using loopholes to reveal the marginal cost of regulation the case of fuel economy standards estimating the cost of regulation is difficult firms sometimes reveal costs indirectly however when they exploit loopholes to avoid regulation we apply this insight to fuel economy standards for automobiles these standards feature a loophole that gives automakers a bonus when they equip a vehicle with flexible fuel capacity profitmaximizing automakers will equate the marginal cost of compliance using the loophole which is observable with the unobservable costs of strategies that genuinely improve fuel economy based on this insight we estimate that tightening standards by one mile per gallon would have cost automakers just 9 27 per vehicle in recent years jel l51 l62 q48

vehicle scrappage and gasoline policy abstract we estimate the sensitivity of scrap decisions to changes in used car values and show how this scrap elasticity produces emissions leakage under fuel efficiency standards a process known as the gruenspecht effect we first estimate the effect of gasoline prices on used vehicle values and scrappage of vehicles with different fuel economies we then estimate the scrap elasticity itself which we find to be 0 7 when applied in a model of fuel economy standards 13 16 percent of the expected fuel savings leak away through the used vehicle market this effect rivals or exceeds the importance of the often cited mileage rebound effect jel h23 l62 l78 q35 q38 q48 q58

nonparametric measures of scale economies and capacity utilization an application to u s manufacturing abstract an economic measure of scale efficiency is the ratio of the minimum average cost to the average cost at the actual output level of a firm it is easily measured by the ratio of the total cost of this output under the constant and variable returns to scale assumptions this procedure does not identify the output level where the average cost reaches a minimum this paper proposes a nonparametric method of measuring this output level using dea the relation between this efficient production scale the short run physical capacity output and the most productive scale size mpss is also discussed an empirical application using state level data from u s manufacturing is used to illustrate the procedure the dea findings are further analyzed using a smoothed bootstrap procedure

primal and dual capacity utilization an application to productivity measurement in the u s automobile industry capacity utilization measures have traditionally been constructed as indexes of actual as compared to potential output this potential or capacity output y can be represented within an economic model of the firm as the tangency between the short and long run average cost curves economic theoretical measures of capacity utilization cu can then be characterized as y y where y is the realized level of output these quantity or primal cu measures allow for economic interpretation they provide explicit inference as to how changes in exogenous variables affect cu additional information for analyzing deviations from capacity production can be obtained by assessing the dual cost of the gap in this article the definitions and representations of primal output and dual cost cu measures are formalized within a dynamic model of a monopolistic firm as an illustration of this approach to characterizing cu measures a model is estimated for the u s automobile industry 1959 1980 and primal and dual cu

ranking trade resistance variables using data envelopment analysis abstract in the context of justus von liebig s law of the minimum this study assesses the impacts that trade barriers have on trade resistance between united states u s manufacturing industries and their trade partners an undesirable trade resistance model is presented where trade barriers are undesirable inputs into the production of the undesirable output trade resistance it is then presented how johansen s notion of capacity is utilized to assess trade barriers impacts estimation takes place by employing data envelopment analysis dea results suggest that u s trade partners port logistics are the most limiting trade barrier for the u s manufacturing industries followed by the distance between the u s and its trade partners the tariff imposed by the u s and the tariff imposed by the trading partner

measuring and assessing capacity utilization in the manufacturing sectors of nine oecd countries following a tradition established by cassels klein and hickman we employ the economic theory of cost and production and define economic capacity output as that output at which short and long run average total cost curves are tangent to one another capacity utilization cu rates are then computed as the ratio of actual to capacity output we implement this framework empirically by specifying and estimating a translog variable cost function for the manufacturing sectors of nine oecd countries we find that by the end of the historical sample the early 1980s pervasive and chronic excess capacity exists while the average cost consequence of excess capacity was relatively modest in the 1960s the burden increased considerably after opec i and after opec ii the premium was as large as 15 of average total costs we also find that electricity and fuel price increases had small impacts on capacity output relative to that from labor or capital finally we adjust conventional measures of multifactor productivity growth for changes in cu and find that the adjusted growth is larger after 1973 than that based on traditional procedures

optimal taxation and cross price effects on labor supply estimates of the optimal gas tax abstract this study estimates parameters necessary to calculate the optimal second best gasoline tax most notably the cross price elasticity between gasoline and leisure prior theoretical work indicates the importance of this elasticity but despite this almost none of the prior studies of commodity taxation and none of the studies on second best environmental regulation actually estimate it using household data we find that gasoline is a relative complement to leisure and thus that the optimal gasoline tax is significantly higher than marginal damages the opposite of the result suggested by the bulk of the prior literature indeed even if there were no externalities at all associated with gasoline the optimal tax rate would still be almost equal to the average gas tax rate in the u s following this approach to estimate cross price elasticities with leisure could strongly influence estimates of optimal rates for other important commodity or pollution taxes

