interpreting measures of economic loss evidence from contingent valuation and experimental studies abstract from the standpoint of conventional welfare theory it is surprising that responses to contingent valuation studies of environmental goods have shown a consistent difference between willingness to pay and compensation demanded measures of economic loss this paper examines these results in light of four reasons most often given as grounds for their dismissal new experimental evidence supports an interpretation of the observed disparity in payment and compensation based measures as both real and psychologically meaningful an alternative conceptual framework suggested by prospect theory is outlined and its relevance for economic assessments of potential environmental change is discussed briefly

suit the action to the word the word to the action hypothetical choices and real decisions in medicare part d in recent years consumer choice has become an important element of public policy one reason is that consumers differ in their tastes and needs which they can express most easily through their own choices elements that strengthen consumer choice feature prominently in the design of public insurance markets for instance in the united states in the recent introduction of prescription drug coverage for older individuals via medicare part d for policy makers who design such a market an important practical question in the design phase of such a new program is how to deduce enrollment and plan selection preferences prior to its introduction in this paper we investigate whether hypothetical choice experiments can serve as a tool in this process we combine data from hypothetical and real plan choices elicited around the time of the introduction of medicare part d we first analyze how well the hypothetical choice data predict willingness to pay and market shares at the aggregate level we then analyze predictions at the individual level in particular how insurance demand varies with observable characteristics we also explore whether the extent of adverse selection can be predicted using hypothetical choice data alone

ex ante consumer welfare evaluation in cost benefit analysis abstract public projects and policies are normally evaluated ex ante i e while consumers may still be uncertain about future prices income levels interest rates and preferences this paper extends the theory of ex ante consumer welfare evaluation by developing a 2 period model with multiple sources of uncertainty it provides insights into the influence of temporal uncertainty on the empirical measurement of ex ante willingness to pay

a comparative analysis of the informational efficiency of the fixed income market in seven european countries abstract this letter investigates the time varying behavior of long memory in sovereign and corporate bond indices of seven european union countries from july 1998 to november 2011 we compute the hurst exponent and detect that the current financial crisis affects more the informational efficiency of the corporate bond market than the sovereign bond market

ex ante and ex post welfare optimality under uncertainty it is widely believed by economic theorists that if there were no transactions costs and if all information about the economy were perfectly shared by all then arrow debreu contingent commodity markets should bring about an ideal allocation the basis for this belief seems clear we have the two efficiency theorems of welfare economics which assure us that in the absence of external effects any competitive allocation is pareto efficient and that any pareto efficient allocation is competitive provided that appropriate lump sum transfers are made of course there are some reservations that need to be made local satiation and non convexities are well known to cause problems but these are not the problems i wish to discuss here to return to the usual argument the next step involves noticing how with contingent commodity markets the efficiency theorems of welfare economics carry over to an economy with uncertainty as explained for instance in chapter 7 of debreu s theorpj of value the fundamental value judgment that gives these efficiency theorems their normative interest is what may be called consumer sovereignty it is an assumption that the social welfare ordering should respect the preferences that govern consumers market behaviour it is a serious value judgment more serious than most economists have been prepared to concede but its seriousness increases when there is uncertainty we know full well that individuals misperceive the probabilities of certain events assuming that they even perceive any probabilities at all see for example kahneman and tversky 1979 nor are we always willing to accept as appropriate the attitudes to risk of individuals who seem either extremely reckless or extremely cautious societies are often willing to make some gestures towards property owners who have not insured themselves adequately against damage from fire flood or tempest and not just because of imperfect insurance markets or even misperceptions of probabilities in addition the inequalities of income that arise when some individuals take more risks than others are not necessarily seen to be desirable particularly if an individual has undertaken a useful but risky activity and has a very low income as a result of failure such gestures are examples of contingent lump sum transfers it seems clear that if such transfers occur to a sufficient extent they could supplant completely the securities markets which are usually sufficient to bring about pareto efficiency they may even be able to go further and correct the imperfections of an arrow debreu market allocation when individuals do misperceive probabilities or else have wrong attitudes to risk this is the main question i wish to consider here the idea that consumer sovereignty should not always extend to economies with uncertainty is not new it can be found in work by diamond 1967 dr6ze

