market performance with multiproduct firms we revisit the fundamental issue of market provision of variety associated with chamberlin spence and dixit stiglitz when firms sell multiple products both products and firms are horizontally differentiated we propose a general nested demand framework where consumers first decide upon a firm then which variant to buy and how much the nested ces is a special case we use it to determine the market s biases when firms compete in product ranges and prices the market system attracts too many firms with too few products per firm firms restrain product ranges to relax price competition but this exacerbates over entry

the environment and emerging development issues development economics for the most part has failed to recognize renewable environmental resources as economic goods yet the lives of the poor in developing countries are intimately tied to the fate of their local common property resources soil fuel wood water and so on ignoring the loss of common property renewable resources via degradation centralization or privatization in calculations of net national product can mask the destruction of resources available to a country s poor behind the false appearance of a growing national economy this paper describes the difference between the problem of managing local common property resources in developing countries and the problem of protecting the global commons such as the atmosphere and oceans it outlines the calculations that would include the local commons in the national income accounting of capital assets and argues that the interests of those most dependent on the increasingly scarce local commons will be best served by placing control in their hands while the central government provides infrastructure and educational support to control the pollution of the global commons on the other hand the paper sketches a plan in which most countries would have a high incentive to participate a global allocation of limited tradable permits to discharge defined pollutants

green price indices abstract this paper suggests two theoretically consistent and empirically tractable ways that a cost of living index can be expanded to include the environment and other public goods in addition it presents an empirical illustration of such an index for los angeles california incorporating air quality and other spatially varying public goods using a hedonic model the results indicate that the required information can be recovered and that including public goods can make a substantial difference in the index

the dangers of extended but incomplete accounting for measures of economic performance in a world of imperfect knowledge abstract the conventions currently employed by national statistical agencies for income and wealth accounting leave out many things relevant to economic performance and human well being this has lead to proposals for and attempts at more comprehensive accounting fully comprehensive accounting is impossible and the question addressed in this paper is whether a fuller but incomplete accounting is guaranteed to be nearer to the truth than the conventional accounting the answer to this question is no in general for example we cannot be sure that genuine saving would be more accurately measured by extending the list of assets that it covers the paper sets out the conditions under which greater accuracy would be assured

welfare reductions from small cost reductions in differentiated oligopoly abstract this paper compares the welfare effects of cost reductions in differentiated bertrand and cournot oligopolies using a linear demand system the paper provides the critical levels of output shares below which a small cost reduction by a bertrand or cournot firm reduces welfare it then shows that the critical value is larger under bertrand competition than cournot competition

the effects of competition on the r d portfolios of multiproduct firms we investigate the r d portfolio choices of multiproduct firms when a firm increases cost reducing r d investment in a given product its rivals will modify their entire r d portfolios by reducing r d investments in that particular product and increasing r d investments in other competing products our analysis demonstrates that r d portfolios will be more specialized when firms face greater competition which will be the case if products become closer substitutes a monopolist begins to face competition from a rival firm or firms compete on price rather than quantity r d cooperation allows firms to internalize the negative externalities of their r d investments in two ways by reducing such investments across all products and by increasingly focusing their r d portfolios on different products firms may completely shut down a subset of their r d projects under r d cooperation if the products concerned are sufficiently close substitutes

testing for the survey mode effect on contingent valuation data quality a case study of web based versus in person interviews this paper addresses the lack of empirical evaluation of the use of web based surveys in the context of contingent valuation surveys we compare using a case study in person interviews with web based surveys regarding response rate information additivity effects and respondents attitudes towards paying the web based survey had a much lower response 5 1 than the in person interviewing 84 we find the web based contingent valuation surveys to be neither more susceptible to information additivity effects nor more prone to zero protest responses we conclude in favor of the use of web based surveys namely in portugal where the number of internet users is rapidly increasing although further research efforts are required on their use

comprehensive nnp social welfare and the rate of return we show that growth in nnp measured in constant prices indicates welfare improvement provided that an observable rate of return measure is positive this is an alternative welfare interpretation of growth in comprehensive nnp compared with that of asheim and weitzman asheim b g weitzman m l 2001 does nnp growth indicate welfare improvement economic letters 73 233 239 which is based on a divisia consumer price index

