national co2 policy and externalities some general equilibrium results for switzerland abstract switzerland following the kyoto agreement plans to reduce co 2 emissions by 10 over the next decade with a tax on the use of fossil fuels this policy while having a marginal effect on global co 2 emission levels will have a positive effect on local environmental quality however since different sources of energy produce different local external effects a uniform co 2 tax is ill targeted this paper shows that a policy setting tax rates equal to the lower bounds of the estimated local marginal external effects would reduce the national co 2 level by 30 using a computable general equilibrium model of the swiss economy it also finds substantial efficiency gains of pigovian taxes as compared to a uniform co 2 tax

the compromise effect in action lessons from a restaurant s menu the compromise effect refers to individuals tendency to choose intermediate options its existence has been demonstrated in a large number of hypothetical choice experiments this paper uses field data from a specialties restaurant to investigate the existence and strength of the compromise effect in a natural environment despite the presence of many factors that potentially weaken the compromise effect e g a very large choice set the opportunity to choose familiar options we find evidence for it both in descriptive statistics and regression analyses options which become a compromise after a change in the choice set gain on average five percent in market share we also find that the compromise effect is especially pronounced in groups while for single customers it is statistically insignificant

what are the farm level impacts of malawi s farm input subsidy program a critical review this article provides a critical analysis of the current frontier of research evaluating malawi s farm input subsidy program fisp whose main objectives are increasing maize production promoting household food security and enhancing rural incomes we focus on farm level studies in malawi identifying consistent and contrasting research results in order to draw important policy lessons and provide suggested avenues for future research while national production estimates suggested dramatic increases in maize production and productivity during the years of the fisp the farm level studies found relatively modest increases in maize production and yields over the same period consistent with the farm level results of modest maize production increases there has been a relative increase in real maize prices and the country continued to import maize during most of the subsidy program years furthermore there is evidence that better off households gained substantially more than poorer households when they participated in the program together these findings cast some doubt on the fisp s ability to reduce food insecurity and poverty we propose a number of policy lessons and suggestions for rigorous investigation including research that directly measures the causal impacts of the fisp program on poverty in malawi

the economy wide impacts and risks of malawi s farm input subsidy program we estimate the impact of malawi farm input subsidy programme using an economywide approach we find potentially substantial net benefits with indirect benefits accounting for about two fifths of total benefits due to these indirect benefits the cut off

dis incentivizing sustainable intensification the case of zambia s maize fertilizer subsidy program abstract poor and declining soil fertility is a major constraint to increased cereal yields in sub saharan africa while input subsidy programs isps for inorganic fertilizer are a popular and expensive tool used by african governments to increase smallholder farmers cereal yields far fewer resources are devoted to promoting other soil fertility management sfm practices that can improve soil health increase cereal yield response to inorganic fertilizer and support sustainable agricultural intensification moreover little is known about how isps affect farmers use of such sfm practices we examine whether and to what extent household participation in zambia s maize fertilizer subsidy program affects the household s use of fallowing intercropping crop rotation and animal manure using nationally representative panel survey data from zambian smallholder farm households we find that zambia s maize fertilizer subsidy program reduces the probability and extent of fallowing and intercropping of maize with other crops in addition we find some evidence that the program induces an increase in continuous maize cultivation on the same plot over time however the weight of the evidence suggests no statistically significant isp effects on the use of animal manure the analysis uses the mundlak chamberlain device to control for time invariant unobserved heterogeneity and addresses concerns related to the endogeneity of selection into the subsidy program with an instrumental variables control function approach overall our results suggest that zambia s maize fertilizer subsidy program may have dis incentivized sustainable intensification rather than promoted it

term premia on euro rates there are at least two statistically firm results regarding international money and capital markets the first is the theory of interest rate parity is empirically valid for euro interest rates 8 the second is forward exchange rates are poor very likely biased predictors of future spot exchange rates 1 3 10 12 13 the former is a comforting finding in that it assures there are no unexploited arbitrage profits the latter is troubling to some because it might be a symptom of an inefficient market that interest rate parity holds suggests international exchange and money market arbitrageurs are fully exploiting all profit opportunities they are behaving rationally that forward exchange rates fail to predict future spot rates at least unbiasedly suggests the existence of some unknown mechanism which robs predictive ability in a naive rational expectations view of the world the failure of forward rates to be unbiased predictors of future spot rates implies either that there is some difference between interest rate pairs other than inflationary expectations or that forward rates do not capture expected inflation differences in any simple way see 9 this paper addresses the first issue if there are differences in interest rate pairs which do not solely reflect expected inflation divergences this must show up as a difference in real interest rates such could be the result of actual instantaneous real rates of identical risk being unequal in magnitude or what is more likely differences in term premia between interest rate pairs when periods greater than say one day are used in interest rate parity and forward rate prediction tests if there are differential term premia in interest rate pairs of say one month or longer then forward exchange rates will mispredict the future spot exchange rate by that margin

valuation in the lab experimental methods have proven useful to explore the power and limits to nonmarket valuation through stated preference methods we now understand better how people learn about and react to the incentives institutions and information created by surveys this paper briefly reviews topics in experimental valuation including ex ante bias corrections ex post bias calibration and examining the circumstances that strengthen or weaken the economist s presumption of rational valuation

unraveling the effect of targeted input subsidies on dietary diversity in household consumption and child nutrition the case of malawi abstract malawi s farm input subsidy program fisp has generated significant attention with several studies showing an increase in maize production since the inception of the program in 2005 but stagnating poverty levels in this study i examine whether and how fisp has affected dietary diversity in household food consumption and child nutrition i find that children under the age of five living in households that received a voucher between 2008 and 2013 for the purchase of fertilizer have a statistically significantly higher at the 1 level weight for age weight for length height and body mass index than children living in non recipient households i also find that households having received a voucher consume cereals nuts vegetables meats and fruits more frequently than non recipient households the analysis uses two stage least squares to account for the endogeneity of selection into the fertilizer subsidy program i test the robustness of these results using child fixed effects the results indicate that past studies evaluating fisp failing to account for the positive gains in child nutrition and household food consumption diversity may be underestimating its benefits

