the informational role of prices we consider a dominant firm with a competitive fringe in order to address the informational role of prices the fringe is necessary for the existence of a unique fully revealing equilibrium in which the price reveals the quality of the good to uninformed buyers a higher price triggers more sales on the part of the competitive fringe reducing both residual demand and profits we find that a larger share of uninformed buyers increases the price reduces the quantity sold by the dominant firm but increases the quantity sold by the competitive fringe this in turn reduces consumer surplus and welfare this article is protected by copyright all rights reserved

the market for quacks a group of n quacks plays a price competition game facing a continuum of patients who recover with probability whether or not they acquire a quack s treatment if patients chose rationally the market would be inactive i assume however that patients choose according to a boundedly rational procedure which re ects anecdotal reasoning this element of bounded rationality has signi cant

financial markets and development my views on this subject have been greatly affected both by the experience of developing countries during the past quarter century and by the major shift evolutionary if not revolutionary in the economists paradigm over that period we have seen that capital accumulation is not enough even the extremely high rates of savings of many of the socialist economies have not managed to compensate for their lack of ability in allocating capital and these countries have for the most part not fared well but extreme free market solutions have fared little better perhaps best illustrated by the experience of chile true believers in the doctrines of the left and the right have this in common they both claim that if the patient had only followed the doctor s orders more precisely the medicine would have worked

trapped in the heat a post communist type of fuel poverty abstract fuel poverty is a still insufficiently researched social and energy challenge with significant climate change implications based on evidence from hungarian panel apartment blocks connected to district heating this paper introduces a new variant of fuel poverty that may not be properly captured by existing fuel poverty indicators this newly defined variant can be largely attributed to post communist legacies though it might also exist in other contexts and assumes that consumers living in poor efficiency district heated buildings are trapped in dwellings with adequate indoor temperatures but disproportionately high heating costs because a changing supplier or fuel is difficult because of the existing technical and institutional constraints and b they do not realistically have the option to reduce individually their heating costs through individual efficiency improvements this situation often translates into payment arrears indebtedness risk of disconnection or reduced consumption of other basic goods and services state supported policy responses to date have favoured symptomatic solutions direct consumer support combined with superficial retrofits though it is argued that only state of the art retrofits such as the passive house based solanova pilot project in dunaujvaros can fully eradicate fuel poverty in this consumer group

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

pricing and signaling with frictions abstract we study a market where each seller chooses the quality and price of goods and the number of selling sites observing sellers choices of prices and sites but not quality buyers choose which site to visit a seller s choices of prices can direct buyers search and signal quality a unique equilibrium exists and is separating when the quality differential is large the equilibrium implements the efficient allocation with public information otherwise the quality of goods and or the number of sites created is inefficient due to a conflict between the search directing and signaling roles of prices

south east europe regional energy market challenges and opportunities for romania abstract the paper takes as its starting point the athens memorandum signed by countries of south east europe whereby a regional energy market in power and gas will be developed the aim under the athens memorandum is that the south east europe regional energy market seerem will be liberalized in a phased manner from 2005 and ultimately that this will form part of the eu s internal energy market the subject of the paper is the extent to which romania one of the biggest countries in south east europe and traditionally a net energy exporter to the region complies with requirements under the athens memorandum and outstanding challenges related to successful serem accession the paper argues that much progress has been made in energy sector reform in romania power prices have increased payments discipline in the power sector has improved independent regulators have been established for power and gas sectors and power and gas utilities have been restructured nevertheless a number of challenges remain if romania is to fully benefit from participation in the seerem further power price increases will be required in the medium term whilst payments discipline remains poor by industry best practice standards in the gas sector retail prices do not reflect border prices and payments discipline remains a problem the paper argues that gas price reform would likely have adverse affordability impacts and proposes means to mitigate these through rationalization of existing social safety nets for gas and heat on investment requirements the paper notes that these are significant in power generation and proposes a contract framework that would support mobilization of finance