representative trust and reciprocity prevalence and determinants this paper provides evidence about the determinants of trust and reciprocal inclinations that is a tendency for people to respond in kind to hostile or kind actions in a representative setting we investigate the prevalence of reciprocity in the population the correlation between trust and positive and negative reciprocal inclinations within person the individual determinants of reciprocity and the relationship with psychological measures of personality we find that most people state reciprocal inclinations in particular in terms of positive reciprocity as well as substantial heterogeneity in the degree of trust and reciprocity trust and positive reciprocity are only weakly correlated while trust and negative reciprocity exhibit a negative correlation in terms of determinants being female and increasing age are associated with stronger positive and weaker negative reciprocal tendencies taller people are more positively reciprocal but height has no impact on negative reciprocity psychological traits also affect trust and reciprocity jel d63 j3 j6

voracious transformation of a common natural resource into productive capital i analyze a power struggle where competing factions have private financial assets and deplete a common stock of natural resources with no private property rights i obtain a feedback nash equilibrium to the dynamic common pool problem and obtain political variants of the hotelling depletion rule and the hartwick saving rule resource prices and depletion occur too fast so substitution away from resources to capital occurs too fast and the saving rate is too high the power struggle boosts output but depresses sustainable consumption genuine saving is nevertheless zero in a fractionalized society world bank estimates may be too optimistic

product diversity in asymmetric oligopoly is the quality of consumer goods too low we analyse an oligopoly model incorporating horizontal differentiation and quality differences high quality goods are overpriced and underproduced when the market is fairly well covered low quality products may be profitable when their net social contribution is negative implying excessive entry in a relatively uncovered market even low quality goods are underproduced and there may be underentry when fixed costs are independent of quality the market tends to select the right firms otherwise the market may produce low quality products when it should produce high quality ones the model is calibrated using market data for yoghurt

analysis of genuine saving and potential green net national income portugal 1990 2005 abstract the context of this paper is the measurement of welfare and weak sustainability defined as non declining utility in dynamic economies i e comprehensive or green accounting we estimate green net national income gnni and genuine saving gs for portugal for the years 1990 to 2005 accounting for the disamenity of air pollution emissions the depreciation of commercial forests and the value of time discussing the implications of the assumptions underlying the inclusion of these terms in the green accounting model the influence of short run cycles is analyzed by estimating gnni excluding business cycles our results suggest that business cycles affect the sustainability message of gnni we find that potential gnni is growing and gs is positive in the analyzed period thereby not indicating a weak sustainability problem in portugal although both depict a trend towards unsustainability excluding technological progress there is a contradiction in the sustainability message of gnni and gs

sustainability and technical progress a rigorous model connects together the following three basic concepts 1 sustainability meaning the generalized future power of an economy to consume over time 2 green nnp meaning a current measure of national income that subtracts off from gnp not just depreciation of capital but also more generally depletion of environmental assets evaluated at current efficiency prices 3 technological progress meaning a projection onto the future of the so called solow residual a simple general formula is derived some crude calculations suggest a possibly strong effect of the residual which hints that our best present estimates of long term sustainability may be largely driven by predictions of future technological progress

air pollution and green accounts a simple model treating air emissions as cumulative pollutants is used to derive measures of green net national product the model implies that pollution emissions are properly valued at their marginal social costs in the measurement of green nnp the level of genuine savings net savings less the value of resource depletion and pollution emissions is shown to provide a useful indicator of sustainable development recent figures on the social costs of fuel cycles are used to derive genuine savings measures for the uk and other european nations several countries had negative genuine savings during the 1980s

pay reference points and police performance several theories suggest that pay raises below a reference point will reduce job performance final offer arbitration for police unions provides a unique opportunity to examine these theories as the police officers either receive their requested wage or receive a lower one in the months after new jersey police officers lose in arbitration arrest rates and average sentence length decline and crime reports rise relative to when they win these declines in performance are larger when the awarded wage is further from the police union s demand the findings support the idea that considerations of fairness disappointment and more generally reference points affect workplace behavior

partial shrouding in asymmetric markets this paper studies shrouding of add on information in a market where firms differ in add on production costs we show that partial shrouding equilibria characterised by a selection result exist firms with high low add on costs shroud unshroud unshrouding firms charge lower base good prices than shrouding firms

