cost therefore the governments of china and other countries with similar consumer characteristics should consider voluntary labeling for gm food while encouraging innovations that reduce the price of gm food as well as controlling the opportunistic behavior of its producers so as to enhance the advantage of voluntary labeling

effects and value of verifiable information in a controversial market evidence from lab auctions of genetically modified food food products containing genetically modified gm ingredients have entered the market over the past decade the biotech industry and environmental groups have disseminated conflicting private information about gm foods this paper develops a unique methodology for valuing independent third party information in such a setting and applies this method to consumers willingness to pay for food products that might be gm data are collected from real consumers in an auction market setting with randomized information and labeling treatments the average value of third party information per lab participant is small but the public good value across u s consumers is shown to be quite large jel c91 d12 d82

the management of fragile resources a long term perspective excessive exploitation diminishes the capacity of natural resources to withstand environmental stress increasing their vulnerability to extreme conditions that may trigger abrupt changes the onset of such events depends on the coincidence of random environmental conditions and the resource state determining its resilience examples include species extinction ecosystem collapse disease outburst and climate change induced calamities the policy response to the catastrophic threat is measured in terms of its effect on the long term behavior of the resource state to that end the l methodology developed originally to study autonomous systems is extended to non autonomous problems involving catastrophic threats

who do consumers trust for information the case of genetically modified foods to be effective groups that disseminate information need the trust of consumers when multiple groups provide conflicting information on a new product or process like gm foods consumers place different levels of trust in the various sources we present a model of the contributions of personal and social capital of a consumer and test a multinominal logit model of relative trust in five different sources of information on genetic modification using a unique data set among our findings is that an increase in consumer s education lowers the probability of trusting information from government private industry organizations consumer and environmental groups or other sources relative to information from an independent third party source and conservative religious affiliation reduces the odds of a consumer trusting private industry organization and increases the odds of trusting nobody relative to an independent third party source

linearized hamiltonian of the libor market model analytical and empirical results abstractthe linearized hamiltonian model is proposed to extend the london interbank offered rate libor market model lmm firstly we studied the hamiltonian of lmm in the framework of quantum finance and the nontrivial upper triangle form of libor drift is derived the linearized hamiltonian is derived to improve the explanatory capability of the model for market data our approach uses one more parameter to explain the initial condition and the model can be used to calibrate libors with extremely high accuracy furthermore the market time index is required for applying the model to multi libor and the results imply that the libor future time lattice becomes shorter as one goes from near future to distant future

optimal transition to backstop substitutes for nonrenewable resources abstract we analyze the optimal transition from a primary nonrenewable resource to a backstop substitute for a class of problems characterized by the property that the backstop cost decreases continuously as learning from r d efforts accumulates to increase the knowledge base the transition policy consists of the r d process and of the time profiles of the primary and backstop resource supply rates we find that the optimal r d process follows a most rapid approach path mrap the knowledge process associated with r d should approach some endogenously derived target process as rapidly as possible and proceed along it thereafter thus if the initial knowledge level is sufficiently low and the cost structure justifies r d activities the r d efforts should be initiated without delay at the highest affordable rate and slow down later on this pattern contrasts previous findings that typically recommend a single humped r d process with a possible initial delay

managing the endogenous risk of disease outbreaks with non constant background risk there is a growing concern that risks of disease outbreak and pandemics are increasing over time we consider optimal investments in prevention before an outbreak using an endogenous risk approach within an optimal control setting using the threat of pandemic influenza as an illustrative example we demonstrate that prevention expenditures are relatively small in comparison to the potential losses facing the usa and these expenditures need to be flexible and responsive to changes in background risk failure to adjust these expenditures to changes in background risk poses a significant threat to social welfare into the future

food safety the media and the information market availability of information has increased rapidly over the past decades yet information on food safety is still considered problematic economists have extensively researched the effects of imperfect information however little attention has been paid to the institutional organization of the supply of information and the incentive schemes in the information market this paper analyzes how and when information is supplied by media organizations and what the implications are we first develop a theoretical framework and afterwards provide empirical evidence from media coverage of two recent food safety crises in europe

advertising information and product quality the case of butter this study examines the roles of cholesterol information and advertising in explaining consumption trends for fats and oils focusing on butter results suggest increased consumer awareness of the health effects of blood cholesterol has contributed to the secular decline in butter consumption in canada although consumers responses to negative information appear to outweigh their responses to positive information the industry advertising campaign launched in 1978 by the dairy bureau of canada has had a positive effect on butter demand