strategic pricing signalling and costly information acquisition abstract consider a market where an informed monopolist sets the price for a good or asset with a value unknown to potential buyers upon observing the price buyers may pay some cost for information about the value before deciding on purchases under a belief restriction which generalizes the idea of the cho kreps intuitive criterion we establish a version of the grossman stiglitz paradox there is no separating equilibrium with fully revealing prices yet we also resolve the paradox there is a unique equilibrium and as the cost of information becomes small the equilibrium approaches the full information outcome and prices become perfectly revealing

a latent structure approach to measuring reputation the present study provides estimates of reputation as a dynamic latent variable that is determined by price premiums and market data further it analyzes the effect of extrinsic factors on reputation specifically this study seeks to i quantify the reputation of washington apples over time ii study the dynamic nature of reputation and iii analyze the effect of the label washington apple the model adopted in this study is the dynamic multiple indicator multiple cause dymimic modeling approach which is a special case of the general latent variable modeling scheme called state space models both dymimic and hedonic approaches are applied to the data on washington apples and results from the two approaches are compared reputation plays an important role in assuring product quality in markets where consumers can only imperfectly judge the product quality until after consumption if reputation effects are absent in these types of markets there is an incentive for producers to reduce quality and take short run gains before buyers catch on in order to avoid such quality cutting products with good reputations will sell for premium prices shapiro 1983 showed theoretically that price premiums are necessary for producers to invest in quality and reputation there is an extensive theoretical literature on reputation but empirical studies are limited empirical studies on the impact of firm reputation on shareholder wealth or product demand include jarrell and peltzman 1985 borenstein and zimmerman 1988 and karpoff and lott 1993 caves and green 1996 showed that factors that may affect a firm s reputation influence the relationship between price and quality gorton 1996 analyzed how a bank s reputation for default affects the discount rate on its debt the measurement of the value of reputation to producers in terms of price premiums and how a reputation can be built up and destroyed are important issues that have not been empirically analyzed the current study provides estimates of reputation as a dynamic latent variable that is determined by price premiums and market data further it analyzes the effect of extrinsic factors on reputation steenkamp 1990 points out that consumers observe at the moment of purchase the intrinsic and extrinsic product quality cues but not the quality attributes intrinsic cues are characteristics of the product such as color freshness texture and flavor while extrinsic

price advertising and the deterioration of product quality arguments in favour of self enforced bans on advertising by professionals often rely on the stylized fact that advertising can communicate information about price but not about quality this being the case it is argued that allowing professionals to advertise runs the risk that firms will compete vigorously over price at the expense of the quality of their product this paper shows that even if price can communicate no information directly about quality it can do so indirectly because price will be a signal of quality because of this allowing advertising is shown to improve consumer welfare

signaling quality through prices in an oligopoly firms signal quality through prices even if the market structure is very competitive and price competition is severe in a symmetric bertrand oligopoly where products may differ only in their quality and each firm s product quality is private information unknown to consumers and to other firms there exist symmetric fully revealing perfect bayesian equilibria where low quality firms randomize over an interval of prices and high quality firms charge high prices signaling requires that the market power and rent of low quality firms be large enough and often this requires that high quality firms exercise sufficient market power there is a unique symmetric fully revealing equilibrium satisfying the d1 criterion in this equilibrium too both low and high quality firms may exhibit considerable market power market power of high quality firms may persist even as the number of firms becomes arbitrarily large every d1 equilibrium involves some revelation of information

monopolistic competition with experience goods this paper constructs a model of monopolistic competition where consumers cannot directly verify product quality prior to an initial purchase instead consumers base initial purchases on observed prices which perfectly signal firms qualities both in and out of equilibrium equilibrium quality is less than efficient but generally bounded away from the minimum quality with free entry observable product variety exceeds what would prevail with perfect information as repeat purchases become large relative to initial purchases or as firms become small relative to the size of the market equilibrium product quality rises and the market converges to the full information equilibrium

