distribution of research gains in multistage production systems research irrespective of the incidence of the levy and benefits no longer is valid we have no disagreement with this important observation but we are concerned about the lack of reliable estimates of the elasticity of substitution building on muth s analysis for which we suggest some changes we explore further the sensitivity of the effects of the distribution of benefits of research to different ways in which research can impact on a multistage production system and to the effects of the elasticities

economic welfare evaluations for producers under uncertainty the validity of producer and consumer surplus measures of firm welfare under risk is examined under constant absolute risk aversion and output price uncertainty only these measures are an exact measure of firm welfare as defined by compensating variation equivalent variation or the change in the certainty equivalent under decreasing absolute risk aversion qualitative comparisons of various measures are discussed for example producer s surplus as measured by the area above the uncompensated risk averse supply curve overstates the compensating variation of a change in expected price of output procedures for calculating firm welfare under production uncertainty and a variety of economic environments are proposed generally these procedures are applicable only when absolute risk aversion is constant

intertemporal consumer surplus in lagged adjustment demand models an application to natural gas pricing abstract applied welfare analyses of policy options typically measure surplus as a single period snapshot or a flow over time assuming stationary supply and demand curves these curves however generally are not independent of time therefore the effects of various policy changes are likely to differ in type and magnitude over time as adjustments are made this paper presents an algorithm for calculating the welfare effects of a policy change in the context of commonly used lagged adjustment demand models an example involving natural gas price decontrol is presented in this example assuming stationary demand curves would overestimate lost consumer surplus by 15

optimal production with learning by doing abstract this paper characterizes optimal production over time when production cost is a decreasing function of past accumulated output when production exhibits learning by doing monopolistic competitive and socially optimal solutions are considered

divergence in alternative hicksian welfare measures the case of revealed preference for public amenities this paper investigates the divergence between the two hicksian welfare measures of non traded amenity improvement associated with housing first the hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures a hedonic two stage approach is then applied to empirically show that for quantity changes in contrast to hypothetical markets divergence in real market is small the paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect the greater the substitution effect the smaller the divergence between the two measures copyright 2002 john wiley sons ltd

simple monetary policy rules and exchange rate uncertainty abstract we analyze the performance and robustness of some common simple rules for monetary policy in a new keynesian open economy model under different assumptions about the exchange rate model adding the exchange rate to an optimized taylor rule that responds to cpi inflation gives only small improvements in terms of economic stability in most model configurations the taylor rule is also slightly more robust to uncertainty about the exchange rate model than are rules that respond to the rate of exchange rate depreciation our results thus indicate that the taylor rule is sufficient to stabilize a small open economy also under exchange rate model uncertainty

application of sample selection model to double bounded dichotomous choice contingent valuation studies modeling households behavior with the data from a contingentvaluation cv survey is often complicated by samplenon response which can cause non response bias and sampleselection bias leading to inconsistent parameter estimates and adistorted mean willingness to pay estimate this paper reportsthe results of empirical tests for both biases using householdsurvey data in which the double bounded dichotomous choice cvquestion involved the benefit of a tap water quality improvementpolicy in korea no non response bias but sample selection bias is detected in the sample to correct for sample selection bias a sample selection model is employed the authors also discusshow failure to correct for bias may distort aggregate benefitestimates

measuring the economic benefits of recycling the case of the waste agricultural film in korea recently increase of the waste agricultural film waf raises the loss of the resources and produces the environmental damage in korea the korean government has established the basic plan for increasing the recycling rate and abating the environmental damage the objective of this paper is to estimate the economic benefits attached to the policy of recycling the waf using contingent valuation method aiming to provide policy makers with useful information to make an informed public decision in recycling the waf the overall results show that the respondents well accepted the contingent market and would be willing to pay a significant amount for the proposed policy of recycling the waf the mean willingness to pay and the truncated mean willingness to pay per household were 4641 korean won us 3 6 and 5730 korean won us 4 4 respectively total economic benefits for the population amounted to approximately 14 33 billion korean won us 11 02 million per year this quantitative information can be use

pricing to market in swedish exports fluctuations in prices of swedish exports to five countries are investigated in this paper we test whether there are systematic differences between prices to different markets and whether relative export prices are affected by macroeconomic conditions in destination countries the test results indicate that deviations from no pricing to market and neutrality of money are quite common and persistent over a sample of 15 years long run monetary neutrality is rejected in almost half of the cases in most cases the degree of pricing to market is also affected by aggregate demand in export markets