degree of scale economies and congestion a unified dea approach abstract there are increasing concerns about how increase in congestion can adversely affect output as well as about the relative benefit cost ratio or return on investment associated with alternative projects or policies to address those problems regardless of what policy strategies are used to address congestion the fact remains that we cannot assess the economic benefits of congestion reduction strategies unless we are able to measure the extent to which congestion affects productivity in general and scale economies in particular this paper makes a novel attempt to suggest a method in a non parametric framework to measure scale elasticity in production in the presence of congestion

long and short run non parametric cost frontier efficiency an application to spanish savings banks the utilisation rate of installed capacity is a popular concept in both the performance appraisal literature and in publications on industrial organisation however a common consensus has yet to be reached concerning the most appropriate way to measure the capacity utilisation of physical inputs and its final effect on company results on the one hand there are approaches that establish capacity utilisation with reference to the maximum level of production that can be achieved in contrast there are other approaches more strictly related to economic analysis of operating costs in this paper our main objective is to define an analytical process that uses non parametric frontier methodology to provide the distance between the total costs of a given unit and the short run frontier costs as a natural extension of this proposal it is possible to compute the short run inefficiency caused by a non optimal dimension of the fixed inputs we define this as capacityefficiency the proposed evaluation process is applied to spanish savings banks covering the period between 1986 and 1995 throughout the period analysed the greater part of cost inefficiency is due to capacity efficiency 2002 elsevier science b v all rights reserved

fuel prices and new vehicle fuel economy comparing the united states and western europe abstract several recent papers have documented an effect of fuel prices on new vehicle fuel economy in the united states this paper estimates the effect of fuel prices on average new vehicle fuel economy for the eight largest european markets the analysis spans the years 2002 2007 and uses detailed vehicle registration and specification data to control for policies consumer preferences and other potentially confounding factors we find fuel prices to have a statistically significant effect on average new vehicle fuel economy in europe the effect estimated for europe is much smaller than comparable estimates for the united states

measuring the rebound effect with micro data a first difference approach abstract we provide estimates of the rebound effect for car transport in denmark using a rich data set with individual household data on car use fuel efficiency and car as well as household characteristics a demand model is estimated in first differences the availability of households in the sample that replaced their car during the period of observation combined with information on their driving behaviour before and after the car switch allows us to identify the rebound effect endogeneity is taken into account by using appropriate instruments results include the following first we reject the conventional formulation in which only fuel cost per kilometre matters second the selection equation confirms that higher fuel prices induce households to switch car third the results suggest the presence of a rebound effect that is on the lower end of the estimates available in the literature specifically our best estimate of the rebound effect is some 7 5 10 fourth the fuel price sensitivity of the demand for kilometres appears to be declining with household income but we do not find a significant impact of income on the rebound effect finally simulation results indicate that the small rebound effect and changes in car characteristics in response to higher fuel prices imply that compared to the reference scenario higher fuel prices lead to a substantial reduction in both the demand for kilometres and in demand for fuel

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

impacts of fuel economy improvements on the distribution of income in the u s abstract we estimate the impacts of passenger car and light truck fuel economy improvements in the u s since 1975 on the real monetary incomes of u s households by income quintile over the period 1980 2014 we limit our analysis to the direct monetary impacts fuel savings minus increased vehicle costs and do not attempt a full welfare analysis we include all vehicle purchases new and used household fuel expenditures come from the u s consumer expenditures surveys ces costs of increased new passenger car and light truck fuel economy were obtained from four national research council nrc studies plus a literature review of earlier estimates the nrc cost functions provide a unique time series of technology supply functions constructed by balanced expert panels and comprised of specific technologies proven to increase fuel economy effects of fuel economy improvements on used vehicle prices are based on an analysis of the ces data retrospective analysis indicates that all income quintiles received net savings and that the effect on the distribution of income was progressive a prospective analysis of future fuel economy improvements produced similar results sensitivity analysis indicates that these findings are relatively robust