prices and qualities in markets with costly information this paper extends the seminal work of akerlof and salop and stiglitz in two directions i the sellers can select both the selling prices and quality levels of their good and ii the buyers can acquire price quality information about individual sellers at a cost we observe multiple price quality combinations in equilibrium which depend upon the distribution of information costs of consumers and upon whether quality or price or both are costly observable welfare comparisons of equilibrium are considered we show that welfare will be greater when price advertising is permitted

california s dysfunctional electricity market policy lessons on market restructuring abstract the restructured electricity market in california has been behaving oddly and badly since summer of 2000 electricity prices have been exorbitantly high and highly volatile despite the high prices the three investor owned utilities are in dire financial shape because they cannot pass on the high costs of wholesale power to their customers due to a rate freeze many policymakers in the us and elsewhere want to know what went wrong in california trying to avoid a similar fate as they proceed with their own market liberalization plans

vertical economies in electric power evidence on integration and its alternatives abstract the restructuring of the electric power industry raises questions about the possible sacrifice of economies previously secured by integrating generation with downstream transmission and distribution this study utilizes a data set of u s electric utilities that differ widely in their degree of vertical integration in order to model estimate and measure such economies cost savings from vertical integration are found to be quite substantial for all but the smallest utilities and are largest for those that are nearly fully integrated the study goes on to investigate alternatives to sources of and determinants of vertical integration among other findings it appears that some holding companies achieve economies comparable to those from vertical integration

an equivalent marginal cost pricing model for the district heating market district heating pricing is a core element in reforming the heating market existing district heating pricing methods such as the cost plus pricing method and the conventional marginal cost pricing method cannot simultaneously provide both high efficiency and sufficient investment cost return to solve this problem the paper presents a new pricing model namely equivalent marginal cost pricing emcp model which is based on the eve pricing theory and the unique characteristics of heat products and district heating the emcp model uses exergy as the measurement of heating product value and places products from different district heating regions into the same competition platform in the proposed model the return on investment cost is closely related to the quoted cost and within the limitations of the heating capacity cost reference and the maximum compensated shadow capacity cost both lower and higher price speculations of heat producers are restricted simulation results show that the model can guide heat producers to bid according to their production costs and to provide reasonable returns on investment which contributes to stimulate the role of price leverage and to promote the optimal allocation of heat resources

energy security electricity population and economic growth the case of a developing south asian resource rich economy economic growth and increasing population is driving the demand for energy in developing economies globally including south asia energy security concerns have heightened in these economies consequently raising questions in their ability to meet the key sustainable development goals this paper specifically examines the inter relationships between energy security captured through the channel of electricity availability based on electricity consumption and economic output in a multivariate framework incorporating the effects of capital formation and population for nepal a developing economy in south asia time series econometrics based on the ardl bounds test approach to cointegration and the toda yamamoto granger causality tests are used to examine and test for long run equilibrium relationships and causality between 1975 and 2014 we find that there is no long run relationship between electricity consumption and economic output for nepal distinguishing it at the regional level for south asia however a 1 increase in population increases electricity consumption by 4 16 in the long run we propose that large scale development of available renewable energy such as hydropower and improvements in energy efficiency will not only strengthen energy security in the long run but also will help tackling climate change in south asian developing economies like nepal

competitive price and quality under asymmetric information we present an analysis of equilibrium in markets with asymmetrically informed consumers some consumers know both price and quality of all sellers whereas others know neither but may search among sellers the equilibrium correlation between price and quality generally increases with the level of information in the market and can be negative when this level is sufficiently small a meta analysis of the available empirical studies strongly supports the model s predictions

oligopolistic competition in price and quality abstract we consider an oligopolistic market where firms compete in price and quality and where consumers have heterogeneous information some consumers know both the prices and quality of the products offered some know only the prices and some know neither we show that if there are sufficiently many uninformed consumers then there exists a unique equilibrium where price is a perfect indicator of quality this equilibrium is characterized by dispersion and pareto inefficiency of the price quality offers where better price quality combinations are associated with lower prices

