giving the consumer the choice a methodology for product ecological footprint calculation abstract as global consumption increases we are faced with a major threat exceeding the earth s capacity to create new resources and absorb waste in the present study we develop a self improving market driven process of ecological footprinting of products proposed as a means to give consumers a real choice in actively monitoring and reducing their ecological impact we conduct a small scale case study to illustrate first stage calculations a wider market application of higher accuracy second or third stage calculations changes market information dynamics as ecological information is internalized for consumers potential impacts on purchasing behavior demand and eco technological innovation are discussed

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

clearing the air the costs and consequences of higher cafe standards and increased gasoline taxes abstract concerns about energy security and climate change have sparked legislators interest in reducing gasoline consumption by increasing corporate average fuel economy cafe standards using an empirically rich simulation model and cost estimates for anticipated fuel economy technologies we estimate annual costs of reducing long run gasoline consumption by 10 via a 3 8 miles per gallon increase in the standards and the potential cost savings from allowing manufacturers to buy and sell fuel economy credits maximum gasoline savings would be realized only after all existing vehicles were replaced or 14 years in our model a gasoline tax would produce greater immediate savings by encouraging people to drive less and eventually to choose more fuel efficient vehicles we demonstrate the advantage of a tax by comparing the cost of the higher cafe standards over the first 14 years against the cost of a gasoline tax that would save the same amount of gasoline over that time

road transport externalities during the last decade much progress has been made in defining measuring the external costs of transport as the cost of tolling equipment falls the set of realistic policy options to internalise these externalities will continue to grow this will determine the research and policy agenda we make three points firstly empirical work is still necessary to better identify marginal external costs including congestion accident and environmental costs secondly any assessment of policy options should treat externalities simultaneously the use of pricing instruments and emissions standards are discussed within this framework thirdly we emphasise the role of government designing the optimal road pricing institutions requires consideration of horizontal and vertical tax competition while double dividend arguments are central to the question of securing public support

optimal two part tariffs in a model of discrete choice abstract in this paper we study welfare optimal two part tariffs in a model of discrete choice the determinants of the sign and magnitude of the fixed and variable tax are analysed in terms of the nature and degree of consumer heterogeneity the price sensitivities of participation probabilities and conditional demands and the nature of distributional concerns in the absence of distributional concerns the model generalises the corrected ramsey rule for the variable tax and it shows that in the absence of collection or fixed participation costs the fixed fee may be negative the conditions that determine the sign of the participation fee turn out to have an intuitive economic interpretation finally the implications of distributional concerns for the optimal fixed and variable taxes are analysed

the making of a hot product a signaling explanation of marketers scarcity strategy every marketer s dream is to create a hot product that customers would absolutely want to have thus generating considerable profit to the marketer according to one school of thought marketers should make products hard to get in order to create really hot products in this paper using a game theoretic model we investigate if such scarcity strategies can indeed be optimal while a scarcity strategy may appear to be a viable approach for making a firm s product successful further analysis raises some puzzling issues in particular it is not clear why a firm would not increase its price to get demand and supply in sync and increase its profit in the process we therefore offer a signaling explanation for the optimality of such strategies and show that a high quality seller may optimally choose to make the product scarce in order to credibly signal the quality of its product to uninformed customers our analysis indicates that a high quality seller optimally employs scarcity as a signaling device in product markets that are characterized ceteris paribus by a small difference in marginal cost between high and low quality products a low reservation price for a low quality product a greater heterogeneity in reservation prices for a high quality product and a moderate number of informed consumers our results provide a rationale for the fact that scarcity strategies are usually observed for discretionary or specialty products but not for commodity products staple products or new to the world products

marginal tax reform externalities and income distribution the paper examines welfare improving and revenue neutral directions marginal policy reforms for an economy with nonidentical individuals and an externality that has a feedback effect on the consumption of taxed goods it considers three types of policy instruments the indirect taxes the uniform poll transfer and public abatement this extends the framework set up by ahmad and stern 1984 bovenberg and de mooij 1994 and schob 1996 the theoretical model is illustrated for a specific externality namely congestion caused by peak car transport

