corrective taxes under oligopoly with inter firm externalities pollution externalities between polluters should be taken into account in the design of corrective taxes when the externalities are substantial and or the number of polluters is large the effluent levies on these firms do not necessarily result in a deadweight loss consequently the second best tax exceeds the marginal social cost of pollution a more general rule is that the tax rate should be greater than the marginal social cost of pollution if and only if a marginal increase in the tax rate results in opposite effects on the changes of equilibrium emission level and output

a review of wta wtp studies abstract willingness to accept wta is usually substantially higher than willingness to pay wtp these constructs have been studied for roughly 30 years and with a wide variety of goods this paper reviews those studies we find that the less the good is like an ordinary market good the higher is the ratio the ratio is highest for non market goods next highest for ordinary private goods and lowest for experiments involving forms of money a generalization of this pattern holds even when we account for differences in survey design ordinary goods have lower ratios than non ordinary ones we also find that ratios in real experiments are not significantly different from hypothetical experiments and that incentive compatible elicitation yields higher ratios

pigouvian taxes under imperfect competition if consumption depends on emissions the paper considers environmental regulation of a consumption good and an externality which influence demand and costs in a nonseparable way under monopoly two instruments are always required for first best the pigouvian tax is more complicated than anticipated

agents evaluations and the disparity in measures of economic loss abstract recent studies have revealed a large and unexpected disparity between willingness to pay and compensation demanded measures of economic loss further evidence of this difference is presented here together with the results of a series of survey and real money exchange experiments which indicate that when advisors evaluate entitlements on behalf of third parties the variation between the measures is far less than is shown by individuals acting on their own behalf given the wide dependence on agents a finding that they may weigh losses differently from people they act for suggests that agents choices may compromise welfare positions

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

the price elasticity of mass preferences i compare the price elasticity of economic and political preferences my central hypothesis is that willingness to pay whether expressed verbally or through cash transactions is more price elastic for economic consumption goods than for public goods i find that increases in price greatly diminish the proportion of people willing to pay for consumer goods such as housing or hardback books whereas the proportion willing to pay more in taxes to support a public good such as environmental protection or shelter for the homeless is much less responsive to changes in price i conclude by discussing the theoretical and political implications of willingness to pay for public and private goods

cartel unity over the business cycle in this paper cartel behavior in business cycles when some firms are vulnerable to bankruptcy in the downturns is investigated this vulnerability would restrict the set of collusive equilibria that are feasible in a repeated game and possibly result in a breakdown in recessions of all collusive agreements it is demonstrated however that the existence of a low cost producer in the cartel could prevent this breakdown by adjusting market shares across the business cycle and thereby eliminating the possibility of bankruptcy for its inefficient rivals this swing producer could enlarge the set of self enforcing collusive equilibria the results of this paper are seen to be consistent with a wide range of observations on the behavior of cartels over the business cycle

valuing non market goods using contingent valuation abstract contingent valuation is a technique being developed by economists for the valuation of environmental commodities not traded in markets this paper discusses the major problem areas associated with this method of value estimation these comprise bias strategic hypothetical and design biases the discrepancy between willingness to pay and compensation demanded the aggregation procedure the choice of question format and non use values some evidence from comparative studies is reported and comments made on the accuracy of contingent valuation answers finally the conditions under which contingent valuation seems to operate best are set out

pricing policies and antlerless elk hunting permits one of the effects of increasing emphasis on leisure time in the u s has been a growth in demand for hunting privileges an example of such growth is the rapidly increasing demand for the opportunity to hunt elk in various western states potter 1982 from 1960 1979 the number of licensed elk hunters more than doubled in north america while average elk hunter success steadily declined from 25 to 14 over the same period even though total elk harvests are increasing elk populations are not growing at a rate anywhere near that of current demand growth thus state fish and wildlife departments must utilize methods to allocate elk resources such allocation procedures include split seasons waiting lines drawings and fee increases each with distinct efficiency and equity implications meyer 1979 peek pederson and thomas 1982 the problem of allocating rocky mountain antlerless elk hunting privileges in eastern oregon is instructive in this regard oregon s department of fish and wildlife controls the hunt of antlerless cow and calf elk by controlling the numbers of hunting tags annually issued for each designated geographic area the numbers of tags issued are determined by estimating the quantity of hunters needed to achieve the target harvest level of antlerless elk in each area for a one dollar processing fee prospective hunters may indicate a first and a second choice hunting area from

