lobbying by capital and labor over trade and labor market policies abstract this paper uses the common agency approach to analyze the joint determination of product and labor market distortions in a small open economy capital owners and union members lobby the government on both tariffs and minimum wages while other factors of production are not organized the paper shows that product and labor market distortions always move in the same direction and that their level is not modified by social pacts between capital and labor it also shows that labor market distortions are second best hence conditionality by foreign organizations should target distortions in product markets but not in labor markets

multinational public goods provision under multilateral income transfers and productivity differences abstractthis article examines multinational public goods provision under multilateral income transfers and productivity differences across countries under a planner who uses linear approximation for utility maximization we show that 1 a country is an income receiver if it has a higher productivity than the average in producing public goods enabling it to provide more public goods 2 the amount of transfers can be pinned down for all countries with an adjustment cost 3 each country obtains an identical utility increment and 4 the country with the lowest adjustment cost is the best candidate for the planner country all results are derived based on well known information regarding the cost of producing the public goods and income levels

strikes and political activism of trade unions theory and application to bangladesh the behavior of bangladeshi trade unions is characterized bypolitical activism and momentous strikes called hartalsthere have played a crucial part in most political changes inthis country we offer a theoretical framework for discussingthis fact and we test empirically its main prediction bybringing out the political cycle that characterizes theoccurrence of strikes in bangladesh

strategic offering for a wind power producer as a result of subsidies and technological maturity renewable electricity producers have grown in some jurisdictions to clearly dominant positions in the market under this context we propose an offering strategy for a wind power producer with market power that participates in the day ahead market as a price maker and in the balancing market as a deviator uncertainty pertaining to wind power production and balancing market price is represented through a set of correlated scenarios the proposed model is a stochastic mathematical program with equilibrium constraints mpec that can be recast as a tractable mixed integer linear programming milp problem which is solvable using available optimization software results from an illustrative example and two case studies show the effectiveness of the proposed model

do firms free ride on rivals r d expenditure an empirical analysis a system of demand equations given oligopolistic interdependence amon firms is derived and estimated for two four digit sic code industries to explain firms r d behaviour through time the two industries chosen are the perfume cosmetic and toiletries pct industry and the drug industry the industries chosen belong to the same two digit sic code classification called the cchemical and allied products industry but not in the drug industry the introduction of the r d tax credit in 1981 however reduced the tendency to free ride in both industries

externalities expectations and pigouvian taxes this article derives pigouvian type corrective measures for reciprocal externalities when non nash behavior characterizes the participants these reciprocal externalities may involve various kinds of environmental pollutants such as acid rain a comparison between corrective measures for nash and non nash behavior demonstrates that positive conjectures regarding the other agent s externality generating activity have an expectation internalizing influence that usually reduces the required corrective measures negative conjectures e g free riding expectations however have an expectation externalizing effect that increases the required corrective measures the article analyzes both two person and n person externalities 13 references 3 figures 1 table

heterogeneity returns to scale and collective action i analyze the effects of resource inequality and valuation heterogeneity on the provision of public goods with increasing or decreasing returns to scale in production the existing literature typically takes the agents characteristics as given and known to the researcher in contrast this paper compares collective action provision across groups of agents with resources and valuations for the public good drawn from different known joint distributions specifically i characterize the expected equilibrium public good level as function of various distributional properties and moments a resource valuation distribution that first order stochastically dominates another distribution always results in higher expected public good provision level independent of the production technology with decreasing returns to scale in the public good production higher resource inequality results in higher expected provision with increasing returns the same result holds when the mean resource level is relatively low but expected provision decreases in inequality when the mean resource level is high a parallel result holds for agents valuations l auteur analyse les effets de l inegalite des ressources et de l heterogeneite dans l evaluation de biens publics dont la production se fait avec des rendements croissants et decroissants a l echelle la litterature specialisee suggere habituellement que les caracteristiques des agents sont donnees et connues du chercheur a contrario ce memoire compare l action collective de groupes d agents dont les ressources et les evaluations du bien public sont tirees de distributions conjointes connues specifiquement le niveau d equilibre anticipe du bien public est fonction de divers moments et proprietes de ces distributions une distribution conjointe ressources evaluations qui en domine une autre au sens stochastique de premier ordre resulte toujours en un niveau de bien public anticipe plus eleve quelle que soit la technologie de production quand les rendements a l echelle sont decroissants une inegalite de ressources plus grande resulte en un niveau de bien public anticipe plus eleve quand les rendements sont croissants le meme resultat s ensuit si le niveau moyen de la ressource est relativement bas mais le niveau de bien public anticipe decroit quand le niveau moyen de la ressource est eleve des resultats paralleles sont notes pour ce qui est des evaluations du bien public par les agents

the economics of worldwide stagflation the last fifteen years have witnessed dramatic changes in economics not only in the manner in which the economics profession views economics but also in the manner in which the general public views economics and economists by the late 1960 s there had emerged more or less a consensus macroeconomic framework that is an agreed upon structure to be used to study economic problems at the aggregate level robert solow stated as quoted in leijonhufvud 1968

an empirical analysis of intergovernmental tax interaction the case of business income taxes in canada both federal and provincial governments in canada levy corporate taxes on busi nesses in their jurisdictions which potentially gives rise to horizontal and vertical tax exter nalities within the federation using a simple model of interdependent tax choices we estimate tax setting functions for the federal government ontario quebec and an aggregate of the remaining eight provinces we find evidence of significant vertical and horizontal tax inter actions provincial tax rates respond negatively to the federal tax rate while at least some provinces increase their tax rates in response to increases in the tax rates of other provinces