on the economic interpretation and measurement of optimal capacity utilization with anticipatory expectations this study builds on recent research giving the notion of capacity utilization clearer economic foundations in this research optimal output ye is defined as the minimum point on the firm s short run average total cost curve and capacity utilization is then computed as cu y y where y is actual output here i extend these concepts to include adjustment costs due to changes in the stock of capital and nonstatic expectations of future output demand and input prices the more general notion of cu is shown to depend on the shadow values of the firm s quasi fixed inputs and is decomposed to isolate the effects of anticipatory expectations an empirical comparison is then made between traditional indices and alternative economic cu measures using annual u s manufacturing data 1954 1980 the calculated indices exhibit plausible patterns which can be interpreted as the effects of nonstatic expectations and adjustment costs

the misuse of net present value in energy efficiency standards abstract consumers are often blamed for not making necessary investments in energy efficient durables despite that these investments have positive net present value npv several papers have argued that when investments have option like characteristics e g irreversibility uncertainty flexible timing and lumpiness the aphorism invest if the net present value of investing exceeds zero isn t the best advice yet curiously the department of energy doe in the united states proposes new regulations mandating higher energy efficiency standards for consumer durables on the basis of non negative npv over an investment s lifetime in this paper we provide a step by step deconstruction of doe s npv methodology and show that doe s method purges volatility volatility persistence and nonstationarity that are otherwise present in energy prices as a result doe s projections of future energy prices are artificially smooth and statistically biased casting serious doubt on the reliability of the magnitude of energy savings from energy efficient durables

assessing energy price induced improvements in efficiency of capital in oecd manufacturing industries to assess how capital stocks adapt to energy price changes it is necessary to account for the impacts on different vintages of capital and to account separately for price induced and autonomous improvements in the energy efficiency of capital stock the results of econometric analysis for five manufacturing industries in 19 oecd countries between 1990 and 2005 indicate that higher energy prices resulted in smaller energy use due to both improved energy efficiency of capital stock and reduced demand for the energy input the investment response to energy prices varied considerably across manufacturing industries being more significant in energy intensive sectors the results of policy simulations indicate that a carbon tax can deliver significant reductions in energy consumption in the medium run with modest declines in energy using capital stock

rate base selection and the structure of regulation this article investigates the role played by rate base valuation rules in the context of rate of return regulation it shows 1 that there is nothing inherently fair about any particular valuation rule 2 that properly interpreted rate bases represent promises of future returns 3 that valuation rules can be fairly selected from a very broad class and 4 that once this is recognized rate of return regulation represents a highly effective and flexible means of avoiding the dynamic consistency problems associated with repeated regulatory reviews in addition the article investigates the nature of optimal rate base valuation rules

capacity utilization measures underlying economic theory and an alternative approach measures of industrial capacity utilization hereafter cu have been used extensively in helping to explain changes in the rate of investment labor productivity and inflation the cu measures have also been used to obtain indices of capital in use as distinct from capital stock in place a number of alternative measures of cu are periodically calculated and published the 1980 economic report of the president for example contains three series that by the federal reserve board the u s department of commerce bureau of economic analysis and the wharton school of finance other publicly available series are those prepared by mcgraw hill publishing company the u s department of commerce bureau of the census and rinfret boston associates inc although a host of cu measures is publicly available it is not at all clear how one should interpret changes over time in each measure or variations among them a principal reason underlying these interpretation problems is that the crucial link between underlying economic theory and the constructed measure of cu is weak one way in which this issue has manifested itself in the policy domain over the last five years has been with respect to the uncertain effects of dramatic increases in energy prices on capacity output and on cu each of the cu measures noted above is computed in such a way that explicitly ignores any role for energy prices yet several times during the last decade though growth to apparently high rates of cu had taken place investment and average labor productivity were much lower than expected and the rate of price increase much greater in brief during the last decade the explanatory power of alternative cu measures has dropped sharply some have conjectured that post opec energy price increases may have brought about major changes in the u s economy so that old quantitative relationships between measured cu and investment labor productivity and price inflation may have been altered substantially in order to assess effects of changes in pe on cu a re examination of the notion and measurement of cu is needed based on the framework of the economic theory of the firm that is the focus of this paper

consumer myopia imperfect competition and the energy efficiency gap evidence from the uk refrigerator market abstract the empirical literature on the energy efficiency gap concentrates on demand inefficiencies in the energy using durables markets and finds evidence that consumers underestimate future energy costs when purchasing a new appliance we take a broader view and also consider the impact of imperfect competition using data on the uk refrigerator market 2002 2007 we find that the average energy consumption of appliances sold during this period was only 7 2 higher than what would have been observed under a scenario with a perfectly competitive market and non myopic consumers one reason for this small gap is that market power actually reduces energy use