valuing environmental commodities some recent experiments a general model of consumer behavior is proposed to assess six recent experiments that have attempted to reveal preferences for environmental goals each experiment used a mix of both the techniques and the theory of demand for non market commodities and each was designed to estimate a non market attitude associated with the environment and to analyze potential biases in the techniques the six cases show some consistency in results the linkage within the contingent market between the environmental attribute institutional setting and the bidding instrument must be realistic and accepted by the respondent to avoid biased results possibly the most important result is the replication of results using a traditional property value study and a contingent bidding approach all evidence obtained to date suggests that hedonic studies of property values or wages travel costs and survey techniques all yield values well one order of magnitude in accuracy 41 references 2 tables

competitive advantage and collusive optima cost differences may often be important in real oligopolies if side payments are impossible the standard cartel objective total industry profits lacks plausibility when costs differ this essay considers plausible alternatives four different technologies for effecting collusion which are essentially identical when costs are equal define sets of possible profits axiomatic bargaining models are used to select unconstrained optima from among these possibilities simple functional forms are employed low cost firms with large shares in cournot equilibrium may have little to gain from collusion if collusion is effective low cost firms will have relatively low estimated conjectural variations

a positive theory of environmental quality regulation this paper demonstrates that environmental quality regulation may enhance producer wealth while simultaneously reducing an externality problem by restricting access to common property regulation not only corrects a resource misallocation but it creates a scarcity rent as well in the recent history of environmental quality the common access problem has been addressed by federal and state agencies through a standards based approach rather than through the enforcement of tradable property rights as a consequence rents from the right to use these assets have accrued to producers the data are convincing that there is a strong interplay between producers consumers and the victims of pollution each party has some influence on the outcome and one sided analysis neglects many important aspects of regulation environmental quality regulation is complicated but many of the observed perplexities are consistent with a rent seeking self interest theory of government 46 references 1 figure 7 tables

information effects in contingent markets information bias in contingent markets is poorly understood in this paper testable hypotheses concerning beneficial contingent market information effects are developed conceptually perspective information and relative expenditure information were expected to increase comprehension and increase bids provision cost information was expected to counteract free riding behavior and also increase bids hypothesis tests using experimental markets suggested that each information type induced small statistically insignificant bid increases however the combined effect of the three information types induced a desirable statistically significant increase in bids this result supports the contention that not all contingent market information effects are biases

pollution control through price incentives the role of rent seeking costs in monopoly markets abstract we consider the effect of rent seeking costs on the design of an efficient pollution tax earlier work has concluded that a pollution tax levied on an otherwise unregulated monopoly should always be less than the pigouvian rate this study demonstrates that if rent seeking costs are present the appropriate discharge tax for a monopoly firm can equal or exceed the marginal damage from its pollution calculations reveal that under a wide range of conditions the ideal corrective tax for a monopoly firm is very close to the fully internalizing pigouvian tax

effect of distance on the preservation value of water quality in the past dozen years an extensive body of literature has developed on the willingness to pay for water quality in particular its recreation use and nonuse preservation values this paper illustrates a procedure for estimating the effect of distance on the preservation value of environmental quality using the contingent valuation approach the case considered is the potential degradation of water quality due to coal mining activity in the flathead river drainage system montana the analysis supports a negative association for this particular study area the effect of distance on preservation value was considered both directly and indirectly through its effect on visits 36 references 2 tables

how do value creation and competition determine whether a firm appropriates value how does competition among economic actors determine the value that each is able to appropriate we provide a formal general framework within which this question can be posed and answered and then provide several results chief among them is a condition that is both required for and guarantees value appropriation we apply our methodology to i assess the familiar notion that uniqueness inimitability and competition imply value appropriation and ii determine the value appropriation possibilities for an innovator whose unique discovery is of use to several others who can compete for the right to use it