regulation with anticipated learning about environmental damages a regulator anticipates learning about the relation between environmental stocks and economic damages for a model with linear quadratic abatement costs and environmental damages and a general learning process we show analytically that anticipated learning decreases the optimal level of abatement at a given information set if learning causes the regulator to eventually decide that damages are higher than previously thought learning eventually increases abatement learning also favors the use of taxes rather than quotas using a model that is calibrated to describe the problem of global warming we show numerically that anticipated learning causes a significant reduction in first period abatement and a small increase in the preference for taxes rather than quotas even if the regulator s initial priors about environmental damages are much too optimistic he is able to learn quickly enough to keep the expected stock trajectory near the optimal trajectory

can china s meat imports be sustainable a case study of mad cow disease rising demand and constrained domestic production have challenged the meat consumption in china to fill the gap between domestic demand and supply china imports an increasing volume of meat produ

the regulation of environmental innovations abstract we offer mechanisms to regulate environmental r d projects that are intertemporal and indivisible and involve high monitoring cost screening and contracting the r d performer are based solely on the project completion time when the project duration is ex ante uncertain to all parties including the performing firm the mechanism is formulated in terms of a completion time limit the mechanism extends to other intertemporal public projects as well as to principal agent settings with dynamic agent s tasks

demand for beef and chicken products separability and structural change several studies have indicated that the recent shift from beef to poultry in consumption is not entirely caused by changes in rela tive prices or income braschler chavas dahlgran hudson and vertin moschini and meilke frank thurman most studies of structural change have focused on red meat consumption only thurman has looked closely at the poultry market and no one has considered poultry products yet the mix of chicken products marketed changed dramat ically during the last twenty years and should have influenced aggregate meat demand the share of broiler slaughter marketed as whole birds declined from 74 in 1965 to 28 in 1985 while cut up parts and processed chick en products increased from 26 to 72 whole birds are inferior goods and cut up parts and processed chicken are normal goods haidacher et al the shift in chicken prod uct mix away from whole birds should have increased the preference for total chicken in this article two related questions are ad dressed first do consumers allocate expendi tures among meats by animal origin or by product type second does disaggregation of meat into products in a meat demand model give insight into the causes of structural

scarcity growth and r d abstract the limits to economic growth due to resource scarcity can be alleviated only by the development of backstop substitutes this paper combines resource based economic growth with r d to reduce the cost of backstop technologies characterizing the entire dynamics of optimal growth and r d processes we find that an economy s growth prospects depend on its type as determined by its production technology and learning ability and by its knowledge capital endowment a wide variety of growth patterns emerges ranging from cases in which an economy that without r d eventually stagnates converges to a steady state is diverted by r d onto a path of sustained growth to cases in which r d is not warranted resource scarcity is shown to encourage r d due to the increased reliance on the backstop technology

development ecological resources and their management a study of complex dynamic systems abstract human well being depends to a large extent on services provided by ecological systems in poor countries this dependence is more transparent than in industrialised countries where the dependence is more indirect effective management of these systems requires a good understanding of their properties and in particular a knowledge of the dynamics of the systems in the article the dynamics of one simple system is analysed economically the system is a lake and the interaction between the run off of nutrients into the lake and the growth of either algae eutrophication in lakes in northern europe and north america or water hyacinths in lakes in southern and eastern sfrica is studied it turns out that the dynamics exhibit bifurcation points so that there are two basins of attraction if the system flips to one basin and it is regarded desirable to return to the other basin there will be hysteresis assuming that there are different users of the lake a differential game is constructed that captures the strategic interests of the users the resulting equilibrium shows first the conventional negative externality that will force the system to a different basin od attraction finally we investigate the use of a tax for bringing back the system to a pareto optimum

abrupt positive feedback and the social cost of carbon optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment the optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages this component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon if the hazard of a catastrophe is constant no correction is needed of the usual pigouvian tax the results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth which set in motion a positive feedback loop convex enough hazard functions cause overshooting of the carbon tax but a linear hazard function gives rise to undershooting a more convex hazard function and a high discount rate speed up adjustment

consumption pollution tradeoffs in an environment vulnerable to pollution related catastrophic collapse abstract this paper considers the consequences of an avoidable risk of irreversible environmental catastrophe for society s optimal long run consumption pollution tradeoffs the risk is assumed to be a nondecreasing function of pollution concentration which evolves as a dynamic environmental renewal process the main objective of the paper is to derive qualitative insights regarding the effects of such risk on optimal management