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

market shares financial constraints and pricing behaviour in the export market a structural dynamic model of price and quantity adjustment is estimated on time series data for exports and export prices two sources of dynamics are considered customer markets and preset prices as predicted by the customer market model the market share adjusts slowly after a change in the relative price and financial conditions affect prices prices are found to be sticky in the sense that they do not reflect the most recent information about costs and exchange rates a parsimoniously parameterized structural model explains about 90 of the variation in market share and the relative price

consumer s surplus versus compensating variation revisited consumer s surplus and a second order approximation to compensating variation are compared to the exact compensating variation for a subsystem of several commodities an empirical application to the relative retail price distortions created by the u s dairy program is presented in the application a new specification for weakly integrable incomplete demand models is developed and estimated the integrable demand model has sufficient flexibility that it is not rejected by the data both welfare approximations are found to introduce large errors in the measurement of deadweight losses

can weak substitution be rehabilitated this paper develops a graphical analysis and an analytical model that demonstrate how weak substitution can be used for non market valuation weak complementarity and weak substitution represent preference restrictions that allow us to develop equivalent price changes to describe quantity or quality changes in non market goods the price changes are hicksian equivalents in that they yield the same utility changes as would the quantity or quality changes after discussion of several potential applications of weak substitution the paper develops the parallel between the restriction and recent strategies from modeling differentiated goods

surplus maximization and optimality i identify assumptions under which policies that maximize expected surplus are pareto optimal even when expected consumer surplus does not even locally represent preferences over price income lotteries besides the oft made partial equilibrium assumptions that only one price varies and that income changes do not aect demand the two other assumptions are that every consumer s indirect utility function is supermodular in price and income and policies order prices by a single crossing property supermodularity holds precisely if relative risk aversion exceeds the income elasticity of demand a mild condition the single crossing property appears strong but holds in many applications that use expected surplus

public and private returns from joint venture research an example from agriculture public research institutions are turning increasingly to the private sector for additional financial support such a trend in the short run lessens the need for public research expenditures but may in the long run prove to be very costly to the economy as a whole this is because private funding increases the chance that the direction of research will shift so that private benefits are enhanced such a shift is especially costly if public research funds are then not forthcoming that would have the potential of producing the maximum level of benefits to the economy as a whole a case study of canadian barley research is used to illustrate this problem

rent seeking and x inefficiency this paper discusses the social cost of monopoly with special attention given to the geometric representation of that social cost notably rent seeking and x inefficiency the possibility of an overlap between these two measures is examined in particular the paper addresses a problem of measure identification which highlights the need to reconsider the normative microfoundations of rent seeking

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

null nullifying or dummifying players the difference between the shapley value the equal division value and the equal surplus division value we provide new characterisations of the equal surplus division value this way the difference between the shapley value the equal surplus division value and the equal division value is pinpointed to one axiom

the economic benefits of surface water quality improvements in developing countries a case study of davao philippines two nonmarket valuation techniques the contingent valuation method and travel cost model are used to estimate the economic value that people in davao philippines place on improving the water quality of the rivers and sea near their community the contingent valuation and travel cost estimates are very close to each other and are quite low both in absolute terms and as a percentage of household income these findings suggest that water pollution control is simply not a high priority for davao s residents and support the argument that households willingness to pay for environmental amenities such as improved water quality is low