the role of technological progress in testing adjusted net savings evidence from oecd countries abstract in this paper we investigate the relationship between comprehensive measures of savings and changes in future consumption in oecd countries this relationship is at the basis of the interpretation of adjusted net savings as a weak sustainability indicator and so evidence of its validity provides support to the use of this indicator we construct various measures of comprehensive savings for 20 oecd countries to include depletion from non renewable resources human capital investment and technological progress given their importance especially for rich countries we focus on the role of technical progress and human capital in the form of changes in education level we do not find strong evidence in favor of including green adjustments in the conventional net savings however we find compelling evidence for the inclusion of technological progress since this involves a forward looking term the above result suggests that to construct an indicator of weak sustainability from conventional net savings some estimate of future technological progress is needed

oil development operating cost estimates 1955 1985 abstract few if any published oil production cost estimates can be verified as to method and basic data using us drilling costs and some assumptions explained in the text this paper estimates development operating costs in 41 oil producing nations from 1955 to 1985 from publicly available data on drilling estimation methods are described in detail so that anyone with access to better information on any item can substitute it to arrive at a better estimate

spatial price equilibrium with information asymmetry in quality and minimum quality standards abstract a spatial price equilibrium model with information asymmetry in quality is developed in both static and dynamic versions producers at the supply markets are aware of the quality of their products whereas consumers located at the demand markets are aware only of the average quality of the products that are shipped to their demand markets minimum quality standards are also captured in order to assess the impacts of such policy interventions we establish qualitative results in the form of existence uniqueness and stability analysis an algorithm is proposed along with a convergence proof it is then utilized to compute solutions to a spectrum of spatial price equilibrium numerical examples in order to explore the impacts of information asymmetry under different scenarios the numerical examples which are of quite general functional forms reveal that as the number of supply markets increases the anonymizing effect leads to a decrease in the average quality on the other hand as the number of demand markets increases the pressure to improve quality increases and the average quality increases finally we demonstrate that after the imposition of minimum quality standards the average quality at the demand markets increases and the prices also increase

gift giving and worker productivity evidence from a firm level experiment abstract we present results from a field experiment designed to measure worker response to a monetary gift from their employer the experiment took place inside a tree planting firm paying its workforce incentive contracts firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity we compare planter productivity the number of trees planted per day on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block and thus under similar planting conditions we find direct evidence that the gift had a significant and positive effect on daily planter productivity controlling for planter fixed effects weather conditions and other random daily shocks

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

does nnp growth indicate welfare improvement abstract we show that instantaneous increases in real nnp over time are an accurate indicator of true dynamic welfare improvements this highlights a connection between the theory of green or comprehensive national income accounting and the theory of real price indices

frames of reference and the quality of life asked to choose most people state confidently that they would rather be killed in an automobile accident than to survive a quadraplegic and so we are not surprised to learn that severely disabled people experience a period of devastating depression and disorientation in the wake of their accidents what we do not expect however are the speed and extent to which many of these victims accommodate to their new circumstances within a year s time many quadraplegics report the same mix of moods and emotions as able bodied people do there is also evidence that the blind the retarded and the malformed are no less happy than other people ads for the new york state lottery show participants fantasizing about how their lives would change if they won i d buy the company and fire my boss people who actually do win the lottery report the anticipated rush of euphoria in the weeks after their good fortune followup studies done after several years however indicate that these people are no happier indeed are in many ways less happy than before as a young man fresh out of college i served as a peace corps volunteer in rural nepal my one room house had no electricity no heat no indoor toilet no running water the local diet offered little variety and virtually no meat and yet at no time during my two year stay in nepal did i experience a sense of material deprivation on the contrary my monthly stipend of 40 was much more than most others in my village had and with it i experienced a feeling of prosperity that i have recaptured only in recent years these observations illustrate the critical role of context as a determinant of human satisfaction the neoclassical economic model of choice abstracts from context saying that utility depends only on the level of consumption consumption levels obviously are important and the neoclassical model performs reasonably well in many instances and yet its narrow focus misses something important to predict people s behavior to draw inferences about their well being or to make intelligent policy decisions we must not only know the relevant levels of consumption but also have an appropriate frame of reference within which to evaluate them

sunk costs windows of profit opportunities and the dynamics of entry abstract this article adds two elements to a standard model of monopolistic competition first the number of potential entrants is limited in each period and increases only over time second the potential entrants differ with respect to the consumers valuation of the variant they could offer the resulting simple model exhibits a rich dynamic structure covering the product life cycle a path dependent equilibrium and the traditional textbook case of entry the welfare analysis confirms the view that there cannot be too much entry even entry of inefficient firms improves welfare

