the housing market impacts of shale gas development using data from pennsylvania and an array of empirical techniques to control for confounding factors we recover hedonic estimates of property value impacts from nearby shale gas development that vary with water source well productivity and visibility results indicate large negative impacts on nearby groundwater dependent homes while piped water dependent homes exhibit smaller positive impacts suggesting benefits from lease payments results have implications for the debate over regulation of shale gas development jel l71 q35 q53 r31 technological improvements in the extraction of oil and natural gas from unconventional sources have transformed communities and landscapes and brought debate and controversy in the policy arena shale gas plays underlying the populated northeastern united states were thought to be uneconomical less than ten years ago but now contribute a major share of us gas supply 1 natural gas has been hailed as a bridge to energy independence and a clean future because of its domestic sourcing and compared with coal and petroleum derivatives its smaller carbon footprint and reduced emissions of other pollutants e g particulates sulfur dioxide car

returns with wholesale price discount contract in a newsvendor problem abstract we consider a newsvendor problem in a supply chain that consists of a manufacturer and a retailer the manufacturer is the stackelberg leader and the retailer is the follower we examine how the manufacturer can contract a wholesale price only agreement with its retailer that maximizes its profit we also propose a returns policy with a wholesale price discount scheme returns discount contract that can achieve supply chain coordination using the wholesale price only contract as a benchmark we show how the manufacturer sets a discounted wholesale price in a returns discount contract that enhances both profits of the manufacturer and the retailer as well as improves the supply chain efficiency

valuing nuclear energy risk evidence from the impact of the fukushima crisis on u s house prices abstract behavioral economics suggests that individuals overweight recent unexpected and or rare events when updating beliefs this study investigates the effect of such an event the fukushima nuclear crisis in 2011 on the learning process of a local environmental risk by evaluating how perceptions of the risk of a nuclear accident are capitalized into house prices near nuclear power plants npps in the u s our results provide new evidence on the dynamics of the effect spatially the impact was concentrated in a 4 km radius around npps and temporally it peaked a half year later and dissipated one year after the crisis

incomplete contracts and privatization the paper offers a selective survey on the incomplete contracts approach to privatization furthermore a simple model of privatization to an owner manager is developed in which different allocations of ownership rights lead to different allocations of inside information about the firm which in turn affect allocative and productive efficiency in this model privatization is a commitment device of the government to credibly reward the manager for a successful cost reduction and to harden his budget constraint

the marginal welfare cost of public funds theory and estimates abstract we derive a general analytic formula for the marginal welfare cost mwc of public funds without imposing restrictive assumptions on preferences or technologies the framework encompasses the various special cases previously considered and reconciles the disparities among the reported estimates of mwc unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending further progress in measuring mwc requires empirical estimation of labor supply functions that include government spending as an explanatory variable

property tax limits local fiscal behavior and property values evidence from massachusetts under proposition abstract this paper examines the impact of a specific property tax limit proposition 2 1 2 in massachusetts on the fiscal behavior of cities and towns in massachusetts and the capitalization of that behavior into property values proposition 2 1 2 places a cap on the effective property tax rate at 2 5 and limits nominal annual growth in property tax revenues to 2 5 unless residents pass a referendum allowing a greater increase the study analyzes the 1990 1994 period a time when massachusetts municipalities faced significant fiscal stress because of a 30 cut in real state aid and a demographically driven increase in school enrollments the findings include the following 1 proposition 2 1 2 significantly constrained local spending in some communities with most of its impact on school spending 2 constrained communities realized gains in property values to the degree that they were able to increase school spending despite the limitation and 3 changes in non school spending had little impact on property values

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

do plants decrease pollution reduction efforts during a recession evidence from upstate new york chemical plants during the us great recession us communities often experience economic hardship with plant or business closings contributing to high unemployment rates in this circumstance communities and local governments may prioritize economic recovery over environmental improvement thereby weakening community and government pressure against polluting plants in an attempt to explore the concern this study examines the impact of local economic downturn on nearby chemical plants toxic release reduction behavior a total of 351 plants in upstate new york and their toxic release inventory data were analyzed for 5 years 2006 2010 the results show plants toxic release reduction efforts were reduced when unemployment and plant closing rates were high therefore the findings highlight a possible limitation to regulatory approaches that rely on public pressure to motivate better environmental performance

measuring environmental effects on property values without hedonic regressions abstract the effect of environmental nuisances on property values has been frequently studied using hedonic regressions yet that method has extensive data and estimation requirements the technique developed in this paper uses repeat sales on houses to substantially reduce these requirements the technique adjusts for depreciation between sales and allows for nonzero error covariance terms when a house has been sold more than twice the effect of highway noise on property values is studied using this method and the results are statistically equivalent to the results of an extensive hedonic study for the same area

