dynamic price competition with fixed capacities in this paper we study price competition for an oligopoly in a dynamic setting where each of the sellers has a fixed number of units available for sale over a fixed number of periods demand is stochastic and depending on how it evolves sellers may change their prices at any time this reflects the fact that firms constantly and almost costlessly change their prices reacting to updates in their estimates of market demand competitor prices or inventory levels in a setting with demand uncertainty we show that there is a unique subgame perfect equilibrium for a duopoly in which all states sellers engage in bertrand competition and the seller with the lower equilibrium reservation value sells a unit at a price equal to the competitor s equilibrium reservation value this structure therefore extends the marginal value concept of bid price control used in many revenue management implementations to a competitive model we give a closed form solution to the equilibrium price paths for a duopoly and extend all the results to an n firm oligopoly we then study extensions to multiple customer types uncertain valuations and differentiated products this paper was accepted by martin lariviere operations management

understanding heterogeneous preferences in random utility models a latent class approach a finite mixture approach toconditional logit models is developed in whichlatent classes are used to promoteunderstanding of systematic heterogeneity the model is applied to wilderness recreationin which a branded choice experiment involvingchoice of one park from a demand system wasadministered to a sample of recreationists the basis of membership in the classes orsegments in the sample involved attitudinalmeasures of motivations for taking a trip aswell as their stated preferences overwilderness park attributes the econometricanalysis suggested that four classes of peopleexist in the sample using the model toexamine welfare measures of some hypotheticalpolicy changes identified markedly differentwelfare effects than the standard singlesegment model and provided insight into thedifferential impact of alternative policies

order backlogs and strategic pricing the case of the u s large turbine generator industry this paper illustrates the usefulness of game theory for strategic management through theoretical and empirical analysis of price competition in the presence of production backlogs game theoretic analysis predicts a different relationship between relative prices and backlog levels than does analysis that ignores the sorts of interactive considerations emphasized by game theory empirical analysis based on data for the u s market for large turbine generators between 1951 and 1963 corroborates the game theoretic prediction the paper concludes with a discussion of the sorts of situations in which game theoretic reasoning is particularly likely to prove useful 1998 john wiley sons ltd

preventing competition because of solidarity rhetoric and reality of airport investments in spain from a public interest perspective there could be a justification for constraining market mechanisms with the aim of progressive redistribution however some policies might be based on selfish motivations of government agents in this article we empirically contrast if the infrastructure policy is based only on public interest motivations or if it is also based on the private motivations of policy makers in this way spain infrastructure policy provides a useful policymaking field to test hypothesis about the behaviour of policy makers we find some evidence regarding the strength of political motivations in explaining such behaviour in fact results from our analysis show that political motivations can eventually play a more relevant role than social welfare maximization

micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

inequality and violent crime abstract we investigate the robustness and causality of the link between income inequality and violent crime across countries first we study the correlation between the gini index and homicide and robbery rates within and between countries second we examine the partial correlation by considering other crime determinants third we control for the endogeneity of inequality by isolating its exogenous impact on these crime rates fourth we control for measurement error in crime rates by modeling it as both unobserved country effects and random noise finally we examine the robustness of this partial correlation to alternative measures of inequality the panel data consist of nonoverlapping 5 year averages for 39 countries during 1965 95 for homicides and 37 countries during 1970 94 for robberies crime rates and inequality are positively correlated within countries and particularly between countries and this correlation reflects causation from inequality to crime rates even after controlling for ot

benefit estimates for landscape improvements sequential bayesian design and respondents rationality in a choice experiment a multi attribute stated preference approach is used to value low and high impact actions on four major landscape components addressed by the rural environment protection scheme in ireland several methodological issues are addressed the use of prior beliefs on the relative magnitudes of parameters standardized description of different levels of landscape improvements via image manipulation software adoption of efficiency increasing sequential experimental design and sensitivity of benefit estimates to inclusion of responses from irrational respondents results suggest that bayesian design updating delivers significant efficiency gains without loss in respondent efficiency and estimates are upward biased when irrational respondents are included

demand for beef from cattle administered growth hormones or fed genetically modified corn a comparison of consumers in france germany the united kingdom and the united states we compare consumer valuations of beef ribeye steaks from cattle produced without growth hormones or genetically modified corn in france germany the united kingdom and the united states results suggest that french consumers place a higher value on beef from cattle that have not been administered added growth hormones than u s consumers however valuations of non hormone treated beef are statistically indistinguishable across germany the united kingdom and the united states results also suggest that european consumers place a much higher value on beef from cattle that have not been fed genetically modified corn than u s consumers copyright 2003 oxford university press