the theory of public goods non nash behaviour abstract most treatments of equilibrium public goods provision assume zero conjectural variations in the sense that each individual regards the behaviour of the rest of the community as independent of his own this paper introduces nonzero conjectural variations into the model a diagram is introduced which can depict both the individual s and the community s equilibrium in the presence of nonzero conjectural variations equilibrium and optimal outcomes are compared and a specific functional form is used to investigate the effect of community size on the nature of equilibrium finally we discuss the requirement that conjectures should be consistent

the harambee movement and efficient public good provision in kenya abstract those familiar with kenya since independence will know of the importance of the harambee system the term harambee has come to mean the provision of goods usually social infrastructure through the voluntary cooperation of members of the community provision of public goods in this way is an important alternative to the more normal method provision through tax finance here we compare these two methods of provision with a view towards determining first the circumstances under which harambee might be more effective and second what policies might be pursued to best utilize this system

models of military expenditure a brief review of the extensive empirical literature devoted to explaining levels of military expenditure indicates a wide variety of unreconciled results however comparing the alternative models is not straightforward this paper uses british post war military expenditures to illustrate some of the methodological issues involved in model comparison evaluation and selection starting from two published models for the uk a systematic specification search leads to a new model which dominates alternative specifications passes a wide range of misspecification tests and also fits well to french data

cooperative versus noncooperative behavior the case of agricultural research voluntary provision of public goods is generally considered suboptimal this result is based on the underlying assumption of noncooperation resulting in the standard nash cournot outcome agents however can reach a cooperative equilibrium if the aggregate level of the public good provided has to coincide across agents given each agent s tax share the resulting lindahl equilibrium implies pareto optimal provision of the public good this paper tests these two competing models by taking the case of agricultural research in the united states results indicate that in over 50 percent of the cases agents follow the noncooperative scheme copyright 1993 by mit press

school finance reform and voluntary fiscal federalism california has transferred the financing of its public schools from localities to the state in response many families have supplemented the tax revenue of their local public schools with voluntary contributions this paper analyzes that phenomenon we propose a model of partial cooperation among parents in making voluntary contributions to their public schools under reasonable conditions the model predicts that contributions per pupil should decline with school size we estimate this relationship using data on contributions to california schools our estimates reveal that contributions per pupil do decline with size however the rate of decline is surprisingly slow 2002 elsevier b v all rights reserved

economics of alliances the lessons for collective action this essay provides an up to date summary of the findings of the literature on the economics of alliances we show that the study of the economics of alliances has played a pivotal role in understanding and applying public good analysis to real world applications we establish that the manner in which alliances address burden sharing and allocative issues is related to strategic doctrines weapon technology perceived threats and membership composition past contributions are evaluated and areas needing further development are identified the theoretical and empirical knowledge gained from the study of alliances is shown to be directly applicable to a wide range of international collectives

auctions or grandfathering the political economy of tradable emission permits despite the prevalence of grandfathered permits we still observe that a hybrid policy in which a fraction of initial emission permits is distributed through auctions is adopted in some cases we also observe that some polluting industries support auctioned permits and that most environmental groups support grandfathered permits this paper attempts to explain these phenomena from the perspective of political economy and investigates the conditions under which grandfathering auctions or a hybrid instrument will be the equilibrium policy by constructing a two stage lobbying game in which the type of policy instrument auction grandfathering or a hybrid instrument is determined in the first stage and then the number of permits is decided in the second stage we highlight the strategic interaction of the lobbying activities between the two stages in explaining the behavior of the lobbying groups

the triple entente and the triple alliance 1880 1914 a collective goods approach the distribution of burdens in alliances may be explained in terms of public and private outputs a joint product model is applied to the triple alliance and triple entente using generalized least squares auto regressive moving average gls arma techniques and time series data results indicate that countries regarded allies military effort more as complements than as substitutes though several examples of free riding behavior are noted the method used here may provide more accurate estimation of publicness problems than is found in the usual static tests

on consistency of conjectures in the private provision of public goods abstract this paper shows that the condition recently given by cornes and sandler for consistency of conjectures in a non nash model of voluntary public good provision is neither necessary nor sufficient it gives an alternative condition which is both necessary and sufficient for consistency of conjectures and may be used to compute appropriate conjectural variations in communities of arbitrary size if a symmetric equilibrium exists

discounting the free ride alliances and security in the postwar world the collective goods theory of alliances and neorealist theory yield conflicting expectations about the security policies of states the former emphasizes the temptation to ride free on the efforts of others while the latter emphasizes the incentives for self help in the cases of britain china and france during the early cold war the constraints identified by neorealist theory reinforced by the advent of nuclear weapons prevailed each discounted the value of the security benefits superpower partners could provide the second ranking powers decisions to shoulder the burden of developing independent nuclear forces are at odds with collective goods arguments that portray especially strong temptations to ride free in the circumstances that prevailed at that time an international system dominated by two superpowers each possessing large nuclear deterrent arsenals that could easily be employed on behalf of allies this analysis suggests that present efforts to discourage additional states from acquiring nuclear weapons by offering them international security guarantees are unlikely to succeed

economic models of nato abstract the seminal work of olson and zeckhauser 1966 on the economic theory of alliances in particular nato provides the theoretical background for this paper after restating their results on alliance allocation behavior in a formal framework we show that these results may fail in a context with decentralized production of the public defense commodity finally we introduce a simple mechanism which allows the implementation of an efficient allocation characterized by proportional burden sharing and cost monotonicity these results can also be applied to other public goods problems

complementarity free riding and the military expenditures of nato allies abstract this paper examines the major influences of an ally s demand for military expenditures demand equations are estimated for a sample of nato nations using the iterative seemingly unrelated regressions technique evidence is presented indicating that structural changes occured in these equations in the early 1970s this instability is the predicted effect of the doctrine of flexible response adopted by nato during this time period the statistical tests show that the medium sized nuclear powers military expenditures responded identically to income and defense spillins the same held true for the lowland allies

