environmental policy under oligopoly with endogenous market structure emission taxes under both fixed number oligopoly and endogenous market structure which are the most relevant market structures for policy issues are examined in the latter case and contrary to what is expected under imperfect competition the optimal tax could exceed marginal external damages which implies that externalities generated by oligopolistic firms could be optimally controlled by overinternalizing environmental damages under endogenous market structure a scheme consisting of a license fee and a second best underinternalizing emission tax can increase social welfare as compared to the use of a single emission tax exceeding marginal damages copyright 1995 by the editors of the scandinavian journal of economics

marketing margins and price uncertainty the case of the u s wheat market this paper seeks to determine the effect of changes in output price risk on marketing margins a theoretical model of price determination in a marketing channel with risk averse firms is developed this model shows that if marketing firms are competitive and decreasingly absolute risk averse then an increase in output price risk should result in higher expected marketing margins empirical evidence from the wheat marketing channel supports the theoretical model increased price variability significantly increases wheat marketing margins for both the farm mill margin and the mill retail margin these results suggest a potential benefit from price stabilization programs

on the credibility of big bang programs the paper examines cases in which from a production efficiency standpoint big bang programs are superior to gradualist programs nevertheless in the presence of i uncertainty about the exogenous shocks ii dependence of policy actions on the state of the economy and iii uncertain future of firms in the context of a generalized short run output contraction big bang programs can lead to inferior outcomes we argue that short term effects of a big bang on output and employment may endogenously weaken the credibility of the program this can induce perverse behaviour on the part of the economic agents leading to outcomes that are worse than those associated with a gradual program for example if the government is perceived to face a political constraints that make high rates of unemployment unacceptable then workers wage claims may be too high because of the perception of a government bailout of insolvent firms should times be tough

toward a theoretical model of voluntary overcompliance abstract we explain why some firms voluntarily overcomply with environmental regulation in our model all consumers value environmental quality but differ in their willingness to pay which depends on their income levels publicly available information on environmental performance of firms enables consumers to identify clean firms firms participate in a two stage duopoly game where they first choose their levels of cleaning technology and next engage in price competition the market gets segmented by income levels a minimum standard binding on the dirty firm has the effect of improving the performance of the cleaner firm a subsidy obtains the same competitive outcome

bivariate garch estimation of the optimal commodity futures hedge six different commodities are examined using daily data over two futures contract periods cash and futures prices for all six commodities are found to be well described as martingales with near integrated garch innovations bivariate garch models of cash and futures prices are estimated for the same six commodities the optimal hedge ratio ohr is then calculated as a ratio of the conditional covariance between cash and futures to the conditional variance of futures the estimated ohrs reveal that the standard assumption of a time invariant ohr is inappropriate for each commodity the estimated ohr path appears non stationary which has important implications for hedging strategies

taxation within cournot oligopoly abstract when the production of output causes pollution we often consider taxation as a means to reduce it this paper examines various forms of taxation to control pollution within cournot oligopoly it shows that two commonly used forms can actually increase pollution in contrast both of these forms unambiguously reduce pollution within the competitive model the paper provides conditions in terms of demand and technology that make taxation effective in the cournot oligopoly case another implication of the analysis is that outside the price taking framework asymmetry of cost functions is particularly important and deserves careful attention when we examine the effect of taxation

optimal tax policy under environmental quality competition this paper studies the socially optimal emission and commodity tax policy when consumers are willing to pay a price premium for environmentally friendlier variants of a commodity vertically differentiated in environmental quality the first best levels of quality can be obtained by a combination of a uniform ad valorem tax and an emission tax or a subsidy for buying green products the first best emission tax is higher than the social valuation of the positive externality associated with average environmental quality regardless of environmentally conscious consumers if only one instrument is available the second best emission tax is equal to the social valuation of the positive externality associated with average environmental quality a uniform ad valorem tax increases welfare only if the social valuation of the positive externality associated with average environmental quality is low enough