wage increases and the dynamics of reciprocity we investigate how workers performance is affected by the timing of wages in a real effort experiment in all treatments agents earn the same wage sum but wage increases are distributed differently over time we find that agents work harder under increasing wage profiles if they do not know these profiles in advance a profile that continuously increases wages by small amounts raises performance by about 15 relative to a constant wage the effort reactions can be organized by a model in which agents reciprocally respond to wage impulses comparing wages to an adaptive reference standard determined by the previous wage

one sided sustainability tests with amenities and changes in technology trade and population abstract if an economy with multiple consumption goods including environmental amenities uniquely maximises present value with constant discounting it is unsustainable at some time if either of two measures augmented net investment or the change in augmented green net national product are zero or negative then augmented denotes that time is treated as a productive stock which includes in each measure the value of future exogenous changes in technology or terms of trade adjustments are found to make each measure a test for individual sustainability when population grows exogenously the practical and philosophical rationale for testing sustainability in a present value maximising and therefore fully prescribed development path is discussed

number of sellers average prices and price dispersion abstract a variety of models provide differing predictions regarding the effect of an increase in the number of competitors in a market seller density on prices and price dispersion we review different approaches to generating equilibrium price dispersion and then empirically estimate the relationship between seller density average product price and price dispersion in the retail gasoline industry using four unique gasoline price data sets controlling for station level characteristics we find that an increase in station density consistently decreases both price levels and price dispersion across four geographical areas

the concept of income in a general equilibrium this paper derives a concept of aggregate real income for a competitive economy in general equilibrium consisting of heterogeneous infinitely lived people and relates it to current and future consumption possibilities an important characteristic of our measure of income which we call real income is that deflation is carried out using a consumption deflator rather than any price index of output we suggest that it may be inappropriate to regard capital gains as income we also present a coherent treatment of the effects of changes to the terms of trade on real income and explain the implications of this for resourceexporting economies hicks 1939 defined income as the maximum amount a man can spend and still be as well off at the end of the week as at the beginning since then there has been a succession of attempts to apply this definition the problem is as hicks acknowledged that the correct interpretation of as well off is by no means clear weitzman 1976 and asheim 1997 suggest that income is equal to the level of consumption which could be sustained indefinitely out of the capitalized value of current income and equate this to being as well off at the end of the week as at the beginning eisner 1988 argues specifically that in a total incomes system effects arising from asset price changes and conventionally regarded as capital gains should be included with income here building on earlier work by sefton and weale 1996 asheim and weitzman 2001 and pemberton and ulph 2001 we provide a comprehensive account of the implications of the idea that as well off should be understood to mean that the present discounted value of current and future utility should be unchanged over the interval considered we work in the context of a general equilibrium taking the prices established in the general equilibrium as given we first look at income from the production side showing that in an economy where prices and the interest rates satisfy an intertemporal efficiency condition income along an equilibrium path can be interpreted as a weighted average of the value of the current and future consumption bundle plus a term adjusting for changes in the nominal price level converting prices to real prices by deflating by the divisia consumption price index removes the need for this adjustment these results are suggestive first they offer a way of defining the income of a household entirely in terms of its consumption possibilities second they indicate that to calculate real income deflation is best carried out using a price index of consumption this is a substantial divergence from current national accounting practice third because we have assumed constant returns there is a trivial aggregation result that aggregate income is equal to the sum of the incomes from the individual sectors

screening competition and job design economic origins of good jobs in recent decades many firms offered more discretion to their employees often increasing the productivity of effort but also leaving more opportunities for shirking these high performance work systems are difficult to understand in terms of standard moral hazard models we show experimentally that complementarities between high effort discretion rent sharing screening opportunities and competition are important driving forces behind these new forms of work organization we document in particular the endogenous emergence of two fundamentally distinct types of employment strategies employers either implement a control strategy which consists of low effort discretion and little or no rent sharing or they implement a trust strategy which stipulates high effort discretion and substantial rent sharing if employers cannot screen employees the control strategy prevails while the possibility of screening renders the trust strategy profitable the introduction of competition substantially fosters the trust strategy reduces market segmentation and leads to large welfare gains for both employers and employees