external threat and collective action i introduction individuals with common interests usually attempt to further their welfare by acting collectively examples of collective action include the provision of a public good or collective good the establishment of clubs and the formation of alliances or political parties in his seminal work the logic of collective action olson 1965 uses the provision of collective goods as an example to discuss collective action problem or coordination failure in particular he analyzes how group size and the distribution of individual benefits of a collective good may affect the provision level of the good two of the most celebrated propositions from his book are the suboptimality proposition the larger the group the farther it will fall short of providing an optimal amount of a collective good p 35 and the exploitation proposition there is a systematic tendency for exploitation of the great by the small p 29 these propositions have generated a broad research effort in collective action problems in economics and political science many scholars have examined the validity of these propositions 1 a limitation of olson s theory is that he analyzed collective action problems as phenomena within a single group while assuming that external threat to a group either does not exist or is treated as a constant in many cases however two or more groups compete against each other in these situations a group s provision of collective goods might be affected by the configurations of its own group and the competing groups and relative strength of the groups to illustrate assume that two alliances of states say a and b are competing for supremacy an increase in a s military spending poses a greater threat to b s security in response to the heightened threat members of b might feel the need to increase their military spending which in turn could affect the military spending decisions of members of a bruce 1990 develops a model that endogenizes external threat in a three country model with two allies and one adversary interest group lobbying is another example to understand a group s lobbying behavior scholars often focus on the number and size of firms within the group and their geographical distribution however the configuration of a competing interest group and the two groups relative strengths should also figure into an individual firm s decision concerning the appropriate contribution to its group s lobbying efforts other examples include party discipline voter turnout ledyard 1981 1984 palfrey and rosenthal 1983 electoral coalitional politics tsebelis 1990 hausken 1995a b negative campaigning in primary elections newman and niou 2000 factional rivalry in civil wars and joint ventures for research and development in industrial organizations all these examples point to the importance of external threat in explaining the logic of collective action in this article to study simultaneously the way intergroup competition and intragroup collective action interact we develop a collective good model that endogenizes external threat in the context of competition between two groups a group can be either defensive or offensive in nature we define a group as defensive if its fighting capacity can be used only to defend its own resources a group is offensive if its fighting capacity can be used to expropriate resources from its rivals as well as protect its own resources we realize that empirically it is difficult to determine whether a group is offensive or defensive but theoretically it is useful to know how the offensive or defensive nature of a group can affect the collective action problem we analyze collective action problems when 1 one of the groups is offensive whereas the other is defensive and 2 both groups are offensive respectively also in group competition if conquests are economically profitable the way spoils of victory are divided among group members can also affect collective action

consistent conjectures and voluntary contributions to public goods why the conventional theory does not work abstract the conventional theory of voluntary contributions to public goods assumes that each person maximises his utility taking other people s behaviour as given nash conjectures it is now coming to be recognised that this theory is inconsistent with observed behaviour this paper argues that the problems of the theory are compounded and not as some economists have argued resolved by relaxing the assumption of nash conjectures if individuals conjectures are consistent each person will hold the correct belief that other people s contributions are inversely related to his own under most reasonable assumptions equilibrium is a state in which no one contributes anything

effects of an anticipated expansion in international public goods on public capital accumulation abstract this paper presents a generic model to include public capital accumulation and the services of international public goods provided by a neighbor country it examines the long run and short run responses of private and public capital accumulation in the home country to an anticipated increase in international public goods it is found that the home economy in effect cuts its public capital stock but keeps an unchanged private capital stock in the long run when a neighbor commits itself to expanding the stock of public goods in the future the key factor determining the short run responses of the home country is the extent to which it will match its government spending with a neighbor country s policy which is associated with the relative difference between the marginal utility of consumption and that of home public capital affected by an increase in international public goods

putting foxes in charge of the hen house the political economy of harvest quota regulations this paper considers a dynamic common agency model of natural resource harvest quota regulation in which both conservationists and harvesters vie to influence the regulator s quota allocations as well as the choice of regulator conservationists tend to benefit from the adoption of regulation since the regulator will reduce the aggregate harvest quota relative to the unregulated equilibrium harvesters however only support the adoption of regulation if the regulator places sufficient weight on their welfare because harvester s support of regulation is conditional while conservationist s support of regulation is unconditional harvester s interests tend to be over represented in the truthful markov perfect equilibrium

inefficient equilibria in lobbying lobbying is often represented as a common agency game common agency games typically have multiple equilibria one class of equilibria called truthful has been identified by bernheim and whinston quarterly journal of economics 1986 101 1 1 31 in this paper we identify another class of equilibria which we call natural in which each principal offers a positive contribution on at most one alternative we run an experiment on a common agency game for which the two equilibria predict a different equilibrium alternative the alternative predicted by the natural equilibrium is chosen in 65 of the matches while the one predicted by the truthful equilibrium is chosen in less than 5 of the matches 2001 elsevier science b v all rights reserved

unions rent creators or extractors this paper proposes a model of workplace specific unions that integrates two views of what unions do one view holds that unions mainly engage in rent extraction another view holds that unions mainly engage in rent creation by providing agency services that increase workplace productivity we demonstrate that the choice between the two activities is systematically related to the economic and regulatory environment in which the union operates product market competition encourages rent creation while labor market deregulation encourages rent extraction moreover we provide a rationale for why firms may want to subsidize unions the editors of the scandinavian journal of economics 2005