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

sticky prices inventories and market power in wholesale gasoline markets a model with costly adjustment of production and costly inventories implies that wholesale gasoline prices will respond with a lag to crude oil cost shocks unlike explanations that rely upon menu costs imperfect information or long term buyer seller relationships this model predicts that futures prices for gasoline will adjust incompletely to crude oil price shocks that occur close to the expiration date of the futures contract we test and confirm this implication examining wholesale price responses in 188 gasoline markets we also find that firms with market power adjust prices more slowly than do competitive firms consistent with the model

what do we learn from the price of crude oil futures summary despite their widespread use as predictors of the spot price of oil oil futures prices tend to be less accurate in the mean squared prediction error sense than no change forecasts this result is driven by the variability of the futures price about the spot price as captured by the oil futures spread this variability can be explained by the marginal convenience yield of oil inventories using a two country multi period general equilibrium model of the spot and futures markets for crude oil we show that increased uncertainty about future oil supply shortfalls under plausible assumptions causes the spread to decline increased uncertainty also causes precautionary demand for oil to increase resulting in an immediate increase in the real spot price thus the negative of the oil futures spread may be viewed as an indicator of fluctuations in the price of crude oil driven by precautionary demand an empirical analysis of this indicator provides evidence of how shifts in the uncertainty about future oil supply shortfalls affect the real spot price of crude oil copyright 2010 john wiley sons ltd

is there an energy paradox in fuel economy a note on the role of consumer heterogeneity and sorting bias abstract from the previous literature it can be found that consumers tend to undervalue discounted future energy costs in their purchase decisions for energy using durables we show that this finding could in part result from ignoring consumer heterogeneity in empirical analyses as opposed to true undervaluation

some inconvenient truths about climate change policy the distributional impacts of transportation policies abstract climate policy has favored costly measures that implicitly or explicitly subsidize lowcarbon fuels we simulate four transportation sector policies cap and trade cat ethanol subsidies a renewable fuel standard rfs and a lowcarbon fuel standard our simulations confirm that alternatives to cat are 2 5 to 4 times more costly but are amenable to adoption due to right skewed distributions of gains we analyze voting on the waxman markey wm cat bill conditional on a district s cat gains a district s rfs gains are negatively correlated with the likelihood of voting for wm our analysis supports campaign contributions as a partial mechanism

gasoline prices and the used automobile market a rational expectations asset price approach this paper examines the impact of changes in gasoline price expectations on the market values of used automobiles an asset model of automobile valuation is used to relate year to year changes in market values to changes in the present discounted value of gasoline expenses econometric evidence from data covering the years 1972 through 1981 substantially confirms the hypothesis of the model that a gasoline price shock causes relative price changes across automobile types in proportion to the differences in their rates of fuel consumption

do consumers recognize the value of fuel economy evidence from used car prices and gasoline price fluctuations abstract debate about the appropriate design of energy policy hinges critically on whether consumers might undervalue energy efficiency due to myopia or some other manifestation of limited rationality we contribute to this debate by measuring consumers willingness to pay for fuel economy using a novel identification strategy and high quality microdata from wholesale used car auctions we leverage differences in future fuel costs across otherwise identical vehicles that have different current mileage and therefore different remaining lifetimes by seeing how price differences across high and low mileage vehicles of different fuel economies change in response to shocks to the price of gasoline we estimate the relationship between vehicle prices and future fuel costs our data suggest that used automobile prices move one for one with changes in present discounted future fuel costs which implies that consumers fully value fuel economy

output and attribute based carbon regulation under uncertainty abstract output based carbon regulations such as fuel economy standards and the rate based standards in the clean power plan create well known incentives to inefficiently increase output similar distortions are created by attribute based regulations this paper demonstrates that despite these distortions output and attribute based standards can always yield strictly greater expected welfare than flat emission standards given uncertainty in demand for output or attributes assuming locally constant marginal damages for fuel economy standards the welfare maximizing amount of attribute or mileage basing is likely small relative to current policy for the electricity sector however an intensity standard may yield greater expected welfare than a flat standard

asymmetric information in residential rental markets implications for the energy efficiency gap abstract this paper explores whether energy cost information asymmetries exist between landlords and tenants by exploiting variation in which party pays for energy because tenants are always fully informed about their total housing costs in the landlord pay regime the effect of energy cost changes on tenant turnover rents and efficiency investment should differ between the two payment regimes under asymmetric information but not symmetric information using energy cost variation in the form of changes in relative heating fuel prices i find evidence that tenants are uninformed about energy costs this results in higher energy expenditures for tenants and implies that information campaigns or efficiency standards may improve market outcomes