differentiated networks equilibrium and efficiency we consider a model of price competition in a duopoly with product differentiation and network effects the value of a good for a consumer is the sum of a common and an idiosyncratic component the first captures the vertical dimension of quality the second captures horizontal differentiation each consumer privately observes his own value for each good but cannot separate the common and the idiosyncratic component therefore he has incomplete information about the value of the goods for the other consumers after firms announce prices consumers choose simultaneously which network to join facing a coordination problem in the efficient allocation both networks are active and the firm with the highest expected quality has the largest market share to characterize the equilibrium allocation we derive necessary and sufficient conditions for uniqueness of the equilibrium of the coordination game played by consumers for given prices the equilibrium allocation differs from the efficient one for two reasons first the equilibrium allocation of consumers to the networks is too balanced since consumers fail to internalize network externalities second if access to the networks is priced by strategic firms then the product with the highest expected quality is also the most expensive this further reduces the asymmetry between market shares and therefore social welfare

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

green net value added as a sustainability metric based on life cycle assessment an application to bounty paper towel abstract sustainability measurement in economics includes assessment of environmental and economic effects in an integrated manner in this study system level economic data are integrated with environmental impacts determined from a life cycle assessment lca of a common product we adopt a costing methodology that captures conventional costs but additionally incorporates externality costs to present a convenient easily interpretable metric green net value added gnva is a type of full cost accounting that incorporates total revenue the cost of production depreciation and environmental externalities we present externality costs disaggregated by upstream sectors full cost of production and gnva to evaluate the relative sustainability of bounty paper towels manufactured at two production facilities we found that the longer running more established line had a higher gnva the predominant components contributing to externality costs come from the stationary sources in the supply chain electricity generation 27 35 refineries 20 21 pulp and paper making 15 23 health related externalities from particulate matter pm2 5 and carbon dioxide equivalent co2e emissions are to a great extent driven by electricity usage and emissions by the facilities followed by pulp processing and transport supply chains for other facility purchases product distribution and end of life management contribute the least to the environmental health related costs

monopolistic competition and preference diversity approach our model is especially attractive because it starts from economic primitives a specification of the set of possible individual preference patterns it shows how specific properties of the distribution of preferences translate into properties of aggregate demand this allows us to understand the relationship between the distribution of preferences and the degree to which the market introduces biases in product selection this paper presents a general model of the demand for differentiated products which has as special cases two of the most popular approaches used to analyse welfare and competition in monopolistically competitive markets the model of spatial competition on the circle and the model of symmetric aggregate demand the circle model is attractive because both demand and costs have a definite and easy to visualize physical foundation and because it is tractable salop 1979 provides an exemplary modem analysis with this model one can analyze the relationship between the optimal amount of product variety and the amount which a monopolistically competitive market will support in many plausible cases competition produces too much variety such a strong conclusion raises questions of robustness almost simultaneously spence 1976 and dixit and stiglitz 1977 developed an alternative approach to monopolistic competition based upon the chamberlinian assumption of symmetry see also shubik 1959 rather than specifying a distribution of preferences and deriving demand through aggregation as did salop and his predecessors these authors started by specifying a symmetric aggregate benefit function indicating how social welfare depends on the amounts of the various products supplied both spence and dixit stiglitz were able to show that the welfare conclusions from the circle model were not robust depending on the functional form of the benefit function equilibrium may entail either excessive or insufficient product variety 1 the assumption of symmetric demand has proven fruitful in the analysis of many economic problems it is therefore natural to ask what distribution of tastes would give

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

adjusting green nnp to measure sustainability weitzman provides a foundation for nnp as the stationary equivalent of a wealth maximizing path when there is a constant interest rate and no exogenous technological progress here the implications of weitzman s foundation are explored in a case encountered in resource models i e the case of non constant interest rates in a setting that allows for exogenous technological progress an expression for nnp is obtained that adjusts green nnp for anticipated capital gains and interest rate effects to produce a measure that indicates sustainability this result is important when measuring the relative sustainability of resource rich and resource poor countries i introduction how should net national product nnp be adjusted for the depletion of natural and environmental resources a prerequisite for examining this problem is to decide on an underlying notion of income at the personal level hicks 1946 defines income as the consumption that if kept constant would yield the same present value as a person s actual future receipts since market prices are not influenced by any single person this notion of income equals a person s maximal sustainable consumption at the national level national income can likewise be defined as the consumption that if kept constant would yield the same present value as the actual future consumption path unless the nation is a small open economy faced with given international prices this notion of national income will exceed