a note on the functional form of travel cost models with zones of unequal populations as bowes and loomis 1980 noted in their contribution for recreation demand functions of a linear form the existence of unequal zonal populations in travel cost models leads to the problem of nonconstant error variances when observations are expressed on a per capita basis i e when the zone average method is used for a model with nonhomogeneous variances the ordinary least squares ols parameter estimates will be unbiased but inefficient these properties will hold true of the consumer surplus estimates as well a weighting of the observations is the well known solution to the heteroskedasticity problem where in this case the appropriate weighting factor for each observation is the square root of the associated zone of origin s population while preserving unbiasedness the weighted least squares wls approach generates parameter estimates that are equivalent to the generalized least squares gls minimum variance estimators in their application of the travel cost method to recreation trips during 1977 down the westwater canyon in utah bowes and loomis illustrated the efficacy of wls in predicting recreation trips more accurately than ols for a linear first stage demand curve as in previous studies the ols linear regression equation grossly mispredicted the total number of trips taken at the actual price per trip of zero and seemingly overestimated the value of consumer surplus further evidence of this latter finding was obtained in a study of warm water fishing in georgia by ziemer musser and

derived demand estimation with survey experiments commercial electric vehicles in this paper the author examines the demand for a hypothetical input electric over the road vehicles in the commercial sector using data from a survey experiment this experiment is designed to allow the estimation of theoretically plausible derived demand functions from either the translog or the ces production functions a heteroscedasticity corrected two limit tobit model is developed and estimated the results provide evidence of considerable adaptability to new technologies and price structures on the part of firms they evidently would be willing to cope with the limited traveling range of electric vehicles if these vehicles were able to provide a less costly means of doing business copyright 1987 by mit press

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

producer surplus and subsidization of pollution control device a non monotonic relationship regulators have been concerned with the impact of environmental regulation on the profitability of regulated firms there have been numerous grants and subsidy programs to reduce the cost of emission control equipment intuitively there should be a monotonically increasing relationship between profits and the amount of subsidization however the author shows that this may not be so since regulation may establish a collusive outcome amongst oligopolistic competitors the role of the subsidization policy may then be seen as the following given cournot players the regulator may subsidize the emission control device to prevent the industry from reaching a profit superior outcome copyright 1990 by blackwell publishing ltd

using contingent valuation to value environmental improvements alternative methods available to economists for valuing non market goods are outlined contingent valuation is then used to value a ban on straw burning

the interaction effect of rivalry restraint and competitive advantage on profit why the whole is less than the sum of the parts rivalry restraint based theoretical mechanisms predict that an industry s profits will increase when its firms engage in less price competition or less direct competition with each other competitive advantage based theoretical mechanisms predict that a firm s profits will increase when it creates superior economic value that direct and indirect competitors cannot fully compete away but what is the interaction effect on profit of simultaneously restraining rivalry and increasing competitive advantage do they positively amplify reinforce each other or negatively dampen undermine each other this paper s theoretical model predicts a negative interaction effect with potentially significant implications for theory practice and pedagogy