pareto optimal trade in an uncertain world gmos and the precautionary principle optimal trade policy in an uncertain world is examined decision maker attitudes toward uncertainty are represented in terms of the gilboa schmeidler 1989 maximin expected utility mmeu model the central result is that in a two country general equilibrium setting with both trading partners possessing an mmeu preference structure pareto optimality can require one trading partner to absorb all uncertainty in the economy if its set of priors is a subset of its trading partners an immediate corollary is that autarky is pareto optimal if the trading partner with the more inclusive set of priors either chooses or is endowed with a nonstochastic technology

novelty preferences and fashion when goods are unsettling abstract there is a whole class of goods those semi durable and durable conveniences for which efficiency and functionality seem not to be the main characteristics of appeal but rather the variability they display in their design properties and in their connections with other goods these goods have not been much dealt with in economics yet these are the goods whose new variants households seem to consume in numbers to which consumers become addicted and in which fashions appear and disappear in this paper i offer a framework for understanding these phenomena without having to resort to one or another form of irrationality on the part of consumers the rationality i suggest however has to include also the cognitive and affective problems that arise when novelty appears

cigarette demand health scares and education in turkey the purpose of this paper is to examine the demand characteristics of cigarettes in turkey aggregate time series date for the 1960 88 period are used in estimation income and price elasticities of cigarette demand are obtained the effect of health warning is estimated to reduce cigarette consumption by about 8 since the inception of warnings in 1982 imports of cigarettes have been allowed since 1984 in addition to advertising of cigarettes in the non electronic media the effect of health warnings are found to be stronger than the opposing effect of advertising the results also suggest that public education about adverse health effects of smoking may be more effective in reducing consumption and less regressive on consumer incomes than raising the price of cigarettes

summits riots and media attention the political economy of information on trade and globalisation supply of information has increased rapidly through the growth of commercial media and technological innovations yet economists still blame anti globalists demonstrations and public opposition to trade liberalisation on poor information this paper analyses how the structure of the media industry affects the distribution of information on trade policy and globalisation we present an empirical analysis of belgian media reporting on trade policy and globalisation over the 1999 2002 period supports these hypotheses and finds strong negative bias in media coverage moreover we find that media coverage of trade policy and globalisation is highly concentrated around summit meetings of political leaders media attention in the popular press is heavily influenced by riots and demonstrations at summits the paper points at important implications for public information on trade policy and globalisation and for economists

consumer prices the consumer price index and the cost of living after presenting major findings and recommendations the cpi commission reiterates the estimate of a 1 1 percentage point per annum upward bias it rejects the contention that the bls already makes substantial corrections for quality change that quality improvements and new products accrue only to the rich and that procedures to make more extensive quality adjustments valuations of new products and adjustments for commodity and outlet substitution are impractical the bias in the cpi can be sharply reduced as the authors detail in this paper coauthors are ellen r dulberger robert j gordon zvi griliches and dale w jorgenson

accounting for global warming risks resource management under event uncertainty abstract optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect the uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved taking atmospheric pollution level as the state variable it is found that uncertainty implies the existence of an equilibrium interval within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint the determination of the interval requires no knowledge of the optimal policy in contrast ignoring event occurrence risk implies a single equilibrium level attracting the optimal process from any initial level

what is it about organic milk an experimental analysis auction experiments were used to examine demand relationships and willingness to pay wtp for organic rbst free no antibiotics used and conventional milk elasticities showed strong substitute and complement relationships between organic rbst free and no antibiotics varieties the sum of the latter two s premiums were not significantly different than the organic premium suggesting diminishing marginal utility for added attributes results from a two stage heteroskedastic tobit model demonstrated that wtp premiums for the varieties differ significantly by demographics and beliefs regarding the conventional version these suggest market segments for rbst free and no antibiotics versions could succeed alongside organic benefiting consumers and producers copyright 2007 oxford university press

a fresh meat almost ideal demand system incorporating negative tv press and advertising impact abstract this paper investigates fresh meat consumption in belgium during 1995 1998 through the specification of a three equation almost ideal demand system aids incorporating a media index of tv coverage and advertising expenditures as explanatory variables estimated parameters and elasticity coefficients are plausible and consistent with demand theory own price elasticities are relatively low indicating a low fresh meat demand sensitivity to price changes over this period which was dominated by mass media reports about the potential health risks associated with meat consumption the scope of the paper extends beyond the estimation of elasticity coefficients and includes the specification of a media index and simulations that provide insights into the impact of negative press relative to advertising efforts specifically the impact of television publicity is shown to have been particularly negative on beef veal expenditures in favour of pork mixture this finding corroborates expectations since mass media issues mainly pertained to bse mad cow disease and hormone residues during the investigated period with relatively little effort being undertaken and with its current strategy fresh meat advertising is found to have only a minor impact compared with negative press