context dependent preferences and innovation strategy disruptive innovations introduce a new performance dimension into a product category but often suffer from inferior performance on key performance dimensions of their existing substitutes hence the followers of these innovations face an important decision to make they must choose to improve the new technology either on the key performance dimension shared with the old technology or on the new performance dimension this paper investigates which path firms should choose when they face such a dilemma in the absence of any cost or capability issues in doing so we integrate customer response into the theory of technological evolution and allow preferences on the product choices to be context dependent we show that context dependent preferences may encourage the follower to improve the new technology on the new performance dimension later we extend our game to a dynamic one and show that the context dependent preferences may cause the pioneer to innovate less this paper was accepted by j miguel villas boas marketing

input subsidy programs in sub saharan africa a synthesis of recent evidence input subsidy programs have once again become a major plank of agricultural development strategies in africa ten african governments spend roughly us 1 billion annually on input subsidy programs isps amounting to 28 6 of their public expenditures on agriculture this article reviews the microlevel evidence on isps undertaken since the mid 2000s we examine the characteristics of subsidy beneficiaries crop response rates to fertilizer application and their influence on the performance of subsidy programs the impacts of subsidy programs on national fertilizer use and the development of commercial input distribution systems and finally the impact of isps on food price levels and poverty rates the weight of the evidence indicates that the costs of the programs generally outweigh their benefits findings from other developing areas with a higher proportion of crop area under irrigation and with lower fertilizer prices factors that should provide higher returns to fertilizer subsidies than in africa indicate that at least a partial reallocation of expenditures from fertilizer subsidies to r d and infrastructure would provide higher returns to agricultural growth and poverty reduction however because isps enable governments to demonstrate tangible support to constituents they are likely to remain on the african landscape for the foreseeable future hence the study identifies ways in which benefits can be enhanced through changes in implementation modalities and complementary investments within a holistic agricultural intensification strategy among the most important of these are efforts to reduce the crowding out of commercial fertilizer distribution systems and programs to improve soil fertility to enable farmers to use fertilizer more efficiently the challenges associated with achieving these gains are likely to be formidable

a review essay about foundations of neuroeconomic analysis by paul glimcher neuroeconomics aims to discover mechanisms of economic decision and express them mathematically to predict observed choice while the contents of neuroeconomic models and evidence are obviously different than in traditional economics some of the goals are identical to explain and predict choice the effects of comparative statics and perhaps make interesting new welfare judgments that are defensible to this end paul glimcher s important book carefully describes how economics psychological and neural levels of explanation can be linked a structure which has been successful in visual neuroscience as glimcher shows the neural evidence is quite strong for a process of learning valuations through prediction error and a simple model of neural valuation and comparison that corresponds to random utility though subject to normalization which produces menu effects there is also rapidly growing evidence for more complicated constructs in behavioral economics including prospect theory s account of risky choice hyperbolic time discounting level k models of games and social preferences corresponding to internal reward based on what happens to other agents

the collapse of purchasing power parities during the 1970 s one of the striking facts concerning the relationship beiveen prices and exchange rates during the 1970 s has been the dismal performance of the predictions of the simple versions of the purchasing power parity doctrine ppp that doctrine in its absolute version states that the equilibrium exchange rate between domestic and foreign currencies equals the ratio of domestic to foreign price levels the relative version of the doctrine relates equilibrium changes in exchange rates to changes in the ratio of domestic to foreign prices during the 1970 s short run changes in exchange rates bore little relationship to short run differentials in national inflation rates and frequently divergences from purchasing power parities have been cumulative this paper reviews and analyzes the empirical record of exchange rates and prices during the 1970 s and the analysis is based on the experience of the dollar pound the dollar frecch franc and the dollar dm exchange rates section 2 presents the evidence on ppp during the 1970 s and contrasts it with the evidence from the 1920 s a period during which the doctrine held up reasonably well this analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy the evidence regarding devia tions from purchasing power parities is also relevant for determining whether there is a case for managed float section 3 attempts to explain what went wrong with

aggregate consumer behaviour and the measurement of inequality this paper presents an approach to inequality measurement based on an econometric model of aggregate consumer behaviour the novel feature of this model is that systems of individual demand functions can be recovered uniquely from the system of aggregate demand functions we present methods for evaluating social welfare based on an explicit social welfare function this social welfare function incorporates measures of individual welfare based on indirect utility functions for all consumer units we develop indexes of inequality based on actual and potential levels of social welfare

energy consumption financial development and economic growth in india new evidence from a nonlinear and asymmetric analysis this paper investigates the asymmetric relationship between energy consumption and economic growth by incorporating financial development capital and labour into a production function covering the indian economy from 1960q1 2015q4 the nonlinear autoregressive distributed lag bounds testing approach is applied to examine the asymmetric cointegration between the variables an asymmetric causality test is also employed to examine the causal association between the considered variables the results indicate cointegration between the variables in the presence of asymmetries the asymmetric causality results show that only negative shocks in energy consumption have impacts on economic growth in the same vein only negative shocks in financial development have impacts on economic growth by contrast symmetrically capital formation causes economic growth finally over the study period a neutral effect exists between the labour force and economic growth in india the implications of these results for growth policies in india are also discussed