valuing public goods a comparison of survey and hedonic approaches although the theory of public goods has progressed rapidly since paul samuelson s seminal article the empirical measurement of the value of demand for public goods only recently has received increased attention perhaps the best known and most widely accepted empirical approach has been the use of hedonic prices wherein for example it is assumed that either wages or housing values reflect spatial variation in public good characteristics of different communities this indirect approach based on theoretical work of charles tiebout kelvin lancaster sherwin rosen and others has proven quite successful among public goods or bads which have been valued using the hedonic approach are climate i hoch air pollution robert anderson and thomas crocker d harrison and d rubinfeld social infrastructure r cummings et al and other community characteristics such as noise level j nelson and ethnic composition ann schnare an alternative approach is to directly ask households or individuals to state their willingness to pay for public goods using survey techniques despite arguments that strategic bias will invalidate survey results there exists the need for an alternative to the hedonic approach as an example consider the case of a remote and unique scenic vista valuable to recreators which is threatened by air pollution from a proposed coal fired plant a typical situation in the western united states although it is possible in principle to impute the value of clean air and visibility from the relative decline in local visitation which might follow construction of a power plant information on the value of visibility at the site is needed prior to construction for socially optimal decision making on plant location and pollution control equipment the hedonic approach is unavailable both because the scarcity of local population as opposed to recreators makes use of wage or property value data impossible and because scenic vistas may themselves be unique for these reasons a randall et al first applied survey methods for valuing visibility and other environmental effects of large coal fired power plants in the four corners region of new mexico since this initial application the survey approach has been widely used to value environmental commodities where market data for hedonic analysis is difficult to acquire see for example brookshire ives and schulze rowe et al brookshire et al other early attempts to value public goods using the survey approach include r davis peter bohm and j hammack and g brown although results of using the survey approach for estimating the value of public goods appear to be internally consistent replicable and consistent with demand theory see schulze et al little work on external validation has been reported thus the purpose of this paper is to report on an experiment designed to validate the survey approach by direct comparison to a hedonic property value study the los angeles metropolitan area was chosen for the experiment because of the well defined air pollution problem and be assistant professor university of wyoming assistant professor university of missouri rolla associate professor university of wyoming and professor university of wyoming respectively the research reported here was funded under a grant methods development for assessing air pollution control benefits from the u s environmental protection agency we would like to give special thanks to alan carlin and shelby gerking for their helpful suggestions and contributions additional helpful comments were received from a myrick freeman iii john tschirhart and james murdoch all conclusions are of course our sole responsibility

an econometric and cultural analysis of rent control in kumasi ghana an empirical analysis of rent control in kumasi ghana is presented based upon a consumer demand model for housing controlled rent to income ratios are exceptionally low for a developing country moreover the asante housing market exhibits unusual cultural attributes and problems in estimating the without rent control situation benefits and costs of rent control are presented by housing types and income levels and distributional impacts assessed

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

on the nature and significance of collusive price leadership abstract with the help of a simple analytical model we are able to analyze and to further clarify the conditions for collusive price leadership as they were originally devised by jesse markham within the confines of this model we show how collusion increases price cost margins but at the same time decreases concentration in the industry

allocation of goods by lottery i introduction many goods such as hunting permits oil drilling leases cellular telephone licenses and rights to fishing berths as well as some buds such as the military draft jury duty and who is to be thrown overboard on a sinking life raft are or have been allocated by lotteries in neo classical welfare economics the random distribution of property rights does not affect allocative efficiency as long as transferability is allowed and the transactions costs are non prohibitive lottery allocations however are generally not transferable thus lottery allocations are inefficient since the goods are not ultimately allocated to the users who value them the most a number of authors such as aubert 1959 fienberg 1971 eckhoff 1989 and elster 1989 36 122 have argued that lotteries are chosen as the allocative instrument because it represents a fair or just means of allocating the goods rawls 1971 374 and eckhoff 1989 have noted that where it is impractical to divide the goods equally among those who desire them a lottery serves to satisfy both the requirement that the process be fair and that the allocation problem be resolved relatively costlessly elster 1989 113 however notes that lotteries are not the only fair allocation mechanism for example he points out that in jewish ethics the problem of allocating an indivisible good such as life saving resources is resolved by denying it to everyone even economists would probably prefer a lottery to this resolution the fairness hypothesis has a rich history in the old testament lotteries are deemed a fair way of allocating goods such as the inheritance of land numbers 33 54 lotteries are also used to allocate bads in perhaps the most famous biblical example of use of lots jonah was chosen by lot to be sacrificed to appease god who had brought a storm that threatened to wreck the ship the story goes that the lot selected jonah because he was shirking his duties elsewhere and should not have even been on the vessel jonah 1 6 1 notice that fair here is taken to mean just given this theological foundation it is not surprising that the lottery has seen frequent use in legal history as well one of the most interesting cases occurred in swedish and finnish trials in the 17th and 18th centuries in cases where a man was murdered by a mob lotteries were used to allocate punishment since the law required an eye for an eye no more and no less eckhoff says that if it was impossible to ascertain which of them had dealt the mortal blow the courts determined that one of the responsible parties be sentenced to death and that the person be selected by lottery 1989 19 a similar use of lotteries occurs in military history to deal with cases of mass desertion in roman armies every tenth man was executed decimated and the remainder pardoned in more modern times the lottery has been used in u s law 2 first of course is the use of a lottery to decide who shall sit on a jury a connection between fairness and lotteries however has also appeared in the common law in an 1842 case u s v holmes which has been discussed by fienberg 1971 eckhoff 1989 and elster 1989 a ship sank in a heavy storm and the lone surviving life raft was in grave danger of sinking the crew threw overboard fourteen male passengers in an effort to save the rest when back in port after being rescued a crewman named holmes the only crew member who had not disappeared upon arrival to port was brought to trial for the deaths of the passengers the court ruled that the non essential members of the crew should have been thrown overboard before any passengers and if that was not sufficient then passengers should have been selected by lot which is the fairest mode elster 1989 65 the fact that a human life presumably a large cost was at stake ex post did not affect the decision 3 the environmental economics literature contains a number of references to the social preferences for and benefits of lottery allocations