energy poverty policies in the eu a critical perspective abstract once confined to the uk context where it was struggling to receive political recognition for years the concept of energy or fuel poverty is slowly entering the eu s agenda where it has crept into a number of regulatory documents and policy proposals using evidence gathered from an international workshop and semi structured interviews with decision makers experts and advocacy activists in brussels and sofia this paper explores the adoption of policies aimed at addressing energy poverty within i the organisational context of the eu and ii national state institutions in bulgaria a member state facing considerable problems at the energy affordability social inequality nexus while the former are largely nascent and poorly co ordinated the latter have already been implemented de jure to a significant extent however many unresolved issues surrounding their de facto implementation remain at the same time national policy makers remain largely unaware of the existence of direct energy poverty related initiatives at the eu level

sustainable development in a transition economy business case studies from poland abstract in general examples from developed countries are cited when making reference to good practice in sustainable development while there is limited access to case studies from transition economies our aim is to analyse case studies from poland which has recently undergone the transition to a market based economy in order to identify and critically assess both the drivers of and barriers to sustainable development in polish business by demonstrating that evidence of good practice is available within poland we also aim to motivate key stakeholders to follow these examples in an addition to importing practice from developed countries together the 11 case studies analysed in the article demonstrate that while constraints exist to sustainable development there are nonetheless positive examples of best practice from which to learn this review therefore complements other studies conducted on sustainable development in transition economies by indicating that lessons can be drawn on promoting sustainable development within this context and in other similar states undergoing economic political and social transition

certification under oligopolistic competition in a symmetric duopolistic market where each firm s choice regarding certain quality attributes such as the environmental friendliness of its product is its own private information the extent of horizontal differentiation between firms plays a crucial role in a certifier s optimal certification policy under a non profit certifier it is always the case that both firms produce the highest quality and opt for certification this is also the case under a for profit certifier but only when the degree of horizontal differentiation is sufficiently high when horizontal differentiation is low the for profit certifier by charging a very high certification fee creates maximum vertical differentiation between firms as a result only one firm produces the highest quality and opts for certification whereas the other firm produces the lowest quality and does not opt for certification this asymmetry under a for profit certifier makes the market inefficient which provides one possible explanation for the existence of mostly non profit certifiers in such markets

does demand for product quality increase worker training abstract we uniquely examine the relationship between firm organized training and the sensitivity of consumer demand to product quality cross section panel fixed effect and instrumental variable estimates confirm that british workplaces provide more intensive training when their product demand is more sensitive to product quality robustness checks including using alternative key variable definitions and a counterfactual analysis examining the importance of competing on price support this confirmation

monopoly provision of product quality with uninformed buyers abstract this essay is concerned with a monopolist s incentives to provide high quality goods when some of its customers cannot observe quality prior to purchase we show that if all buyers have the same tastes for quality the monopolist will not try to take advantage of the poorly informed when tastes differ however some quality randomization may become profitable as a means to loosen binding self selection constraints the profitability of randomization is shown to depend upon the relative degrees of risk aversion of the buyers and on the convexity of the firm s cost of quality function we view our results as pointing to some potential benefits from imperfect quality control

opening up international trade with eastern europe trade with eastern europe carl b hamilton and l alan winters previous economic policy in the soviet union and eastern europe sought to restrict international trade with market economies hence liberalization and reform should now lead to a huge increase in such trade this will have a major impact both on the reforming economies and on their new trade partners first we develop an empirical model of trade flows between existing market economies and use this to forecast long run trade flows as the former soviet union and eastern europe are reabsorbed into the world economy second we provide a more detailed analysis of one key sector agricultural trade we compare and contrast three regime changes reform in the east admission of the east to the ec cap and worldwide success on agricultural liberalization in the gatt third we adduce evidence of high quality human capital in eastern europe and argue that this will tend to confer a comparative advantage in quite sophisticated products we conclude by stressing that since trade cannot be permanently and profoundly unbalanced western market economies can enjoy potential gains from trade only if they allow market access to emergent producers from the former soviet union and eastern europe