the economics of non convex ecosystems introduction the word convexity is ubiquitous in economics but absent from economics in this paper we explain why and show what difference it makes to economic analysis if ecosystem non convexities are taken seriously a simple proof is provided of the connection between self similarity and power laws we also provide an introduction to each of the papers in the symposium and draw out the way in which they form a linked set of contributions

optimal management with potential regime shifts we analyze how the threat of a potential future regime shift affects optimal management we use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics and exogenous versus endogenous probabilities of regime shift prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock we show that all other cases yield unambiguous results in particular with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels

a split sample revealed and stated preference demand model to examine homogenous subgroup consumer behavior responses to information and food safety technology treatments the combination and joint estimation of revealed and stated preference rp sp data approach to examining consumer preferences to relevant policy based measures typically fail to account for heterogeneity in the data by considering behavior of the average individual however in policy based analyses where the research is often driven by understanding how different individuals react to different or similar scenarios a preferred approach would be to analyze preferences of homogenous population subgroups we accomplish this by developing a split sample rp sp analysis that examines whether homogenous subgroups of the population based on individual health and behavioral characteristics respond differently to health risk information and new food safety technology the ongoing efforts by the us food and drug administration fda to reduce illness and death associated with consuming raw gulf of mexico oysters provide an ideal platform for the analysis as the health risks only relate to a very specific consumer subgroup results from split sample demand models indicate that educational information treatments cause vulnerable at risk consumers to reduce their oyster demand implying that a more structured approach to disseminating the brochures to the at risk population could have the desired result of reducing annual illness levels also findings across all subgroups provide strong empirical evidence that the new fda policy requiring processing technology to be used in oyster production will have a detrimental effect on the oyster industry

news and volatility of food prices financial markets exhibit an asymmetric news effect with unexpected low prices generating more price volatility than news of high prices the present study examines us food markets for such asymmetric news effects analysis of 25 years of monthly data for 45 retail food items shows that price news destabilizes about a third of the markets with unexpected price increases more destabilizing

models as usual for unusual risks on the value of catastrophic climate change we study the role of alternative intertemporal preference representations in a model of economic growth stock pollutant and endogenous risk of catastrophic collapse we contrast the traditional discounted utility model which assumes risk neutrality with respect to intertemporal utility with a multiplicative choice model that displays risk aversion in that dimension first we show that both representations of preferences can rationalize the same business as usual economy for a given interest rate and no pollution externality second once we introduce a collapse risk whose hazard rate is a function of the pollution stock multiplicative preferences recommend a much more stringent policy response an illustration in the context of climate change indicates that switching to the multiplicative preference representation has a similar effect in terms of policy recommendations as scaling up the schedule of the hazard rate by a factor of 100

food safety issues and the bse scare some lessons from the french case abstract the bovine spongiform encephalopathy bse scare began after the uk minister of health admitted a possible link between the bse prion and the creutzfeldt jakob disease contaminating humans the paper outlines a survey conducted in the area of rennes to analyse consumer behaviour after the bse crisis a contingent scenario was proposed to determine the willingness to pay wtp for beef which should not transmit cjd using a mix of the referendum method and the bidding process the variables considered as main determinants of the wtp have been selected the study concludes with the interests and limits of the method used and the implications of the bse scare on food policy in fact the mad cow disease raises the problem of loss of public confidence and the means to restore it consumers are waiting for a greater transparency or traceability and according to the survey would accept to pay for it

food scare crises and developing countries the impact of avian influenza on vertical price transmission in the egyptian poultry sector abstract a bivariate smooth transition vector error correction model is applied to monthly poultry price data to analyze the effects that avian influenza has had on price transmission along the egyptian poultry marketing chain in order to reflect consumer awareness of the crisis an avian influenza food scare information index is developed and used within the model as a transition variable our results suggest that price adjustments to deviations from the market equilibrium parity depend on the magnitude of the avian influenza crisis further these adjustments are found to have very different implications for market equilibrium during the crisis retailers use their market power to increase marketing margins in contrast wholesaler margins are found to decline results also suggest that food safety information indices contribute to understanding the economic effects of food scare crises in developing countries