radial and non radial decompositions of profit change with an application to indian banking abstract grifell tatje and lovell grifell tatje e lovell c a k 1999 profits and productivity management science 45 1177 1193 made significant contributions to the literature on the extended radial dea framework by decomposing profit change into six mutually exclusive components their approach however poses two basic problems first the radial estimates on these components might give conflicting signals about the direction of profit change after the full radial efficiencies are achieved when slacks are present second evaluations of these components using base period prices as weights can be potentially misleading to address these concerns we first introduce non radial dea models and then provide a few strong theoretical arguments in favor of using as weights either current period prices or an average price covering both periods to value the contributions of each of these components the indian banking sector is taken as a case study to illustrate the radial and non radial decompositions of profit change so as to empirically examine the role of competition on profit change and its drivers our broad empirical results are as follows first radial and non radial models yield diametrically opposite results on the contributions of various components second the increasing efficiency change trends in all ownership groups after 2002 indicate that the government reform process instituted on the banking industry has had a favorable effect on the performance of the indian banking sector third despite the fact that nationalized banks are the oldest banks their output and resource allocation behaviors do not reflect their learning experience

indian bank efficiency and productivity changes with undesirable outputs a disaggregated approach the objective of this study is to examine technical efficiency and productivity growth in the indian banking sector over the period from 2004 to 2011 we apply an innovative methodological approach introduced by chen et al 2011 and barros et al 2012 who use a weighted russell directional distance model to measure technical inefficiency we further modify and extend that model to measure tfp change with npls we find that the inefficiency levels are significantly different among the three ownership structure of banks in india foreign banks have strong market position in india and they pull the production frontier in a more efficient direction spbs and domestic private banks show considerably higher inefficiency we conclude that the restructuring policy applied in the late 1990s and early 2000s by the indian government has not had a long lasting effect

new vehicle characteristics and the cost of the corporate average fuel economy standard by 2016 the corporate average fuel economy cafe standard will increase by 40 this article focuses on the medium run effects of fuel economy regulation we estimate consumers willingness to pay for vehicle characteristics we employ a novel empirical strategy that accounts for the characteristics endogeneity by using variation of engine models used in vehicle models the results imply that consumers value an increase in power more than an increase in fuel economy simulations of the effects of an increase in the cafe standard suggest that regulatory costs are significantly smaller in the medium run than in the short run

when do consumers search this paper provides empirical evidence relating search to price movements we measure consumer search directly from traffic statistics for web sites that report gasoline prices we show empirically that consumers search more as prices rise than they do when prices fall asymmetric search patterns have consequences for price behavior our findings indicate that retail margins are squeezed by increased search in addition we show that there is more price dispersion when prices are falling than when prices are either stable or rising our results provide a search based explanation for the rockets and feathers phenomenon of asymmetric price adjustment

regulation and corporate investment policy in a previous paper it was shown that the traditional rule that the allowed return on the equity of a regulated firm should be set equal to its cost of equity capital was conceptually deficient 2 this deficiency arises because the cost of equity capital of a regulated firm depends upon its risk which depends in turn upon the regulatory policy that will be followed in the future including the allowed rate of return it was argued therefore that this traditional rule should be replaced by the requirement that the regulatory policy be consistent a consistent regulatory policy achieves what the traditional rule only attempts it ensures that at the time of a regulatory hearing the market value of the firm equity is equal to the equity financed portion of the rate base to devise a consistent regulatory policy it is necessary to have a valuation model which takes explicit account of regulatory policy such a model was developed in the above mentioned paper in this paper we generalize the earlier valuation model so that the investment policy of the regulated firm is determined by the value maximizing decisions of the management instead of being taken as exogenous to the extent that investment policy is discretionary its endogeneity must be taken into account in devising a consistent regulatory policy and this is made possible by the generalized model in reality it seems unclear to what extent the investment policies of regulated firms are predetermined by the requirement that they meet demand and to what extent they are discretionary since the model presented here easily accommodates constraints on the investment policy it is the more appropriate model so long as there exists any element of discretionary investment behaviour and permits a more adequate approach to the determination of consistent regulatory policies with discretionary investment policy an important consequence of any particular consistent regulatory policy is the investment policy it induces in section 4 we show how the value maximizing investment policy is affected by the choice of regulatory policy on the other hand regulated firms are wont to argue that their investments are in the main predetermined by demand and must be undertaken regardless of their profitability this putative lack of discretion it is maintained means that the appropriate allowed rate of return is higher than would otherwise be the case in section 4 also we evaluate the strength of this consideration by comparing the allowed rate of return under consistent regulatory policies when investment policy is and is not discretionary section 5 shows briefly how the analysis can be extended to account for the effect of debt in the capital structure