customer regulatory and competitive pressure as drivers of environmental innovation we develop an economic analysis in order to examine the effects of consumer regulatory and competitive pressure on firm investments in environmentally friendly production specifically we ask why do firms vary in their levels of environmental innovation under what conditions are such pressures effective in bringing about environmental innovation we first consider a monopolist who faces the twin pressures of reduced customer demand and regulatory penalties as a result of its emissions in response to these pressures the firm has the opportunity to make a costly investment in reduction of emissions secondly we consider a competitive scenario in which two firms compete for environmentally sensitive customers solving our model we find that pressure has the intended effect as long as the firm s initial level of emissions is below a certain threshold if the emissions are above this threshold we find that pressure might have an adverse effect on the firm s environmental investment and that subsidies that support environmental innovation can be a better alternative we also show that competition over environmentally sensitive customers can improve the effectiveness of environmental pressures

congestion pricing and capacity of large hub airports a bottleneck model with stochastic queues this paper models and estimates congestion prices and capacity for large hub airports the model includes stochastic queues time varying traffic rates and endogenous intertemporal adjustment of traffic in response to queuing delay and fees relative costs of queuing and schedule delays are estimated using data from minneapolis st paul simulations calculate equilibrium traffic patterns queuing delays schedule delays congestion fees airport revenues airport capacity and efficiency gains the paper also investigates whether a dominant airline internalizes delays its aircraft impose it tests game theoretic specifications with atomistic nash dominant stackelberg dominant and collusive airline traffic

visual quality and sustainability considerations in tolerance optimization a market based approach during the late stages of product development dimensional tolerances are chosen to balance quality requirements with manufacturing costs designers typically judge how much variation in the product dimensions should be allowed while still maintaining the perception of high quality for the product or brand but this is rarely based on a quantitative understanding of how consumers actually perceive variation and quality likewise environmental sustainability priorities which can also be affected by dimensional tolerances through production waste and product lifespan are often chosen without knowing how such attributes are received by consumers this paper presents a survey based technique for understanding how tolerance and pricing decisions influence market demand and manufacturer profits accounting for consumer perceptions of visual quality and environmental friendliness a case study of a mobile phone design is explored including variation propagation simulation manufacturing cost and environmental impact estimation online choice based conjoint cbc survey design and administration consumer demand model construction and profit maximization for the markets in china sweden and the united states the results show how consumers make trade offs in purchasing decisions when choosing among mobile phone attributes including price environmental friendliness and visual quality and different scenarios are compared based on survey design country of interest and the company s global product strategy

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

a temporal and spatial equilibrium analysis of commuter parking abstract this paper examines the effects of parking availability on morning rush hour congestion and assesses the relative efficiency of road tolls and parking fees without pricing drivers occupy parking in order of increasing distance from the cbd a time varying toll can prevent queueing but does not affect the order in which parking spots are taken optimal location dependent parking fees may be superior they do not eliminate queueing but induce drivers to park in order of decreasing distance from the cbd thereby concentrating arrival times closer to work start times competitively set parking fees do nothing to reduce queueing and are relatively inefficient

optimal policies in cities with congestion and agglomeration externalities congestion tolls labor subsidies and place based strategies abstract this paper develops a spatial general equilibrium model that accommodates both congestion and agglomeration externalities while firms and households land use decisions are endogenous across continuous space focusing on the interaction between externalities and land use patterns we examine the efficiencies of first best policies and second best pricing and place based strategies using numerical simulations a first best policy must combine both pigouvian congestion tolling pct and pigouvian labor subsidies pls instruments or design an optimal toll or subsidy internalizing agglomeration externalities or congestion externalities we also examine second best pricing policies if only one instrument is adopted congestion pricing policies alone e g a partial pct or a flat rate toll can improve social welfare only in heavy congestion cities and their welfare gains may be insignificant e g below 10 of the welfare improvement achieved by first best policies in contrast second best labor subsidy policies alone are a more effective alternative to first best policies as to place based policies the firm cluster zoning fcz regulation is more efficient than the urban growth boundary ugb policy ugbs only have small effects on the agglomeration economy but could worsen land market distortions via residential rent escalation effects these findings suggest that it is important to internalize business land use decisions and relax monocentricity assumptions in order to appreciate the interplay of both urban externalities since spatial adaptations to policy interventions can distort system efficiencies