promise scholarship programs as place making policy evidence from school enrollment and housing prices abstract place based promise scholarship programs which guarantee financial aid for qualifying graduates of a school district have proliferated in recent years using data from multiple sites we compare the evolution of school enrollment and residential real estate prices around program announcement dates within promise eligible and surrounding areas while our estimates indicate that enrollment increased following promise announcements merit based programs generated relative increases in white enrollment housing prices respond strongly in neighborhoods with better primary schools and in the upper half of the housing price distribution we conclude that these programs have important and under studied distributional considerations

determining optimal price and order size for a price setting newsvendor under cycle service level abstract there has been significant interest in the single period newsvendor problem where besides determining the order size the decision maker has to set the selling price the model is applicable when demand for the product is a stochastic function of the selling price although there have been several studies the problem needs exploration given that retailers prefer using service level rather than the shortage cost to model the economic consequence of a stock out we analyze the problem using a chance constrained formulation and provide a procedure for determining the optimal price and order size for a price setting newsvendor

estimating the marginal willingness to pay function without instrumental variables abstract the hedonic model of rosen 1974 has become a workhorse for valuing the characteristics of differentiated products despite a number of well documented econometric problems including a source of endogeneity that has proven difficult to overcome here we outline a simple likelihood based estimation approach for recovering the marginal willingness to pay function that avoids this endogeneity problem using this framework we find that marginal willingness to pay to avoid violent crime increases by sixteen cents with each additional incident per 100 000 residents accounting for the slope of the marginal willingness to pay function has significant impacts on welfare analyses

the estimation of demand parameters in hedonic price models this paper shows that the econometric problem of estimating hedonic demand parameters is not a standard identification problem caused by demand supply interaction as has been often assumed estimation procedures based on this assumption lead to biased results the hedonic estimation problem is instead caused by the endogeneity of both prices and quantities when households face a nonlinear budget constraint an instrumental variables solution to this problem is suggested using instruments that exogenously shift the budget constraint

infrastructure and public utilities privatization in developing countries should governments in developing countries promote private ownership and deregulated prices in noncompetitive sectors or should they run publicly owned firms and regulate prices at the expense of rents to insiders a theoretical model is used to answer these normative questions the analysis focuses on the tradeoff between fiscal benefits and consumer surplus during privatization of noncompetitive sectors privatization transfers control rights to private interests and eliminates public subsidies yielding benefits to taxpayers at the cost of increased prices for consumers in developing countries where budget constraints are tight privatization and price liberalization may be optimal for low profitability industries but suboptimal for more profitable industries and once a market has room for more than one firm governments may prefer to regulate the industry without a credible regulatory agency regulation is achieved through public ownership

a single period stocking and pricing problem involving stochastic emergency supply abstract we develop a model for determining jointly optimal price and production policy of products with short life cycles subject to partially uncertain supply capacity within the price setting newsvendor framework we consider that demand in excess of the stocking quantity can be met by an emergency order due to the randomness of emergency supply capacity it may not always be possible to satisfy the demand completely assuming that all customers are charged the same price we explore the optimal sourcing and pricing decisions in the commonly used additive and multiplicative demand scenarios the first order conditions imply that the optimal price in the problem with random emergency supply is less than the optimal price associated with the deterministic demand problem when demand uncertainty is additive and it is greater than the optimal price associated with the deterministic demand problem when demand uncertainty is multiplicative we also find that the same type of comparative static applies in the multiplicative uncertainty case when there exists a dual source emergency system consisting of a perfectly reliable supplier and a second supplier with a stochastic capacity

unimodality of price setting newsvendor s objective function with multiplicative demand and its applications abstract we present a general solution framework for the price setting newsvendor problem with a multiplicative stochastic demand under mild assumptions such as increasing price elasticity on the mean demand function and increasing generalized failure rate on the distribution of the random factor we first prove that both the profit function with respect to price and its derived function with respect to order quantity are quasi concave three applications are then studied under our solution framework 1 we consider a wholesale price only contract by which a manufacturer sets a wholesale price and a newsvendor determines an order quantity and the retail price and show that the manufacturer s profit function is unimodal with respect to retailing price or stocking factor under certain conditions 2 we consider a newsvendor problem in which the demand depends on both the retail price and the level of sales effort and the cost exerting the sales effort is proportional to the order quantity we prove that there exists a unique pair of price and sales effort levels that maximize the total profit this result is established under a set of mild assumptions on the demand and cost functions 3 we identify a property in the single period profit function that satisfies condition 1 of huh and janakiraman 2008 which in turn guarantees the optimality of s s policy for an infinite stationary dynamic inventory price control system with lost sales and fixed order costs finally the unimodality of the newsvendor problem with a general stochastic and price sensitive demand is studied