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

exploration information and aec regulation of the domestic uranium industry abstract for roughly twenty years following the second world war the atomic energy commission was the only purchaser of domestically produced uranium such monopsony power implicitly allowed the atomic energy commission s to regulate the u s uranium industry this paper investigates the atomic energy commission s implicit regulation asking if an efficient allocation of resources was induced the main finding is that undesirably high levels of exploration were induced

alternative collective goods models of military alliances theory and empirics i introduction in a seminal article mancur olson and richard zeckhauser 1966 characterized the north atlantic treaty organization nato in the mid 1960s as a group of allies who shared a pure public good in the form of deterrence to qualify as a pure public good a good s benefits must be nonexcludable i e available to all group members once provided and nonrival in consumption i e consumption opportunities associated with a unit of the good do not decline with the number of users pure public goods are characterized by free riding behavior owing to non excludability which permits individuals to partake in the benefits of the good without expending their own scarce resources olson and zeckhauser also demonstrated that a pure public good such as deterrence is associated with an exploitation hypothesis whereby the large agents allies shoulder the payment burdens of the small agents allies using data from 1964 olson and zeckhauser 1966 274 77 established that defense burdens are positively correlated with the economic size of the allies as measured by gross national product gnp over the next twenty five years a large literature has generalized and extended the olson and zeckhauser collective goods theory of alliances van ypersele de strihou 1967 recognized that defense expenditures could generate country specific private benefits e g disaster relief protection of colonies management of domestic unrest along with purely public deterrence with the presence of ally specific benefits the strength of the exploitation hypothesis is attenuated since a small ally might willingly shoulder a relatively large burden provided that this ally views its defense expenditures as possessing a large share of nation specific benefits in a series of articles murdoch sandler and others 1 formulated a joint product model in which the military activity of an ally yields pure public impure public and or private jointly produced outputs or benefits if the benefits derived from the allies military expenditures were from a single purely public good then the joint product model would obviously degenerate to the model of olson and zeckhauser 1966 murdoch and sandler 1984 sandler and forbes 1980 and sandler and murdoch 1990 have shown that the joint product model outperforms the pure public good deterrence model for nato during various time periods in recent years a number of important contributions to the collective good analysis of alliances have appeared these include the inclusion of foreign trade considerations wong 1991 marginal cost differentials among allies mcguire 1990 weber and wiesmeth 1991 leader follower behavior bruce 1990 and median voter considerations dudley and montmarquette 1981 murdoch sandler and hansen 1991 and okamura 1991 mcguire and groth 1985 engineered an econometric procedure for distinguishing between allocative processes e g non cooperative and cooperative within an alliance while subsequent work by sandler and murdoch 1990 operationalized this econometric procedure until now collective good models of alliances have computed alliancewide defense levels by simply summing the allies expenditures however the appropriate manner for aggregating defense efforts among allies may depend on geographical strategic and technological determinants for example the defense efforts of the weakest ally or link along a front may determine the strength of the allies defenses since the enemy s ability to penetrate behind the front hinges on the weakest fortification hirshleifer 1983 in consequence the minimal defense level of the allies and not the sum determines alliance capabilities the purpose of this paper is fivefold first we intend to look at different methods of aggregating allies military expenditures to determine alliancewide defense levels three procedures summation weakest link and best shot are examined

a brave new world kantian nashian interaction and the dynamics of global climate change mitigation abstract we model game theoretic situations in which agents motivated by kantian ethics interact with conventional nashian agents we define the concept of generalized kant nash equilibrium which encompasses the nash equilibrium the kantian equilibrium and the kant nash equilibrium as special cases we show the existence and uniqueness of a kant nash equilibrium in a static game of climate change mitigation and derive its properties in a dynamic setting we analyze a differential game of climate change mitigation in the presence of both types of agents and compare their markov emission strategies for both the static model and the dynamic model as the population share of kantians increases the quality of the environment improves and both types of agents are better off

strategic interaction among governments in the provision of a global public good abstract how do governments respond to other governments when providing a global public good using data from 2007 to 2014 on medical research funding for infectious and parasitic diseases we examine how governments and foundations in 41 countries respond to funding changes by the us government which accounts for half of funding for these diseases because funding across governments might be positively correlated due to unobserved drivers they have in common we use variation in the representation of research intensive universities on us congressional appropriations committees as an instrument for us funding we find that a 10 increase in us government funding for a disease is associated with a 2 to 3 reduction in funding for that disease by another government in the following year

multi area energy and reserve dispatch under wind uncertainty and equipment failures the cross border trading among electricity markets in an interconnected multi area system e g in central europe and the integration of renewable resources e g wind energy have remarkably increased in recent years to efficiently operate such system a proper coordination among different areas is required within this context a decentralized algorithm for market clearing is proposed in this paper to dispatch simultaneously energy and reserve under wind generation uncertainty and equipment failures the proposed technique does not require a central operator but just a moderate interchange of information among neighboring areas additionally the benefit of cross border trading is studied

tax competition and tax coordination in a median voter model this paper analyzes the welfare effects of capital tax coordination in a simple model of fiscal competition where fiscal policy is subject to majority voting and households differ with respect to their labor and capital income it turns out that a coordinated capital tax increase may raise or reduce welfare depending on the relative magnitude of i economic distortions induced by a labor tax and ii political distortions resulting from the influence of the median voter on fiscal policy decisions a negative welfare effect is more likely the smaller the marginal excess burden of the labor tax and the smaller the ratio of the median voter s labor income to average labor income we also use empirical estimates of the marginal excess burden of taxation to determine the welfare effects of tax coordination it turns out that a negative welfare effect of coordinated tax increases may emerge in our model for empirically reasonable parameters

energy and reserve pricing in security and network constrained electricity markets this paper analyzes some unresolved pricing issues in security constrained electricity markets subject to transmission flow limits although the notion of separate reserve types as proposed by ferc can be precisely and unambiguously defined when transmission constraints are active the very existence of separate reserve prices and markets is open to question when the prices are based on marginal costs instead we submit here that the only products whose marginal costs can be separately and uniquely defined and calculated are those of energy and security at each node thus under marginal pricing at any given network bus all scheduled reserve types should be priced not at separate rates but at a common rate equal to the marginal cost of security at that bus furthermore we argue that nodal or area reserves cannot be prespecified but must be obtained as by products of the market clearing process simulations back up these conclusions