the impact of exchange rate volatility on international trade reduced form estimates using the garch in mean model abstract in this paper we use a multivariate garch in mean model of the reduced form of multilateral exports to examine the relationship between nominal exchange rate volatility and export flows and prices the model imposes rationality on perceived exchange rate volatility unlike conventional two step strategies tests are performed for five industrialized countries over the post bretton woods era we find that the garch conditional variance has a statistically significant impact on the reduced form equations for all countries for most of the countries the magnitude of the effect is stronger for export prices than quantities in addition the estimated magnitude of the impact of volatility on exports is not robust to using the conventional estimation strategy jel f41 f31

risk response in the beef marketing channel a multivariate generalized arch m approach a model of the farm retail price spread for beef is specified under rational expectations in which systematic risk response on the part of marketing intermediaries is allowed the three equation structural model contains potentially time varying risk terms in margin and supply equations which i approximate and estimate using a multivariate garch in mean approach the estimated model is used to infer relative risk premia in beef margins and to simulate short run equilibrium risk effects results indicate that price risk has at times had substantial impacts on farm and retail beef prices and production

innovation policy for directing technical change in the power sector this paper discusses policy instruments for redirecting technical change within the electricity sector to mitigate climate change first we unravel the mechanism behind directed technical change explaining why markets may underprovide innovations in expensive renewable technologies in comparison to innovations in energy efficient fossil fuel generators subsequently we characterize technical change in electricity generation technologies stressing the heterogeneity of knowledge spillovers both within and between clean electricity generation technologies we argue that there exists a rationale for a portfolio approach to innovation in the electricity sector i e optimal innovation policies are neither fully generic nor fully specific and they need to be adapted in response to new information learned by the government the existing innovation literature does not however provide a clear cut answer for designing such a policy we compare policy instruments and argue that public r d support to clean technologies either in the form of subsidies or prizes seems to be the prime candidate for implementing non generic innovation policy

the role of transportation costs in the economics of commodity markets transportation costs still play an important role in the economics of commodity markets in this paper i present a theoretical framework aimed at describing spatial arbitrage under uncertainty i analyze the effect of changing transport costs on different yet related variables volume of trade volatility of prices and levels of spatial price differentials as a tribute to enke and samuelson the model is referred to as the stochastic enke samuelson model it provides predictions for variables such as price volatilities or correlations which cannot be defined in the deterministic framework of the standard spatial price equilibrium model the statistical tests display a convergent array of evidence in favor of the model

hedging multiple price uncertainty in international grain trade commodity and freight futures contracts are analyzed for their effectiveness in reducing uncertainty for international traders a theoretical model is developed for a trader exposed to several types of risk ols hedge ratio estimation is compared to the sur and the multivariate garch methodologies explicit modeling of the time variation in hedge ratios via the multivariate garch methodology using all derivatives and taking into account dependencies between prices results in reductions in risk even after accounting for transaction costs results confirm that while the commodity futures contracts are important for hedging risk freight futures are a useful mechanism for reducing risk copyright 2000 oxford university press

the welfare effects of environmental taxation on a green market where consumers emit a pollutant this paper examines the welfare impact of emission taxes and subsidies in a green market where consumers emit a pollutant through their usage of products produced by duopolists for this purpose we employ a discrete continuous model including both consumer choice and usage of an environmentally differentiated product in a utility consistent framework the findings indicate that an emission tax is always welfare dominant over a subsidy on consumer purchases of the clean product because of its contribution to a reduction in environmental damage it does this by both inducing firms to improve the environmental qualities of their products and by constraining consumer usage of these products

environmental tax in a green market we examine the impact of an emission tax in a green market characterized by consumers environmental awareness and competition between firms for both environmental quality and product prices the unique aspect of this model comes from the assumption that the cost for an increase in quality is fixed we show that the emission tax improves welfare thanks to a decline in pollution and despite an accentuation of product differentiation the higher the marginal environmental damage is the higher the optimal tax will be the optimal tax however becomes lower than the marginal damage when the market is not too large finally when marginal environmental damage is not too low the optimal tax leads to a green product monopoly