personalized pricing and advertising an asymmetric equilibrium analysis we study personalized price competition with costly advertising among n quality cost differentiated firms strategies involve mixing over both prices and whether to advertise in equilibrium only the top two firms advertise earning bertrand like profits welfare losses initially rise then fall with the ad cost with losses due to excessive advertising and sales by the wrong firm when firms are symmetric the symmetric equilibrium yields perverse comparative statics and is unstable our key results apply when demand is elastic when ad costs are heterogeneous and with noise in consumer tastes

comparing augmented sustainability measures for scotland is there a mismatch we estimate and compare two empirical measures of the weak sustainability of an economy for the first time the change in augmented green net national product gnnp and the interest on augmented genuine savings gs yearly calculations are given for each measure for scotland during 1992 1999 augmentation means including using projections to 2020 changed production possibilities enabled by exogenous technical progress or changing oil prices the change in augmented gnnp and the interest on augmented gs are both always positive showing no sustainability problem for scotland then according to the assumptions underlying our weak sustainability calculations however the former greatly exceeds the latter even when macroeconomic fluctuations are taken into account this is a mismatch which poses an unresolved problem with the theory resolving it may require respecifying the utility functions used in mainstream growth theory

augmenting the world bank s estimates ireland s genuine savings through boom and bust abstract the world bank computes estimates of genuine savings gs a leading indicator of sustainable development for most countries a well established literature has called for methodological enhancement this paper presents augmented estimates of irish gs throughout a period of unprecedented economic expansion and decline 1990 2016 a time series constructed predominantly from national sources includes the most comprehensive coverage of pollutants in the literature surveyed we apply a novel method to aid the property rights designation assessment required for transboundary pollutant accounting in sharp contrast to the world bank s estimates our findings suggest that a modern developed economy can exhibit signs of unsustainability furthermore extended environmental damages drive these results suggesting expanded country specific gs may diverge considerably from the world bank s estimates we find rapid economic development and rapid declines in environmental damages can occur concurrently and on the transition away from an unsustainable path

logit demand estimation under competitive pricing behavior an equilibrium framework discrete choice models of demand have typically been estimated assuming that prices are exogenous since unobservable to the researcher product attributes such as coupon availability may impact consumer utility as well as price setting by firms we treat prices as endogenous specifically prices are assumed to be the equilibrium outcomes of nash competition among manufacturers and retailers to empirically validate the assumptions we estimate logit demand systems jointly with equilibrium pricing equations for two product categories using retail scanner data and cost data on factor prices in each category we find statistical evidence of price endogeneity we also find that the estimates of the price response parameter and the brand specific constants are generally biased downward when the endogeneity of prices is ignored our framework provides explicit estimates of the value created by a brand i e the difference between consumers willingness to pay for a brand and its cost of production we develop theoretical propositions about the relationship between value creation and competitive advantage for logit demand systems and use our empirical results to illustrate how firms use alternative value creation strategies to accomplish competitive advantage

if wages fell during a recession abstract many economies exhibit downward wage rigidity surveys of managers indicate that employers hold wages rigid because they believe morale will suffer after a wage cut otherwise there is little evidence for how employers beliefs contribute to wage rigidity and whether those beliefs are accurate using an experiment we demonstrate that effort falls after workers experience a wage cut despite this partial confirmation of the bewley 1999 morale theory half of the employers in our experiment cut wages and lose money as a result under nominal inflation real wage cuts do not have a significant effect on effort

assessment of the theory of comprehensive national accounting with data for portugal we present time series tests of the quality of genuine savings and green net national income for predicting welfare changes these tests check the validity of the theory of comprehensive national accounting and more broadly of the theory of economic growth the value of technological progress is included as well as the effects of business cycles we use estimates for portugal as inputs overall our results indicate that both genuine savings and changes in green net national income have the same sign as changes in welfare but reject the hypothesis that the estimated comprehensive national accounting measures coincide with the theoretical expressions the results also suggest that comprehensive accounting indicators perform better than conventional national accounting indicators implying that in general the corrections proposed by the comprehensive accounting theory add explanatory power to conventional measures the exception is the inclusion of education expenditures and technological progress which decrease explanatory power excluding business cycles from green net national income increases the agreement with the theory comparing both indicators in general genuine savings presents better results

