a time frequency analysis of trade openness and co2 emissions in france abstract the paper explores the comovement between trade openness and carbon dioxide co2 emissions in france over the period 1960 2013 by using the wavelet tool the investigation offers detailed information about this interaction for different sub periods of time and frequencies it also reveals the lead lag nexus between variables under cyclical and anti cyclical shocks the main findings reveal no comovement at high frequency between trade openness and gas emissions confirming the neutral hypothesis on short term the co2 emissions positively drive the trade openness at medium frequency hence on medium term the inexistence of strong environmental rules stimulate the international trade especially the exports obtained based on pollutant capacities curiously the trade openness positively runs the gas emissions at low frequency herein on long term the interaction between trade and co2 emissions is driven by the business cycle

the ellsberg paradox and risk aversion an anticipated utility approach the paper describes a decision process under which it is rational to prefer a lottery with known probabilities to a similar ambiguous lottery where the decision maker does not know the exact values of the probabilities the ellsberg paradox this is done by modeling ambiguous lotteries as two stage lotteries by assuming the independence axiom without the reduction of compound lotteries axiom and by using the anticipated utility functional this paper also gives conditions under which less ambiguity is preferred and presents some comparative statics analysis as well as some inter personal comparisons finally it proves that within the anticipated utility framework risk and ambiguity are almost identical copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

climate change uncertainty irreversibility and the precautionary principle this paper begins with a critique of the option value argument used by economists to explain and justify the precautionary principle the argument is shown to misrepresent both uncertainty and irreversibility an alternative justification of the precautionary principle is discussed under conditions of keynesian uncertainty and irreversibility interpreted in terms of incommensurability recent formal decision theories under keynesian uncertainty are reviewed and their limitations explored with particular reference to the insights that decision theory can bring to understanding the precautionary principle throughout the decision problems under consideration are those faced by climate change policy makers copyright oxford university press

energy consumption and the influencing factors in china a nonlinear perspective abstract different from many studies on energy kuznets curve this paper does not directly consider income factor but conducts a nonlinear study on per capita primary energy consumption and electricity consumption in china whose economic development is considered investment driven in which government macroeconomic policies especially government expenditure plays a very important role in particular this paper attempts to compare the different impacts of government expenditures and the other influencing factors on energy consumption based on the results of the threshold regression in the future with the further development of the economy the driving force of labor population growth will slow down comparing with primary energy the relationship between electricity consumption and its influencing factors will change later and the difference in the effects of the influencing factors is mainly reflected in the formation of capital stock investment and the development of urbanization government expenditure on private goods may not be always as inefficient in energy consumption and cleaner production as previously thought in the literature meanwhile the growth of government expenditure on public goods will become a powerful driving factor which indicates that the government needs to assess its overall impact on energy consumption and energy efficiency when participating in the provision of public goods the paper also found that when studying the issue of energy consumption and regional differences in china the geographic classification of eastern central and western regions may not be appropriate grouping according to energy consumption levels may be one of the better options and the distribution of energy consumption levels in china s provinces is consistent with the distribution of government expenditure levels the estimation results also provide us with important policy implications the government expenditure in education is of great importance and it can produce a strong energy saving effect through technological progress

preference reversals and the independence axiom of all of the paradoxical patterns of behavior reported in laboratory experiments one of the most perplexing for decision theorists is the preference reversal phenomenon a subject in a preference reversal experiment is typically given a choice between a lottery with a high probability of winning a modest amount of money a p bet and a lottery with a low probability of winning a large amount of money a bet the lowest amount of money for which the subject would willingly sell either of these lotteries is also elicited the most common reversal is for a subject to choose the p bet over the bet but to put a higher selling price on the bet preference reversals were first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 in discussing the psychologists discovery of such reversals david grether and charles plott remark the inconsistency is deeper than mere lack of transitivity or even stochastic transitivity it suggests that no optimization principles of any sort lie behind even the simplest of human choices 1979 p 623 this paper offers a simple alternative explanation of documented preference reversals an explanation that does not require the abandonment of the transitivity assumption

uncertainty and risk in financial markets this paper considers a general equilibrium model in which the distinction between uncertainty and risk is formalized by assuming agents have incomplete preferences over statecontingent consumption bundles as in bewley 1986 without completeness individual decision making depends on a set of probability distributions over the state space a bundle is preferred to another if and only if it has larger expected utility for all probabilities in this set when preferences are complete this set is a singleton and the model reduces to standard expected utility in this setting we characterize pareto optima and equilibria and show that the presence of uncertainty generates robust indeterminacies in equilibrium prices and allocations for any specification of initial endowments we derive comparative statics results linking the degree of uncertainty with changes in equilibria despite the presence of robust indeterminacies we show that equilibrium prices and allocations vary continuously with underlying fundamentals equilibria in a standard risk economy are thus robust to adding small degrees of uncertainty finally we give conditions under which some assets are not traded due to uncertainty aversion

decreasing risk aversion and mean variance analysis on formule un ensemble de postulats d aversion pour le risque absolu decroissant et on montre que seules les fonctionnelles d utilite moyenne variance peuvent les satisfaire