marketing costs and instability in the international grain trade fixed factors in the international grain marketing system reduce flexibility and make adjustment to variable trade volumes difficult a theoretical model is used to show how this causes marketing costs with trade instability to exceed those occurring under stability also it is demonstrated that the marketing system increases the adverse effects of price variation on importers and exporters supporting empirical evidence primarily dealing with ocean shipping is presented the results suggest that stable trade volumes may reduce marketing costs significantly thus the marketing system should be considered in questions dealing with instability in the international grain trade

optimal production for manufacturers considering consumer environmental awareness and green subsidies abstract manufacturers provide products that have distinct green levels i e higher degree of environmental friendliness to satisfy consumer demands with different green preferences a product with a higher green level generate fewer emissions but have higher costs to encourage those manufacturers to produce environmentally friendly products a government can implement subsidy policies this paper focuses on the decision making problem faced by manufacturers to determine which levels of green products to produce and production quantities at each green level we develop an optimization model under oligopolistic competition considering green preferences and subsidies with the objective of profit maximization for the manufacturers we prove the existence and uniqueness of equilibrium and propose a converged algorithm with theory of finite dimensional variational inequality numerical results show that an increase of consumer environmental awareness will incentivize manufacturers to produce more green products with higher green levels but this does not necessarily lead to higher profits for the manufacturers moreover a well designed subsidy policy can not only generate more profits for manufacturers but also save subsidy investment for the government in addition with the changes of consumer environmental awareness or and subsidy policy manufacturers may obtain more profits even if the competition is more fierce

environmental policy in a green market this paper studies the impact of some frequently used environmental policies in a duopolistic market where purchasers are willing to pay more for less polluting goods when consumers differ in their environmental awareness a cleaner and a dirtier variant coexist in equilibrium the higher the average willingness to pay for the good the lower are variants unit emissions but the higher are industrial aggregate effluents a maximum unit emission standard reduces unit emissions of both variants but boosts firms sales and consequently increases industrial aggregate emissions as a result social welfare may be reduced we also explore the effects of technological subsidies and product charges including differentiation of charges

risk behavior and rational expectations in the u s broiler market this study examines the empirical implications of extending the rational expectations hypothesis reh to include price uncertainty a general estimation framework that incorporates both the restrictions on structural parameters and the variance covariance terms is developed garch time series processes are used to generate time varying expectations of both the means and the variances of exogenous variables the empirical application is with a quarterly model of the u s broiler industry the results indicate that the rational expectation of price variance is an important determinant of broiler supply a formal test indicates that the restrictions implied by the reh cannot be rejected

a copula garch approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate product price arbitrage and crude oil price abstract global liquefied petroleum gas lpg trade shows an increasing trend but is under researched this paper focuses on the lpg market and aims to model the dependence dynamics among lpg freight rates crude oil price and propane location arbitrage conditional copula garch model is applied to estimate dependencies different types of copulas with both time invariant and time varying dependence structures are fitted and their suitability has been compared the findings suggest that firstly baltic lpg blpg freight rate and the arbitrage between propane far east and middle east prices have conditional time varying dependence and the dependence is higher in market downturns furthermore blpg and the arbitrage between far east and us propane prices have symmetric dependence and such a relationship has strengthened since 2013 secondly middle east propane price is found to have the strongest correlation with crude oil prices compared to far east and us propane prices indicating higher sensitivity to crude oil price changes last but not least the relationship between crude oil and blpg is relatively weak and mostly positive

on the taxation of polluting products in a differentiated industry this paper studies the provision of environmental quality in an imperfectly competitive market it uses a vertical differentiation model in which the free entry equilibrium results in an under provision of quality the following main results are obtained first a commodity tax may have a significant impact on the market structure in this setting it tends to increase the number of active firms second through its impact on market structure a commodity tax may be welfare improving even though quality creates a positive externality third a commodity tax may bring about an equilibrium that is arbitrarily close to a pareto efficient allocation