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

does food safety information impact u s meat demand a theoretical model of consumer response to publicized food safety information on meat demand is developed with an empirical application to u s meat consumption evidence is found for the existence of pre committed levels of consumption seasonal factors time trends and contemporaneous own and cross commodity food safety concerns the average demand response to food safety concerns is small especially in comparison to price effects and to previous estimates of health related issues this small average effect masks periods of significantly larger responses corresponding with prominent food safety events but these larger impacts are short lived with no apparent food safety lagged effects on food safety concerns in the united states have dramatically increased in the past decade with regard to incidences of contaminated meat products concerns have arisen because contaminated meat products can result in serious risk to the well being and health of consumers contamination comes from a myriad of sources including but not limited to outbreaks of listeria monocytogenes escherichia coli e coli and salmonella centers for disease control and prevention food safety problems are not isolated to the united states as other unsafe contaminates in meats have emerged across the world including highly publicized outbreaks of bovine spongiform encephalopathy bse in europe the potential impacts of publicized food safety events on consumer s demand for meat products in the united states include own effects on the demand for the contaminated meat involved as well as cross effects impacting the demand for other meats the objective of this article is to investigate whether publicized food safety concerns surrounding beef pork and poultry chicken and turkey have impacted meat consumption food safety indices are constructed separately for beef pork and poultry

saving money vs investing money do energy ratings influence consumer demand for energy efficient goods abstract the article analyses economic barriers leading to the energy efficiency gap in the market for energy using products by observing several million transactions in the uk over two years the empirical exercise estimates aids models for refrigerators washing machines tvs and light bulbs results indicate that market barriers are crucial in the demand for energy efficient options and consumer response to changes in appliance prices total expenditures and energy prices depends on the possibility of behavioural adjustments in consumption in contrast with the induced innovation hypothesis current electricity prices can fail to induce innovation because of their short term impact on disposable income while consumers invest in energy efficiency when expecting electricity prices to rise in the future

insurance and climate driven extreme events abstract we investigate how insurance affects agents decisions when being faced by endogenous climate driven extreme events this is not only important in order to understand how the possibility of insurance augments mitigation and saving decisions but it also improves our understanding of how insurance should be provided since there are no studies as of now that rely on such an integrated approach we extend the literature along two lines firstly we develop a neoclassical growth framework with endogenous extreme events and an insurance sector secondly we introduce a simulation method that allows us to explicitly take these extreme events into account and which yields additional numerical insights in doing so we can fully characterize and quantify the impact of different insurance policies for mitigation and economic growth decisions our analytical results and computational experiments show that i transparency of the insurance sector is the decisive requisite for abatement activities implying substantial policy opportunities ii a decentralized economy will under invest in abatement without adequate policy interventions iii precautionary beliefs on the frequency of extreme events lead to more sustainability iv a social security system which prices insurance fairly is preferable to an insurance industry which provides insurance with an overhead

pollution control in an uncertain environment abstract the effects of the threat of occurrence of environmental catastrophes on optimal pollution control are considered recent analysis of irreversible events is extended to two types of reversible events single occurrence and multiple occurrence recurrent events while it is possible that the threat of irreversible events induces more pollution we show that reversible events under quite general conditions induce more conservation less pollution the analysis is carried out via a simple method the h method to identify optimal steady states by comparing steady state policies with small variations from them for recurrent events the optimal state process must approach a unique steady state from any initial level in this case the h method characterizes the dynamic behavior of the optimal state process without actually solving for it

are we consuming too much this paper articulates and applies frameworks for examining whether consumption is excessive we consider two criteria for the possible excessiveness or insufficiency of current consumption one is an intertemporal utility maximization criterion actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility the other is a sustainability criterion which requires that current consumption be consistent with non declining living standards over time we extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change in applying this formula we find that some poor regions of the world are failing to meet the sustainability criterion in these regions genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital

media coverage of biotech foods and influence on consumer choice in the last two decades few issues in the global agrifood sector have attracted as much media attention as biotechnology thousands of brief and in depth articles have been written focusing on diverse issues from the spectacle of ecological disasters to the promise of feeding a burgeoning world population among those accounts of alleged health risks could influence consumer perceptions and behavior directly indeed reporters across the globe have continued to draw parallels between biotechnology and other known food hazards such as mad cow disease and chemical contaminants such as dioxin they have also continued to raise the possibility of unknown long term health effects essentially framing biotechnology as a food safety risk marks and kalaitzandonakes marks et al there is evidence that this broad and often negative media coverage of biotechnology has raised public awareness influenced public perceptions and altered the public agenda on biotech foods in europe and elsewhere bauer durant bauer and gaskell this is not surprising as over 90 of consumers receive information about agrifood biotechnology primarily through the popular press and television hoban and kendall despite the apparent influence of media coverage on public perceptions however the question of whether such coverage has also affected consumer purchasing behavior has not been answered the answer to this question is broadly relevant with less than 2 of the u s population now engaged in agricultural production the average food consumer has diminishing personal experience and knowledge of agriculture