quantity discount dependent consumer preferences and competitive nonlinear pricing abstract producers of consumer packaged goods often offer several package sizes of the same product and charge a lower unit price for a larger size in this article the authors investigate the quantity discount effect or the phenomenon that consumers derive transaction utility from the unit price difference between a small and a large package size of the same product the authors propose a modeling framework composed of a demand side model and a supply side model the empirical results suggest that quantity discount induced gains or losses have a significant impact on consumer buying behavior the authors also find a substantial amount of structural heterogeneity that is some consumers perceive quantity discounts as gains whereas others perceive quantity discounts as losses conversely the supply side analysis suggests that manufacturers in the empirical application do not consider quantity discount effects when setting prices through a series of policy experiments the authors show that by accou

a decision support model for selecting product service benefit positionings abstract the art and science of successful product service positioning generally hinges on the firm s ability to select a set of attractively priced consumer benefits that are valued by the buyer distinctive in one or more respects believable deliverable and sustainable under actual or potential competitive abilities to imitate neutralize or overcome in the target markets that the firm selects while easily said meeting all of these conditions is often the exception rather than the rule for many years the ubiquitous quadrant chart has been used to provide a simple graph of product service benefits usually called product service attributes described in terms of consumers perceptions of the importance of attributes to brand supplier choice and the performance of competing firms on these attributes this paper describes a model that extends the quadrant chart concept to a decision support system that optimizes a firm s market share for a specified product service in particular we describe a decision support model that utilizes relatively simple marketing research data on consumers judged benefit importances and supplier performances on these benefits to develop message components for specified target buyers a case study is used to illustrate the model the study deals with developing advertising message components for a relatively new entrant in the us air shipping market we also discuss more briefly management reactions to application of the model to date and areas for further research and model extension

designing price contracts for boundedly rational customers does the number of blocks matter when designing price contracts one of the major questions confronting managers is how many blocks there should be in the contract we investigate this question in the setting of a manufacturer retailer dyad facing a linear deterministic consumer demand theoretical marketing models predict that the manufacturer s profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase however increasing the number of blocks to three yields no incremental profits we test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer s share of profits surprisingly having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits we show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer s utility we also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple block contract

could ralph nader s entrance and exit have helped al gore the impact of decoy dynamics on consumer choice abstract people are frequently faced with making a new choice decision after a preferred option becomes unavailable prior research on the attraction effect has demonstrated how the introduction of an option into a choice set increases the share of one of the original options the authors examine the related but previously unaddressed issue of whether the unexpected exit of an option from a choice set returns the choice shares of the original options to the status quo in a series of experiments they observe that when an option turns out to be unselectable following a choice problem in which it was selectable the choice shares of the remaining options are predictably different from those of a choice problem in which the option was unselectable from the start they also observe that this attraction effect due to the disappearance of a decoy is likely a consequence of changes in the importance of decision criteria they conclude with a discussion of the theoretical and managerial implications of the research

power to the principals an experimental look at shareholder say on pay voting with recent legislation mandating that publicly traded corporations submit their ceos compensation for a nonbinding shareholder vote a systematic understanding of shareholder preferences has neve

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

measuring food insecurity the frequency and severity of coping strategies abstract defining and interpreting food security and measuring it in reliable valid and cost effective ways have proven to be stubborn problems facing researchers and programs intended to monitor food security risks this paper briefly reviews the conceptual and methodological literature on food insecurity measurment describes a particular method for distinguishing and measuring short term food insecurity at the household level and discusses ways of generalizing the method the method developed enumerates the frequency and severity of strategies relied on by urban households when faced with a short term insufficiency of food this method goes beyond more commonly used measures of caloric consumption to incorporate vulnerability elements of food insecurity as well as the deliberate actions of household decision makers when faced with food insufficiency

a rule of one a rule ofone one rational person is enough to make a market one irrational person is enough to break a game let me explain the power of the market as an exchange institution rests in its ability to move resources from lowto highvalued uses the market works if one person is rational enough to look for arbitrage opportunities among the other irrational players he buys low and sells high the market collects and disseminates this information such that others

state conditional fertilizer yield response on western kenyan farms 15 16 17 we acknowledge with gratitude support from the rockefeller foundation the united states agency for 18 international development usaid leadership enhancement in agriculture program leap and the 19 coupled natural and human systems program of the biocomplexity initiative of the national science 20 foundation through grant bcs 0215890 the world agroforestry center icraf graciously hosted 21 the lead author for part of the research and provided soil test results we are also grateful to james

carbon pricing and energy efficiency improvement why to miss the interaction for developing economies an illustrative cge based application to the pakistan case abstract carbon energy taxes and energy efficiency improvement are studied well in the recent years for their potential adverse impacts on economy especially for lost production and international competitiveness and rebound effects however little attention has been paid to investigate them jointly which can not only prevent fall of energy services cost and thereby rebound effect but reduce the associated macroeconomic costs this study thus employs a 20 sector cge model to explore separately the impacts of carbon tax and its coordinated implementation with energy efficiency improvement on the pakistan economy the country underwent enormous pressure of energy security issues as well as climate change fallouts in the last couple of years and can be regarded as a suitable candidate for energy environmental conservation policies to be considered at a broader context with more concrete efforts the simulation results show that the impact of carbon tax on gdp is negative but resulting reductions in pollutant emissions are relatively high moreover the gdp is expected to grow comparatively positive when analyzed with improvements in energy efficiency with even higher decline in energy consumption demand and so emissions this simultaneous economic and environmental improvement would thus have positive implications regarding sustainable development of the country

market boundaries and product choice illustrating attraction and substitution effects what happens to the share of choices each item receives when the choice set boundaries are extended by adding a new item that is extremely good on one dimension but poor on the others first there is a substitution effect whereby the new item takes choice share mainly from similar items in the set second there is an attraction effect resulting in a general shift of preference toward the added item experimental studies show that choice patterns conflict with current theoretical and common sense ideas about the effect of added alternatives on choice