the political economy of scandinavian neutrality the article examines whether three of the neutral nations of eu rope sweden switzerland and finland have adhered to their choice of armed neu trality by being self reliant on their own defenses using a joint product model the authors specify a reduced form equation for a nation s demand for military expenditures empirical estimates of these demands suggest that sweden free rod e on nato after institution of the doctrine of flexible response however the o thertwo netural nations have been self reliant throughout the period 1957 82 w ith pooled data cross equation restrictions highlight theessential differences between nato and nonaligned scandinavian countries copyright 1986 by the editors of the scandinavian journal of economics

donor funding of multilateral aid agencies determining factors and revealed burden sharing the paper reports an empirical study of the factors affecting burden sharing among oecd s 22 dac members in bankrolling the multilateral aid agencies these are the un agencies world bank s ida and non ida programmes regional development banks european community and other multilateral agencies that include the global environmental facility and the montreal protocol on environment annual data over 1970 2000 pooled across the donor countries form the basis for the empirical estimation of each donor s share in the oda aid receipts for each multilateral agency our findings suggest the existence of reverse exploitation i e the financial burden of the agencies is disproportionally carried by the smaller donors the study also finds that

inequality lobbying and resource allocation this paper describes how wealth inequality may distort public resource allocation a government seeks to allocate limited resources to productive sectors but sectoral productivity is privately known by agents with vested interests in those sectors they lobby the government for preferential treatment the government even if it honestly seeks to maximize economic efficiency may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies broadly speaking both poorer economies and unequal economies display greater public misallocation the paper warns against the conventional wisdom that this is so because such governments are more corrupt jel d72 d78 d82 016 in this paper we propose a particular channel through which wealth inequality distorts the resource allocation process our analysis rests on four premises

collective action in an asymmetric world abstract a central authority possessing tax and expenditure responsibilities can readily provide an efficient level of a public good absent a central authority voluntary arrangements must replace coercive ones and significant under provision must be expected international public goods are particularly challenging due to the substantial asymmetries among nations small interest nations have strong incentives to ride cheaply our empirical results reveal cheap riding intentions in providing for climate change mitigation a critical international public good the evidence is provided by individual nations intended nationally determined contributions voluntarily pledged for the paris climate change conference we find that larger nations made much larger pledges in proportion to both their gross national incomes and their historical emissions implications for the nordhaus climate club and carbon tax proposals are discussed to achieve pareto optimality despite disparate cheap riding incentives we propose the cheap riding efficient equilibrium that solution takes the nash equilibrium as a base point and then applies the principles of either the nash bargaining solution or the lindahl equilibrium to proceed to the pareto frontier

a dynamic conjectural variations model in the private provision of public goods a differential game approach abstract the purpose of this paper is to provide a reasonable microfoundation to justify the concept of a conjectural variations equilibrium which is often used in the literature on private provision of public goods with the help of the differential game by interpreting the steady state conjectures in a dynamic contribution game as the conjectural variations in the corresponding static game we derive explicit forms of nash or non zero conjectural variations depending on the choice of the strategy spaces furthermore we find that there may be uncountable many conjectural variations and the possibility of matching behavior i e positive conjectural variations when non linear markov perfect strategies are used and when the domain of a state variable is appropriately restricted

successful leadership in global public good provision incorporating behavioural approaches in the standard model of voluntary public good provision and other game theoretic models climate friendly leadership of a country is not successful a unilateral increase of this country s greenhouse gas abatement measures i e contributions to the global public good of climate protection will not lead to a positive reaction by the other countries but instead trigger a reduction of their abatement efforts and thus a crowding out effect in this paper it is shown how this undesired consequence need no longer occur when elements of behavioral economics are incorporated in the otherwise standard model of public good provision in particular strategic complementarities between the public good contribution of the leading country and those of the follower may result either if the follower has specific non egoistic or other regarding preferences or if the leader s contribution positively affects the follower s beliefs i e his conjectural variations about the leader s behaviour

the demand for military expenditures an international comparison earlier studies have explained inter country variations in the share of gnp devoted to military expenditures by international spillovers and by differences in the threat of attack related to relative incomes in this paper we use the theory of public choice to explain these differences we attempt to measure the importance of both international spillovers and relative incomes along with two other factors the tax price elasticity of demand and economies of scale in the consumption of security we find that international spillovers are significant and positive that the income elasticity of demand is greater than unity that the tax price elasticity of demand explains part of observed inter country differences and that there are considerable economies of scale in the consumption of military spending finally between 1960 and 1975 there was apparently a substantial increase in the value which each country derived from a dollar of military spending by its allies this phenomenon which seems related to the increased importance of deterrent weapons has tended to induce individual alliance members to reduce the share of their national income devoted to defense

determinants of the increase in the number of interest groups in western democracies theoretical considerations and evidence from 21 oecd countries mancur olson s theory of institutionalsclerosis is based on the notion that thenumber of interest groups within a countryincreases with the duration of itspolitical stability the following paperargues that the increase in the number ofinterest groups over time could also be aconcomitant of economic development theoretically both explanations provetenable an empirical cross sectionalregression analysis using data from 21oecd countries finds no evidence for asignificant impact of the duration ofpolitical stability on the number ofinterest groups a significantly positiveeffect is however reported for the degreeof economic development