trade liberalization and environmental taxation in federal systems the literature on trade liberalization and environment has not yet considered federal structures in this paper we show how the design of environmental policy in a federal system has implications for the effects of trade reform trade liberalization leads to a decline in pollution taxes regardless of whether pollution taxes are set at the federal centralized or local decentralized level and it increases social welfare the effect under a decentralized system is smaller than if these taxes are set by the federal government and pollution emissions therefore decline in this case moreover majority bias interacts with trade liberalization if federal taxes are used

economic theory of choice and the preference reversal phenomenon a reexamination in a recent issue of this review david grether and charles plott 1979 hereinafter referred to as g p presented a series of experiments that show that individual decisions are made in a manner inconsistent with standard preference theory this inconsistency can be illustrated by the following example individuals under suitable laboratory conditions first have a choice between a lottery with a high probability of winning a small sum of money the p bet probability bet and a lottery with a high stake but low probability of winning the m bet money bet after indicating a preference for one of the lotteries in the pair the same subjects are then asked to place a monetary value on each of the individual lotteries grether and plott found that a large number of participants stated a preference for the p bet in the first round but placed a higher value on the other lottery the m bet in the second round this behavior a preference reversal is inconsistent with the traditional statements of preference theory

strategic commitment to price to stimulate downstream innovation in a supply chain abstract it is generally in a firm s interest for its supply chain partners to invest in innovations to the extent that these innovations either reduce the partners variable costs or stimulate demand for the end product they will tend to lead to higher levels of output for all of the firms in the chain however in response to the innovations of its partners a firm may have an incentive to opportunistically increase its own prices the possibility of such opportunistic behavior creates a hold up problem that leads supply chain partners to underinvest in innovation clearly this hold up problem could be eliminated by a pre commitment to price however by making an advance commitment to price a firm sacrifices an important means of responding to demand uncertainty in this paper we examine the trade off that is faced when a firm s channel partner has opportunities to invest in either cost reduction or quality improvement i e demand enhancement should it commit to a price in order to encourage innovation or should it remain flexible in order to respond to demand uncertainty we discuss several simple wholesale pricing mechanisms with respect to this trade off

keynesian uncertainty and liquidity preference in his economic writings keynes hints that his liquidity preference analysis is informed by the notion of evidential weight that first appears in his earlier treatise on probability this paper reviews keynes s distinction between probability and evidential weight and offers an account of its influence in his later work on the incentive to hold liquid assets alternative representations of the keynesian uncertainty liquidity preference relation are assessed in the light of this discussion james tobin s mean variance approach the keynesian fundamentalist view of paul davidson and the flexibility approach represented by louis makowski copyright 1994 by oxford university press

the effects of fiscal policy on co2 emissions evidence from the u s a abstract this paper examines the effects of fiscal policy on co2 emissions using vector autoregressions on u s quarterly data from 1973 to 2013 in particular we analyze the short and mid term interactions between fiscal policy and emissions by using sign restrictions to identify the policy shocks we construct the impulse responses to linear combinations of fiscal shocks corresponding to the scenarios of deficit financed spending and deficit financed tax cuts to consider possible variations of the effect of fiscal policy according to the sources of pollution we distinguish between production and consumption generated co2 emissions the results point out that the implementation of expansionary fiscal spending provides an alleviating effect on emissions from both sources of the pollutant whereas deficit financed tax cuts are associated with an increase on consumption generated co2 emissions the exact pattern of the effects depends on the source of emissions the scenario of fiscal policy that is implemented and the functional class of government expenditure being increased

is environmental policy a secondary trade barrier an empirical analysis should international trade agreements be extended to include negotiations over environmental policy the answer depends on whether countries distort levels of environmental regulations as a secondary means of providing protection to domestic industries our results suggest that they do previous studies of this relationship have treated the level of environmental regulation as exogenous and found a negligible correlation between environmental regulation and trade flows in contrast we find that when the level of environmental regulation is modelled as an endogenous variable its estimated effect on trade flows is significantly higher than previously reported jel classification fl f14 f18 est ce que la politique environnementale est une barriere commerciale secondaire une analyse empirique est ce que les accords commerciaux internationaux doivent etre etendus pour couvrir la politique environnementale la reponse depend du degre de distorsion que les pays introduisent dans leur politique environnementale pour proteger leurs industries nationales nos resultats suggerent que cet impact est important des etudes anterieures de cette relation ont traite la politique environnementale comme exogene et ont montre qu il existe une co relation negligeable entre politique envir onnementale et flux commerciaux au contraire nous revelons que quand la politique environnementale est consideree comme variable endoge ne son effet sur les flux com merciaux est plus eleve de maniere significative que ce qu on a note anterieurement

on the surprising sufficiency of linear models for dynamic pricing with demand learning we consider a multiperiod single product pricing problem with an unknown demand curve the seller s objective is to adjust prices in each period so as to maximize cumulative expected revenues over a given finite time horizon in doing so the seller needs to resolve the tension between learning the unknown demand curve and maximizing earned revenues the main question that we investigate is the following how large of a revenue loss is incurred if the seller uses a simple parametric model that differs significantly i e is misspecified relative to the underlying demand curve we measure performance by analyzing the price trajectory induced by this misspecified model and quantifying the magnitude of revenue losses as a function of the time horizon relative to an oracle that knows the true underlying demand curve the price of misspecification is expected to be significant if the parametric model is overly restrictive somewhat surprisingly we show under reasonably general conditions that this need not be the case this paper was accepted by gerard cachon stochastic models and simulation