on the valuation of uncertainty in welfare analysis thisarticle developsa general model of private and public choice under temporal uncertainty the model incorporatesthe effectsof ris k preferencesand the pros pect of future learning into both the individual and aggregate valuationsof public projects the analys isprovidesnew ins ightson individual valuation itsimplicationsfor benefit cos t analys isand the characterization of paretoefficiency under uncertainty it also resolves some of the confusion in the option value and quasioption value literature private and public decisions typically involve many sources of uncertainty including uncertainty about prices income technology environmental quality health etc temporal uncertainty is also common where some of the risk 1 getsresolved over time due to learning additionally private and public decisions often exhibit some form of irreversibility implying that current choicescan affect the ability of decision makers to be flexible and to adjust their future choices in response to forthcoming information when uncertainty and irreversibility are both present welfare analys isgainscomplexity and importance although considerable progress has been made since weisbrod s seminal article a better understanding of the roles of uncertainty and irreversibility in welfare analys improve our ability aseconomis ts to communicate the importance of risk in project evaluation to public decision makers

measuring welfare effects of product contamination with consumer uncertainty abstract a methodology is developed for measuring consumer welfare loss from market demand due to contamination when information is imperfect comparison of behavior before and after awareness permits calculation of the cost of ignorance which occurs when news of contamination is withheld or undiscovered for a time as well as when excessive reporting and exaggeration cause overreaction avoidance costs are also calculated for consumers who consume less than they would with perfect information due to risk aversion the methodology is applied to analyzing the heptachlor crisis which reduced milk consumption in hawaii by over 80

demand for health insurance marketplace plans was highly elastic in 2014 2015 abstract a major provision of the affordable care act was the creation of health insurance marketplaces which began operating for the 2014 plan year although enrollment initially grew in these markets enrollment has fallen recently amid insurer exits and rising premiums to better understand these markets we estimate premium elasticity of demand for marketplace plans using within plan premium changes from 2014 to 2015 accounting for state specific trends and simultaneous changes in generosity our preferred estimate implies that a one percent premium increase reduces plan specific enrollment by 1 7 percent we argue that this high elasticity reflects the rapid growth and high churn in this market as well as the high degree of standardization and the availability of many close substitutes

the welfare impact of medicare hmos we estimate the welfare associated with the medicare hmo program now known as medicare choice m c we find that the creation of the m c program resulted in approximately 15 6 billion in consumer surplus and 52 billion in profits from 1993 to 2000 in 2000 dollars this program most likely generated significant net social welfare however we find that consumer surplus is geographically unevenly distributed prescription drug coverage accounts for approximately 45 of the estimated consumer surplus for 2000 consumer surplus increases in the number of plans in a county and most of the increase in welfare is due to increased premium competition

valuing amenity resources under uncertainty does the existence of fair contingent claims markets matter abstract alternative welfare measures are evaluated as measures of the value of change in access conditions for environmental resources and it is shown that traditional hicksian surplus estimates systematically underestimate benefits it is further argued that the existence of fair contingent claims markets is a peripheral consideration in benefit estimation that state dependent payments present no significant collection obstacles not already encountered in state independent payment schemes and that risk neutral social decision making requires state dependent benefit measures for situations involving individual risk these findings imply that future research should focus on developing theoretical bounds between the expected value of state dependent benefit measures and conventional measures and that contingent valuations techniques need to be extended to measure contingent payment possibilities for changes in uncertain access conditions to environmental resources

supply uncertainty option price and option value this article develops a general model of private and public choice under temporal uncertainty the model incorporates the effects of risk preferences and the prospect of future learning into both the individual and aggregate valuations of public projects

price delay and market frictions in cryptocurrency markets abstract we study the efficiency of cryptocurrencies by measuring the price s reaction time to unexpected relevant information we find the average price delay to significantly decrease during the last three years for the cross section of 75 cryptocurrencies we find delays to be highly correlated with liquidity

the inefficiency of bitcoin revisited a dynamic approach abstract this letter revisits the informational efficiency of the bitcoin market in particular we analyze the time varying behavior of long memory of returns on bitcoin and volatility 2011 until 2017 using the hurst exponent our results are twofold first r s method is prone to detect long memory whereas dfa method can discriminate more precisely variations in informational efficiency across time second daily returns exhibit persistent behavior in the first half of the period under study whereas its behavior is more informational efficient since 2014 finally price volatility measured as the logarithmic difference between intraday high and low prices exhibits long memory during all the period this reflects a different underlying dynamic process generating the prices and volatility