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

pollution taxes and pollution abatement in an oligopoly supergame abstract this paper investigates the effects of an emissions tax on the incentives for oligopolists to acquire alternative pollution abatement technologies the analysis is conducted in terms of a repeated game and it is demonstrated that there are circumstances in which the firms may reject the option of acquiring the pollution abatement equipment even when this lowers their production costs

estimation of the optimal futures hedge standard approaches to designing a futures hedge often suffer from two major problems first they focus only on minimizing risk so no account is taken of the impact on expected return second in estima ting the hedge ratio no allowance is made for time variation in the distribution of cash and futures price changes this paper describes a technique for estimating the optimal futures hedge that corrects these problems and illustrates its use in hedging treasury bonds with t bond futures copyright 1988 by mit press

extent and possible causes of intrayear agricultural commodity price volatility wheat corn rice soybeans and cotton experienced higher volatility in the second half of the 2000s for the sample at hand the unit root tests only validate a new period of high volatility for wheat and cotton if in the next couple of years however corn rice and soybeans maintain their higher volatility a new period of high volatility may also be validated statistically regarding the factors driving the intrayear volatility gmm estimates show that commodity market fundamentals i e the stock to use ratio and to a lesser extent the degree of internationalization are the most systematically statistically significant coefficients among commodities over time consecutive low stock to use ratios and a thin international market provoke typically high volatility speculative activity and liquidity in the agricultural derivative market have a stabilizing effect on the spot price if any finally common macro factors significantly impact volatility especially the volatility of petrol and of exchange rates their dispersion importance over the sample is quite sizeable however it is difficult to establish a link between on the one hand loose monetary policy business cycle and inflation and on the other hand commodity price volatility as the sign of the estimated coefficient changes depending on the commodity and the estimated elasticities are quite low

a market equilibrium analysis of the impact of risk on the u s rice industry an economic model of supply demand for u s rice suggests that increases in risk result in decreased acreage and increased marketing margins in a market equilibrium context the empirical results also suggest rice production and rice prices are more responsive to changes in risk faced by marketing firms than changes in risk faced by producing firms

information and the provision of quality differentiated products governments often enact information provision policies to overcome asymmetric information of product qualities we show that increasing awareness among consumers of the quality of a good can but will not always encourage firms to produce goods with higher levels of quality even if product qualities increase social welfare may fall as information provision results in too much product differentiation we show that the effectiveness of emission taxes and output subsidies are affected by the level of consumer knowledge of product quality and we identify conditions under which information provision is welfare enhancing relative to these price instruments jel l15 q58 i introduction in the past 20 years consumers have become increasinglyconscious ofthe undesirable health and safety attributes of the products they consume and surveys suggest that a growing percentage of consumers are willing to pay more for higher quality products such as organic foods and household cleaners and detergents that contain less toxic ingredients guber 2003 other high quality products facing higher demand include energy efficient products like extended life lightbulbs and improved home insulation often these highquality products provide private benefits that are excludable to buyers as well as public benefits that are nonrival and nonexcludable for example reduced pesticide and chemical residue on food may lower the risk of cancer while also reducing contaminated run off that degrades ground and surface water quality extended life lightbulbs and improved home insulation may reduce an individual s utility bill while also reducing greenhouse gas emissions from lower energy consumption although interest in these types of high quality productsisgrowing demand isoften relatively small market shares of organic produce for

causality and price discovery an application of directed acyclic graphs directed acyclic graphs dag s and error correction models ecm s are employed to analyze questions of price discovery between spatially separated commodity markets and the transportation market linking them together results from our analysis suggest these markets are highly interconnected but it is the inland commodity market that is strongly influenced by both the transportation and commodity export markets however the commodity markets affect the volatility of the transportation market over longer horizons our results suggest that transportation rates are critical in the price discovery process lending support for the recent development of exchange traded barge rate futures contracts