comparing the efficiency of alternative policies for reducing traffic congestion abstract this paper compares the efficiency of a single lane toll a uniform congestion tax across freeway lanes a gasoline tax and a transit fare subsidy at reducing congestion there are three conditions for an efficient outcome relating to travel across modes across peak and off peak periods and sorting out drivers with high and low time costs across faster and slower freeway lanes each policy involves some inefficiency indeed the single lane toll gasoline tax and transit subsidy forego at least two thirds of the efficiency gains under an ideal congestion tax that varies across lanes however the uniform congestion tax achieves over 90 of these gains

information and usage of free access congestible facilities with stochastic capacity and demand we investigate the effect of information on users participation decisions at a free access congestible facility that is subject to unpredictable fluctuations in capacity and demand with demand isoelastic in user cost and user cost isoelastic in the ratio of demand to capacity optimal design capacity is larger with mean preserving spreads in capacity and demand if and only if demand elasticity is less than one expected welfare is greater with better information interestingly with nonconstant elasticity demand and or user costs information can be welfare reducing

congestion agglomeration and the structure of cities abstract congestion costs in urban areas are significant and clearly represent a negative externality nonetheless economists also recognize the production advantages of urban density in the form of positive agglomeration externalities the long run equilibrium outcomes in economies with multiple correlated but offsetting externalities have yet to be fully explored in the literature therefore i develop a spatial equilibrium model of urban structure that includes both congestion costs and agglomeration externalities i then estimate the structural parameters of the model using a computational algorithm to match the spatial distribution of employment population land use land rents and commute times in the data policy simulations based on the estimates suggest that congestion pricing may have ambiguous consequences for economic welfare

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

fly by night firms and the market for product reviews this paper presents a model that permits third party information provision in a market characterized by information asymmetries and reputation formation the model is used to examine how the market for information provision affects prices and supply in the primary market they find that decreasing the cost of providing and using information 1 increases rather than decreases the margins received by reputable service firms 2 decreases the price of new untested service firms so reputation is more costly to build and 3 leads to more high quality firms and less fly by night firms copyright 1989 by blackwell publishing ltd

segmenting the market the monopolist s optimal product mix abstract in an industry producing products which differ in quality to consumers who vary in their willingness to pay it may happen that only a bounded number of producers can coexist at noncooperative price equilibrium in other words the industry is a natural oligopoly we are here concerned with a special example in which only one producer can survive our focus of interest in the present paper is to examine this monopolist s optimal product range depending on the dispersion of consumers willingness to pay income either i the monopolist will find it optimal to segment the market completely offering the maximum number of products permitted or ii the monopolist will offer only a single product the precise nature of this switch of policy which occurs at a certain critical distribution of consumer incomes willingness to pay is explored fully

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

signaling new product reliability with after sales service contracts prior studies on performance based contracting pbc for after sales services have highlighted its advantages over traditional resource based contracting rbc when products are established and their reliability is known to all parties we develop a game theoretic model to investigate how these insights are affected when the vendor is privately informed about the reliability of a newly developed product a novel feature of our model is the interaction between reliability signaling private information and the vendor s discretionary investment in spares inventory private action which arises naturally in the setting we consider we find that this interaction leads to contrasting equilibrium outcomes under the two contracts rbc induces the vendor to focus on inventory savings leading to underinvestment in spares whereas pbc induces the vendor to focus on reliability signaling achieved through overinvestment in inventory as a result neither contract is efficient we investigate two means to mitigate this inefficiency but either approach has caveats a making inventory verifiable removes the trade off between reliability signaling and inventory investment but results in diverging contract preferences between the vendor and the buyer b pooling inventories across multiple buyers saves inventory costs but it also hinders reliability signaling potentially exacerbating inefficiency this paper was accepted by yossi aviv operations management

structural estimation of congestion costs abstract we estimate a structural model of congestion costs using a bayesian nash equilibrium approach the individual s preference for traveling depends on the anticipated level of congestion which in turn is determined by travelers decisions of mobility the model is estimated using a french transportation household survey results confirm the presence of incomplete information and show that aversion to congestion is 6 6 lower during peak times than during off peak times a traveler s willingness to pay to save 1 min in traffic is estimated at 0 73 euros during peak times and 0 25 euros during off peak times

transport tax reform commuting and endogenous values of time abstract we consider a model of urban transport with two trip purposes commuting assumed perfectly complementary to labour supply and noncommuting to analyse the effects of transport tax reform on the value of time and marginal external congestion costs higher commuting taxes plausibly reduce time values but higher noncommuting transport prices will typically raise the value of time the intuition for this latter finding is that the reduction in congestion that follows from the tax increase itself raises net wages per hour of work inclusive of commuting time empirical illustrations with belgian data show a potentially large effect of transport tax reform on time values in quite a few of the tax reforms studied traffic levels are reduced but the increase in time values implies that marginal external congestion costs actually increase