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

volatility and return jumps in bitcoin abstract in this article we are interested in understanding the dynamics of bitcoin daily returns and volatility cryptocurrencies have very high unconditional volatility and are subject to sudden massive price swings we start with a standard log normal stochastic volatility model then explore two formulations which incorporate discontinuous jumps to volatility and returns jumps to volatility are permanent while jumps to mean returns have contemporaneous effects only results point to two high volatility periods the first from late 2013 to early 2014 likely associated to the mt gox incident the second covers the year of 2017 peaking on december likely driven by increased popular attention jumps to mean returns are specially relevant to capture large price variations mostly negative associated with formative events in cryptocurrency markets such as hacks and unsuccessful fork attempts

adaptive market hypothesis and evolving predictability of bitcoin abstract this study evaluates the adaptive market hypothesis amh and evolving return predictability in bitcoin market we use two robust methods in a rolling window framework to capture time varying linear and nonlinear dependence in bitcoin returns we find that market efficiency evolves with time and validates the amh in bitcoin market

compensating variation consumer s surplus and welfare the compensating variation was defined by j r hicks 1942 as the amount one would have to deduct from a person s income to make him just as well off after a change in prices and income as he had been in the initial situation if the compensating variation is positive the individual is better off under the new situation since the compensating variation furnishes a uniquely defined numerical cardinal indicator of welfare improvement it provides an implicit ranking of alternative prospective situations not only relative to the initial situation but also relative to each other in practice this appears to be how this and other tools of cost benefit analysis are actually used one is interested in knowing not only whether a particular bridge or a particular excise tax will lead to an improvement in welfare but which out of a set of alternative bridges or alternative tax systems will improve welfare the most 1 in this paper we analyze conditions under which the compensating variation can be validly used in this generalized sense these turn out to be precisely the same as conditions previously derived see our 1976 paper for the valid use of consumer s surplus as a welfare measure in our final section we analyze the problem of deriving the generalized equivalent and compensating variations either exactly or approximately from observable demand functions by means of generalizations of or alternatives to consumer s surplus

flexibility learning and irreversibility in environmental decisions a bayesian approach the bayes decision is characterized and studied for a two period decision problem involving a proposed resource development project it is assumed that development is irreversible and that expectations about benefits and costs during the second period vary with experiences resulting from the first period action the amount and types of learning achieved depend upon the particular action taken during the first period flexible sequential decision procedures are compared with fixed once and for all decisions it is shown that under this specification optimal development decisions are not necessarily more conservative when a sequential procedure is used the possibility of reneging on a fixed decision is formally specified and studied

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

a search for long memory in international stock market returns abstract a major issue in financial economics is the behavior of stock returns over long as opposed to short horizons this study provides empirical evidence from the perspective of long memory analysis international evidence on long memory is explored using the morgan stanley capital international stock index data for eighteen countries two tests that are robust to short term dependence and conditional heteroskedasticity are employed a modified rescaled range test and a fractional differencing test the empirical results in general provide little support for long memory in international stock returns the findings are not sensitive to inflation adjustments in stock returns data sources and statistical methods used

decentralized efficiency arbitrage in bitcoin markets using tick level bitcoin data from february 2013 through april 2018 we show substantial arbitrage spreads between global bitcoin markets spreads follow multiple consistent patterns minimum and m

the inefficiency of bitcoin bitcoin has received much attention in the media and by investors in recent years although there remains scepticism and a lack of understanding of this cryptocurrency we add to the literature on bitcoin by studying the market efficiency of bitcoin through a battery of robust tests evidence reveals that returns are significantly inefficient over our full sample but when we split our sample into two subsample periods we find that some tests indicate that bitcoin is efficient in the latter period therefore we conclude that bitcoin in an inefficient market but may be in the process of moving towards an efficient market

price discovery of cryptocurrencies bitcoin and beyond abstract academic research on cryptocurrencies is almost exclusively directed towards bitcoin we extend existing literature by performing various tests on efficiency of several cryptocurrencies and additionally link efficiency to measures of liquidity cryptocurrencies become less predictable inefficient as liquidity increases

long memory and efficiency of bitcoin under heavy tails the long memory is usually defined via auto covariances which further connect with hurst exponent the heavy tails in bitcoin returns can cause infinite auto covariances which make the analysis of

an application of extreme value theory to cryptocurrencies we study the tail behaviour of the returns of five major cryptocurrencies by employing an extreme value analysis and estimating value at risk and expected shortfall as tail risk measures we find that bitcoin cash is the riskiest while bitcoin and litecoin are the least risky cryptocurrencies