ownership versus competition efficiency in public enterprise certainly the introduction of product market competition into potentially competitive or at least contestable markets can improve performance to take just one example morrison and whinston 1986 1986 estimate that even in the imperfectly contestable u s airline industry the annual u s welfare gains from deregulation have been around 6 billion

gasoline price uncertainty and the design of fuel economy standards abstract what are the implications of gasoline price volatility for the design of fuel economy policies i show that this problem has a strong parallel to weitzman s 1974 classic model of using price or quantity controls to regulate an externality changes in fuel prices act as shocks to the marginal cost of complying with the standard assuming constant marginal damages from fuel consumption an application of weitzman 1974 implies that a fixed fuel economy standard reduces expected welfare relative to a price policy such as a feebate or equivalently a fuel economy standard that is indexed to the price of gasoline when the regulator is constrained to use a fixed standard i show that the usual approach to setting the standard equate expected marginal compliance cost to marginal damage is likely to be sub optimal because the standard may not bind if the realized gasoline price is sufficiently high instead the optimal fixed standard will be relatively relaxed and may be non binding even at the expected gasoline price finally i show that although an attribute based standard allows vehicle choices to flexibly respond to gasoline price shocks the resulting distortions imply that the optimal fuel economy standard is not attribute based

the effects of the corporate average fuel efficiency standards in the us this paper examines the effects of the corporate average fuel economy standards cafe on automobile sales prices and fuel consumption first a discrete choice model of automobile demand and a continuous model of vehicle utilization are estimated using micro data from the consumer expenditure survey for 1984 1990 next the demand side model is combined with a model of oligopoly and product differentiation on the supply side with these elements in place the effects of the cafe regulation are assessed through simulations and compared to the effects of alternative policy instruments such as an increase in gasoline tax

what do consumers believe about future gasoline prices a full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices we provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the michigan survey of consumers we find that average consumer beliefs are typically indistinguishable from a no change forecast justifying an assumption commonly made in the literature on consumer valuation of energy efficiency we also provide evidence on circumstances in which consumer forecasts are likely to deviate from no change and on significant cross consumer forecast heterogeneity

do energy prices influence investment in energy efficiency evidence from energy star appliances abstract i examine whether electricity prices influence the likelihood that consumers purchase high efficiency appliances by using state year panel data on electricity prices and the proportion of sales of new appliances that involve high efficiency energy star models i find no evidence that electricity prices affect the propensity for consumers to choose high efficiency appliances point estimates are extremely small and precisely estimated the findings suggest that price based energy policies may be limited in the extent to which they increase investment in residential energy efficiency which has been considered one of the lowest cost opportunities for reducing carbon emissions

rational inattention and energy efficiency abstractthis paper argues that it will often be rational for consumers to pay limited attention to energy efficiency when choosing among energy consuming durable goods like automobiles or home appliances the reason is that the proper valuation of energy efficiency requires time and effort but differences in efficiency across products will rarely be pivotal to choice when consumers have strong preferences regarding other product attributes the paper first explains why proper valuation of efficiency is difficult even in the presence of government energy labels it next develops a model that shows how to value additional information about energy efficiency in a discrete choice context it then uses data on automobiles to show that consumers experience only small welfare losses when forced to choose a car without detailed information about fuel costs finally the paper discusses the implications of rational inattention for both economic research and public policy

forecasting gasoline prices using consumer surveys this paper analyzes the predictive power of a new data set of consumer gasoline price forecasts taken from the michigan survey of consumers msc msc data generally perform as well as a no change forecast in predicting future gasoline prices and they substantially out perform the no change forecast during the recent economic crisis during which time they track futures market prices finally the cross respondent dispersion of the msc forecasts increases substantially during the economic crisis paralleling the large increase in price volatility at this time

when the carrot goes bad the effect of solar rebate uncertainty abstract although meant to encourage investment in solar photovoltaic pv systems some incentive policies may themselves become a barrier in instances where policy related uncertainty is present as potential solar adopters delay their investment until uncertainty is resolved this study utilizes a quasi experimental setting to quantify the effect of solar policy uncertainty focusing on the california solar initiative s residential rebate program i exploit the temporary exhaustion of funds within one of the utility territories as an exogenous source of increased uncertainty and estimate that it leads to a 67 drop in rebate applications in an average zip code week there is considerable heterogeneity in this effect depending on household income and pv system size among households that are least likely to invest in pv without a rebate incentive program participation drops by up to 69 this suggests potentially significant loss in program effectiveness due to lower pv adoption and underscores the importance of accounting for uncertainty in policy evaluations