the third leg of the kantian tripod for peace international organizations and militarized disputes 1950 85 immanuel kant believed that democracy economic interdependence and international law and organizations could establish the foundations for perpetual peace our analyses of politically relevant dyads show that each of the three elements of the kantian peace makes a statistically significant independent contribution to peaceful interstate relations these benefits are evident even when the influence of other theoretically interesting factors such as relative power alliances geographic contiguity and economic growth is held constant increasing the number of shared memberships in intergovernmental organizations igos by one standard deviation reduces the incidence of militarized disputes by about 23 percent from the baseline rate for a typical pair of bordering states if both members of a dyad are democratic conflict is 35 percent less likely than the baseline increasing both the dyadic trade gdp ratio and the trend in trade by a standard deviation reduces the chance of conflict by 38 percent together all the kantian variables lower the probability of a dispute by 72 percent we check for reverse causation and find reason to believe that a feedback system is at work with igos reducing conflict and low conflict dyads joining igos democracies and interdependent states are more likely to join igos with one another bringing together the three elements of a system for kantian peace

endogenous conjectural variations in oligopoly abstract conventional oligopoly theories provide no mechanism for oligopolists to learn from their experience of other firms behavior in forming conjectural variations this paper explores two approaches to the solution of this problem in the first the consistent conjectures approach oligopolists passively react to changes in other firms outputs so as to keep their own profits at a maximum other firms correctly anticipate these reactions in the second approach the matching behavior approach firms actively choose reactions which will induce other firms to reduce their outputs again these reactions are correctly anticipated by the other firms the implications of these alternative models are derived and contrasted with the implications of the cournot and joint profit maximization models

instrument choice in a fishery abstract this paper considers the choice of regulatory instruments in a fishery fishing captains consumers and input suppliers each attempt to influence the regulator s choice of instruments the regulator chooses among instruments such as input restrictions entry restrictions or individual transferable quotas itqs regulatory instruments that result in zero fishery rents can only occur if the regulator places an extraordinary weight on the welfare of input suppliers relative to fishing captains and consumers indeed heterogeneity of fishing captains is neither necessary nor sufficient to obtain regulations that fail to generate fishery rents

the theory of collective action and burden sharing in nato mancur olson s theory of collective action could account for much of the variance in the defense burdens of the allied nations of the north atlantic treaty organization nato in the early years of the cold war but the association between economic size gross domestic product or gdp and defense burden the ratio of military expenditures to gdp has declined to insignificant levels two influences are shown to be important in producing this change the increased pursuit of private goods by greece turkey and portugal and the growing cooperation among the other european allies since cooperation in the military realm has not provided the europeans with credible means of self defense it appears to be a consequence of the general growth of interdependence in europe during the postwar period nato is still essentially a uniquely privileged group producing a relatively pure public good accordingly the theory of collective action continues to provide valuable insights into the operation of the alliance

pricing energy and reserves using stochastic optimization in an alternative electricity market this paper presents a stochastic linear programming model that can be used for pricing in electrical energy and reserve markets it addresses capacity energy and reserve dispatch problems that may arise from n 1 contingency scenarios possible market solutions focusing on generator compensation using real time day ahead and hybrid schemes are enumerated along with opportunities for consumer pricing and transmission costing this model is illustrated on a 6 bus test system as well as a larger 66 bus system representing the ontario network a key difference among schemes is the degree of risk to the generators measured by variance in profit

assessment of the cost associated with wind generation prediction errors in a liberalized electricity market in this paper a probabilistic methodology for estimating the energy costs in the market for wind generators associated with wind prediction errors is proposed generators must buy or sell energy production deviations due to prediction errors when they bid in day ahead or hour ahead energy markets the prediction error is modeled through a probability density function that represents the accuracy of the prediction model production hourly energy deviations and their associated trading costs are then calculated three study cases based on real wind power installations in spain are analyzed the three study cases show that the error prediction costs can reach as much as 10 of the total generator energy incomes

burden sharing in the nato alliance an empirical test of alternative views this paper undertakes an empirical test of two opposing views of interdependencies among members of military alliances the first view associated with olson and zeckhauser argues that the public good aspect of defense induces free riding behavior by smaller alliance members which imposes a disproportionate burden of supporting the alliance on the larger members a second view argues that nato defense activities produce a mix of outputs some of which are not purely public and some of which may be complementary across nations furthermore the nature of the weapons systems and their relative use by alliance members may induce substantial cooperation by allies the test proposed here analyzes the relationship between defense spending shares of nato members and their population and relative wealth shares a simple model is specified and tested using pooled time series cross sectional data the empirical results indicate more support for the cooperative view of ally relationships than the olson zeckhauser non cooperative model

moral behaviour altruism and environmental policy free riding is often associated with self interested behaviour however if there is a global pollutant free riding will arise if individuals calculate that their emissions are negligible relative to the total so total emissions and hence any damage that they and others suffer will be unaffected by whatever consumption choice they make in this context consumer behaviour and the optimal environmental tax are independent of the degree of altruism for behaviour to change individuals need to make their decisions in a different way we propose a new theory of moral behaviour whereby individuals recognise that they will be worse off by not acting in their own self interest and balance this cost off against the hypothetical moral value of adopting a kantian form of behaviour that is by calculating the consequences of their action by asking what would happen if everyone else acted in the same way as they did we show that a if individuals behave this way then altruism matters and the greater the degree of altruism the more individuals cut back their consumption of a dirty good b nevertheless the optimal environmental tax is exactly the same as that emerging from classical analysis where individuals act in self interested fashion

economic valuation of reserves in power systems with high penetration of wind power this paper proposes a methodology to determine the required level of spinning and nonspinning reserves in a power system with a high penetration of wind power the computation of the required reserve levels and their costs is achieved through a stochastic programming market clearing model spanning a daily time horizon this model considers the network constraints and takes into account the cost of both the load shedding and the wind spillage the methodology proposed is illustrated using an example and a realistic case study some conclusions are finally drawn