the decoy effect in relative performance evaluation and the debiasing role of dea abstract there is overwhelming evidence that performance ratings and evaluations are context dependent a special case of such context effects is the decoy effect which implies that the inclusion of a dominated alternative can influence the preference for non dominated alternatives adapting the well known experimental setting from the area of consumer behavior to the performance evaluation context of data envelopment analysis dea an experiment was conducted the results show that adding a dominated decision making unit dmu to the set of dmus augments the attractiveness of certain dominating dmus and that dea efficiency scores discriminating between efficient and inefficient dmus serve as an appropriate debiasing procedure the mention of the existence of slacks for distinguishing between strong and weak efficient dmus also contributes to reducing the decoy effect but it is also associated to other unexpected effects

salience and consumer choice we present a theory of context dependent choice in which a consumer s attention is drawn to salient attributes of goods such as quality or price an attribute is salient for a good when it stands out among the good s attributes relative to that attribute s average level in the choice set or more broadly the choice context consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality price ratios the model accounts for a variety of disparate evidence including decoy effects and context dependent willingness to pay it also suggests a novel theory of misleading sales

findings biased but efficient an investigation of coordination facilitated by asymmetric dominance in several marketing contexts strategic complementarity between the actions of individual players demands that players coordinate their decisions to reach efficient outcomes yet coordination failure is a common occurrence we show that the well established psychological phenomenon of asymmetric dominance can facilitate coordination in two experiments thus we demonstrate a counterintuitive result a common bias in individual decision making can help players to coordinate their decisions to obtain efficient outcomes further limited steps of thinking alone cannot account for the observed asymmetric dominance effect the effect appears to be due to increased psychological attractiveness of the dominating strategy with our estimates of the incremental attractiveness ranging from 3 6 a learning analysis further clarifies that asymmetric dominance and adaptive learning can guide players to an efficient outcome

unraveling the choice format effect a context dependent random utility model a few recent studies report that preferences elicited from a two alternative choice format are different from those elicited from a three alternative choice format when both choice set designs contain a status quo option we hypothesize that the choice format effect might disappear when we estimate a random utility model rum that allows for context dependent preferences based on the estimated context dependent rum we find that the choice format effect is likely the result of two offsetting effects a task complexity effect that increases the probability of choosing the status quo option and a preference matching effect which decreases the probability

the effect of local consideration sets on global choice between lower price and higher quality a set of alternatives under consideration is often divided into subsets or local sets by some external e g product display format at the store or internal e g a decision rule factor we propose that the manner in which a global set of alternatives varying in price and quality is divided into local sets can have a systematic effect on consumer choice between a lower price alternative and a higher quality alternative three such effects are investigated 1 consumers who first choose from pairs of products a b b c a c and then choose from the set of all three products a b c are more likely to prefer the cheapest alternative than consumers who only choose from the complete set 2 the choice share of a low price low quality brand is greater when alternatives varying in price quality and features are displayed by brand i e each display presents different models of one brand as compared to a display by feature level i e each display presents comparable models of different brands and 3 consumers considering a pair of two option local sets each consisting of different brands and feature levels e g a feature enhanced model of a low quality brand vs a basic model of a high quality brand are more likely to select a feature enhanced model from the global set of four options than those who consider the same alternatives in other local set configurations or consider only the global set these predictions were supported in seven studies which also provided insights into the boundaries of the effects focusing on the paired comparison effect we discuss the theoretical and practical implications of the findings

developing food labelling strategies multi level labelling abstract labelling is an important cue for consumers as it helps to quickly communicate information about a product or production process however the majority of labels on the market are binary such as labels that indicate whether a product was produced using animal welfare friendly standards or not or whether it was produced organically or not yet there are many intermediate qualities that binary labels do not display in turn this could lead to a market failure a multi level label can show different process standards of products explicitly nonetheless before launching a multi level labelling system it should be tested if a multi level labelling system can shift market shares in favour of the labelled products using a consumer study with 1538 german consumers and the example of animal welfare the shares of product choices are calculated two comparisons of the shares of product choices will be made one between no label and a binary label and the other between no label and a multi level label the results suggest that a multi level labelling system achieves higher market shares therefore boosts sustainability attributes and can result in higher revenues or sales the results deliver important information for policymakers and industry

solow meets leontief economic growth and energy consumption abstract this paper proposes a methodology that integrates a growth model with an input output model to analyze the impacts of economic growth on the consumption of energy the integration between the models is carried out by calibrating the growth module which incorporates energetic inputs renewable and nonrenewable in the production function and implementing shocks by the supply side capital labor renewable and nonrenewable energy in the input output model this allows us to verify the pattern of energy consumption for each sector in the input output matrix we apply this methodology to study the energy consumption of eleven economic sectors in brazil using data from the brazilian national accounts and input output matrix ibge and the national energy report ben we conduct experiments involving changes in technological progress growth rate extraction and regeneration rates of both renewable and nonrenewable resources and population growth to analyze the impact of changes in the parameters of the model on the sectoral output growth rate and consequently on the consumption of energy in each economic sector

the attraction effect and its explanations abstract the attraction effect violates choice consistency one of the central assumptions of economics i present a risky choice experiment to test it and disentangle some of its explanations i find the attraction effect but in a smaller magnitude than previously thought i uncover a range effect that shows that people weight more attributes whose range increases i also show that the aggregate results hide considerable heterogeneity between subjects

a computable general equilibrium model of energy economy and equity interactions in pakistan this article introduces a computable general equilibrium model of the pakistan economy some major extensions to a standard neoclassical model have been made to capture the interlinkages between economy energy and equity the model has been designed mainly to carry out policy oriented short term studies especially for the energy sector an illustrative application of the model shows its capability to provide detailed information which are useful in analysis of a policy issue