disappointment in decision making under uncertainty decision analysis requires that two equally desirable consequences should have the same utility and vice versa most analyses of financial decision making presume that two consequences with the same dollar outcome will be equally preferred however winning the top prize of 10 000 in a lottery may leave one much happier than receiving 10 000 as the lowest prize in a lottery this paper explores the implications of disappointment a psychological reaction caused by comparing the actual outcome of a lottery to one s prior expectations for decision making under uncertainty explicit recognition that decision makers may be paying a premium to avoid potential disappointment provides an interpretation for some known behavioral paradoxes and suggests that decision makers may be sensitive to the manner in which a lottery is resolved the concept of disappointment is integrated into utility theory in a prescriptive model

buffalo hunt international trade and the virtual extinction of the north american bison in the sixteenth century north america contained 25 to 30 million buffalo by the late nineteenth century fewer than 100 remained while removing the buffalo east of the mississippi took over 100 years the remaining 10 to 15 million buffalo on the great plains were killed in a punctuated slaughter lasting little more than ten years i employ theory international trade statistics and first person accounts to argue the slaughter was initiated by a foreign made innovation and fueled by a foreign demand for industrial leather european demand and american policy failure are jointly responsible for the slaughter on the plains jel f14 n51 n71 q57

carbon footprint taxes we analyze whether a carbon consumption tax is logistically feasible we consider a carbon footprint tax cft which would be modeled after a credit method value added tax the basis for the tax would be a product s carbon footprint which includes all of the emissions released during production of the good and its inputs as well as any greenhouse gases latent in the product our analysis suggests that a pure cft requiring the calculation of the carbon footprint of every individual product may be prohibitively costly however a hybrid cft seems economically feasible the hybrid cft would give firms the option to either calculate the carbon footprint of their outputs and have their products taxed based on those footprints or use product class specific default carbon footprints as the tax basis thereby saving on calculation costs because the cft would be levied on all goods consumed domestically the cft would keep domestic firms on an even footing with those producing in countries without active climate policy protecting competitiveness and reducing leakage

bargaining and boldness abstract we study a multiperson bargaining problem with general risk preferences through the use of shaked s game of cycling offers with exogenous breakdown if preferences are smooth then as the risk of breakdown vanishes the limiting outcome is one in which bargainers are equally marginally bold where a bargainer s marginal boldness measures his willingness to risk disagreement in return for a marginal improvement in his position under smoothness any ordinal nash solution is an equally marginally bold outcome however unlike the concept of the ordinal nash solution a unique equally marginally bold outcome exists in natural cases in particular if all bargainers have risk averse preferences of the rank dependent expected utility type for these preferences the equally marginally bold outcome maximizes a bargaining power adjusted asymmetric nash product where the degree of asymmetry is determined by the disparity in the marginal valuation of certainty among bargainers journal of economic literature classification numbers c72 c78 d81

risk perception in psychology and economics abstract the concept of rationality has been basic to most economic analysis its content has been successively refined over the generations as applied to the static world of certainty it has turned out to be a weak hypothesis not easily refuted and therefore not very useful as an explanation though not literally a tautology but recent decades have seen the development of stronger versions applied to a world in which time and uncertainty are real among its most important manifestations have been criteria for consistency in allocation over time the expected utility hypothesis of behavior under uncertainty and what may be termed the bayesian hypothesis for learning that is the consistent use of conditional probabilities for changing beliefs on the basis of new information these hypotheses have been used widely in offering explanations of empirically observed behavior though as not infrequently in economics the theoretical development has gone much further than the empirical implementation these hypotheses have also been used increasingly in normative analysis as a component of benefit cost studies therefore frequently referred to as benefit risk studies the value of reducing mortality rates from diseases for example has been studied by assuming that choice of occupations is made inter alia by comparing wage differences with mortality differences

theories of choice under ignorance and uncertainty abstract in this paper knight s distinction between risk and uncertainty and its significance for economic analysis are examined the paper consists of a survey of some recent developments on the theory of choice under uncertainty and some applications of these theories to problems for which bayesian decision theory has not proved entirely satisfactory two problems are examined in detail the first is that of finance and insurance and the second is that of risktaking behaviour with special emphasis on lotteries

ambiguity and uncertainty in ellsberg and shackle this paper argues that the similarities between ellsberg s and shackle s frameworks for discussing the limits of the probabilistic approach to decision theory are more important than usually admitted the paper discusses the grounds on which the ambiguity surrounding the decision maker in ellsberg s urn experiments can be deemed analogous to the uncertainty faced by shackle s entrepreneur taking crucial decisions the two authors insights are assessed and special attention is paid to the criteria for decision under uncertainty they put forward the paper establishes a link between ellsberg s and shackle s perspectives and the non additive probability approach of gilboa and schmeidler an approach that offers an alternative to standard probability calculus which can be of use to analyse both ambiguity and uncertainty the comparison between ellsberg and shackle draws on an interpretation of keynes s treatise on probability emphasising keynes s rejection of both well defined probability functions and maximisation as a guide to human conduct it is shown that keynes s viewpoint implies a reconsideration of the boundaries of probability theory that is in the same vein of ellsberg s and shackle s concern in the years of the consolidation of savage s new probabilistic mainstream copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