quality differentials and prices are cherries lemons in g a akerlof s market for lemons goods of differential qualities sell under the same standard if no price differentials exist then the low quality goods drive out the high quality goods in cherry markets heterogeneous lots of cherries sell within the same market standard at the time of sale buyers know only the market standard since different qualities sell under the same standard the potential for lemons exists if buyers cannot identify different qualities the authors theoretical and empirical models suggest seller characteristics signal quality to buyers and buyers pay premiums to firms with these characteristics thus cherries are not lemons copyright 1991 by blackwell publishing ltd

warranty quality and price in the us automobile market the observed negative relationship between quality and warranty in the us auto market is analysed using a cost based approach developed by cooper and ross the theory of warranty and quality choice by producers and consumers is extended by endogenizing the joint price quality and warranty decision differences in producer costs and consumer preferences are found to explain the inverse relationship which suggests that american manufacturers should adjust their pricing warranty and quality strategy when entering foreign markets

pareto improvements from lexus lanes the effects of pricing a portion of the lanes on congested highways abstract though economists have long advocated road pricing as an efficiency enhancing solution to traffic congestion it has rarely been implemented primarily because it is thought to create losers as well as winners this paper shows that a judiciously designed toll applied to a portion of the lanes of a highway can generate a pareto improvement before using the revenue a sufficient condition being that drivers with a high value of time travel at the peak of rush hour i obtain these new theoretical results by extending a standard dynamic congestion model to reflect an important additional traffic externality extra traffic does not simply increase travel times but also introduces frictions that reduce throughput the analysis draws attention to a practical policy that may help overcome the widespread opposition to road pricing

the value of automobile travel time implications for congestion policy abstract public policy has remained stoutly resistant to the economic profession s call to use congestion tolls to minimize the social costs from automobile congestion this paper explores this issue by using stated preference models to estimate the value that commuters are willing to pay to save travel time we find that this value is low and surprisingly insensitive to travel conditions and how toll revenues are used it appears that even high income commuters having adjusted to congestion through their modal residential workplace and departure time choices simply do not value travel time savings enough to benefit substantially from tolls

certification and minimum quality standards when some consumers are uninformed we compare certification to a minimum quality standard mqs policy in a duopolistic industry where firms incur quality dependent fixed costs and only a fraction of consumers observe the quality of the offered goods compared to the unregulated outcome both profits and social welfare would increase if firms could commit to producing a higher quality an mqs restricts the firms quality choice and leads to less differentiated goods this fuels competition and may therefore deter entry a certification policy which awards firms with a certificate if the quality of their products exceeds some threshold does not restrict the firms quality choice in contrast to an mqs certification may lead to more differentiated goods and higher profits we find that firms are willing to comply with an ambitious certification standard if the share of informed consumers is small in that case certification is more effective from a welfare perspective than a minimum quality standard because it is less detrimental to entry

voluntary product safety certification this paper describes the incentives for firms to seek voluntary product safety certifications we consider a firm that makes the decision of whether or not to seek certification prior to selling the product we show that even when the firm and the consumers have the same beliefs about the product s safety there are incentives for the firm to seek safety certification the main analysis investigates the role of consumer moral hazard and shows that it can lead to greater incentives for voluntary certification when inherent product safety and effort are substitutes but smaller incentives when they are complements the analysis of consumer moral hazard provides a nuanced perspective on the so called risk compensation or the peltzman effect phenomenon which postulates higher levels of accidents for safer products in our paper products that are successfully certified can end up with a higher incidence of accidents we also uncover an interesting nonmonotonic relationship between effectiveness of consumer