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

assessing the macroeconomic impact of a healthcare problem the application of computable general equilibrium analysis to antimicrobial resistance there is a positive relationship between the health of a nation and its economic prosperity however in evaluating health care economists typically concentrate on the economic impact only to the health care sector which may mis specify the social costs and benefits of a disease or intervention this paper demonstrates the value of using a macroeconomic approach to modelling a major health problem using the context of antimicrobial resistance and the application of the computable general equilibrium technique this approach is described in detail and its added value demonstrated in the case of amr

a context dependent model of the gambling effect this paper presents a context dependent theory of decision under risk the relevant contextual factor is the presence of a riskless lottery in a preference comparison the theory only deviates from expected utility if the set of options contains both riskless and risky lotteries the main motivation for the theory is to explain the gambling effect contrary to previous theories of the gambling effect the present theory is consistent with stochastic dominance it can however violate transitivity the theory allows for a decomposition of the interaction between risk aversion and gambling aversion and thereby extends the classical arrow pratt measure of risk aversion

a theory of kindness reluctance and shame for social preferences abstract recent experimental evidence from dictator games suggests that proposers take money from receivers when taking is an option and that many proposers are reluctant to play the game this paper proposes a behavioral model with two components a choice correspondence that depends on the endowed allocation and the menu of allocations available and a preference ordering over endowment menu pairs the choice correspondence governs behavior when the proposer actually plays a game and the preference ordering governs the proposer s willingness to play a particular game the model is then used to characterize notions of proposer kindness reluctance and shame

soil quality and fertilizer use rates among smallholder farmers in western kenya studies of fertilizer use in sub saharan africa have been dominated by analyses of economic and market factors having to do with infrastructure institutions and incentives that prevent or foster increased fertilizer demand largely ignoring how soil fertility status conditions farmer demand for fertilizer we apply a switching regression model to data from 260 farm households in western kenya in order to allow for the possibility of discontinuities in fertilizer demand based on a soil carbon content scc threshold we find that the usual factors reflecting liquidity and quasi fixed inputs are important on high scc plots but not on those with poorer soils external inputs become less effective on soils with low scc hence the discernible shift in behaviors across soil quality regimes for many farmers improved fertilizer market conditions alone may be insufficient to stimulate increased fertilizer use without complementary improvements in the biophysical conditions that affect conditional factor demand

negative rebound and disinvestment effects in response to an improvement in energy efficiency in the uk economy this paper uses a computable general equilibrium cge framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the uk national economy previous work for the uk has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero the research reported in this paper involves carrying out a systematic sensitivity analysis where relative price sensitivity is gradually introduced into the system focusing specifically on elasticities of substitution in production and trade parameters in order to determine conditions under which rebound effects become a likely outcome the main result is that while there is positive pressure for rebound effects even where direct and indirect demands for energy are very price inelastic this may be partially or wholly offset by negative income competitiveness and disinvestment effects which also occur in response to falling energy prices the occurrence of disinvestment effects is of particular interest these occur where falling energy prices reduce profitability in domestic energy supply sectors leading to a contraction in capital stock in these sectors which may in turn lead to rebound effects that are smaller in the long run than in the short run a result that runs contrary to the predictions of previous theoretical work in this area

the influence of serotonin deficiency on choice deferral and the compromise effect abstractpsychological and physiological states such as mood hunger stress and sleep deprivation are known to affect decision making processes and therefore crucially influence consumer behavior a possible biological mechanism underlying the observed variability of consumer behavior is the context sensitive variation in the levels of neuromodulators in the brain in a series of four experimental studies the authors pharmaceutically reduce the levels of the neurotransmitter serotonin in the brain to diminish the availability of subjects cognitive resources in doing so they study how serotonin brain levels influence 1 subjects tendency to avoid buying and 2 consumers preference for product options positioned as a compromise in a given choice set rather than for more extreme alternatives i e the compromise effect using realistic product choice scenarios in a binding decision framework they find that a reduction of brain serotonin levels leads to choice deferral and decreases the compromise

behavioral and welfare effects of tournaments and fixed performance contracts some experimental evidence using experimental economics we compare the efficiency and welfare effects of tournaments and fixed performance contracts our subjects agents were generally better off under fixed performance contracts but the advantage of the fixed performance contract disappears if the relative magnitude of the standard deviation of the common shock exceeds a critical value efficiency wise agents tend to exert higher effort under fixed performance contracts on average additionally an increase in the common shock standard deviation appeared to be associated with lower effort under tournaments our results shed light on the potential impact of legislative proposals to ban tournament contracts

subsidies and crowding out a double hurdle model of fertilizer demand in malawi this article uses a double hurdle model with panel data from malawi to investigate how fertilizer subsidies affect farmer demand for commercial fertilizer the article controls for potential endogeneity caused by the nonrandom targeting of fertilizer subsidy recipients results show that on average 1 additional kilogram of subsidized fertilizer crowds out 0 22 kg of commercial fertilizer but crowding out ranges from 0 18 among the poorest farmers to 0 30 among relatively nonpoor farmers this indicates that targeting fertilizer subsidies to the rural poor is likely to maximize the contribution of the subsidy program to total fertilizer use

the impact of deal proneness on wtp estimates in incentive aligned value elicitation methods even after controlling for hypothetical biases some incentive aligned value elicitation methods still produce different willingness to pay wtp estimates in this study we compare wtp estimates from three incentive aligned value elicitation methods real choice experiment rce real double bounded dichotomous contingent valuation rcvm and becker degroot marschak auction bdm we find that participants aggressiveness in obtaining low prices i e deal proneness influences wtp estimates in the bdm auction but not those elicited from the rce and rcvm the participants with higher levels of deal proneness tend to submit lower bids in the bdm auction the discrepancies in wtp estimates between different incentive aligned procedures are narrower for participants with lower levels of deal proneness our results indicate that the bids in bdm auctions may be understated and the auction mechanism may induce the gambling behavior of people who are deal prone that is whether the bdm auction is truly incentive aligned is again called into question we also discuss the practical implications for food retailers