health insurance tradeoffs revisited abstract in two recent papers journal of health economics 18 2 141 152 journal of health economics 18 6 811 824 nyman raised some questions about the welfare calculations and conclusions in our earlier paper manning and marquis health insurance the tradeoff between risk pooling and moral hazard vol 15 1996 this note discusses the erroneous criticisms in his papers first although we estimated a marshallian demand curve our calculations are based on compensating variations that incorporate the gains from risk pooling second our estimates of second best insurance plans indicate that some cost sharing is optimal in contradiction to his assertion that our results raise questions about the desirability of insurance coverage the comment also deals with other issues raised by nyman

the demand function for residential heat through district heating system and its consumption benefits in korea abstract the demand for residential heat rh through a district heating system dhs has been and will be expanded in korea due to its better performance in energy efficiency and the abatement of greenhouse gas emissions than decentralized boilers the purposes of this paper are two fold the first is to obtain the demand function for dhs based rh in korea and investigate the price and income elasticities of the demand employing the quarterly data covering the period 1988 2013 the short run price and income elasticities are estimated as 0 700 and 0 918 respectively moreover the long run elasticities are 1 253 and 1 642 respectively the second purpose is to measure the consumption benefits of dhs based rh employing the economic theory that they are the sum of the actual payment and consumer surplus for the consumption considering that the average price and estimated consumer surplus of the dhs based rh use in 2013 are computed to be krw 87 870 usd 84 1 and krw 62 764 usd 60 1 per gcal the consumption benefits of the dhs based rh are calculated to be krw 150 634 usd 144 2 per gcal this information can be beneficially utilized to conduct an economic feasibility study for a new dhs project related to rh supply

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

welfare implications of community forest plantations in developing countries the orissa social forestry project community forest plantations are a common intervention in developing countries we use household and remote sensing data from orissa india to estimate welfare effects of community forest plantations in terms of the value of decreased collection times plantations afford users a selection model accounting for possible jointness in site location and productivity is used to estimate collection production functions for different household labor categories in natural and community forests two measures of an opportunity cost of time are used to determine welfare effects of time saved due to community forests we find access to community forests is important to marginal productivity of different labor categories but to different degrees highlighting the need to disaggregate household data when analyzing these interventions we also find substantial welfare improvements from time savings for many households and villages

what do income tests tell us about the gap between wta and wtp for public goods abstract theory relates the gap between wta willingness to accept compensation and wtp willingness to pay to the income elasticity of wtp it has been suggested that empirical estimates of the income elasticity of wtp can therefore be used to test whether an observed gap between wta and wtp is consistent with rational behavior we examine this issue for the case of non market public goods we identify the theoretically appropriate tests of income sensitivity and examine conditions for valid income sensitivity tests we show that income tests may provide false signals in common settings indicating an inconsistency where none exists

giving respondents time to think in contingent valuation studies a developing country application abstract this paper evaluates whether the time given people to think about their responses to cvm valuation questions influences their answers our study was conducted in nigeria as part of an evaluation of rural households willingness to pay for public taps and private connections to improved drinking water systems respondents who were allowed time to evaluate the proposed water system bid significantly less than those who did not have that time moreover this conclusion was upheld regardless of whether the water system was a public tap or a private connection

bootstrapping in applied welfare analysis bootstrapping procedures are used to estimate the statistical properties of common empirical welfare measures results from a monte carlo experiment indicate that welfare estimates such as marshallian consumer surplus often exhibit significant bias standard errors of welfare estimates are found to often exceed the magnitude of the point estimate for typical cross section data sets and are generally larger than the difference between comparable hicksian and marshallian measures precision of welfare estimates can be markedly enhanced through generating larger data sets obtaining better model fits and through imposition of innocuous inequality restrictions on the demand function parameters