power sector reform in south asia why slow and limited so far although south asian developing countries had initiated some form of electric power sector reform in the 1990s often under external lending agency pressures not much progress has been made so far and there is hardly any noteworthy example of a successful reform in the region this paper provides a brief review of power sector reform efforts in five south asian countries and uses an institutional economics framework to identify the factors shaping the success of power sector reforms four factors namely instability of rule makers poor overall acceptance slow adaptation and poor transition management are identified and their effect on the reform process of south asia are analysed the paper finds that political instability has affected the power sector reform of the region making hard decisions difficult to take slow progress of reform has also affected the sector viability as signs of adverse effects on the power sector investment and performance are already visible

causes and consequences of price premiums existing literature that argues for the prevalence of price premiums is examined an evaluation of an extant model identifies several possible boundary conditions that limit the applicability of the model a set of propositions is developed based on these boundary conditions linking buyer seller and market factors to the magnitude of price premiums that should be available alternative means for empirical testing of the propositions are offered and some implications and applications of this line of thinking for pricing and brand management are described copyright 1996 by university of chicago press

quality uncertainty and informative advertising we present a price signalling model with informative advertising a costly advertisement informs of the good s quality directly and therefore the seller determines the fraction of informed buyers endogenously we show that informative advertising only occurs in pooling equilibria for an advertising pooling equilibrium to exist consumer valuation for high quality advertising cost prior probability that quality is high and inaccuracy of the buyers pre purchase information must be sufficiently high for some parameters there is a unique undefeated advertising pooling equilibrium if advertising is used in equilibrium the adverse selection problem is mitigated

reliability pricing and quality control abstract the purpose of this paper is to construct a theoretical framework which allows a manufacturer to examine the tradeoffs between pricing reliability design and quality control issues in particular the paper investigates effects of risk aversion on the relative prominence of one or the other policy instruments in addition the results of extensive numerical analyses are presented relating basic managerial guidelines with price reliability and quality control

certification and market transparency we provide elementary insights into the effectiveness of certification to increase market transparency in a market with opaque product quality sellers use certification as a signaling device while buyers use it as an inspection device this difference alone implies that seller certification yields more transparency and higher social welfare under buyer certification profit maximizing certifiers further limit transparency but because seller certification yields larger profits active regulation concerning the mode of certification is not needed these findings are robust and widely applicable to for instance patents automotive parts and financial products

spatializing energy justice this paper introduces the concept of spatial justice and inequality to understandings of energy poverty and vulnerability by applying an explicitly spatial lens to conceptualize energy poverty as a form of injustice it contributes to debates in the domain of energy justice where previous examinations of energy deprivation through a justice framing have focused on inequalities between social groups and often marginalized questions of spatial difference we start from the premise that geographic disparities in the risk and incidence of domestic energy deprivation are a key component of energy justice an extensive literature review has allowed us to highlight the spatial and temporal variation of cross sectoral and entire energy chain injustices that lead to elevated energy poverty risks these processes contribute to the rise of energy injustices via four mechanisms which we term landscapes of material deprivation geographic underpinnings of energy affordability vicious cycles of vulnerability and spaces of misrecognition operating at a multiplicity of scales while lending some support to area based approaches towards energy poverty alleviation our findings also suggest that such policies alone may marginalize the underlying structural dynamics that re produce spatial inequalities therefore achieving energy justice necessitates broader interventions in the fundamental driving forces of spatial inequality

using game theory to model competition the article is an exposition of the basic concepts of noncooperative game theory and their application to advertising product and price competition

reforming the power sector in transition do institutions matter this paper aims to investigate the often poorly explored link between power sector reforms and wider institutional reforms in the economy across different groups of transition countries we use panel data econometrics based on bias corrected dynamic fixed effect analysis lsdvc to assess the impact of reforms on macroeconomic and power sector outcomes the results indicate that power sector reform is highly inter dependent with wider reforms in other sectors of the economy the findings indicate that failure to harmonize inter sector reforms leads to power sector reform measures being ineffective we conclude that the success of power sector reforms in developing countries largely depend on the extent to which they synchronize inter sector reforms in the economy