momentum trading in cryptocurrencies short term returns and diversification benefits abstract we test for the presence of momentum effects in cryptocurrency market and estimate dynamic conditional correlations dccs of returns between momentum portfolios of cryptocurrencies and traditional assets first investment portfolios are constructed adherent to the classic j k momentum strategy using daily data from twelve cryptocurrencies for over a period of three years we identify the existence of momentum effect which is highly significant for short term portfolios but disappears over the longer term second we show that cross correlations of weekly returns between momentum portfolio of cryptocurrencies and traditional assets are unlike correlations of returns between traditional assets third we find that momentum portfolios of cryptocurrencies not only offer diversification benefits but also can be a hedge and safe haven for traditional assets

information and the concept of option value this paper examines the arrow fisher henry concept of option value and analyzes its properties including its relationship to the value of information and the effects of increasing uncertainty about the future consequences of irreversible development it is shown that this option value is distinct from but bounded by the value of information in the overall decision problem also it is distinct from a concept of option value that appears in b s bernanke quart j econom 98 85 106 1983 however when there is a continuum of development levels rather than a binary choice between full development and no development some of these conclusions need to be modified

crypto currencies an introduction to not so funny moneys we introduce the distributed ledger blockchain technology of crypto currencies we examine the monetary attributes of crypto currencies and describe some of the reasons they have been adopted the paper discusses the mechanics of bitcoin the original crypto currency to illustrate the fundamental elements of decentralized crypto currencies we then provide a high level summary of the implications of crypto currencies for consumers financial systems and for monetary and regulatory authorities we argue that crypto currencies are unlikely to supplant traditional fiat currencies and we anticipate an enduring role for financial intermediaries in facilitating credit

modelling the dynamics of bitcoin and litecoin garch versus stochastic volatility models abstractwe examine and compare a large number of generalized autoregressive conditional heteroskedastic garch and stochastic volatility sv models using series of bitcoin and litecoin price retu

announcement effects in the cryptocurrency market cryptocurrencies have gained popularity as new economic investment assets globally in recent years this study examines market reactions to major news events associated with cryptocurrencies abnor

what causes the attention of bitcoin bitcoin has received enormous attention both by the media and investors alike but why has bitcoin received such attention this paper answers this question by examining the relationship between investor attention and bitcoin fundamentals and finds that realized volatility and volume are both significant drivers of next day attention of bitcoin

on the inefficiency of bitcoin abstract urquhart 2016 investigated the market efficiency of bitcoin by means of five different tests on bitcoin returns it was concluded that the bitcoin returns do not satisfy the efficient market hypothesis we show here that a simple power transformation of the bitcoin returns do satisfy the hypothesis through the use of eight different tests the transformation used does not lead to any loss of information

some stylized facts of the cryptocurrency market abstractwe examine the stylized facts of eight forms of cryptocurrencies representing almost 70 of cryptocurrency market capitalization in particular the empirical results show that 1 there ex

hospital competition in hmo networks abstract we develop a framework for analyzing bargaining relationships between hospitals and hmos under selective contracting using a unique dataset on hospitals in the los angeles area from 1990 to 1993 we estimate the determinants of actual negotiated prices paid to hospitals by two major hmos we find that a hospital s bargaining power and thus its price decrease when the hmo can readily turn to alternative networks that exclude the hospital we simulate the effect of hypothetical hospital mergers on bargaining power and find that some hospital mergers even in urban areas with many nearby hospitals can lead to significant price increases

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

choice inconsistencies among the elderly evidence from plan choice in the medicare part d program we evaluate the choices of elders across their insurance options under the medicare part d prescription drug plan using a unique data set of prescription drug claims matched to information on the characteristics of choice sets we document that elders place much more weight on plan premiums than on expected out of pocket costs value plan financial characteristics beyond any impacts on their own financial expenses or risk and place almost no value on variance reducing aspects of plans partial equilibrium welfare analysis implies that welfare would have been 27 higher if patients had all chosen rationally

long term dependence in stock returns abstract we test for long term dependence in us stock returns analyzing composite and sectoral stock indices and firms returns series to evaluate aggregation effects fractal dynamics are not detected in stock indices but are present in some firms returns series

option value under income and price uncertainty abstract we present a rigorous examination of the sign of option value under income and price uncertainty we state and prove three theorems on the sign of option value when preferences are state independent if income is uncertain the sign of option value is opposite the sign of the income elasticity of the good in question the analysis of price uncertainty is in two parts one covers the case of own price uncertainty and the other the case where the price of some other good is uncertain in both cases the sign of option value is generally ambiguous