welfare measurement in the household production framework the household production approach to consumer behavior developed from the work of gary becker william gorman and kelvin lancaster has considerable descriptive appeal in modelling the decisions of households the approach derives from the observation that households frequently purchase market goods that do not yield utility directly but are combined to produce commodity service flows which the household values thus observed behavior is determined by household production technology as well as by tastes the advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology though we rarely possess useful a priori information regarding tastes the putative advantages of the household production approach are questioned on empirical and conceptual grounds by robert pollak and michael wachter 1975 they show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology raising serious econometric difficulties in the estimation of commodity demand functions in addition since commodity prices become functions of the commodity bundle consumed the analogy to traditional demand theory breaks down joint production occurs when a good enters several production processes simultaneously or equivalently when a good in one production process also enters directly into the individual s utility function the most common example is time which provides the context for all production processes and is often associated with the production of several commodities simultaneously since joint production in the household is likely to be pervasive the critique by pollak and wachter cannot be ignored in response to the comment by william barnett pollak and wachter 1977 suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices this approach confounds tastes and technology but it eliminates the troublesome concept of commodity prices as parameters when in fact they are likely to be endogenous in this paper we show that results from positive analysis such as the critique by pollak and wachter have implications for the use of the household production framework for welfare analysis the household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas gardner brown john charbonneau and michael hay elizabeth wilman yet traditional approaches to welfare measurement are frequently inapplicable we argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology we extend pollak and wachter s results by demonstrating that marshallian demand functions for commodities cannot be uniquely defined thus marshallian functions cannot be used to derive exact compensated functions in the manner of jerry hausman and of george mckenzie and i f pearce nor can compensating and equivalent variation measures be bounded by marshallian consumer s surplus estimates following robert willig in fact duality results that normally allow us to move between marshallian and hicksian functions are not assistant and associate professors respectively department of agricultural and resource economics university of maryland college park md 20742 this paper is scientific article no a3404 contribution no 6476 of the maryland agricultural experiment station we wish to thank darrell hueth james opaluch v kerry smith and elizabeth wilman for comments on an earlier draft

contingent valuation techniques for assessing environmental impacts further evidence abstract this paper provides further evidence on the development and application of the iterative bidding technique used to assess environmental impacts three specific issues the hypothetical nature of the survey technique the questionnaire information structure and the bidding procedure starting point are examined theoretically and empirically to determine their effect on individual bid behavior the empirical results indicate that the importance of these influences may have been overstated in earlier studies

axiomatic foundations of hicksian measures of welfare change abstract the aggregate hicksian measures i ev i and i cv i are characterized by three simple properties one property concerns the ranking of two states the measures are paretian a second property expresses the postulate that welfare changes are to be evaluated in money the third one deals with redistributions of incomes distributional considerations are taken into account by employing variable distributional weights i

comparing open ended choice experiments and experimental auctions an application to golden rice we use two experimental valuation methods to estimate consumer demand for genetically modified golden rice the first is an open ended choice experiment oece where participants name the quantities of golden rice and conventional rice demanded at each of several price combinations one of which will be randomly chosen as binding this allows us to estimate market demand by aggregating demand across participants this estimate of market demand also allows us to estimate own price elasticity and consumer surplus for golden rice comparing willingness to pay wtp estimates from the oece with those from a uniform price auction we find that oece wtp estimates exhibit less affiliation across rounds and the effects of positive and negative information under the oece are more consistent with prior expectations and existing studies we also find that while auction wtp estimates more than double across five rounds oece wtp estimates are stable across rounds and are always roughly equal to those from the final auction round

on measuring the value of a nonmarket good using market data we use line integral theory to lay out in a more general theoretical framework the conditions under which it is possible to measure with market data the welfare effects of a change in a nonmarket good we present in detail a numerical method of measuring the value of nonmarket goods using market data under either weak neutrality or weak complementarity our numerical method is more flexible than the existing analytical method because it can be used with any well behaved marshallian demand function and can be used even when the willig condition does not hold