a public policy aid for bioenergy investment case study of failed plants abstract recent failures of renewable energy plants have raised concerns regarding government s role in providing credit subsidies and have harmed the long run development of renewable energy the major reason for these failures lies in government loan appraisers not having a model that addresses these root causes and instead relying on traditional net present value npv analysis what is required is a model representing entrepreneurs investment decision processes when faced with uncertainty irreversibility and flexibility that characterize renewable energy investments the aim is to develop such a model with a real options analysis roa criterion as the foundation a case study comparing npv with roa decisions for 50 and 100 million gallon ethanol plants is used as a basis for future development of a template government loan appraisers can use for evaluating the feasibility of renewable energy investments

context dependent preferences the standard theory of choice based on value maximization associates with each option a real value such that given an offered set the decision maker chooses the option with the highest value despite its simplicity and intuitive appeal there is a growing body of data that is inconsistent with this theory in particular the relative attractiveness of x compared to y often depends on the presence or absence of a third option z and the market share of an option can actually be increased by enlarging the offered set we review recent empirical findings that are inconsistent with value maximization and present a context dependent model that expresses the value of each option as an additive combination of two components a contingent weighting process that captures the effect of the background context and a binary comparison process that describes the effect of the local context the model accounts for observed violations of the standard theory and provides a framework for analyzing context dependent p

real versus nominal forecast errors in the prediction of foreign exchange rates abstract imposing a small number of common but strong assumptions allows the varianve of the ex post forecast error in forward exchange rates to be decomposed into its parts that part due to errors in forecasting relative inflation the nominal error and that part due to real shocks for a sample of large and small industrial countries we show that real shocks have been predominant in the post bretton woods world this result implies that models of exchange rate determination which do not explicitly incorporate real shocks are inappropriate for explaining recent exchange rate volatility

consumption process and multiple valuation of landscape attributes abstract environmental valuation can be seen as a process which evolves as individuals reflect on their consumption experience in this paper we consider how environmental values could change as the subject has reached the end of the consumption process a split sample comparison is conducted for estimating the values tourists give to a set of landscape attributes the first subsample was taken on site as subjects were on a tour contemplating the landscape of the island of gran canaria canary islands the second subsample was contacted at the airport when individuals were about to leave the tourist enclave since landscapes are complex environmental goods we utilize and compare a multiple contingent valuation cv approach with the stated preference approach of contingent ranking the results show that the influence of the consumption experience depends on the valuation method and the consideration of interaction effects in the model the valuation functions were not stable across both sites for most of the models considered and some of the attributes changed their values between the two points of the consumption process interaction effects were more relevant with the contingent ranking model suggesting that cv is a more limited approach in a context of multiple valuation

misunderstanding of the binomial distribution market inefficiency and learning behavior evidence from an exotic sports betting market abstract this paper uses the setting of a volleyball game and an exotic sports betting on the point difference of volleyball games to test whether people correctly understand the probabilities related to outcomes of a process which follows a binomial distribution we find that people consistently underestimate the probabilities of outcomes that correspond to extreme ends of the distribution this is consistent with the extremeness aversion bias documented in decision making studies whereas previous studies on the extremeness aversion bias find the existence of the bias in a consumer choice setting we document that this bias also exists in an investment setting we find evidence of learning behavior over time however it is not sufficient to eliminate the bias

disrupting demand for commercial seed input subsidies in malawi and zambia summary this study uses nationally representative household level panel data from malawi and zambia to identify the determinants of subsidized maize seed and fertilizer receipt and to estimate how input subsidies affect households commercial purchases of improved maize seed varieties in both countries we find that households in areas where the ruling party won the last presidential election acquire significantly more subsidized inputs than other households results also indicate that each additional kilogram of subsidized maize seed acquired by a household reduces its commercial improved maize seed purchases by 0 58 kg in malawi and by 0 49 kg in zambia on average

new developments in applied general equilibrium analysis 1 introduction john piggott 2 hidden challenges in recent applied general equilibrium exercises john whalley 3 the measurement of waste and welfare in applied general equilibrium models erwin diewert 4 sensitivity analysis for linearized computable general equilibrium models adrian pagan and john shannon 5 the european economic community general equilibrium computations and the economic implications of membership john spencer 6 economic interdependence in the pacific basin a general equilibrium approach glenn harrison and larry kimbell 7 regional impacts of tariffs in canada preliminary results from a small dimensional numerical general equilibrium model richard jones john whalley and randall wigle 8 agricultural protection and market insulation policies applications of a dynamic multisectoral model tony chisholm and rodney tyers 9 a general equilibrium model of taxation that uses micro unit data with an application to the impact of instituting a flat rate income tax joel slemrod 10 consumption taxes foresight and welfare a computable general equilibrium analysis charles ballard and larry goulder 11 special purpose versions of a general purpose multisectoral model tax issues and the australian wine industry tony meagher brian parmenter russel rimmer and ken clements 12 general equilibrium analysis of economic policy dale jorgenson and daniel slesnick 13 the welfare cost of interest rate ceilings in developing countries a general equilibrium approach hasan imam 14 general equilibrium with price rigidities trien nguyen 15 short run macroeconomic closure in applied general equilibrium modelling experience from orani and agenda for further research russel cooper keith mclaren and alan powell 16 new developments in the application of general equilibrium models to economic history john james