do environmental right to know laws affect markets capitalization of information in the toxic release inventory abstract this paper investigates how information contained in the u s environmental protection agency s toxic release inventory tri program one of the largest environmental right to know programs affects prices in the housing market i use a strengthening of the reporting requirements for the chemical lead in 2001 as exogenous variation to test for housing price changes near existing firms who must now report using a difference in differences specification i find that listing an existing firm in the toxic release inventory lowers housing prices up to 11 within approximately 1 mile the results suggest that housing market participants do capitalize into prices at least some information conveyed by the tri program

reexamining the empirical evidence for an environmental kuznets curve this paper uses an updated and revised panel data set on ambient air pollution in cities worldwide to examine the robustness of the evidence for the existence of an inverted u shaped relationship between national income and pollution we test the sensitivity of the pollution income relationship to functional forms to additional covariates and to changes in the nations cities and years sampled we find that the results are highly sensitive to these changes and conclude that there is little empirical support for an inverted u shaped relationship between several important air pollutants and national income in these data

entry and exit patterns of toxic firms we pair an establishment level dataset from texas with public information available in the toxics release inventory tri to evaluate the standing of dirty industries in texas census tracts with a focus on environmental justice concerns the share of nonwhite residents in a tract is positively correlated with the number of tri reporting firms and an inverse u shaped relationship characterizes the number of tri reporting firms and a tract s median income even after controlling for factor prices and other covariates which might drive firm location decisions entrants that report to the tri are more likely to locate in areas with a higher share of nonwhite residents firms that report to the tri are also more likely to enter areas with a low share college graduates in contrast the number of entrants from industries which do not have tri reporters is negatively related to the percent of nonwhite residents in a tract firms in these non reporting industries are also more likely to enter areas with a high share of college graduates polluters appear to agglomerate raising concerns about both chemical releases being concentrated in certain tracts and also affecting nonwhite dense areas disproportionately the strength of these effects often depend on an urban rural classification with rural areas experiencing the most pronounced concerns moreover tri reporting firms are less likely to exit the market relative to their peers which operate in the same industry but do not need to file tri reports suggesting releases may affect a region in the long run

dynamic pricing and ordering decisions by a monopolist this paper considers the relationship between pricing and ordering decisions for a monopolistic retailer facing a known demand function where over the inventory cycle the product may exhibit i physical decay or deterioration of inventory called wastage and ii decrease in market value called value drop associated with each unit of inventory on hand the retailer is allowed to continuously vary the selling price of the product over the cycle we introduce a notion of instantaneous margin and use it to derive profit maximizing conditions for the retailer the model explains the markdown of retail goods subject to decay it also provides guidance in determining when price changes during the cycle are worthwhile due to product aging how often such changes should be made and how such changes affect ordering intervals and quantities

relationships among three assumptions in revenue management this note discusses the relationships among three assumptions that appear frequently in the pricing revenue management literature these assumptions are mostly needed for analytical tractability and they have the common property of ensuring a well behaved revenue function the three assumptions are decreasing marginal revenue with respect to demand decreasing marginal revenue with respect to price and increasing price elasticity of demand we provide proofs and examples to show that none of these conditions implies any other however they can be ordered from strongest to weakest over restricted regions and the ordering depends upon the region

environmental information provision market valuation and firm incentives an empirical study of the japanese prtr system the environmental performance of a listed firm could affect its level of investment in pollution prevention and its access to financial markets previous studies using tobin s q that explore market response to environmental performance do not distinguish between the impact of performance on investment and market response which may mislead conclusions to overcome this problem we simultaneously estimate the functions of the intangible asset the replacement cost and the toxic chemical risk we find that the japanese financial market does not value risk associated with toxic chemical releases nevertheless even without market valuation firms increase investment to reduce pollution 2010 by the board of regents of the university of wisconsin system

monopoly and soft budget constraint a benevolent government may decide to subsidize an unprofitable monopoly whose profits do not capture all the social surplus from its production anticipating this the firm may underinvest in order to become unprofitable and extract state subsidies the resulting welfare loss may exceed by many times the deadweight cost of monopoly pricing committing the firm to a price ceiling may soften its budget constraint and thus reduce welfare competition can harden budget constraints in industries in which free entry is socially excessive

information as regulation the effect of community right to know laws on toxic emissions abstract there is growing academic and policy level interest in the use of information as quasi regulatory mechanisms such as toxic release inventory tri and green labels mandatory disclosure requirements have been touted as market based incentives that may affect firm behavior we provide new evidence on the effectiveness of disclosure requirements by examining firm behavior in response to disclosures of tri emissions we find that firms with the largest stock price decline on the day this information became public subsequently reduced emissions more than their industry peers this is consistent with the view that financial markets may provide strong incentives for firms to change their environmental behavior