strategic behaviour some experimental evidence abstract a test to detect the presence of strategic bias in responses to direct willingness to pay questioning is developed and applied in an experimental setting involving three separate groups of individuals the smith auction a demand revealing process is also tested using the same format under direct questioning significant over stating behaviour was observed whilst the bids made in the smith auctions were predominantly under statements whilst the smith auction mean bids appear to be most suited to the task of numerical extrapolation the direct questioning process is cheaper to implement it is concluded that a combination of the two questioning techniques involving the adjustment of direct questioning bids on the basis of information generated by a smith auction carried out using a sub sample of respondents offers the most potential for estimating values in a real world case

being better vs being different differentiation competition and pricing strategies in the spanish hotel industry we study the effects of vertical and horizontal differentiation on pricing policy in a large sample of hotels in spain we show that hotels with more stars i e vertically differentiated offer smaller discounts over listed prices in addition to charging higher prices similarly hotels that belong to a branded chain i e horizontal differentiation also charge higher prices and provide smaller discounts we show how the degree of local competition moderates the effect of differentiation on pricing policy but only for vertical differentiation differentiation indeed protects hotels from the pressure to reduce prices as competition increases but being better seems to be more effective than just being different

environmental policy when market structure and plant locations are endogenous abstract a two region two firm model is developed in which firms choose the number and the regional locations of their plants both firms pollute and market structure is endogenous to environmental policy there are increasing returns at the plant level imperfect competition between the home and the foreign firm and transport costs between the two markets at critical levels of environmental policy variables small policy changes cause large discrete jumps in a region s pollution and welfare as a firm closes or opens a plant or shifts production to from a foreign branch plant the implications for optimal environmental policy differ significantly from those suggested by traditional pigouvian marginal analysis

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

strategic factor market intelligence an application of information economics to strategy formulation and competitor intelligence this paper develops a model of information acquisition decisions by firms that are competing in a strategic factor market barney 1986 to purchase a scarce resource whose value is unknown and differs across firms the model builds on the argument that more accurate expectations about the firm specific value of resources is other than luck the only way for firms to obtain the specific resources required for competitive advantage we address the more specific question of what types of information firms should gather to accomplish this goal the model generates a series of testable hypotheses about how a firm s optimal mix of different types of information is affected by a number of factors including the level of uncertainty about the value of the resource being acquired the rarity imitability and nonsubstitutability of that resource the level of inscrutability of firms pre existing stocks of resources and firms information gathering and information processing capacities

hedonic prices property values and measuring environmental benefits a survey of the issues this paper provides a review of the theoretical basis and the assumptions required in order to use hedonic price equations derived from property value data to obtain measures of the prices and the inverse demand functions for environmental amenities such as air quality it also includes a review and assessment of existing empirical applications of the technique to problems of air and water quality and urban noise