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

do increases in energy efficiency improve environmental quality and sustainability governments world wide increasingly see energy efficiency as an important aspect of sustainability however there is a debate in the literature as to whether the impact of improved energy efficiency on reducing energy use might be partially or more than wholly offset through rebound and backfire effects this paper clarifies the theoretical conditions under which such effects would occur and explores their likely significance using a computable general equilibrium cge model of the scottish economy we find that for scotland a general improvement in energy efficiency in the production sectors of the economy initially produces rebound effects that eventually grow into backfire energy use ultimately increases in response to an efficiency gain and the ratio of gdp to co2 emissions falls the economic factors underpinning rebound effects are straightforward energy efficiency improvements result in an effective cut in energy prices which produces output substitution competitiveness and income effects that stimulate energy demands however the presence of strong rebound or even backfire does not mean that efficiency enhancing policies are irrelevant rather it suggests that such policies operating alone are insufficient to generate environmental improvements the implication is that a co ordinated portfolio of energy policies is required

mandatory versus voluntary labelling of genetically modified food evidence from an economic experiment opponents of the voluntary labelling scheme for genetically modified gm food products often argue that consumers have the right to know and therefore advocate mandatory labelling in this article we argue against this line of reasoning using experimental auctions we show that the quality of the signal generated by a mandatory labelling scheme is affected by the number of labels in the market if there are two labels one for gm products and one for non gm products mandatory and voluntary labelling schemes generate a similar degree of uncertainty about the quality of products that do not carry a label

how high are rates of return to fertilizer evidence from field experiments in kenya the idea that peasant farmers are rational profit maximizers has been a staple of development economics since theodore schultz 1964 it has also been influential in shaping policy for example agricultural experts have stressed the importance of fertilizer use in raising agricultural yields pointing to impressive results on experimental farms and to huge differences in agricultural productivity across countries with different levels of fertilizer use robert evenson and douglas gollin 2003 historically many countries subsidized fertilizer in response but economists have been skeptical of claims that farmers are leaving money on the table noting that fertilizer may not have the same returns on real world farms as on experimental farms that returns to fertilizer may be low for many farmers even if they are high on average tavneet suri 2007 that fertilizer may require complementary inputs or may be risky many countries have withdrawn or scaled back fertilizer psychology and development theory and experimental evidence

context dependent voting and political ambiguity abstract in recent decades psychologists have shown that the standard model of individual choice is often violated one regularly observed violation is that choices are influenced by the decision context to incorporate these effects into politics we introduce a theory of context dependent voting and apply it to the puzzle of why candidates are so frequently ambiguous in their policy pronouncements we show that context dependent voters develop a taste for ambiguity even when they evaluate distances quadratically and exhibit traditional risk aversion turning to aggregate effects we incorporate context dependent voting into a model of electoral competition and show that strategic candidates respond in equilibrium to context dependent voters by offering ambiguous platforms thereby affecting the policy outcome

what are the effects of input subsidy programs on maize prices evidence from malawi and zambia an important hypothesized benefit of large scale input subsidy programs in africa is that by raising maize production the subsidies should put downward pressure on retail maize prices to the benefit of urban consumers and the rural poor who tend to be net food buyers to inform debates related to this rationale for input subsidies this study estimates the effects of fertilizer subsidies on retail maize prices in malawi and zambia using market or district level panel data covering the 2000 2001 to 2011 2012 maize marketing years results indicate that roughly doubling the size of malawi s subsidy program reduces maize prices by 1 2 2 5 on average in zambia roughly doubling the scale of the country s subsidy program reduces maize prices by 1 8 2 8 on average the results are robust across countries and model specifications and indicate that the fertilizer subsidy programs in malawi and zambia have had a minimal effect on retail maize prices

nudging farmers to use fertilizer theory and experimental evidence from kenya we model farmers as facing small fixed costs of purchasing fertil izer and assume some are stochastically present biased and not fully sophisticated about this bias such farmers may procrastinate post poning fertilizer purchases until later periods when they may be too impatient to purchase fertilizer consistent with the model many farmers in western kenya fail to take advantage of apparently profit able fertilizer investments but they do invest in response to small time limited discounts on the cost of acquiring fertilizer free deliv ery just after harvest calibration suggests that this policy can yield higher welfare than either laissez faire policies or heavy subsidies

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

dyadic compromise effect existing research on the compromise effect has focused exclusively on the individual this paper investigates compromise effects in a setting that involves multiple individuals making a choice we study whether the dyadic compromise effect dce exists the association between dyadic and individual compromise effects and strategies to mitigate the dce we build a statistical model of dyadic choice that formally incorporates dce we conduct two studies to test our proposed models empirically in study 1 we begin with an investigation of the dce with student subjects in study 2 we test for the presence of dce among married couples when making retirement investment choices in both studies model free and model based evidence provides strong support for the presence of dce a model that incorporates dce provides a better fit than models that do not evidence in support of dce is shown to be robust to alternative compromise effect model specifications and utility aggregation methods we find that the indi

salience competition and decoy goods we consider a brand manufacturer who can offer next to its high quality product also a decoy good and faces competition by a competitive fringe that produces low quality we show that the brand manufacturer optimally provides a decoy good to boost the demand for its main product if consumers purchasing decisions are distorted by salient thinking the optimal decoy good is designed such that the superior quality of the brand manufacturer s main product and the unattractive feature of the fringe product are salient

decoy effects in choice experiments and contingent valuation asymmetric dominance while a dominated choice involves a situation in which one option clearly dominates another on all relevant dimensions an asymmetrically dominated choice typically arises where at least two options do not dominate each other and one but not both of those options does dominate a third option we demonstrate that the introduction of such an asymmetrically dominated option can have a significant impact upon choices between non dominated options within the same choice set for non market goods furthermore we show that this effect can then translate into significant impacts upon subsequent valuations for those non dominated options

input use and market development in sub saharan africa an overview abstract this paper sets forth the background and objectives of this special issue trends in input use since 1980 are reviewed and a conceptual framework is presented for analyzing problems of input use and formulating strategies for resolving them reasons for low levels of fertilizer use by smallholder farmers are summarized briefly the essential points of the papers in the special issue and their implications for further expansion of input use in sub saharan africa are then outlined

a rank dependent utility approach to model intra and inter individual heterogeneity in risky choice behaviours using a stated preferences survey the objective of this paper is to investigate the intra and inter individual heterogeneity of mode choice when travel time is subject to variability by inter i