job additionality and deadweight spending in perfectly competitive industries the case for optimal employment subsidies abstract this paper links the old literature on employment subsidies with the current theories of contract and regulation one important source of inefficiency of employment subsidies is non additional employment and deadweight spending which occur when private firms receive a subsidy for jobs that would have been created without the subsidy we identify the asymmetry of information between the government and the private firm as the source of these problems when the government proposes optimal incentive contracts to promote employment we show that all employment creations are additional and that the deadweight spending is equal to the information rent which may be null when firms types are discrete

the effect of emission information on housing prices quasi experimental evidence from the european pollutant release and transfer register in this paper we study whether the release of pollutant emission information has an effect on housing prices the event under study is the publication of the first wave of emission quantity data from the european pollutant release and transfer register in 2009 our analysis is based on quarterly housing prices at the german postal code level for the years 2007 2011 and provides the first evidence from europe on this research question estimating a differences in differences model and controlling for observable differences in land use housing type distribution tax revenues and other postal code area characteristics by means of propensity score matching we find no significant effect of the release of emission information on the value of houses in affected postal code areas this result survives a number of robustness checks designed to assess whether our findings are due to data aggregation issues or the actual treatment definition this leads to the conclusion that on an aggregate level the 2009 publication of e prtr data did not have an immediate and noticeable effect on housing prices in germany

recent theoretical work on the soft budget constraint the soft budget constraint is a syndrome that was identified and studied by janos kornai in his analysis of centrally planned economies see kornai 1980 the syndrome is said to arise when a seemingly unprofitable enterprise is bailed out by the government or the enterprise s creditors in other words the enterprise is not held to a fixed budget but finds its budget constraint softened by the infusion of additional credit when it is on the verge of failure kornai viewed the soft budget constraint as a crucial ingredient for explaining the salient features of socialist economic performance in particular the pervasiveness of shortages one interesting puzzle is why centrally planned economies have been particularly susceptible to the influence of the soft budget constraint the capitalist world is hardly immune as the recent financial crisis in asia attests but on the whole it has proved less vulnerable indeed the very origin of the soft budget constraint and the mechanism by which it gives rise to shortages and other undesirable effects are also obviously important questions although kornai s work has long been well known and appreciated answers to these associated theoretical questions have been hazarded only recently in maskin 1996 i surveyed some of the initial efforts in this direction including mathias dewatripont and maskin 1995 which argues that centralization of credit can give rise to soft budget constraints because it facilitates the refinancing of

house prices during siting decision stages the case of an incinerator from rumor through operation abstract the impact of an undesirable land use on house prices is not constant over time previous proximity studies which employed only discrete changes in information such as an epa superfund site announcement ignored potentially important phases of the adjustment process this study explicitly measures how the effects of an undesirable land use evolve over the siting process and life of the disamenity some price response to rumors of a facility is indicated and the evidence that prices respond at groundbreaking before operation is strong the distance premium persists at least 7 years after the facility begins operations

designing a private industry government auctions with endogenous market structure abstract this paper considers government mechanisms for auctioning production rights in which both the winners and the market structure doupoly dual sourcing monopoly sole sourcing or government owned production are a function of the bids in designing the optimal mechanism the government considers the tradeoffs among consumer surplus producer surplus and revenue under incomplete information doupoly is implemented less frequently and government production more frequently than under complete information when bidders are symmetric the optimal mechanism can be implemented as a modified second price auction applications to privatization deregulation and defense procurement are discussed

a theory of bot concession contracts in this paper we discuss the choice for build operate and transfer bot concessions when governments and firm managers do not share the same information regarding the operation characteristics of a facility we show that larger shadow costs of public funds and larger information asymmetries entice governments to choose bot concessions this result stems from a trade off between the government s shadow costs of financing the construction and the operation of the facility and the excessive usage price that the consumer may face during the concession period the incentives to choose bot concessions increase as a function of informational asymmetries between governments and potential bot concession holders and with the possibility of transferring the concession project characteristics to the public authority at the termination of the concession

valuing the urban hukou in china evidence from a regression discontinuity design for housing prices abstract this paper explores the demand side of hukou household registration acquisition in china by estimating the market valuation of urban hukou based on jinan city s acquiring the hukous by purchasing houses policy this paper uses houses with a floor area slightly larger and slightly smaller than the minimum required as the treatment and control groups respectively to implement a regression discontinuity design the results show that residents willingness to pay for urban hukou in jinan city was approximately 90 000 126 000 yuan in 2017 we also find great heterogeneity in different housing submarkets the value of hukou is much higher in immigrant dominated housing markets and top primary school districts our findings are robust to parametric and nonparametric estimates and different model specifications we perform falsification tests by assuming a false policy introduction date and placebo tests based on rental data our analysis offers insights for hukou system reform and public services provision