fuel consumption and gasoline prices the role of assortative matching between households and automobiles abstract analyses of policies to reduce gasoline consumption have focused on two effects a compositional effect on the fuel economy of the automotive fleet and a utilization effect on how much people drive however the literature has missed a third effect a matching effect in which policies change how high utilization households are matched to fuel efficient vehicles in equilibrium we show that higher gas prices should lead to stronger assortative matching empirical estimates using us micro level data are consistent with this hypothesis we find a 0 50 increase in the gas tax would reduce us gas consumption by 0 8 through the matching effect alone bringing annual environmental benefits of about 1 7 billion

the rebound effect for automobile travel asymmetric response to price changes and novel features of the 2000s abstract previous research suggests that the elasticity of light duty motor vehicle travel with respect to fuel cost known as the rebound effect is modest in size and probably declined in magnitude between the 1960s and the late 1990s however turmoil in energy markets during the early 2000s has raised new questions about the stability of this elasticity using panel data on u s states we revisit the simultaneous equations methodology of small and van dender 2007 and hymel et al 2010 to see whether structural parameters have changed using data through 2009 we confirm the earlier finding of a rebound effect that declines in magnitude with income but we also find an upward shift in its magnitude of about 0 025 during the years 2003 2009 in addition we find that the rebound effect is much greater in magnitude in years when gasoline prices are rising than when they are falling it is also greater during times of media attention and price volatility which explains about half the upward shift just mentioned

estimating a bayesian stochastic frontier for the indian banking system abstract this paper employs a bayesian stochastic frontier providing exact inference on both cost and profit efficiencies of the indian banking sector in the period of 2000 2006 we also test for the inclusion of off balance sheet data in model specification the findings suggest that public banks are the most efficient followed by private and foreign banks however the latter largely improved profit efficiency outperforming domestic banks by the end of the sample accounting for off balance sheet activities significantly improves profit efficiency levels

capacity utilisation and profitability a decomposition of short run profit efficiency the principal aim of this paper is to measure the amount by which the profit of a multi input multi output firm deviates from maximum short run profit and then to decompose this profit gap into components that are of practical use to managers in particular our interest is in the measurement of the contribution of unused capacity along with measures of technical inefficiency and allocative inefficiency in this profit gap we survey existing definitions of capacity and after discussing their shortcomings we propose a new ray economic capacity measure that involves short run profit maximisation with the output mix held constant we go on to describe how the gap between observed profit and maximum profit can be calculated and decomposed using linear programming methods the paper concludes with an empirical illustration involving data on 28 international airline companies the empirical results indicate that these airline companies achieve profit levels which are on average us 815m below potential levels and that 70 of the gap may be attributed to unused capacity

the effects of alternative regulatory policies on utility investment strategies the environment for planning and constructing power plants has undergone substantial changes since the early 1970s after this decade of change many utilities are completing costly plants that are larger than necessary to satisfy current demand and requesting that the plants be added to the rate base the used and useful uu and the prudent investor pi criteria have been applied by increasing numbers of regulatory commissions to determine whether excess capacity plants should be included in the rate base this paper considers whether these criteria will induce firms to invest efficiently much of the discussion of these criteria has focused on developing an appropriate method for allocating excess capacity costs between consumers and investors it is widely recognized that allocating some of the excess capacity costs to investors increases the risk faced by utilities 2 this increased risk both increases the market cost of capital and reduces the utility s incentive to invest efficiently in new plants in the future consumers therefore trade lower current expenses for higher capital and operating costs in the future the importance of these concerns depends on the answers to two questions 1 how soon will new capacity be needed and 2 to what extent will the current policy affect future allowed rates of return and capital investment in response to the first question some analysts indicate that the situation of current excess capacity will be reversed in the early 1990s 3 this paper explores the second question by developing a simple model to consider the relation between the uu or pi policies the allowed rate of return and the level of future investment this important relationship is complex some writers have emphasized capital market con

decomposing capacity utilization in data envelopment analysis an application to banks in india abstract this paper briefly reviews the existing methods of capacity utilization in nonparametric framework from economic perspectives and then suggests an alternative in the light of limitations therein in the spirit of work by coelli et al coelli t j grifell tatje e perelman s 2002 capacity utilisation and profitability a decomposition of short run profit efficiency international journal of production economics 79 261 278 we propose two methods radial and non radial to decompose the input based physical technological capacity utilization into various meaningful components viz technical inefficiency ray economic capacity utilization and optimal capacity idleness a case study of indian banking industry is taken as an example to illustrate the potential application of these two methods of decomposition our two broad empirical findings are that first competition created after financial sector reforms generates high efficiency growth and reduces excess capacity second the cost gap of the short run cost from the actual cost is higher for the nationalized banks over the private banks indicating that the former banks though old do not reflect their learning experience in their cost minimizing behavior