pricing to market in a small open economy the determinants of norwegian import prices of manufactures are investigated over the period 1970 1 1991 4 multivariate cointegration analysis establishes a long run relationship between import prices foreign prices the exchange rate and domestic unit labour costs normalized on import prices the long run elasticities are 0 63 foreign prices and the exchange rate and 0 37 domestic costs deviations from this relationship are highly significant in a structural import price equation which also contains positive effects of growth in domestic demand and inflation as well as a negative effect from the norwegian unemployment rate the estimated parameters appear reasonably stable within the sample

markets and the measurement of value consumer s surplus and the hicksian measures of compensating and equivalent variation have a long history in empirical economic analysis however at both the theoretical and the empirical level economists psychologists and public choice theorists have not been able to reach a significant consensus regarding the usefulness of these measures economic theorists have only recently dissected the differences which exist between alternative welfare measures in a systematic and transparent fashion in willig 1976 hausman 1981 and takayama 1984 the role of income in determining the correct theoretical measurements of compensating and equivalent variations was exposed during this same period of time theoretical results obtained by the psychologists kahneman and tversky 1979 indicated that the fundamental structure of preferences upon which the theoretical economic results are based is flawed the so called prospect theory of decision developed by these authors indicated that measured of welfare based upon payment will differ from measures of welfare based upon compensation because of the fact that individuals will value losses at a greater marginal rate than gains this difference was then predicted to dominate any income effect important in the economist s model finally this period recorded the emergence of many demand revealing processes which provide individuals with appropriate incentives to accurately reveal their preferences as summarized in coursey and schulze 1986 one interpretation of the literature on incentive compatibility suggests a set of well defined guidelines for improving both the accuracy and validity of compensating and equivalent variation measures these differences in professional preferences regarding what is important in improving the accuracy of economic welfare measurements led john

bidding for surplus in network allocation problems in this paper we study non cooperative foundations of network allocation rules we focus on three allocation rules the myerson value the position value and the component wise egalitarian solution for any of these three rules we provide a characterization based on component efficiency and some balanced contribution property additionally we present three mechanisms whose equilibrium payoffs are well defined and coincide with the three rules under consideration if the underlying value function is monotonic non monotonic value functions are shown to deal with allocation rules applied to monotonic covers the mechanisms are inspired by the implementation of the shapley value by perez castrillo and wettstein bidding for the surplus a non cooperative approach to the shapley value j econ theory 100 2 2001 274 294

welfare losses due to market power hicksian versus marshallian measurement this paper warns against the use of marshallian welfare loss in applied analysis of market power we show how to compute the hicksian deadweight loss from an ordinary demand then from an experiment using real data on twenty one sectors of the french food industry we find that the marshallian deadweight loss poorly approximates the exact hicksian measure hence it is advisable to use the latter in applied welfare analysis copyright 2001 oxford university press

what marshall didn t know on the twentieth century s contributions to economics some of this century s many valuable contributions to economics like macroeconomics econometrics and game theory are widely recognized however arguably equally important is the enhanced role of empirical study permitted by more abundant data and improved methods also insufficiently recognized are the increased rigor and use of applied economics in public finance regulation corporation finance etc employing abstract theory and sophisticated data analysis the striking contrast with earlier intuitively based applied economics and empirical study is illustrated comparison with marshall s principles also indicates that except for macroeconomics remarkably little space in today s texts deals with some of the rich contributions of this century what has twentieth century economics accomplished a great deal as will be shown here but the discussion needs an illuminating starting point in 1946 after arriving at the london school of economics as an entering graduate student 1 i soon found that in

public monopoly and economic efficiency evidence from the pennsylvania liquor control board s entry decisions we estimate a spatial model of liquor demand to analyze the impact of government controlled retailing on entry patterns in the absence of the pennsylvania liquor control board the state would have roughly 2 5 times the current number of stores higher consumer surplus and lower payments to liquor store employees with just over half the number of stores that would maximize welfare the government system is instead best rationalized as profit maximization with profit sharing government operation mitigates but does not eliminate free entry s bias against rural consumers we find only limited evidence of political influence on entry jel d42 d72 l11 l12 l43 l81