on the environmental discount rate abstract in this paper i show that environmentalism itself can provide a rigorous foundation for the low and declining discount rates that environmentalists seem to favor in long term cost benefit calculations if indeed it is a stylized fact that we are moving toward a world where environmental spending is increasingly important that scenario per se may significantly lower the social rate of return a formula is derived for the ratio of social to private discount rates as a simple function of two operational environmental parameters the formula is used to explain why the social rate of return ought to be lower than the private rate and why this gap called environmental drag when measured in terms of equivalent evaporation of national income may be expected to increase over time

bot projects incentives and efficiency abstract in recent years governments have been increasingly adopting build operate transfer bot contracts for large infrastructure projects however bot contracts have received little attention from economists the apparent agency problem in bot projects has never been analyzed in this paper we develop a model to examine the incentives efficiency and regulation in bot contracts we show that a bot contract with a price regulation during the concession period and a license extension after the concession period is capable of achieving full efficiency both license extension and price control are observed in many real world bot projects we also investigate the efficiency in such contracts by considering other factors including time consistency price ceiling foreign ownership and the lack of price regulation

participation constraints in adverse selection models abstract this paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter s reservation utility depends on his type the informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade the paper identifies conditions for the optimal contract to be separating to be nonstochastic and to induce full participation it also discusses the nature of the solution when bunching occurs the results are applied to nonlinear pricing under price cap regulation and bypass competition and to competition in nonlinear pricing journal of economic literature classification numbers d82 d42 d23 d78 l51 l15

inequality at birth some causes and consequences recent research shows that health at birth is affected by many factors including maternal education behaviors and participation in social programs in turn endowments at birth are predictive of adult outcomes and of the outcomes of future generations exposure to environmental pollution is one potential determinant of health at birth that has received increasing attention a large literature outside of economics advocates for environmental justice and argues that poor and minority families are disproportionately exposed to environmental hazards i provide new evidence on this question showing that children born to less educated and minority mothers are more likely to be exposed to pollution in utero and that white college educated mothers are particularly responsive to changes in environmental amenities i estimate that differences in exposure to toxic releases may explain 6 of the gap in incidence of low birth weight between infants of white college educated mothers and infants of black high school dropout mothers this abstract was borrowed from another version of this item

newsvendor models for innovative products with one shot decision theory abstract in this paper newsvendor problems for innovative products are analyzed because the product is new no relevant historical data is available for statistical demand analysis instead of using the probability distribution the possibility distribution is utilized to characterize the uncertainty of the demand we consider products whose life cycles are expected to be smaller than the procurement lead times determining optimal order quantities of such products is a typical one shot decision problem for a retailer therefore newsvendor models for innovative products are proposed based on the one shot decision theory osdt the main contributions of this research are as follows the general solutions of active passive apprehensive and daring focus points and optimal alternatives are proposed and the existence theorem is established in the one shot decision theory a simple and effective approach for identifying the possibility distribution is developed newsvendor models with four types of focus points are built managerial insights into the behaviors of different types of retailers are gained by the theoretical analysis the proposed models are scenario based decision models which provide a fundamental alternative to analyze newsvendor problems for innovative products

financing infrastructure in developing countries this article develops a theoretical framework to analyse options for financing infrastructure in developing countries we build a basic model that gives motivations for using a combination of public finance private debt and private equity the model is then extended in a number of ways to examine factors that are important for developing countries we focus in particular on key institutional weaknesses that are often important for infrastructure investment overall we show that such weaknesses can be key in determining financing choices but that they do not all push in the same direction financing schemes must therefore be adapted to consider the institutional limitations that are most pertinent in any given context

mean variance analysis of supply chains under wholesale pricing and profit sharing schemes in this paper we explore the use of a wholesale pricing and profit sharing scheme wpps for coordinating supply chains under the mean variance mv decision framework we first analytically establish the necessary and sufficient conditions for coordinating the centralized supply chain by wpss we then show that there exists a unique equilibrium of the stackelberg game with wpps in the decentralized case after that we discuss the information asymmetric case in which the retailer can be benefited by pretending to be more risk averse finally we propose a new measure for the manufacturer to prevent this cheating from happening insights are generated

government outsourcing public contracting with private monopoly the article studies the impact of the government budget constraint on the regulation of natural monopolies in adverse selection contexts the government maximises total surplus but incurs some cost of public funds a la laffont and tirole 1993 government outsourcing is proposed as an alternative to regulation in which firms freely enter the market and choose their prices and output levels however government can contract ex post with the private firms this ex post contracting set up allows more flexibility than regulation where governments commit to both investment and operation cash flows this is especially relevant in case of high technological uncertainties

income environmental disamenity and toxic releases the literature argues that income growth leads to increased demand for environmental quality and thus reduction in pollution using a utility theoretic model we hypothesize that the income pollution relationship should depend on the level of disamenity of the pollutant we proxy for disamenity using the toxicity of releases for counties in the united states the functional relationship between income and releases depends on the level of disamenity the form is more concave for more toxic releases we find that environmental improvements occur at lower levels of per capita income for more toxic pollutants jel q25 q28 o13