interpreting pre trends as anticipation impact on estimated treatment effects from tort reform abstract while conducting empirical work researchers sometimes observe changes in outcomes before adoption of a new policy the conventional diagnosis is that treatment is endogenous this observation is also consistent however with anticipation effects that arise naturally out of many theoretical models this paper illustrates that distinguishing endogeneity from anticipation matters greatly when estimating treatment effects it provides a framework for comparing different methods for estimating anticipation effects and proposes a new set of instrumental variables to address the problem that subjects expectations are unobservable finally this paper examines a specific set of tort reforms that was not targeted at physicians but was likely anticipated by them interpreting pre trends as evidence of anticipation increases the estimated effect of these reforms by a factor of two compared to a model that ignores anticipation

why are prices sticky the dynamics of wholesale gasoline prices the menu cost interpretation of sticky prices implies that the probability of a price change should depend on the past history of prices and fundamentals only through the gap between the current price and the frictionless price we find that this prediction is broadly consistent with the behavior of nine philadelphia gasoline wholesalers nevertheless we reject the menu cost model as a literal description of these firms behavior arguing instead that price stickiness arises from strategic considerations of how customers and competitors will react to price changes

measures of technical efficiency abstract fare and lovell j econom theory 19 1978 150 162 suggest four properties that a measure of technical efficiency should satisfy the commonly employed debreu farrell measure fails three of them necessary and sufficient conditions for a measure to satisfy the four conditions are provided and recently proposed measures are analyzed in the light of this result also it is argued that the debreu farrell measure has several desirable properties when one takes account of 1 perhaps unknown market prices and the relationship between technical and economic efficiency and 2 its characterization as a measure of economic efficiency using the shadow prices implicit in the production technology

an examination of the effect of ownership on the relative efficiency of public and private water utilities the behavior of privately and publicly owned water utilities is examined by estimating a generalized variable cost function containing the regular characteristics of the neoclassical cost function without requiring that cost minimization subject to market prices be imposed as a maintained hypothesis assuming that unobserved shadow prices reflect the regulatory environment of the water industry tests for cost minimization are obtained by deriving shadow prices as functions of market prices the empirical results provide evidence that public water utilities are more efficient than private utilities on average but are more widely dispersed between best and worst practice

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

cost revenue and profit efficiency measurement in dea a directional distance function approach abstract estimation of efficiency of firms in a non competitive market characterized by heterogeneous inputs and outputs along with their varying prices is questionable when factor based technology sets are used in data envelopment analysis dea in this scenario a value based technology becomes an appropriate reference technology against which efficiency can be assessed in this contribution the value based models of tone 2002 are extended in a directional dea set up to develop new directional cost and revenue based measures of efficiency which are then decomposed into their respective directional value based technical and allocative efficiencies these new directional value based measures are more general and include the existing value based measures as special cases these measures satisfy several desirable properties of an ideal efficiency measure these new measures are advantageous over the existing ones in terms of 1 their ability to satisfy the most important property of translation invariance 2 choices over the use of suitable direction vectors in handling negative data and 3 flexibility in providing the decision makers with the option of specifying preferable direction vectors to incorporate their preferences finally under the condition of no prior unit price information a directional value based measure of profit inefficiency is developed for firms whose underlying objectives are profit maximization for an illustrative empirical application our new measures are applied to a real life data set of 50 us banks to draw inferences about the production correspondence of banking industry

consumers perceptions and misperceptions of energy costs this paper presents three initial stylized facts from the vehicle ownership and alternatives survey voas a nationally representative survey that elicits consumers beliefs about gasoline prices and the relative energy costs of autos with different fuel economy ratings first american consumers devote little attention to fuel costs when purchasing autos second consistent with a cognitive bias called mpg illusion consumers underestimate the fuel cost differences between low mpg vehicles and overestimate the differences between high mpg vehicles third americans mean and median expected future gas prices were above current prices and predictions of the futures market at the time of the survey although it is often argued that misperceived energy costs justify policies to encourage the sale of energy efficient durable goods these results show that misperceptions and expectations that differ from market information could either increase or decrease energy efficiency