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

welfare and distribution effects of water pricing policies in this paper distribution and welfare effects of changes in block price systems are evaluated a method is discussed to determine for a marshallian demand function equivalent variation in case of a block price system the method is applied to compare for the metropolitan region of sao paulo alternative pricing policies on the basis of their demand welfare and distribution effects of changing water prices results show that there is a trade off between average welfare and income distribution a pro poor price system may result in lower average welfare than a flat price system but in higher individual welfare for the poor moreover there is a trade off between revenues for the water company and income distribution even though pro poor price systems may not be as good for average welfare as flat price systems their direct effects on poverty are important introducing pro poor price systems however may have financial consequences for the water companies

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

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

errors in import demand estimates based upon unit value indexes disaggregated import demand elasticity estimates based on import unit value indexes are used in virtually all trade policy simulation models however unit value indexes have been criticized especially by kravis and lipsey 1974 to examine the effect of using unit value indexes on estimates of disaggregated import demand elasticities this paper compares regression results using unit value indexes with results using u s bureau of labor statistics import price indexes for several detailed trade categories based on quarterly data for 1978 88 results show that using unit value indexes does not greatly affect estimated import demand elasticities

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

adjustment costs and pricing to market theory and evidence abstract this paper develops an adjustment cost model of pricing to market the model consists of a monopolist who supplies an identical nondurable good to two foreign markets it is shown that the degree of pricing to market increases with the relative importance of the transitory component in exchange rates customs data from 1978 through 1987 on u s and canadian imports of seven german commodities are used to estimate the model s parameters and test its over identifying restrictions

approximating compensated income from ordinary demand functions abstract this paper proposes a re versible s econd or der t aylor resort approximation to compensated income from ordinary demand functions resort yields the malmquist vartia m v algorithm as a first order case using the slutsky equation resort obtains the substitution matrix and checks it for symmetry and negative semi definiteness to validate compensated income this validation procedure is an improvement over m v

option price estimates for water quality improvements a contingent valuation study for the monongahela river abstract we present the findings from a contingent valuation survey designed to estimate the option price bids for the improved recreation resulting from enhanced water quality in the pennsylvania portion of the monongahela river the findings are based on a survey design that used professional interviewers to conduct personal interviews determined from a representative sample of 393 households in addition the research suggests that protest bids and outliers be viewed similarly accordingly a new technique for identifying outlying responses is proposed the findings suggest that the question format affects the option price estimates and that criteria for determining the final sample of responses can have an important influence on contingent valuation results

despairing over disparities explaining the difference between willingness to pay and willingness to accept this paper examines the three major explanations for the disparity between willingness to pay wtp and willingness to accept wta observed in contingent value surveys and laboratory experiments a belief that the results must be biased in some fashion hanemann s 1991 substitutes hypothesis and the loss aversion model proposed by tversky and kahneman 1991 starting from the assumption that individuals make utility maximizing choices we develop structural equations that yield parametric tests of the hypotheses within a single non experimental framework the approach is flexible enough to incorporate a variety of functional form and distributional assumptions and can be applied to either data from either open ended bids or dichotomous choice questions the usefulness of the approach is demonstrated using data from a survey that asked both wtp and wta questions the results provide weak support for loss aversion

the evidence of strategic pricing policies of turkish textile exports this paper examines the strategic pricing behaviour pricing to market ptm policies of textile exports in the 1990s for a hyperinflation country turkey whose currency has been depreciating continually for the last two decades the findings show that turkish textile export categories exhibit evidence of strategic pricing behaviour when the turkish textiles export data is analysed for different frequencies the results show that evidence of strategic pricing behaviour is observed in response to changes in real exchange rates for textile exports for closer lagging periods and strategic pricing behaviour diminishes with further lagging periods also evidence of strategic pricing behaviour is observed in a more recurrent fashion with higher frequency data three month periods than with relatively lower frequency data six month and 12 month periods another interesting finding is that turkish textile exporters prefer to increase their prices as a reaction if they had adjusted their prices in an overshoot