the regional allocation of infrastructure investment the role of equity efficiency and political factors abstract this paper analyses the main determinants of the regional allocation of infrastructure investment the estimated investment equation is derived from a general specification of the government s objective function berhman and craig am econom rev 77 1987 315 which accounts both for the equity efficiency trade off and for deviations from this rule that arise because of political factors the reaction of investment to changes in the regional output provides information about the strength of the equity efficiency trade off the main political factor considered is a measurement of the electoral productivity of funds invested in each region the equation is estimated from panel data on investment and the capital stock of transportation infrastructure i e roads rails ports and airports for the spanish departments nuts3 during the period 1987 1996 we use a dynamic specification of the equation that allows for slow adjustment and which is estimated by gmm methods arellano and bond rev econom stud 58 1991 277 the results suggest that efficiency criteria play only a limited role in the geographical distribution of government infrastructure investment specific regional infrastructure needs and political factors both appear to be factors that do explain the regional allocation of infrastructure investment

is the median voter decisive evidence from referenda voting patterns abstract this paper examines whether the voter with the median income is decisive in local spending decisions previous tests have relied on cross sectional data while we make use of a pair of california referenda to estimate a first difference specification the referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 and 67 to 55 respectively we find that voters rationally consider future public service decisions when deciding how to vote on voting rules however the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules especially in communities that have a large share of high income voters with attributes that suggest low demand for public services based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group this two type model implies that our low demand types individuals over age 45 with no children have demands that are 45 lower than other voters collectively these findings are consistent with high income voters with weak preferences for public educational services voting with the poor against increases in public spending on education

does decentralization reduce income inequality only in rich states we investigate the relationship between fiscal decentralization and income inequality using data from u s states over three and a half decades our study contributes to the literature in several ways in terms of empirical methodology and specification first we take into account integration and cointegration properties of the data and estimate the cointegratingrelationship between fiscal decentralization and income inequality using fully modified ordinary least squares following pedroni 2000 second we investigate the direction of the causality finally and perhaps most importantly we investigate if the relationship between fiscal decentralization and income inequality is conditional on income in each state we find that fiscal decentralization does reduce income inequality but only in rich states we also find that causality runs from fiscal decentralization to income inequality not the other way around

a cautionary note on designing discrete choice experiments a comment on lusk and norwood s effect of experiment design on choice based conjoint valuation estimates recent monte carlo work on choosing experimental designs for discrete choice experiments seemed to greatly simplify this choice for applied researchers it suggested that a commonly used designs can generate unbiased estimates for indirect utility function specifications with main effects only and main effects plus higher order terms and b random designs are more efficient than main effects designs we show that these results are very specific to the particular indirect utility specifications studied and do not generalize well we further show that conclusions drawn concerning random designs are problematic and potentially dangerous for applied researchers

social security in a moral economy an empirical analysis for java private transfer payments are modeled as outcomes of a constrained social choice pro blem facing donors the approach is applied to a large household leve l data set for java and hypotheses are tested concerning the performa nce of the moral economy as a social security system transfer be havior is found to be very different between rural and urban areas w hile transfer receipts and outlays are income inequality reducing in rural areas this is not the case in urban areas there is also evidence of transfers being targeted to disadvantaged households such as the sick elderly and for urban areas the unemployed copyright 1988 by mit press

utility in willingness to pay space a tool to address confounding random scale effects in destination choice to the alps we compare two approaches for estimating the distribution of consumers willingness to pay wtp in discrete choice models the usual procedure is to estimate the distribution of the utility coefficients and then derive the distribution of wtp which is the ratio of coefficients the alternative is to estimate the distribution of wtp directly we apply both approaches to data on site choice in the alps we find that the alternative approach fits the data better reduces the incidence of exceedingly large estimated wtp values and provides the analyst with greater control in specifying and testing the distribution of wtp copyright 2008 oxford university press

needs economic constraints and the distribution of public home care when private goods are publicly provided at subsidized prices government authorities have to determine the distribution of services on recipients the distribution of services according to need is frequently referred to as an important policy goal thus governments are assumed to develop standards for evaluating the relative needs of different clients this paper analyses the impact of needs and economic constraints on the distribution of public home care in norway the empirical results show that individual needs have a significant effect on the distribution of home care another finding is that local public authorities with higher disposable incomes meet client needs better finally the results are utilized to derive a measure of client specific need