dynamic learning and context dependence in sequential attribute based stated preference valuation questions a hybrid stated preference model is presented that combines the referendum contingent valuation response format with an experimentally designed set of attributes a sequence of valuation questions is asked to a random sample in a mailout mail back format econometric analysis shows greater discrimination between alternatives in the final choice in the sequence and the vector of preference parameters shifts lead and lag choice sets have a structural influence on current choices and unobserved factors induce positive correlation across the responses these results indicate that people learn about their preferences for attributebased environmental goods by comparing attribute levels across choice sets

an ahp decision making model for optimal allocation of energy subsidy among socio economic subsectors in iran abstract this paper presents an analytical hierarchy process ahp decision model for sectoral allocation of energy subsidy based on several criteria with determination of priorities for these criteria through questionnaire and ahp method the overall rank of these criteria that have the most influence on distribution of energy subsidy among socio economic sub sectors are as the following inflation economic growth labor intensity distribution of energy subsidy among socio economic levels energy intensity and social cost of air pollution according to the model the first priority for allocation of energy subsidy is commercial sector and the last priority is related to transportation sector investigating the impact of changing priority of the criteria on overall results indicates that the socio economic sub sectors ranking in receiving subsidy have little sensitivity for changing priority of the subsidy criteria

the importance of social learning for non market valuation neoclassical valuation methods often measure the contribution that non market goods make to utility as income compensations this circumvents arrow s impossibility ai a theoretical proof establishing the impossibility of social preferences but those methods cannot be used in all settings we build on arrow s original proof showing that with two additional axioms that allow for social learning a second round of preference elicitation with a social announcement after the first generates logically consistent social preferences in short deliberation leads to convergence a web game aligning with this is trialed to select real world projects in a deliberative way with the board of an australian aboriginal corporation analysis of the data collected in the trial validates our theory our test for convergence is statistically significant at the 1 level our results also suggest complex social goods are relatively undervalued without deliberation most non market valuation methods could be easily adapted to facilitate social learning

are kenyan farmers under utilizing fertilizer implications for input intensification strategies and research abstract it is widely perceived that african farmers are under utilizing inorganic fertilizer however very little long term evidence from farmers fields accounting for variations in agro ecological conditions has been assembled to back this claim or determine the conditions under which it is true using five waves of nationwide household survey data from kenya covering 13 years we estimate the relative and absolute profitability of nitrogen application rates on maize fields and compare these profitability conditions to observed nitrogen use patterns over time in general we find that farmers are consistently and steadily increasing towards risk adjusted economically optimal rates of fertilizer application over time and that in the most agriculturally productive areas farmers application rates on maize sometimes exceed rates that maximize profitability fertilizer use rates may nevertheless be profitably raised in these areas but doing so will require the adoption of complementary inputs and management practices that raise maize response rates to fertilizer application this motivates a more holistic approach to input intensification strategies in the region

the discriminating consumer product proliferation and willingness to pay for quality abstract the authors propose that a crowded product space motivates consumers to better discriminate between options of different quality specifically this article reports evidence from three controlled experiments and one natural experiment that people are prepared to pay more for high quality products and less for low quality products when they are considered in the context of a dense as opposed to a sparse set of alternatives to explain this effect the authors argue that consumers uncertain about the importance of quality learn from observing market outcomes product proliferation reveals that other consumers care to discriminate among similar alternatives and in turn this inference raises the importance of quality in decision making

do fertilizer subsidies crowd out organic manures the case of malawi we assess the impacts of the malawian farm input subsidy program on manure use at the farm plot level using more than 3 000 farm plot observations from six districts in central and southern malawi over three years 2006 2007 and 2009 the probabilities and intensities of manure use were investigated with the correlated random effects cre probit and tobit models the endogeneity of access to fertilizer subsidies and fertilizer use intensity was controlled for with a control function approach both the probability of manure use and intensity of manure use were positively correlated with the intensity of fertilizer use a 1 increase in fertilizer use intensity is associated with a 1 94 1 96 increase in the intensity of manure use outside the subsidy program and a 0 62 1 66 increase in manure use with the subsidy program a 1 increase in average fertilizer price was associated with a 0 43 0 76 increase in the probability of manure use and a 3 5 5 3 increase in the intensity of manure use

the cross price effect on willingness to pay estimates in open ended contingent valuation abstract previous literature has shown that potential buyers use a reference price or product to form their opinion about the value of a new product therefore the pricing decision is an interactive process we investigate the two generalizations of the cross price effect the neighborhood price effect and the asymmetric price effect on consumer willingness to pay wtp for multiple similar products in an open ended contingent valuation context results show that the cross price effect on wtp is prominent with the neighborhood price effect holding in contingent valuation no conclusions are reached about the asymmetric price effect

cropland allocation effects of agricultural input subsidies in malawi summary we measure the impacts of malawi s farm input subsidy program on the cropland allocation decisions of farmers in kasungu and machinga districts in central and southern malawi using a two step regression strategy to control for endogenous selection into the program we find positive correlations between participation in the program and the amount of land planted with maize and tobacco furthermore results suggest that participating households simplified crop production by allocating less land to other crops e g groundnuts soybeans and dry beans our findings have implications for policies aimed at promoting both food self sufficiency and crop diversification in low income settings 2011 elsevier ltd all rights reserved

on decisions that lead to decisions direct and derived evaluations of preference many consumer choices lead to subsequent decisions in such situations any choice option may be evaluated based on its own characteristics direct evaluations or evaluated based on the characteristics of alternatives it makes available in subsequent decisions derived evaluations we contrast direct and derived evaluations in the context of two consumer research issues first in choices between a lone option and a group of alternatives direct evaluations bias preferences toward the group whereas derived evaluations bias preferences away from the group second in choices between stores sensitivity to price is greater under derived than direct evaluations