quality indicators in theory and in fact abstract in recent literature it has been suggested that consumers need have no knowledge of product quality as a number of quality indicators or signals may be used as substitutes very little attention has been paid to the empirical verification of these studies the present paper is devoted to the issue of how well these indicators perform using market data provided by consumer magazines from 3 countries the results strongly indicate that price is a poor quality indicator the paper also presents some evidence which suggests that seller reputation and easily observable characteristics are also poor indicators

vertical restraints and producers competition this paper examines the rationale for vertical restraints it shows that there are important circumstances under which these restrictions have significant anti competitive effects the paper focuses on the consequences of exclusive territorial arrangements among the retailers of two products which are imperfect substitutes such arrangements are shown to increase consumer prices under plausible conditions the increase in consumer prices is sufficiently large to more than offset the deleterious effects from double marginalization resulting from reduced competition among retailers the imposition of exclusivity provisions is may be part of a nash equilibrium among producers these results hold whether there are or are not franchise fees this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

the virtues of gradualism and legitimacy in the transition to a market economy this paper presents a simplified model of sectoral restructuring in eastern europe a move towards allocative efficiency is desired by the reform minded government but the shift to higher productivity which such efficiency requires would lead to massive layoffs and labour reallocation in the transition period we look at the impact of political constraints unanimity and or majority worker approval on reform proposals when the government faces a heterogeneous workforce holding private information on relative outside opportunities when the budgetary consequences of exit compensations are so important as to make partial reforms preferable to full reforms gradualism emerges as the optimum in a dynamic context without government commitment it is also shown that under democratic majority rule a government in control of the agenda of reforms can win majority approval for plans which end up hurting majority interests intertemporally by threatening to switch majorities in future reform proposals this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

eliciting and utilizing willingness to pay evidence from field trials in northern ghana we utilize the becker degroot marschak 1964 mechanism to estimate the willingness to pay for clean drinking water technology in northern ghana the bdm mechanism has attractive properties for empirical research allowing us to directly estimate demand compute heterogeneous treatment effects and study the screening and causal effects of prices with minor modifications to a standard field experiment setting we demonstrate the implementation of bdm along these three dimensions compare it to the standard take it or leave it method for eliciting willingness to pay and discuss practical issues for implementing the mechanism in true field settings jel classifications c93 d12 d82 l11 l31

microeconomic issues in the transition to a market economy evidence from developing countries suggests that a one sided preoccupation with macroeconomic issues may be unfortunate as macro stabilization programs tend to unravel in the presence of an inadequate micro adjustment for example kiguel and liviatan 1990 this finding is important because the socialist system introduced microeconomic distortions that probably transcend those observed in the third world the recent developments in poland yugoslavia and the soviet union also support the hypothesis that macro stabilization will be difficult to achieve in the transforming socialist economies in the absence of adequate micro adjustments in this paper i address what i consider to be the most important micro issues related to the transition from socialist to market economies i first summarize the initial microeconomic conditions and then describe the main changes that have taken place in the early stages of the transition finally i discuss the micro policy agenda that needs to be addressed if the transition is to be successful

welfare gains from quality certification of infant foods results from a market experiment in mali in low income countries malnutrition is often most severe among infants of six to twenty four months they need higher density foods than the family diet but density is a credence attribute we hypothesize that the premium now paid for heavily advertised brands reflects demand for quality assurance which could be provided at lower cost to competing firms through third party certification we use a new market experiment to find that mothers average willingness to pay for certification is about 1 75 kg or four times its cost so that total economic surplus gains from introducing certification to mali would be on the order of 1 million annually

entry and experimentation in oligopolistic markets for experience goods abstract we investigate a two period bertrand market in which one seller introduces an experience good the new product competes with an alternative good of known quality ex ante neither sellers nor consumers know the value of the new product while consumers can learn their valuation for the new good by actual consumption experimentation sellers cannot observe experimentation outcomes thus asymmetric information arises if the buyer experiments as a result the equilibrium is inefficient and too little entry occurs