the econometric analysis of models with risk terms summary in this paper we have attempted to provide an integrated approach to the estimation of models with risk terms it was argued that there exist orthogonality conditions between variables in the information set and higher order moments of the unanticipated variable density these could be exploited to provide consistent estimators of the parameters associated with the risk term specifically it was recommended that an iv estimator should be applied with instruments constructed from the information set four existing methods commonly used to estimate models with risk terms are examined and applications of the techniques are made to the estimation of the risk term in the us c exchange market and the effects of price uncertainty upon production

performance versus design standards in the regulation of pollution abstract this paper presents a model of pollution regulation in an oligopolistic market two forms of regulation are considered performance standards which regulate pollution directly by an upper limit on emissions and design standards which regulate pollution indirectly by a minimum usage requirement of an enissions control input equilibria under each regulatory regime are characterized a welfare analysis reveals that performance standards are preferred to design standards if the objective is minimization of emissions plus pollution damage costs however the comparison is indeterminate if the regulator s objective is total surplus less pollution damage an equivalence between emissions taxes and performance standards is established so the above welfare comparisons also apply to emissions taxes versus design standards

endogenous quality choice price vs quantity competition two versions of a vertical product differentiation model one with fixed and the other with variable costs of quality are analyzed to study how the hypotheses of price versus quantity competition affect equilibrium solutions product differentiation arises under all the scenarios considered contrasting previous findings of symmetric quality choices under cournot behavior however to relax harsher market competition firms differentiate more under bertrand than under cournot a simple welfare measure also indicates that the economy is better off when firms compete on prices with fixed costs of quality not only consumer but also producer surplus is higher under price competition copyright 1993 by blackwell publishing ltd

statistical significance of indicators of efficiency and incentives examples from west african agriculture indicators of efficiency and incentives derived from trade theory such as the domestic resource cost coefficient drc and effective protection ep are generally presented as simple means analysis of their distributions using farm data on millet and sorghum production from west africa shows them to be highly variable and in some cases to be significantly skewed the analysis also shows the indicators to be highly elastic to changes in such parameters as input and output prices if this variability is not considered when making inferences from such data policy recommendations can be seriously misleading because they are based on different farming populations

marketing margins market power and price uncertainty this paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food processing industry facing output price uncertainty the framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry oligopoly oligopsony price distortions and an output price risk component the empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs the principal finding is that while farm wholesale margins are more consistent with competitive performance now than they were fifteen years ago the output price risk component persisted throughout the sample period

the effect of barge and ocean freight price volatility in international grain markets this paper looks at the potential role of time varying volatility of mississippi river barge and ocean freight prices on commodity prices in illinois at the us gulf and in rotterdam using a vector error correction garch in mean model the model is used to infer the extent to which transportation price risk affects price dynamics in international grain markets results from a simulation exercise indicate that both barge and ocean price volatility influence grain prices but barge price volatility tends to have a greater impact on grain prices and marketing margins than that arising from ocean price volatility consistent with most studies that evaluate the role of risk in marketing channels results here suggest that a reduction in barge rate risk would reduce marketing margins between illinois and the us gulf and between the us gulf and rotterdam the existence of an ocean freight futures contract coupled with the lack of a futures contract for barge rates may be partially responsible for the finding that barge rates have a significant influence on grain prices and contribute most to wide marketing margins found throughout the international grain marketing system

duopoly and quality standards abstract in the absence of sunk costs a low quality producer benefits from a mildly restrictive quality standard whereas a high quality producer suffers from it consumers welfare increases if the firm producing the higher quality does not increase its quality significantly in response to the increase in quality by its rival a sufficiently severe standard causes exit from the industry when there are no sunk cost the high quality producer exits first