the effect of power plants on local housing values and rents abstract this paper uses restricted census microdata to examine housing values and rents for neighborhoods in the united states where power plants were opened during the 1990s compared to neighborhoods with similar housing and demographic characteristics neighborhoods within 2 miles of plants experienced 3 7 decreases in housing values and rents with some evidence of larger decreases within 1 mile and for large capacity plants in addition there is evidence of taste based sorting with neighborhoods near plants associated with modest but statistically significant decreases in mean household income educational attainment and the proportion owner occupied

an elasticity approach to the newsvendor with price sensitive demand we introduce a measure of elasticity of stochastic demand called the elasticity of the lost sales rate which offers a unifying perspective on the well known newsvendor with pricing problem this new concept provides a framework to characterize structural results for coordinated and uncoordinated pricing and inventory strategies concavity and submodularity of the profit function as well as sensitivity properties of the optimal inventory and price policies are characterized by monotonicity conditions or bounds on the elasticity of the lost sales rate these elasticity conditions are satisfied by most relevant demand models in the marketing and operations literature our results unify and complement previous work on price setting newsvendor models and provide a new tool for researchers modeling stochastic price sensitive demand in other contexts

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

credit and efficiency in centralized and decentralized economies we study a credit model where because of adverse selection unprofitable projects may nevertheless be financed indeed they may continue to be financed even when shown to be low quality if sunk costs have already been incurred we show that credit decentralization offers a way for creditors to commit not to refinance such projects thereby discouraging entrepreneurs from undertaking them initially thus decentralization provides financial discipline nevertheless we argue that it puts too high a premium on short term returns the model seems pertinent to two issues soft budget constraint problems in centralized economies and differences between anglo saxon and german japanese financing practices

bridging the trade environment divide protection for free traders this word represents the consummate evil for environmentalists it is the ultimate good of course for the trade community protection conjures up dark images of smoot and hawley while the environmental camp sees clear mountain streams lush green forests and piercing blue skies one cannot blame all of the tensions at the trade environment interface on linguistic differences but these competing perspectives are emblematic of a deep clash of cultures theories and assumptions trade officials often seek to limit efforts to link trade and environmental policy making and sometimes to prohibit such efforts altogether in this regard the narrow focus and modest efforts of the world trade organization s committee on trade and environment are illustrative 1 the launch of negotiations for a free trade area of the americas with an express decision to exclude environmental issues from the agenda provides an even starker example of the trade community s hostility toward serious environmental engagement economists have been prominent among those arguing that pollution control and natural resource management issues are best kept out of the trade policy making process cooper 1994 bhagwati 1999 other economists however have tried to set trade policy making in a broader context and to build environmental sensitivity into the international trading system runge 1994 rodrik 1997 summers 2000

a theory of environmental risk disclosure abstract the regulation of environmental risks increasingly emphasizes the awareness and empowerment of stakeholders the success of this approach however seems to depend crucially on the quality of environmental disclosures in this paper we investigate the amount and quality of the information that would be voluntarily delivered to some stakeholder by a potential polluter we find that information may be hazier when the stakeholder is confident or naive a priori the cost of analyzing the received reports increases little with their complexity or a polluter s net expected payoff from undertaking an industrial activity that would turn out to be unsafe is small a worried stakeholder and a low cost of producing more accurate figures on the other hand favor disclosure of high quality information by delivering information of very good quality safe firms can set themselves apart more easily from dangerous ones the higher the relative ex post payoff from their current industrial activity implications of this framework for the scope and design of public programs of environmental disclosure are briefly examined

optimal procurement policies under price dependent demand abstract we study a periodic review inventory model where in addition to the procurement quantity price is also a decision variable we develop a model where demand in each period is a random variable having a price and possibly period dependent probability distribution with the expected demand decreasing in price the model includes price limits and fixed ordering costs in addition to unit procurement holding and shortage costs we study the optimal policies which jointly maximize the discounted expected profit over a finite planning horizon we characterize the form of the optimal procurement policy under a general price demand relationship and give a sufficient condition for it to be s n s n type we also discuss some special cases and extensions to the basic model including the infinite horizon problem

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

on the unimodality of the price setting newsvendor problem with additive demand under risk considerations abstract we present a mean variance analysis of the single product single period price setting newsvendor problem with additive price dependent demand the main goal of this paper is to use a mean variance framework to solve any risk sensitive instance and find conditions under which the unimodality of the problem is guaranteed we introduce such conditions via the lost sales rate elasticity the elasticity of the optimal price and the elasticity of the expected safety stock surplus to provide managerial insight in terms of the newsvendor s level of service we also simplify the optimization problem in case that those conditions do not hold the main contribution of this paper is that by evaluating the unimodality of the problem for any possible risk attitude it extends previously published results found for the concavity of the solution in risk neutral and moderately risk sensitive cases

s s optimality in joint inventory pricing control an alternate approach we study a stationary single stage inventory system under periodic review with fixed ordering costs and multiple sales levers such as pricing advertising etc we show the optimality of s s type policies in these settings under both the backordering and lost sales assumptions our analysis is constructive and is based on a condition that we identify as being key to proving the s s structure this condition is entirely based on the single period profit function and the demand model our optimality results complement the existing results in this area