innovation and technology diffusion in competitive supply chains abstract innovations in consumer products frequently rely on technological advances across multiple tiers in a supply chain considering the consumer market demand and downstream investment conditions as input we model a game in a two tier supply chain where downstream firms choose to adopt different levels of an upstream technology and an upstream technology leader determines its pricing policy we identify two necessary but distinct elements for the successful development adoption and diffusion of upstream technologies that are sold to lower tiers as components within final products 1 the level of technology demanded by the market we develop a measure technological potential which describes the highest level of an upstream technology demanded by consumer markets 2 a sufficiently rich return to an upstream innovator as a function of different levels of technology from these two elements we show that the relative magnitudes of two competing sets of consumer market factors determine the technological potential whereas the overall magnitude of the factors in both sets determines the return to the upstream developer we discuss how this difference in consumer market factors influence on these two elements may determine how different technologies fare in the supply chain our results have managerial implications for investors in research and development project selection in identifying profitable technologies that are also demanded at higher capability levels and for governments in defining more targeted public policies for example in choosing the right tier of a supply chain to provide subsidies to encourage market support for certain technologies

a portfolio performance index fund managers may sensibly be averse to earning a time averaged portfolio return that is less than the average return of some designated benchmark when a portfolio is expected to earn a higher average return than the benchmark return the probability that it will not approaches zero asymptotically at a computable exponential decay rate the probability decay rate is thus proposed here as a new portfolio performance index in the widely analyzed special case in which returns are normally distributed the new performance index maximizing portfolio is the same as the popular sharpe ratio maximizing portfolio the results of the two approaches generally differ however because of nonnormal levels of skewness and or kurtosis in the portfolio attributable to large asymmetrical economic shocks or investments in options and other derivative securities an illustrative example will show that the new index is easy to implement and consistent with empirical evidence on portfolio choice favors investments with

the end of the robinson patman act evidence from legal case data the robinson patman act rp an antitrust statute aimed at protecting small businesses limits price setting in distribution channels to avoid costly penalties under rp managers take a variety of precautions when pricing to retailers and wholesalers but how likely is a court to find a defendant guilty of violating the rp we find that this likelihood has dropped drastically as a result of recent supreme court rulings from more than 1 in 3 before 1993 to less than 1 in 20 for the period 2006 2010 the analysis also points to an increased success of the no harm to competition defense which reflects the view that the courts have raised the hurdle for plaintiffs to establish competitive harm finally our results indicate that smaller plaintiffs over time have fared worse than larger ones a trend that challenges the notion that rp protects small businesses

strategic choice of quality when quality is costly the persistence of the high quality advantage in a two firm two stage model of vertical product differentiation i show that for every convex fixed cost function of quality the firm that chooses the higher quality at the first stage earns the higher profits the result holds for the pure strategy equilibrium in the simultaneous quality game and it holds as well if firms choose their qualities in sequential order

footloose and pollution free in numerous studies economists have found little empirical evidence that environmental regulations affect trade flows in this paper we propose and test several common explanations for why the effect of environmental regulations on trade may be difficult to detect we demonstrate that whereas most trade occurs among industrialized economies environmental regulations have stronger effects on trade between industrialized and developing economies we find that for most industries pollution abatement costs are a small component of total costs and are unrelated to trade flows in addition we show that those industries with the largest pollution abatement costs also happen to be the least geographically mobile or footloose after accounting for these distinctions we measure a significant effect of pollution abatement costs on imports from developing countries and in pollution intensive footloose industries

is the income elasticity of environmental improvements less than one we estimated the income elasticity of environmental improvements for a number of european data sets the value of this parameter is consistently found to be less than one with few exceptions our findings are compared with state of the art contingent valuation studies from other countries we also compared our findings with those reported in the literature on charitable donations and corporate donations these studies show a similar pattern donations decrease as a percentage of income as income increases

harmonizing tailpipe policy in symmetric countries improve the environment improve welfare abstract we show that harmonizing emissions policy may be bad for the environment and or global welfare even when pollution is transboundary and countries are identical in every way harmonization effectively internalizes the transboundary aspects of pollution but it also changes the politics surrounding tailpipe regulation with harmonization producers can no longer avoid strict local regulation by simply exporting their products to overseas markets with weak standards for consumer goods as a result harmonization may raise political opposition to regulation to examine these competing effects we develop a generic treatment of the politics of environmental regulation a treatment we show to be isomorphic to three popular models of political economy majority rules a political elite and a political contributions approach we find that harmonization both weakens environmental regulation and reduces global welfare when the level of political capture by dirty industry is high relative to the rate of pollution transmission across borders

integrated product architecture and pricing for managing sequential innovation science and technology advances drive firms to continually enhance their product s performance and launch sequentially improving offerings firms face challenges in marketing such improving products to well informed forward looking consumers who anticipate product improvements and seek to delay their purchase timing product design specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence however such an architecture based approach can present new challenges as well and dealing with them requires carefully coordinated cross functional decision making by the firm in this paper we identify and formalize the notion of design inconsistency which refers to the monopolist firm s inability to commit to future product design architectures we find that firms experience design inconsistency even when they are able to commit to future prices and design inconsistency lowers firm profits as well as consumer surplus we then derive a joint product architecture and pricing approach to solve this problem this enables an innovating firm to optimally and in a time consistent manner launch modular upgradable products the modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation this paper was accepted by preyas desai marketing