do hypothetical and actual marginal willingness to pay differ in choice experiments application to the valuation of the environment abstract in this paper we test the validity of choice experiments with donations for environmental projects in particular we test whether or not there are differences in preferences between a hypothetical and an actual choice experiment our experiments indicate no differences in addition internal tests of validity indicate transitive and stable preferences in both experiments although there are some indications of possible learning effects during the experiment

bayesian conjoint choice designs for measuring willingness to pay in this paper we propose a new criterion for selecting efficient conjoint choice designs when the interest is in quantifying willingness to pay wtp the new criterion which we call the wtp optimality criterion is based on the c optimality criterion which is often used in the optimal experimental design literature we use a simulation study to evaluate the designs generated using the wtp optimality criterion and discuss the design of a real life conjoint experiment from the literature the results show that the new criterion leads to designs that yield more precise estimates of the wtp than bayesian d optimal conjoint choice designs which are increasingly being seen as the state of the art designs for conjoint choice studies and to a substantial reduction in the occurrence of unrealistically high wtp estimates

the distribution of public services an exploration of local governmental preferences a local governmental welfare function is specified to explore two of its central characteristics the equity productivity trade off and differential weights across neighborhoods the constrained maximization model is estimated using service outcomes safety in the welfare function as opposed to publicly provided inputs police over neighborhoods the equity productivity trade off is found to be considerable and not all neighborhoods are weighted equally the results show that inequality aversion and unequal concern by local government over service outcomes must be addressed explicitly to understand the observed distribution of publicly provided inputs with important implications for standard analysis of local governmental behavior copyright 1987 by american economic association

optimal experimental design for double bounded dichotomous choice contingent valuation the double bounded dichotomous choice model is becoming popular in the contingent valuation literature this technique considers the responses to two bids the second one being determined according to the response to the first and it has been shown to be statistically more efficient than the standard single bounded model in this paper the issue of the optimal choice of bid values for the double bounded logit model is addressed these designs are derived to satisfy the d optimal c optimal and fiducial method criteria

optimal designs for discrete choice contingent valuation surveys single bound double bound and bivariate models this paper finds the designs for discrete choice contingent valuation surveys which maximize the precision of a statistic of interest about the public s willingness to pay wtp for a change in the environmental quality such as median wtp an optimization problem is set up in which the efficiency of the estimate of median wtp or a related concept is the objective function to optimize with respect to the survey design i e the set of bids offered to the respondents in deriving the optimal designs we consider alternative econometric models such as the basic single bound model that uses the responses to the first payment question the traditional interval data or double bound model for surveys with a follow up payment question and the recently proposed bivariate binary response model simulations are carried out to compare the alternative design principles and assess their performances with respect to the statistic of primary interest median wtp and other welfare measures such as mean wtp other designs that are constructed ad hoc are also examined

designing conjoint choice experiments using managers prior beliefs abstract the authors provide more efficient designs for conjoint choice experiments based on prior information elicited from managers about the parameters and their associated uncertainty the authors use a bayesian design procedure that assumes a prior distribution of likely parameter values and optimizes the design over that distribution the authors propose a way to elicit prior information from managers and show in monte carlo studies that the procedure provides more efficient designs than the current procedures the authors provide an empirical application in which they elicit prior information on the parameter values and the associated uncertainty from managers here the bayesian design provides 30 50 lower standard errors of the estimates and an expected predictive validity that is approximately 20 higher

dynamic price competition with capacity constraints and a strategic buyer we analyze a simple dynamic durable good model two incumbent sellers and potential entrants choose their capacities at the start of the game we solve for equilibrium capacity choices and the necessarily mixed pricing strategies in equilibrium the buyer splits the order with positive probability to preserve competition making it possible that a high and low price seller both have sales sellers command a rent above the value of unmet demand by the other seller a buyer benefits from either a commitment not to make future purchases or by hiring an agent to always buy from the lowest priced seller

donor preferences and recipient fiscal behavior a simultaneous analysis of foreign aid we theoretically develop and empirically estimate a preference model determining foreign aid donor behavior aid access and levels are separately determined by endogenous budgetary allocations the international economic environment the distribution of income between countries basic human needs the small country effect and regional bias we find fungibility of aid in recipient budgets is due to donor and recipient preferences despite the importance of other economic influences we find a significant pro poor country bias in aid allocations although little aggregate influence of basic human needs or regional bias the small country effect is significant for two of six donors jel f35 o19 h 77