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

estimates of the impact of crime risk on property values from megan s laws abstract we estimate the willingness to pay for reductions in crime risk using the location and move in dates of sex offenders we find significant effects of sex offenders locations that are geographically localized house prices within 0 1 miles of a sex offender fall by 4 percent on average we then use this finding to estimate the costs to victims of sexual offenses and find costs of over 1 million per victim far greater than previous estimates however we cannot reject the alternative hypotheses that individuals overestimate risks posed by offenders or that living near an offender poses significant costs exclusive of crime risk jel k42 r23 r31

the effect of legalizing retail marijuana on housing values evidence from colorado does legalizing retail marijuana generate more benefits than costs this paper provides a first step toward addressing that question by measuring the benefits and costs that are capitalized into housing values we exploit the time series and cross sectional variations in the adoption of colorado s municipality retail marijuana laws rmls and examine the effect on housing values with a difference in differences strategy our estimates show that the legalization leads to an average 6 increase in housing values indicating that the capitalized benefits outweigh the costs in addition we find suggestive evidence that this relatively large housing value appreciation is likely due to rmls inducing strong housing demand while having no discernible effect on housing supply finally we show that the effect of rmls is heterogeneous across locations and property types jel k20 r28

technical note optimal dynamic joint inventory pricing control for multiplicative demand with fixed order costs and lost sales this note studies the optimal dynamic decision making problem for a retailer in a price sensitive multiplicative demand framework our model incorporates lost sales holding cost fixed and variable procurement costs as well as salvage value we characterize the structure of the retailer s discounted expected profit maximizing dynamic inventory policy for both finite and infinite selling horizon problems

a note on probability distributions with increasing generalized failure rates distributions with an increasing generalized failure rate igfr have useful applications in pricing and supply chain contracting problems we provide alternative characterizations of the igfr property that lead to simplify verifying whether the igfr condition holds we also relate the limit of the generalized failure rate and the moments of a distribution

coordinating inventory control and pricing strategies with random demand and fixed ordering cost the finite horizon case we analyze a finite horizon single product periodic review model in which pricing and production inventory decisions are made simultaneously demands in different periods are random variables that are independent of each other and their distributions depend on the product price pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered the objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon we show that when the demand model is additive the profit to go functions arek concave and hence an s s p policy is optimal in such a policy the period inventory is managed based on the classical s s policy and price is determined based on the inventory position at the beginning of each period for more general demand functions i e multiplicative plus additive functions we demonstrate that the profit to go function is not necessarilyk concave and an s s p policy is not necessarily optimal we introduce a new concept the symmetrick concave functions and apply it to provide a characterization of the optimal policy

regulation and capitalization of environmental amenities evidence from the toxic release inventory in massachusetts environmental regulation in the united states has undergone a slow evolution from command and control strategies towards market based regulations one such innovation is the toxics release inventory tri a regulation that requires polluting e rms to publicly disclose information about their toxic emissions the basic tenet of this regulation is that it corrects for informational asymmetries between polluters and households allowing communities to pressure polluters to decrease their emissions policy makers have judged the tri a tremendous success as national releases declined by 43 between 1988 and 1999 yet many of the fundamental problems which are known to lead to the classic failure of the coase theorem such as high transaction costs and dife culties in organizing cast doubt on the effectiveness of disclosure rules alone to lead to an efe cient outcome in the caseof pollution we use an event study methodology with high quality data on house prices and other local attributes to assess the extent to which the public values changes in toxic releases and thus the success of tri our major e ndings include 1 declines in toxic releases appear unrelated to any political economy variables that might lead to public activism 2 initial information released under tri had no signie cant effect on the distribution of house prices and 3 house prices show no signie cant impact of declines in reportedtoxic releases over time standard errors aresmall enoughthat we can reject the hypothesis that large declines in toxic releases lead to more than a 0 5 increase in house prices these results also hold when we control for differences in the availability of information on tri and the possible effect of expectations our e ndings cast doubt on the ability of the public to process complex information on hazardous emissions and support the coase theorem in that right to know lawssuch as tri may not be the most effective form of environmental regulation