pricing and lead time decisions in decentralized supply chains this paper studies a decentralized supply chain consisting of a supplier and a retailer facing price and lead time sensitive demands a stackelberg game is constructed to analyze the price and lead time decisions by the supplier as the leader and the retailer as the follower the equilibrium strategies of the two players are obtained using the performance of the corresponding centralized system as a benchmark we show that decentralized decisions in general are inefficient and lead to inferior performance due to the double marginalization effect however further analysis shows that the decision inefficiency is strongly influenced by market and operational factors and if the operational factors are dominating it may not be significant this shows that before pursuing a coordination strategy with retailers a supplier should first improve his or her own internal operations

participation in gvcs and co2 emissions abstract this paper attempts to explore the determinants of co2 emissions in the context of international trade while there exist studies that examine the roles of horizontal specialization and inter industry trade transactions little previous research attention has been paid to the roles of vertical specialization and intra industry trade transactions in affecting co2 emissions to fill the knowledge gap this study uses the panel data of 62 countries and regions for the period of 1995 2011 to estimate the effect of participation in global value chains gvcs on per capita co2 emissions major findings include 1 the relationship between participation degrees in gvcs and per capita co2 emissions is found to be inversely u shaped at the aggregate economy level and for most individual industries 2 per capita gdp shows an n shaped relationship with per capita co2 emissions and 3 benign drivers of co2 emissions include r d energy conservation and population control it can be concluded that countries with low gdp or gvc participation degrees are expected to experience worsening co2 emissions in the short or even medium run this trend however can be moderated or even reversed with more r d investments

regional versus multilateral trade liberalization environmental taxation and welfare the paper considers trade between identical countries with imperfectly competitive markets and compares the impacts of regional and multilateral tariff reduction on strategic environmental taxation and welfare while both forms of trade liberalization increase production and consumption in tariff reducing countries regionalism also reduces production in a non participating country and may decrease its consumption consequently regionalism and multilateralism change pollution tax and welfare in the tariff reducing countries in similar ways when pollution is local but in dissimilar ways for global pollution when pollution is global regionalism is likely to be preferred to multilateralism for the establishment of free trade among countries liberalisation du commerce regional versus celle du commerce multilateral fiscalite environnementale et bien etre ce memoire considere le commerce entre des pays identiques avec des marches de concurrence imparfaite et compare les impacts d une reduction regionale et multilaterale de tarifs sur la fiscalite environnementale strategique et le bien etre meme si les deux formes de liberalisation accroissent la production et la consommation dans les pays qui reduisent les tarifs le regionalisme reduit aussi la production dans un pays non participant et peut reduire sa consommation consequemment regionalisme et multilateralisme changent la taxe sur la pollution et le bien etre dans les pays qui reduisent leur tarif d une maniere similaire quand la pollution est locale mais de maniere dissimilaire quand la pollution est globale quand la pollution est globale le regionalisme est susceptible d etre prefere au multilateralisme pour l etablissement du libre commerce entre pays

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

trade and the environment a partial synthesis there is an emerging consensus in the environmentalist community opposing free trade while some economists view this as simply another outlet for protectionism recent work has begun to move beyond the rhetoric to probe more deeply into the theoretical and empirical relationships between international trade and environmental quality the purpose of the present paper is twofold we first integrate some of the existing literature by using the simple concepts of general equilibrium pollution supply and demand our survey of the trade and environment literature is more

decomposing the environmental effects of trade liberalization the case of consumption generated pollution this paper investigates the effect of international trade on consumption generated tailpipe pollution for countries exporting the dirty good trade liberalization increases its price thus increasing domestic production and decreasing domestic consumption of dirty goods at the same time this forces pollution from production and consumption to move in opposite directions leading us to expect that trade induced composition effects work differently for tailpipe and smokestack pollution our theoretical model predicts that capital abundance reinforces the pollution policy effect for tailpipe pollution counter to the case with smokestack pollution empirical support for this comes from our analysis of an international panel of data on carbon monoxide emissions we find evidence in support of an effect analogous to the pollution haven hypothesis which has typically not been observed in previous literature thus trade liberalization may affect smokestack and tailpipe pollution differently

animal spirits investment and unemployment an old keynesian view of the great recession this paper develops a dsge model with investment and capital accumulation build along demand driven explanations of the great recession specifically following farmer 2013 i set forth a search framework in which households decide about consumption while firms decide about recruiting effort as well as investment this setting closed with market clearing in good and asset markets has one less equation than unknowns therefore in order to solve such an indeterminacy i assume that investment is driven by self fulfilling expectations about the adjustment cost of capital consistently with the view of business cycles pushed by stock price fluctuations this model has the potential to provide a more comprehensive rationale of the consumption investment patterns observed during the years of the crisis

vertical product differentiation with entry abstract this paper examines the non cooperative behaviour of established firms that compete in product quality and prices while foreseeing the effects of their rivalry on the decisions made by the later entrants we prove an existence and uniqueness of the equilibrium and show that the dominant firms engage in maximal product differentiation i e select the highest and lowest technologically feasible qualities later entrant however always selects an intermediate quality moreover we show that the equilibrium configuration is identical to that generated by perfect foresight equilibrium in a model of sequential entry furthermore the profits earned by each firm are ranked in the same order as the qualities implifying that the later entrant despite being the last mover ends up with higher profits and larger market share than one of the incumbents