pool strategy of a price maker wind power producer we consider the problem of a wind power producer trading energy in short term electricity markets the producer is a price taker in the day ahead market but a price maker in the balancing market and aims at optimizing its expected revenues from these market floors the problem is formulated as a mathematical program with equilibrium constraints mpec and cast as a mixed integer linear program milp which can be solved employing off the shelf optimization software the optimal bid is shown to deliver significantly improved performance compared to traditional bids such as the conditional mean or median forecast of wind power distribution finally sensitivity analyses are carried out to assess the impact on the offering strategy of the producer s penetration in the market of the correlation between wind power production and residual system deviation and of the shape of the forecast distribution of wind power production

conflict and cooperation the structure of equilibrium payoffs in common agency abstract this paper is a contribution to the theory of common agency initiated by b d bernheim and m d whinston 1986 quart j econ 101 1 31 by common agency we mean the following an agent decides upon an action which affects its well being as well as the well being of n other individuals the principals each of whom offers a menu of payments contingent on the action chosen under complete information bernheim and whinston prove the existence of an interesting subset of nash equilibria they call truthful provide arguments in defense of this refinement and characterize the set of equilibrium payoffs this paper provides a set of theoretical results to identify the structure of equilibrium payoffs with special attention to the payoff of the agent by focusing on complete information we are in a position to evaluate the effects of competition per se on the magnitude of the rent obtained by the agent we illustrate this user guide on a wide and diverse family of applications including auctions competition for an input economic influence and private production of public goods journal of economic literature classification numbers c72 d72

international regimes and alliance behavior explaining nato conventional force levels with the end of the cold war the military posture of the north atlantic treaty organization nato has entered a period of profound change prior to the recent dramatic political events in europe however nato conventional force levels in the central region had been remarkably stable for some three decades this article seeks to explain this record of stability in terms of three widely used theories of international relations it argues that balance of power theory and public goods theory cannot alone provide a satisfactory account rather these traditional approaches for understanding alliance behavior must be supplemented by regime theory which emphasizes the constraining effects of enduring institutional factors even in the face of structural change specifically it shows how an international regime has influenced the provision of conventional forces in the central region by alliance members more generally this analysis seeks to contribute to the literature on international regimes in three ways first it demonstrates that regimes do matter by providing an example of their importance for explaining state behavior and international outcomes second it extends regime theory to relations among military allies third it elaborates a comprehensive model for understanding why states actually comply with regime injunctions the model stresses both the ways in which regimes effectively modify the international environment within which states operate altering the costs and benefits associated with different courses of action and the ways in which participating states may internalize regime norms and rules thereby making compliance increasingly automatic

a game theoretical pricing mechanism for multi area spinning reserve trading considering wind power uncertainty the rapid development of wind power has led to an increased demand for spinning reserve in power systems today however one of the most severe challenges to china s power systems is the mismatch between wind power installation capacity and the capability for supplying spinning reserve within each independently operated provincial power system coordinating the spinning reserve across multiple areas would providentially improve the accommodation of wind power this paper proposes a game theoretical model for spinning reserve trading between provincial systems that treat spinning reserve as a commodity based on the incomplete information the trading price is calculated by satisfying the bayesian nash equilibrium and then the trading quantity is determined this ensures that both the buyer and the seller are able to maximize their expected profit case studies are performed using a 2 bus interconnected system and a 3 area ieee rts system the results show that the proposed model is valid and effective

lobbying under political uncertainty abstract this paper considers a model of lobbying described as a common agency game it departs from the current literature by assuming that the special interest groups are not a priori organized or unorganized and that the type of the politician is not common knowledge we characterize equilibria when the choice set of the politician consists of two policies we discuss the conditions leading to efficiency and the characteristics of the groups explaining their relative success in the process of influence we also offer some results for the general case including disjoint necessary and sufficient conditions for the equilibria to be efficient

a stochastic programming model for a day ahead electricity market with real time reserve shortage pricing we present a multi period stochastic mixed integer programming model for power generation scheduling in a day ahead electricity market the model considers various scenarios and integrates the idea of reserve shortage pricing in real time instead of including all the possible scenarios we parsimoniously select a certain number of scenarios to limit the size of the model as realistic size models are still intractable for exact methods we propose a heuristic solution methodology based on scenario rolling that is capable of finding good quality feasible solutions within reasonable computation time

donations to a public good in a large economy abstract the characteristics of private provision of public goods in a large economy are investigated when agents undertake an activity which has an adverse effect on the quantity of the public good itself in contrast to a model in which provision is by donations alone a substantial proportion of the population can be donors in a large economy nevertheless the model faces certain empirical difficulties

multi area unit scheduling and reserve allocation under wind power uncertainty this paper proposes a decentralized methodology to optimally schedule generating units while simultaneously determining the geographical allocation of the required reserve we consider an interconnected multi area power system with cross border trading in the presence of wind power uncertainty the multi area market clearing model is represented as a two stage stochastic programming model the proposed decentralized procedure relies on an augmented lagrangian algorithm that requires no central operator intervention but just moderate interchanges of information among neighboring regions the methodology proposed is illustrated using an example and a realistic case study

negative conjectures and increased public good provision abstract a stochastic non nash model with negative conjectures is developed which yields a condition in which an individual increases voluntary public good provision relative to the nash solution

campaign finance regulation with competing interest groups abstract regulatory caps on contributions to political campaigns are the cornerstones of campaign finance legislation in many established democracies and their introduction is considered by most emerging ones are these regulations desirable this paper studies contribution caps in a menu auction lobbying model with limited budgets and costly entry in the absence of entry contribution caps improve welfare by leveling the political playing field with entry however a competition effect and a bargaining effect may arise resulting in inefficient entry and exit decisions in particular a cap may lead to worse policies than the status quo and even if better policies are chosen the resulting gain in welfare may be more than offset by the entry costs regulation can also lead to the simultaneous entry of competing groups creating costly rent seeking on issues previously unaffected by lobbying