urban safety in vancouver allocation and production of a congestible public good this paper is a simultaneous exploration of the within city production of safety with the endogenous allocation of public inputs police three issues are central one is an examination of the local government allocation function second is that safety is specified as a congestible public service consistent with club theory finally the model is estimated using a survey measure of crime these innovations are due to a unique data set containing observations by neighborhoods in the city of vancouver the results are crucial for illustrating crime deterrence as well as the local public good nature of safety

willingness to pay for energy saving measures in residential buildings this paper uses a choice experiment to evaluate the consumers willingness to pay for energy saving measures in switzerland s residential buildings these measures include air renewal ventilation systems and insulation of windows and facades two groups of respondents consisting respectively of 163 apartment tenants and 142 house owners were asked to choose between their housing status quo and each one of the several hypothetical situations with different attributes and prices the estimation method is based on a fixed effects logit model the results suggest that the benefits of the energy saving attributes are significantly valued by the consumers these benefits include both individual energy savings and environmental benefits as well as comfort benefits namely thermal comfort air quality and noise protection

the equity productivity tradeoff public school resources in brazil abstract a governmental welfare function is specified to explore the equity productivity tradeoff in the allocation of governmental schooling resources the constrained maximization model is estimated for brazil using expected incomes in each geographical area as the outcome of interest and governmental resources for each area as the input the equity productivity tradeoff in brazillian governmental preferences is estimated to be considerable with a welfare curvature close neither to the utilitarian nor to the rawlsian extremes but close to the intermediate cobb douglas value this implies neutral rather than reinforcing or compensating behavior in the allocation of governmental resources with the result that the distribution of such resources across areas is more equal than is that of expected incomes

effect of experimental design on choice based conjoint valuation estimates in this article we investigate the effect of several commonly used experimental designs on willingness to pay in a monte carlo environment where true utility parameters are known all experimental designs considered in this study generated unbiased valuation estimates however random designs or designs that explicitly incorporated attribute interactions generated more precise valuation estimates than main effects only designs a key result of our analysis is that a large sample size can substitute for a poor experimental design overall our results indicate that certain steps can be taken to achieve a manageably sized experimental design without sacrificing the credibility of welfare estimates

voluntary income redistribution with migration abstract this paper examines theoretically the welfare magnet problem brought about by income redistribution in a small area where disparities across jurisdictions in transfer policies may induce both recipient and resource migration we show that the level of redistribution determined by majority rule may either rise or decline as household mobility increases and that this level will be either higher or lower than the efficient level to an extent that depends on local market conditions the social value of migrants and the mobility of both the rich and the poor in particular an economy may benefit from the immigration of transfer recipients we also derive the form of an efficient community specific subsidy to transfers which in some cases will be negative

optimal designs of discrete response experiments in contingent valuation studies optimal designs for estimating model parameters and other characteristics such as mean and median willingness to pay are discussed when a logistic or a probit regression model is used for analyzing a contingent valuation study with discrete questions a numerical example related to a study of the value of preserving some virgin forests in sweden illustrates the efficiencies of different designs and how a sequential procedure can be applied copyright 1992 by mit press

bias in discrete response contingent valuation abstract the empirical literature on discrete response contingent valuation has found that seemingly innocuous changes in the statistical models estimated result in significantly different point estimates of willingness to pay this paper hypothesizes and tests several potential explanations for these results first it investigates and compares the biases inherent in single bounded and double bounded maximum likelihood estimation procedures and examines how they react to various bid designs and sample sizes then it examines the presence and identification of outliers in binary choice data and how these outliers influence estimation finally it presents an alternative approach to addressing the issue of outliers which explicitly acknowledges the possibility of upwardly biased response probabilities

crime and local inequality in south africa the authors examine the effects of local inequality on property and violent crime in south africa their findings are consistent with economic theories relating inequality to property crime and also with sociological theories that imply that inequality leads to crime in general burglary rates are 20 30 percent higher in police station jurisdictions that are the wealthiest among their neighbors suggesting that criminals travel to neighborhoods where the expected returns from burglary are highest the authors do not find evidence that inequality between racial groups fosters interpersonal conflict at the local level