policy dilemma of innovation an info gap approach abstract new ideas or technologies are often advocated because of their purported improvements on existing methods however what is new is usually less well known and less widely tested than what is old new methods may entail greater unknown dangers as well as greater potential advantages the policy maker who must choose between innovation and convention faces a dilemma of innovation we present a methodology based on info gap robustness to deal with the innovation dilemma we illustrate the approach by examining the policy decisions for managing the light brown apple moth in california

the optimal pace of product updates some firms e g intel and medtronics use a time pacing strategy for product development pd introducing new generations at regular intervals if the firm adopts a fast pace introducing frequently it prematurely cannibalizes its old generation incurring high development costs while if it has a slow pace it fails to capitalize on customer willingness to pay for improved technology we develop a model to gain insight into which factors drive the pace we consider pd cost the diffusion rate coefficients of innovation and imitation the rate of margin decline and the degree to which a new generation stimulates market growth we find that a faster pace is generally associated with faster diffusion a higher market growth rate and faster margin decay not so intuitively we find that relatively minor differences in the development cost function can significantly impact the pace

cleaning up while cleaning up pollution abatement interest groups and contingent trade policies this paper analyzes the political economy of environmental policy formation in a trading economy with established rules for administered protection we argue that the social costs associated with the adoption of an inefficient environmental regime are likely to be compounded by induced restrictions on trade when the effected industries are import competing the preferences of interest groups for alternative environmental regimes tend to be linked to the legal institutional setting in which trade policy is conducted under existing rules and practices in the area of administered protection there is reason to believe that interest group preferences for an inefficient approach to pollution control will be strengthened because the adoption of such a regime is more likely to lead to a concomitant increase in trade barriers

national treatment and the optimal regulation of environmental externalities we analyze the role of national treatment in the regulation of environmental product standards for an open economy a social planner uses product standards to control emissions from the consumption of a traded good we show that whether national treatment of standards interferes with welfare maximizing policy depends on the instruments available to the policy maker consumption or emissions tax and differences in the cost of complying with the standard we also highlight the asymmetric incidence of the domestic and import product standard when taxes are suboptimal this asymmetric incidence can also cause welfare maximizing policy to violate national treatment on analyse le role du principe de traitement identique des entites domestiques ou importees dans la reglementation des normes environnementales dans une economie ouverte un gouvernement utilise des normes pour controler les emissions decoulant de la consommation d un produit transige internationalement on montre que le fait que le traitement identique des normes va ou non interferer avec l objectif poursuivi qui est de maximiser le niveau de bien etre va dependre de l ensemble des instruments disponibles pour l architecte des politiques une taxe sur la consommation ou sur les emissions et des differences dans les couts a encourir pour se conformer aux normes on souligne aussi l incidence asymetrique des normes sur les produits domestiques et importes quand les taxes sont sous optimales cette incidence asymetrique peut faire que la politique qui vise la maximisation du bien etre soit en violation du principe de traitement identique

risk aversion in the theory of expected utility with rank dependent probabilities expected utility with rank dependent probability theory is a model of decision making under risk where the preference relations on the set of probability distributions is represented by the mathematical expectation of a utility function with respect to a transformation of the probability distributions on the set of outcomes this paper defines based on g teaux differentiability measures of risk aversion for such preferences which characterize the relation more risk averse and applies these measures to the analysis of unconditional and conditional portfolio choice problems

environmental regulations transfers and trade theory and evidence abstract this paper develops a theory of compensation of producers for the costs associated with environmental regulations we show that the existence of transfers can give counter intuitive effects of environmental policy on both output and trade flows in particular the compensation obtained by producers neutralizes the effect of environmental policy on output and consequently on trade flows this may help explain why previous empirical research has found weak evidence that environmental regulations affect trade patterns the theory is tested using agricultural sector data the evidence supports the hypothesis that environmental regulations and transfers are positively correlated

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

product development decisions a review of the literature this paper is a review of research in product development which we define as the transformation of a market opportunity into a product available for sale our review is broad encompassing work in the academic fields of marketing operations management and engineering design the value of this breadth is in conveying the shape of the entire research landscape we focus on product development projects within a single firm we also devote our attention to the development of physical goods although much of the work we describe applies to products of all kinds we look inside the black box of product development at the fundamentaldecisions that are made by intention or default in doing so we adopt the perspective of product development as a deliberate business process involving hundreds of decisions many of which can be usefully supported by knowledge and tools we contrast this approach to prior reviews of the literature which tend to examine the importance of environmental and contextual variables such as market growth rate the competitive environment or the level of top management support

justifying precautionary policies incommensurability and uncertainty abstract when decisions are taken in conditions of keynesian or knightian uncertainty and when there is a threat of serious or irreversible environmental damage the precautionary principle is often recommended to guide decision making however the precautionary principle has been widely criticised in response to these criticisms a qualitative version of the precautionary principle is developed which draws its normative content from a blend of formal decision theory and political philosophy it is argued that precautionary action can be justified by some flexible combination of uncertainty and incommensurability the greater the uncertainty the less incommensurability is required to justify precautionary action and vice versa throughout the paper the arguments are explored using the example of climate change decision problems