fairness and fairness for neighbors the difference between the myerson value and component wise egalitarian solutions abstract we replace the axiom of fairness used in the characterization of the myerson value myerson 1977 by fairness for neighbors in order to characterize the component wise egalitarian solution when a link is broken fairness states that the two players incident to the link should be affected similarly while fairness for neighbors states that a player incident to the link and any of his other neighbors should be affected similarly fairness for neighbors is also used to characterize the component wise egalitarian surplus solution and a two step egalitarian surplus solution these results highlight that egalitarian and marginalistic allocation rules can be obtained by applying the same equal gain loss property to different types of players

analysing rationing policies drought and its effects on urban users welfare analysing rationing policies during drought the aim of this paper is to study the impact on consumers of rationing policies implemented during water shortages water scarcity gives rise to the need for rationing and various methods including supply cutoffs can be used a model is devised to quantify the welfare losses associated with qualitive and quantitive restrictions based on virtual prices and using the consumer surplus as a welfare measurement welfare variations for different users have been calculated to achieve the aim information relative to seville spain has been used analysing the drought period that took place in the first half of the 1990s it has been possible to observe the main source that led to welfare losses for each kind of user

export price responses to exogenous exchange rate movements the export price responses to three different exogenous exchange rate movements are investigated using data on swedish exports of automobiles and kraft paper to three destination countries a pric

contingent valuation in korean environmental planning a pilot application to the protection of drinking water quality in seoul this paper describes the application of the contingent valuation cv or willingness to pay wtp survey technique to a problem of public policy evaluation in seoul korea matters of principal interest include the definition of the problem and policy protection of seoul s drinking water supply from disruption by slugs of contaminants in the source river the han adjustments to standard cv techniques and assumptions required by the cultural and physical reality of seoul the representativeness of the spatially drawn sample estimation of the willingness to pay equation as a check on theoretical validity and the policy implications of the results the bottom line is asserted to be that cv may be especially valuable in countries such as korea that have serious environmental problems and a history of not producing data that might be used in alternative indirect benefit estimation exercises further it appears that if care is exercised in adjusting to local reality the method can be made as successful as it has been in the u s and northern europe

solidarity within a fixed community we study the consequences of a solidarity property that specifies how a value for cooperative games should respond if some player forfeits his productivity i e becomes a null player nullified solidarity states that in this case either all players weakly gain together or all players weakly lose together combined with efficiency the null game property and a weak fairness property we obtain a new characterization of the equal division value

value of recreational fishing in the brazilian pantanal a travel cost analysis using count data models abstract recreational fishing value of the brazilian pantanal is measured using travel cost method tcm we compare non linear poisson and negative binomial count data models to estimate recreational fishing trip demands the count data and truncated models are used primarily to account for non negative integer and truncation properties of recreational fishing trips as suggested by the recreation valuation literature the results reveal that non linear and truncated count data models perform relatively well in our study the economic values of recreational fishing in terms of consumer surplus cs are derived using non linear and truncated models we estimate the cs values from 540 54 to 869 57 per trip resulting in the total social welfare estimate range from 35 to 56 million the study demonstrates a relatively high value of recreational fishing in the pantanal in comparison to similar studies conducted in other parts of the world the findings of this study would be important for resource management decisions in the pantanal and could serve as a reference in valuing similar resources in other ecosystems around the world

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

a review article the case against the use of the sum of compensating variations in cost benefit analysis this paper presents a case against the use of the sum of compensating varia tions as a cost benefit test we argue that 1 the ethical judginents implied by the test are not defensible 2 positive sums of compensating variations occur without potential pareto improvements resulting in social preference reversals without simultaneous scitovsky re versals 3 when lump sum transfers are feasible a positive sum of compensating variations is necessary but not sufficient for a potential pareto improvement 4 in order to eliminate preference reversals and intransitivities all households must have almost identical quasi homothetic preferences a condition that is not satisfied in real economies