reputation in an internet auction market i introduction without transmission of credible information asymmetries may lead to underproduction of goods or even market failure reputation mitigates inefficiencies associated with information asymmetries by providing an informative signal of quality 1 the difficulty in quantifying reputation means that few studies can analyze empirically the role of reputation in markets our analysis of a quantified market observed measure of reputation provides direct evidence of the effect of a seller s reputation on the terms of a onetime real world transaction thereby contributing empirical support to a fundamental economic principle this study empirically examines person to person transactions within the internet market known as ebay in this virtual market of unseen participants and products buyers and sellers face the risks of repudiation as the counter party may deny the agreement after the fact buyers assume risks associated with lack of seller integrity and asymmetric information about the particular product as the buyer is typically required to send payment before the seller ships the product in addition for many ebay transactions the cost of enforcing a contract is high relative to the transaction s value resulting in a practical absence of legal enforcement 2 by providing a history of trade execution information ebay benefits market participants by reducing information asymmetries while achieving substantial transaction cost economies market participants relate personal experiences which ebay uses to calculate a numerical reputation measure for each user market participants in turn can use this reputation measure to assess counter party risk and adjust bidding behavior accordingly in a sample of 460 auctions held between january 1998 and july 1998 we find a positive relation between prices and ebay s reputation measure higher reputation sellers experience higher auction prices ceteris paribus our findings suggest that repeat players are rewarded for building reputation consistent with the belief that the high reputation seller s value of future transactions outweighs the value of taking advantage of the buyer in the current transaction buyers are willing to pay more to a higher reputation seller this article contributes to the literature not only by providing quantitative support of long accepted reputation theories but also by illustrating the use of nontraditional markets as a natural laboratory for experiments this article is an example of how a newly formed electronic market can provide the elements necessary for analytical research we find that ebay transactions for this item exhibit characteristics similar to transactions in more conventional markets namely 1 prices are higher when there is less quantity supplied when fewer of the items are available the same day 2 prices are lower during periods of lower demand times less likely to have high traffic 3 sellers with higher shipping and handling costs receive lower prices and 4 sellers failing to provide information about shipping and handling fees i e larger information asymmetries receive fewer bids dramatic innovations in online market structure and increasing availability of online market data should enable researchers to examine directly other traditionally non quantifiable economic ideas this article is organized as follows section ii describes how reputation can be used to facilitate transactions in the presence of asymmetric information section iii describes the ebay market summarizes the listing and bidding processes and discusses the reputation mechanism for this market section iv presents the price and reputation descriptive statistics associated with a consistently auctioned item and reports the empirical findings of how this item s highest bid price varies with the level of the seller s reputation we conclude in section v with a discussion of ebay s continued attempts to add value to the market through recent structural changes

warranties as a signal of quality in this paper we demonstrate through an example that in oligopolistic markets it is only in special cases that warranties can serve as signals of quality warranties are perfect signals only in cases in which the intrinsic attributes of products are neither too clustered nor too widely spaced otherwise multiple separating equilibria arise and the informational content of warranties is limited

monotone equilibria in signaling games abstract we examine the monotonicity of the sender s equilibrium strategy with respect to her type in signaling games we show that when the sender s return from the receiver s action depends on her type the spence mirrlees condition cannot rule out equilibria in which a higher type sender chooses a strictly lower action than a lower type we provide sufficient conditions under which all equilibria are monotone which require that the sender s payoff is decreasing in her action is increasing in the receiver s action and has strictly increasing differences between her type and the action profile we apply our sufficient conditions to education signaling advertising and warranty provision

the incidence of congestion tolls on urban highways abstract the incidence of an optimal short run congestion toll is investigated using an equilibrium model of modal choice and congestion on a highway corridor served by express bus transit it is argued that for an externality tax the usual equi revenue analysis of burdens is inappropriate instead welfare effects are computed under three alternative assumptions about redistribution of toll revenues in almost all cases the net result is benefits for all income groups it is concluded that congestion tolls should not be rejected on grounds of income distribution but that an explicit package of tolls and revenue uses is probably a political prerequisite for adoption

economics of a bottleneck abstract drawing on vickrey amer econ rev 59 251 261 1969 and subsequent literature this paper provides a thorough economic analysis of the simplest bottleneck model of road congestion with peak load demand in the morning rush hour a fixed number of identical individuals one per car must travel from home to work between which is a bottleneck of given capacity the costs of travel include queuing time and schedule delay time early or late for work the frequency distribution of departure times adjusts so that in equilibrium all individuals have the same travel costs the paper extends the previous literature by examining a coarse toll and solving for optimal capacities the application of congestion tolls can generate efficiency gains by altering the frequency distribution of departure times previous estimates of the efficiency gains from congestion tolling are likely to be substantially downward biased because they have ignored this effect