the political economy of pollution taxes in a small open economy abstract this paper develops a positive theory explaining pollution tax policy outcomes in a small open economy the equilibrium tax rate depends on lobby group membership the relative importance of lobbying activities and the tax elasticity of pollution the equilibrium properties are investigated the model is extended to incorporate pollution abatement and a pollution abatement subsidy we show that total pollution may be increasing in the pollution abatement subsidy rate this effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium

specifications of social welfare in economic studies of climate policy overview of criteria and related policy insights an important assumption in economic studies of climate policy is the social welfare function this paper shows that applying distinct decision or social welfare criteria can result in different optimal policies of climate control notably if climate change impacts are uncertain first decision criteria in current climate economic studies are reviewed next the most important alternatives are discussed including their mathematical formalization and incorporation in economy climate models most of these alternative criteria suggest more stringent climate policies to be optimal than the standard discounted utilitarianism approach however several important welfare criteria have not or hardly seen any application in the economic analysis of climate policy we conclude that there is clear need for systematic research on this theme for which the current review provides a solid basis

environmental regulation in an open economy abstract environmental regulation by a large trading country affects the world price of traded commodities a series of second best environmental taxes are derived which explicitly incorporate trade effects for cases which depend on the type of externality the regulating country s commodity trade balance and the presence or absence of trade taxes in the regulated market a coordinated policy solution using both tax and tariff instruments also is derived the practical implications for domestic environmental policy making which emerge from the theoretical results are evaluated

trade politics and the environment tailpipe vs smokestack abstract the vast majority of economic research on environmental regulation in open economies focuses on producer generated smokestack pollution we instead consider consumer generated tailpipe pollution we examine how political opposition to environmental regulation varies with a country s trade regime and show that the impact on environmental policy of a move from autarky to free trade can depend critically on who ultimately generates pollution producers or consumers we find that opening to trade may raise industry opposition to smokestack regulation but reduce its opposition to strict tailpipe policy

temporal risk and the nature of induced preferences abstract it has been known since the work of h markowitz portfolio selection efficient diversification of investments yale univ press 1959 and j mossin amer econ rev 59 1969 172 174 that even an individual whose underlying preferences satisfy the von neumann morgenstern axioms will not choose over delayed i e temporal risky prospects in a manner which can be modelled as expected utility maximizing since most economically important instances of risk taking insurance real investment agriculture career training involve delayed as opposed to immediately resolved risk the standard use of expected utility theory to model such decisions must be questioned in this paper the technique of generalized expected utility analysis m j machina econometrica 50 1982 277 323 and the theory of support functions r t rockafellar convex analysis princeton univ press 1970 are applied to exactly model and hence determine the nature of preferences over temporal risky prospects

demand forecast sharing in a dual channel supply chain abstract we assess the benefits of sharing demand forecast information in a manufacturer retailer supply chain consisting of a traditional retail channel and a direct channel the demand is a linear function of price with a gaussian primary demand i e zero price market potential both the manufacturer and the retailer set their price based on their forecast of the primary demand in this setting we investigate the value of sharing demand forecasts we analyze the make to order scenario in which prices are set before and production takes place after the primary demand is known and the make to stock scenario in which production takes place and prices are set before the primary demand is known we also compare the supply chain performance with and without the direct channel under some assumptions production cost is zero and each demand function has the same slope of price we find that the direct channel has a negative impact on the retailer s performance and under some conditions the manufacturer and the whole supply chain are better off our research extends and complements prior research that has investigated only the inventory and replenishment related benefits of information sharing

choice under uncertainty with the best and worst in mind neo additive capacities the concept of a non extreme outcome additive capacity neo additive capacity is introduced neo additive capacities model optimistic and pessimistic attitudes towards uncertainty as observed in many experimental studies moreover neo additive capacities can be applied easily in economic problems as we demonstrate by examples this paper provides an axiomatisation of choquet expected utility with neo capacities in a framework of purely subjective uncertainty

are individuals bayesian decision makers there has been increasing interest in whether normative models of individual choice under uncertainty accord with actual behavior these concerns have been much greater than in other economic contexts because of the particularly severe demands such decisions place on the rationality of the decision maker the limitations of these decisions have widespread consequences as they provide the rationale for many governmental efforts to regulate the risks people face here i explore the issues raised by a bayesian decision framework focusing particularly on my analyses of worker and consumer behavior

does amd spur intel to innovate more we estimate an equilibrium model of dynamic oligopoly with durable goods and endogenous innovation to examine the effect of competition on innovation in the personal computer microprocessor industry firms make dynamic pricing and investment decisions while consumers make dynamic upgrade decisions anticipating product improvements and price declines consistent with schumpeter we find that the rate of innovation in product quality would be 4 2 percent higher without amd present though higher prices would reduce consumer surplus by 12 billion per year comparative statics illustrate the role of product durability and provide implications of the model for other industries

non bayesian decision theory ahead of its time the case of g l s shackle this article deals with the reception of george l s shackle s volume expectation in economics introducing a unique attempt to discard the probability framework in the investigation of behaviour under uncertainty through a fresh reading of the textual evidence including correspondence held at cambridge university library the article assesses why decision theorists interest in shackle s theory substantial during the 1950s faded away in the early 1960s the article argues that apart from shackle s refusal to comprehend that his critics were under the influence of a new subjective probability perspective a major explanation of the dismissal of his work stays in shackle s stance not to establish a collaborative link with those critics who showed a positive attitude towards his theory the article shows though that the discussion between shackle and his critics hinged on a number of topics that are still crucial to the current developments of decision theory