learning by doing and the costs of a backstop for energy transition and sustainability we assess the impact of being able to substitute an unlimited but costly energy substitute like wind solar for a non renewable resource like oil coal in a model of sustainable growth the prospects for sustainability on the optimal path depend crucially on the costs of this substitute furthermore the poorer a country measured in terms of capital stock at a given point in time the later it should switch to the renewable substitute and the more likely it will be unsustainable taking learning by doing in account we find that this leads to an earlier switching time but does not guarantee sustainability

endogenous discounting and climate policy under risk of abrupt climate change the occurrence hazard is added to the social discount rate as a result the social discount rate 1 increases and 2 turns endogenous to the global warming policy the second effect bears profound policy implications that are magnified by economic growth in particular we find that greenhouse gases ghg emission should be terminated at a finite time so that the ensuing occurrence risk will vanish in the long run due to the public bad nature of the catastrophic risk the second effect is ignored in a competitive allocation and unregulated economic growth will give rise to excessive emissions in the long term the ghg emission paths under the optimal and competitive growth regimes lie at the extreme ends of the range of feasible emissions

gmo standards endogenous policy and the market for information the paper develops a composite index of gmo standards restrictiveness for 60 countries assigning objective scores to six different regulatory dimensions using this index and its components we empirically investigate the political and economic determinants of gmo regulations for 55 countries controlling for spatial autocorrelation results show that many of the determinants highlighted in the theoretical literature such as the structure of the agricultural sector and the institutional environment are important determinants of the restrictiveness of the gmo regulation as a key result there emerges a prominent role of the market for information showing that the structure of domestic mass media public vs private is an important driver of gmo standards

regulating environmental threats environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than or in addition to inflicting a damage gradually the possibility of abrupt occurrence of climate change related calamities is a case in mind the uncertainty associated with the realization of these threats and their public bad nature complicate the design of optimal economic response we derive a pigouvian hazard tax schedule that implements the socially optimal outcome the tax is based on the expected cost of the hazard generating activities and serves to reduce hazardous emissions well in advance of the catastrophic occurrence a numerical example illustrates possible effects of the proposed regulation scheme implications for climate policy are discussed

political economy of the media and consumer perceptions of biotechnology although households are flooded with information through dozens of tv channels plenty of newspapers journals and radio the public is said to be poorly informed on many important issues for example european consumers oppose genetically modified gm foods despite scientists and official institutions claiming those products are safe these reactions are blamed on consumers being poorly informed there is an extensive literature on imperfect information see akerlof stiglitz an important implicit assumption in this literature is that such information problems may be solved by providing more information the problem is that information provision is assumed to be neutral however in reality most information is not provided by institutions whose objective is to foster the public good but by organizations who have an internal incentive to select certain information and certain forms of information over other information it is either provided by private sources with their own profitmaximizing objectives or by public sources that may have the formal goal of providing objective information but administrators and governments may have incentives to bias the information this issue is particularly relevant for consumers risk perceptions about gm foods over 90 of consumers receive information about food and biotechnology primarily through the popular press and television hoban and kendall extensive media coverage of possible risks can lead to decreased demand for example johnson shows how media coverage of product contamination by

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

the impact of food scares on price adjustment in the uk beef market abstract this paper considers the impact of food scares predominately concerns relating to bse on uk beef prices at retail wholesale and producer levels over the 1990s acknowledging the co movement that exists between prices in the meat marketing chain we use a co integrating framework the results of which show the importance of publicity regarding the safety of food in the transmission of beef prices in the uk the food publicity index that we use has a marked negative impact on the prices at all levels a result that is consistent with the effect of an inward shift in the demand function moreover the extent of price decline varies between the marketing stages entailing that the price spreads rise in response to an increase in the negative publicity about food safety while not a formal test of market power these observations are consistent with recent theoretical results demonstrating that market power exacerbates price changes in the upstream sectors for a given change in the retail demand function the implication of these varying price changes is that the food safety concerns also cause the marketing margins between the stages to widen the uk s competition commission has recently investigated the abuse of market power in the food sector inspired largely by this specific issue