politics and social costs estimating the impact of collective action on hazardous waste facilities firms that generate negative externalities may consider the effects of their location on the surrounding environment because of the right of their prospective neighbors to demand compensation for pollution and raise the transaction costs of location since communities vary both in the value individuals place on the environment and in the ability of residents to organize politically locations that generate the least political opposition may not be the locations that result in the lowest externalities this article tests whether the degree to which firms internalize their externalities depends on the ability of affected communities to engage in collective action the results indicate that firms processing hazardous waste when deciding where to expand capacity do take into account variations in the potential for collective action to raise their costs

stocking and pricing decisions under endogenous demand and reference point effects abstract in this paper we study the newsvendor s pricing and stocking decisions under reference point effects the demand faced by the newsvendor is endogenous and the customers may also decide to procure the product from an outside option we characterize the firm s optimal pricing and stocking decisions our analysis reveals a threshold policy on the firm s ordering and pricing decisions while considering the impact of reference point effects we also find that as the level of optimism increases the firm s optimal ordering level decreases and optimal price increases we further study the impact of loss aversion on the firm s ordering and pricing decisions

a risk averse newsvendor model under marketing dependency and price dependency abstract in this paper we analyze a single period inventory model where a risk averse newsvendor makes a joint decision on ordering pricing and marketing under the cvar risk measure criterion the newsvendor can exert marketing effort to enhance market demand we assume that the newsvendor s marketing effort affects the scale of the demand distribution and hence to model the marketing dependent demand as a multiplicative form we characterize sufficient conditions that guarantee existence and uniqueness of the optimal solutions under some mild assumptions on demand distribution expected demand function and marketing effort cost which are widely used in the related literature we show that the optimal order quantity increases in the newsvendor s marketing effort but the optimal price remains unchanged whether the demand is marketing dependent or not additionally we explore impact of exogenous parameters such as unit order cost salvage value and the newsvendor s risk aversion coefficient on the optimal decision variables and find that the optimal marketing effort always keeps the same changing direction with the optimal marketing independent order quantity as the exogenous parameters change this suggests that impact of the parameters on the optimal order quantity gets strengthened in the case of marketing dependent demand

an integrated approach to price differentiation and inventory decisions with demand leakage abstract price differentiation is among widely practiced tools in revenue management rm in which a seller offers same or slightly different products or services at different prices to its customers earlier research studies have shown that the benefits from price differentiation are evident when the market segmentation is assumed to be perfect in a perfect market segmentation customers associated with a market segment do not move between market segments however it is not uncommon to observe that a market segmentation a firm operates in is seldom prefect and due to imperfect segmentation customers move between market segments which is also referred to as demand leakage in addition the firms predominantly experience stochastic demand and thus a firm experiences both the short sales and leftovers due to demand uncertainty this research proposes a model to address the issue of an optimal market segmentation using price differentiation as a tool we also establish an integrated framework for pricing order and production quantity allocation decisions in each market segment when a firm experiences demand leakage from one market segment to another and faces price dependent stochastic demand the model is analyzed to determine an optimal decision framework on pricing order quantity allocation and market segmentation using the proposed price differentiation due to the complexity of the problem both the hierarchical and joint optimization approaches are developed a simplified closed form optimal solution to the problem is outlined in the case of hierarchical approach the model is also analyzed for a situation in which the distribution of the price dependent stochastic demand is unknown and a distribution free approach is utilized to address the problem it is identified that the use of distribution free approach also results in a closed form optimal solution to the problem a numerical study is presented to demonstrate the performance of the model and solution approaches the benefits of the optimal market segmentation using a differentiation price are also highlighted along with the proposed integrated optimal decision framework when a firm experiences demand leakage

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

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

incomplete information and optimal market structure public purchases from private providers abstract market structure is endogenized in a normative model of public procurement featuring a social cost of profit product variety economies of scale and incomplete information about cost depending on parameters either sole sourcing or dual sourcing might be optimal however if the social cost of profit is positive but not too large incomplete information biases optimal market structure in favor of sole sourcing on the other hand this bias in favor of sole sourcing may be reversed if the social cost of profit is large an application to the publicly financed treatment for drug abuse motivates the analysis

optimal order quantity and pricing decisions in single period inventory systems abstract in this paper we consider simultaneous pricing and procurement decisions associated with a one period pure inventory model under deterministic or probabilistic demand we investigate the necessary and sufficient conditions for an type policy to be optimal for the determination of the procurement quantity we also show how the corresponding optimal price can be obtained

relief for the environment the importance of an increasingly unimportant industrial sector deindustrialization stagnant real incomes of production workers and increasing inequality are latter day features of many economies it is common to assume that such developments pressure policymakers to relax environmental standards however when heavily polluting industries become less important economically their political importance also tends to diminish consequently a regulator may increase the stringency of environmental policies like some other studies we find that declining industrial employment translates into stricter environmental standards in contrast to previous studies but consistent with our argument we find that greater income inequality is associated with policies that promote a cleaner environment jel q58 p16 j31 c23