voting for pollution policy the importance of income inequality and openness to trade abstract this paper analyzes how openness and the distribution of factor ownership interact to determine individual and aggregate demand for pollution policy analysis of voter preferences in autarky shows that an increased stake in either the dirty or the clean industry can induce an individual voter to prefer stricter environmental policy similarly the paper shows that poorer voters may be the greener voters within an electorate the model also reveals that the incidence of pollution policy depends upon a country s trade regime with consequences for the direction in which income inequality influences aggregate demand for pollution policy

strategic investment in technological innovations abstract the aim of this paper is to determine the optimal timing of technology investment of a single firm in a duopoly framework as time passes different technologies are invented which after sometime become available for the firm to adopt the question here is not only when a firm should invest but also which technology should be adopted for different scenarios the optimal technology investment decision is determined outcomes range from pre emption equilibria to equilibria with second mover advantages

a new model for decisions under uncertainty abstract a representation for preferences between uncertain acts that is not unduly more complex than the ramsey savage model can simultaneously accomodate allais s paradox ellsberg s paradox preference reversals and cyclic preferences

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

revisiting the environmental kuznets curve in a global economy the present study deals with an empirical investigation between co2 emissions energy intensity economic growth and globalization using annual data over the period of 1970 2010 for turkish economy we applied unit root test and cointegration approach in the presence of structural breaks the direction of causality between the variables is investigated by applying the vecm granger causality approach our results confirmed the existence of cointegration between the series the empirical evidence reported that energy intensity and economic growth globalization increase condense co2 emissions the results also validated the presence of environmental kuznets curve ekc the causality analysis shows bidirectional causality between economic growth and co2 emissions this implies that economic growth can be boosted at the cost of environment

shackle on choice imagination and creativity hayekian foundations this paper develops a response to some of the criticisms that have been made of g l s shackle s analysis of human decision making because of its reliance on a cartesian account of the mind it is argued that the basis for a response can be found in the work on theoretical psychology developed by shackle s fellow subjectivist and one time phd supervisor f a hayek in particular the ideas advanced by hayek in his 1952 book the sensory order can be used to provide an account of the mind that avoids the shortcomings of shackle s cartesianism whilst still doing justice to his emphasis on genuine choice expectations and the role of creativity and the imagination in human decision making

the impact of royalty contract revision in a multistage strategic r d alliance this paper investigates the impact of royalty revision on incentives and profits in a two stage research and development r d stage and marketing stage alliance with a marketer and an innovator the marketer offers royalty contracts to the innovator we find that the potential for royalty revision leads to more severe distortions in the optimal initial royalty contracts offered by the marketer we show that if the innovator plays a significant role in the marketing stage the marketer should offer a low royalty rate initially and then revise the royalty rate up later otherwise she should do the opposite we identify two major effects of royalty revision first royalty revision provides the marketer with a flexibility to dynamically adjust royalty rates across the two stages of the alliance to better align the innovator s incentives this incentive realigning effect improves the marketer s profit second royalty revision makes it harder for the marketer to obtain private information from the innovator because the innovator worries that the marketer will take advantage of the information to revise the initial contract to a more favorable one to herself later this information revealing effect hurts the marketer s profit we characterize in what kind of alliances marketers would benefit the most from royalty revision so that managers should clearly establish the expectation for royalty revision and in what kind of alliances markerters would not benefit from royalty revision so that managers should commit not to revise the initial royalty contract with royalty contracts that are contingent on the r d outcome of the r d stage we find that contingent contract structure could be either substitutable by fully capturing the incentive re aligning effect or complementary by weakening the information revealing effect to royalty revision depending on whether the innovator plays a significant role in the marketing stage managers may need to use a contingent contract if possible either to replace or with royalty revision accordingly to improve profits this paper was accepted by kamalini ramdas entrepreneurship and innovation

uncertainties in macroeconomic assessments of low carbon transition pathways the case of the european iron and steel industry abstract the climate targets agreed in paris 2015 render deep decarbonization of energy and emission intensive industries crucial policy makers are interested in the macroeconomic consequences of such decarbonization pathways and often rely on integrated modelling studies however the underlying modelling assumptions and uncertainties often remain unquestioned or invisible although they may govern the models results for the case of a zero process emission pathway of the european iron and steel industry we demonstrate how different assumptions on different layers of uncertainty influence results we show that effects strongly depend on technology choice prevailing macroeconomic states as well as regional characteristics the underlying socio economic development and the climate policy trajectory seem to play a less important role particularly we find that the choice of model i e which macroeconomic theory strand it arises from influences the sign and magnitude of macroeconomic effects and thus should be well understood in terms of appropriate interpretations by both modelers and policy makers we emphasize that model assumptions should be transparent results sought as to be robust across a range of possible contexts and presented together with the conditions under which they are valid to that end co design and co production in research would support its relevance and applicability

choice under partial uncertainty this paper analyzes problems of choice under uncertainty where a decisionmaker does not use subjective probabilities the decisionmaker has a set of beliefs about which states are more likely than others but his beliefs cannot be represented as subjective probabilities three main kinds of decision rules are possible in this framework these are maximin type maximax type and choosing that action that gives the highest payoff in the state which the decisionmaker believes to be most likely the author replaces the commonly used merger of states axiom with a version of the sure thing principle copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association