intertemporal incentives under loss aversion this paper studies the intertemporal allocation of incentives in a repeated moral hazard model with reference dependent preferences as in k oszegi and rabin 2009 besides consumption utility the agent experiences utility from the change in his beliefs about present and future eort and income when eort plans are rational the prospect of being disappointed by the outcome realization equals that of being pleasantly surprised and hence the loss averse agent is on net hurt by news in contrast to the prediction with classical preferences but consistent with real world contracts if consumption utility is not too concave and news about present income carries suciently larger weight in utility than news about future income a contract setting a current

resource depletion and sustainability in small open economies abstract exogenous price changes affect the amount that a small country exporting natural resource commodities must invest to sustain its consumption level the necessary amount is given by the difference between hotelling rent and the discounted sum of future terms of trade effects capital gains the latter term is found to be large relative to the former in the case of petroleum depletion in indonesia this suggests that resource rich countries will need to invest more than previously expected to sustain their consumption levels if natural resource prices continue their long term historical decline

empirical testing of genuine savings as an indicator of weak sustainability a three country analysis of long run trends genuine savings has emerged as a widely used indicator of sustainable development this approach to conceptualising what sustainability is about has strong links to work published by anil markandya and colleagues over 20 years ago in this paper we use long term data stretching back to 1870 to undertake empirical tests of the relationship between genuine savings gs and future well being for three countries britain the usa and germany our tests are based on an underlying theoretical relationship between gs and changes in the present value of future consumption based on both single country and panel results we find evidence supporting the existence of a cointegrating long run equilibrium relationship between gs and future well being and fail to reject the basic theoretical result on the relationship between these two macroeconomic variables this provides some support for the gs measure of weak sustainability

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

comparative advertising disclosing horizontal match information improved consumer information about horizontal aspects of products of similar quality leads to better consumer matching but also to higher prices so consumer surplus can go up or down while profits rise with enough quality asymmetry though the higher quality and hence larger firm s price falls with more information so both effects benefit consumers this occurs when comparative advertising is used against a large firm by a small one comparative advertising as it imparts more information therefore helps consumers although it also improves the profitability of the small firm overall welfare goes down because of the large loss to the attacked firm

a note on technology choice firm heterogeneity and welfare abstract in this note i extend the technology choice model of mills and smith int j ind org 14 1996 317 329 by analyzing an industry with more than two firms i show that heterogeneous firms can arise as in the duopoly case however the welfare implications are not robust in particular it is not necessarily the case that the market produces too much homogeneity when more than two firms are active the business stealing effect creates a bias towards overinvestment

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

the timing of discretionary bonuses effort signals and reciprocity abstract in a real effort experiment we investigate the relationship between reciprocity and the timing of discretionary bonuses in a two period principal agent manager worker setting we vary the timing of the manager s bonus decision in order to examine two main channels reward and trust through which discretionary bonuses may operate average worker performance improves when bonus decisions are made between the two periods since both channels are simultaneously active first period output significantly increases as workers attempt to signal their trustworthiness to managers when the bonus decision is made upfront or at the end average output is no different than in a baseline setting without the bonus mechanism furthermore output after a bonus is not paid decreases substantially consistent with negative reciprocity our main findings are reinforced by using time spent on the available real leisure activity as an alternative measure of subjects effort

hartwick s rule in open economies to sustain constant consumption the hartwick rule prescribes reinvesting all resource rents in reproducible capital this paper shows that the rule does not apply to open economies since the underlying stationary technology assumption is violated when gains from trade are taken into account a correct analog to the hartwick rule for open economies is developed and applied to a model of capital accumulation and resource depletion la regle de hartwick dans les e conomies ouvertes pour maintenir la consommation constante la regle de hartwick prescrit qu il faut reinvestir toutes les rentes des ressources dans du capital reproductible ce me moire montre que la regle ne s applique pas dans le cas d economies ouvertes parce que le postulat d une technologie stationnaire n9est pas satisfait quand on tient compte des gains engendres par le commerce international l auteur developpe une version correcte pour les economies ouvertes dans 1 esprit de la regle de hartwick et l applique a un modele d accumulation de capital et d epuisement des ressources