requiem for option value as freeman 1984 accurately notes a lot of ink has been spilled over the concept of option value during the last two decades graham in his seminal 1981 article outlined the specific conditions under which option price is and more significantly is not an appropriate and relevant measure of value under demand uncertainty while graham s article demonstrates that option value is relevant only under restrictive assumptions regarding preferences and the nature of the uncertainty both the tone and contents of recent articles on the

measuring the degree of time varying market inefficiency abstract we estimate a time varying autocorrelation of stock returns as a degree of market inefficiency the relative inefficiency of the u s stock market varies from 1955 to 2006

option value an exposition and extension this article examines the role of the discount rate in making decisions that will have significant implications for the environment the authors begin by providing a rationale for discounting in general and by describing the main factors that determine

cryptocurrencies and momentum abstract retrieving a set of 143 cryptocurrencies for a sample spanning 2014 2018 we investigate the popular momentum strategy implemented in the cryptocurrency market contrary to earlier studies our findings do not indicate any evidence of significant momentum payoffs supporting the view that the cryptocurrency market is far more efficient than suggested in earlier studies

the choice of a welfare measure under uncertainty use of option price as a welfare measure when conducting a benefit cost analysis under uncertainty is appropriate only if the project under consideration will have no impact on the allocation of risk among individuals use of the willingness to pay locus as a benefit measure is appropriate only if the project will result in an efficient allocation of risk a more general welfare measure is proposed maximum agreeable payment that correctly measures the benefits and costs of any project

price adjustment policies and firm size i introduction by the fall of 2009 several state departments of transportation in the united states adopted price adjustment policies to mitigate significant fluctuations in the cost of oil based inputs in government procurement price escalation in oil based materials such as asphalt binder or fuel was the main cause behind the trend firms increased bids to offset higher input prices adversely affecting procurement costs damnjanovic et al 2008 because inputs like asphalt experienced significant cost increases e g the price of alphalt increased by 31 in 2005 alone it is not surprising that contractors in general and small firms in particular struggled with construction budgets in response to the growing uncertainty many states introduced price adjustment policies for related inputs effectively dampening losses and profits at times of unanticipated cost fluctuations 1 while the latter part of last decade saw notable oil price price deviates beyond a certain range of the baseline index increases in the recent months firms enjoyed cost savings a percentage of which can be passed on to departments of transportation with the establishment of this policy going beyond industries directly impacted by uncertainty in oil prices the provisions investigated in this paper are common in defense contracting and were added to the health care law in what came to be known as risk corridors 2 as an example the department of defense has embedded such provisions in fixed price contracts with economic price adjustment fpepa these measures are designed to limit contractors exposure to economic uncertainty and market volatility prevalent in long term fixed price arrangements 3 in the same spirit the regional greenhouse gas initiative an emission permit trading program involving nine northeastern states in the united states held down price escalations by placing a price collar on allowances that limits variability we investigate the effect of the price adjustment policy on firm bidding behavior and competition intensity in road construction in oklahoma which can offer insights on the effectiveness of implementing such policies across industries we use data on public construction auctions to study the effect of this policy on firms of different sizes where size heterogeneity is a defining characteristic of the market cho 1986 the construction industry displays market concentration featuring a small number of strong contenders from the pool of over 150 participants in our sample the 11 firms that won most frequently were awarded over a quarter of auctioned projects and more than 38 of contracted value compared with the manufacturing sector surveyed in audretsch and mahmood 1995 a notably higher percentage of new construction companies end up failing many undersized and startup builders compete on the margin and have a low chance of making it to the list of long term players the literature has identified a strong correlation between firm size and financial solvency in association with firm survival and growth see brito and mello 1995 and hubbard 1998 in what follows we frame our empirical analysis with a theoretical model highlighting this connection as noted by gertler and gilchrist 1994 and martinelli 1997 there are asymmetric changes in firms borrowing costs when financial constraints are tightening in the face of uncertainty and they depend on the level of capital accumulation as a result high volatility in input prices is likely to reinforce the imbalance among competitors of different sizes 4 price adjustment policies help to level the playing field between small and large firms without invoking differential treatment toward a group finally there has been considerable interest in the literature in various policies that departments of transportation around the country use to help small businesses such as bid preference policies and setasides see for instance the work of denes 1997 marion 2009 krasnokutskaya and seim 2011 and athey coey and levin 2013