an econometric technique for comparing median voter and oligarchy choice models of collective action the case of the nato alliance this paper devises an empirical methodology for discriminating between the median voter model and the oligarchy choice model when applied to the collective provision of a public good in particular an empirical methodology is engineered so that a nested test procedure can evaluate competing models the authors apply this methodology to examine the demand for military activities of ten members of the nato alliance a two stage least squares procedure corrected for autocorrelation is used to estimate the demand equations test results vary some allies abide by the median voter model others by the oligarchy model and still others by neither copyright 1991 by mit press

an endogenous policy model of hierarchical government endogenous policy models usually neglect that government policies are frequently the result of decisions taken at different tiers by different agents each enjoying some degree of autonomy in this paper policies are the outcome of the choices made by two agents within a hierarchy a legislator decides on the budget to be successively spent by a bureaucrat both agents are lobbied by one or two interest groups the combination of sequential decisionmaking and lobbying implies that the interaction between the agent at one tier and the interest group s depends on the exchange between the same interest group s and the agent at the other tier our results concerning multi tier lobbying and legislatorial oversight substantially qualify the conventional wisdom related to one tier lobbying in particular the reaction of the legislator to lobbying at the bureaucratic tier may make lobbying wasteful even when there is no competition from other lobbies moreover the legislator benefits from lobbying only when there is competition between interest groups at the upper tier it is also shown that competition for influence at the bureaucratic tier may work as a perfect substitute for legislatorial oversight extensions of the model indicate its usefulness for the analysis of decisionmaking in other multilevel governance structures like federations or firms

voluntary provision of a public good and individual morality abstract we examine both in general games in strategic form and in games of voluntary provision of a public good some implications of the assumption that individuals may obey ethical codes of conduct the notion of morality considered captures the intuition often attributed to kant that a moral action leads to the best outcome when it is properly universalized we propose a formalization of this idea which generalizes earlier attempts made in this direction in the literature by allowing the players to differ both in their strategy sets and their preferences we show that it is easy to find examples of games in which no moral behavior of this type exists or where the only existing kantian code of conduct leads to a pareto inefficient outcome we then more specifically examine the issues of existence and pareto efficiency of kantian norms of behavior in games of voluntary provision of a public good we find in this context that there is no conflict between morality and pareto efficiency since any kantian norm of behavior is pareto efficient we also prove the existence of a kantian norm of individual contribution

lobbying for minimum wages using a common agency lobbying framework this paper illustrates how the minimum wage set reflects the interaction between economic and political factors and under what circumstances will the policymaker be induced through lobbying to change the minimum wage specifically when the labor demand elasticity is large lobbying is successful in inducing the policymaker to set the minimum wage in accordance with her political ideology however the paper also shows the conditions under which lobbying will reverse the ideological preference and induce a business friendly government to increase the minimum wage empirical analysis on a panel data for ten canadian provinces gives considerable support for theoretical predictions the real minimum wage decreases in skill adjusted union density and political ideology while larger labor demand elasticity reinforces the influence of political ideology in the presence of lobbying jel j38 d72 d78

international public goods and contribution productivity differentials abstract this paper investigates the impacts of productivity differentials in contributing to the public good on national welfare in the context of non cooperative voluntary provision of a pure public good a country with high productivity does not necessarily enjoy high welfare subsidizing the other country in a contribution game may lead to a strong paradoxical result while a lump sum transfer will lead to a weak paradoxical result we also explore the relationship between the price of the public good and the size of an open club in a multi club model

employment effects of product and labour market reforms are there synergies this article investigates the effect of product market liberalisation on employment allowing for interactions between policies and institutions in product and labour markets using panel data for oecd countries over the period 1980 2002 we present evidence that product market deregulation is more effective at the margin when labour market regulation is high the data also suggest that product market liberalisation may promote employment enhancing labour market reforms

financing of public goods and noncooperative theory of bargaining abstract this paper deals with an application of the noncooperative theory of bargaining to the financing of public goods we characterize the equilibrium of the bargaining game and perform comparative statics with respect to the model parameters in particular our results indicate that i if agreement from both parties is necessary to provide a public good the poorer party may make a negative contribution to the provision of a public good and ii if each party is free to provide the public good without the assent of the other party outside option principle then only non negative contributions are possible

the political economy of the peace dividend we develop a model of the peace dividend and use it to predict the fiscal consequences of a reduction in the demand for military spending the model is based on the assumption that the political process responds to political demands and costs in a way that maximizes net political benefits the predictions of our model on how a peace dividend will be allocated over nonmilitary spending tax relief and deficit reduction is tested against the experience of eight major wars in united states history

damned if you do and damned if you don t two masters abstract we study common agency problems in which two principals groups make costly commitments to incentives that are conditioned on imperfect signals of the agent s action our framework allows for incentives to be either rewards or punishments for our basic model we obtain a unique equilibrium which typically involves randomization by both principals greater similarity between principals leads to more aggressive competition the principals weakly prefer punishment to rewards sometimes strictly with rewards an agent voluntarily joins both groups with punishment it depends on whether severe punishments are feasible and cheap for the principals we study whether introducing an attractive compromise reduces competition between principals our framework of imperfect monitoring offers a natural perturbation of the standard common agency model of menu auctions which results in sharper equilibrium predictions the limit equilibrium prediction provides support to both truthful equilibria and the competing notion of natural equilibria which unlike the former may be inefficient

giving overseas and public policy remarkable numbers of people give to overseas development charities the aim of this paper is to consider how such overseas giving is best modelled and the implications for public policy widely used theories of charitable giving based on warm glow or the provision of public goods provide insight but are not fully satisfactory as explanations of giving for the specific purpose of development instead an identification approach to individual giving is proposed here that combines the results focus of the public goods formulation with the scale of the warm glow model the theoretical model is used to examine the implications for public policy including the extent to which official aid crowds out private giving and how public policy should take account of private willingness to make charitable transfers overseas