the economics and politics of regulation this article provides a critical survey of the literature on the economics and politics of regulation after some conceptual clarifications the article surveys the evolution of perspectives on regulation during the post second world war period emphasizing especially the interactions between intellectual changes and real world economic and political developments it then looks at some themes that are neglected in the current literature the inevitability of regulation the need to create and not simply regulate markets distributional issues dynamic considerations and the politics of regulation and suggests that incorporating these themes more closely into the discussion will improve our understanding in this area copyright 1997 by oxford university press

price quality and reputation evidence from an online field experiment we examine the link between price quality seller claims and seller reputation in internet auctions after purchasing actual baseball cards and having them professionally graded we find that some buyers in the online graded market are misled by incredible claims of quality they pay higher prices but do not receive better quality and in fact are defrauded more often online seller reputation is effective for identifying good faith sellers but conditional on completed auctions reputable sellers do not provide better quality evidence also suggests that high claim sellers target less experienced buyers we attribute these patterns to two loopholes in the ebay rating system we benefited from the comments of austan goolsbee raphael thomadsen john shea dan vincent david reiley larry ausubel peter cramton v joseph hotz jeff smith jimmy chan vincent crawford mark duggan and attendees at numerous seminars and conferences we are particularly grateful to seth sanders and john list for their constructive advice at the early stage of the research to timothy bresnahan rachel kranton and thomas hubbard for their detailed suggestions in reshaping earlier versions and to editor ariel pakes and two anonymous referees for their careful readings special thanks to eight friends who acted as our agents in purchasing baseball cards in retail markets and to numerous sports card store owners who shared their insights on the sportscard industry excellent research assistance from randy alexander moore and krzysztof fizyta is gratefully acknowledged any remaining errors are ours

experience dependent information diffusion and product quality in a monopoly market for an experience good the diffusion of product quality information may depend on whether or not the information is favorable to capture this asymmetry our model uses as its information source a quality survey which suffers from response bias consumers may attempt to adjust for bias but are not required to do so correctly as a result quality under perfect information need not be and usually will not be higher than quality under imperfect information in addition the externality exerted by informed consumers on uninformed consumers may not be the traditional beneficial externality jel l15

official finance requirements in the 1990s abstract estimates based on a savings gap model with endogenous private bank lending suggest that projections of development aid requirements for sub saharan africa low income asia and latin america by fishlow 1987 the development committes 1988 and the un 1988 are too optimistic a substantial increase in official financial flows to developing countries is necessary it appears that an increase in private bank exposure by 25 a 35 debt reduction and a 35 interest reduction as proposed in the recent brady plan are insufficient to reach minimum growth rates in the three developing regions

prices as signals of product quality this paper is concerned with the provision of quality in markets in which consumers have only imperfect information the analysis focuses on a market for a product that can be produced at different quality levels all consumers prefer higher to lower quality but they may differ in their willingness to pay for quality producers can produce any quality they like but higher qualities are more costly to produce the information in this market is imperfect in the sense that the exact quality chosen by a firm is known only to the firm itself some information about the quality of a firm s product will however reach its potential customers even if they do not make any special effort to acquire it within the framework suggested here two conclusions are drawn first prices may serve as signals which exactly differentiate the available quality levels that is there exists a fulfilledexpectations equilibrium at which each price signals a unique quality level second the pricesignals are not arbitrary each price signal exceeds the marginal cost of producing the quality it signals such a mark up depends on the nature of the product specific information received by consumers the poorer the information the higher the mark up

a review of the pricing mechanisms for district heating systems heating represents the largest proportion of energy use as supplied to consumers across all end energy uses therefore there is huge potential for energy savings in the heating sector in order to reduce the emission of co2 district heating dh has been considered an efficient environmentally friendly and cost effective method for heating in buildings and is playing an important role in the mitigation of climate change in the interest of fairness and in the highly competitive market the dh companies operate there is a strong need to develop a novel heat pricing mechanism in order to promote sustainable development of dh systems in this paper existing methods and models regarding heat pricing have been reviewed the features of different pricing mechanisms have been analysed including advantages and disadvantages insights into developing an advanced pricing mechanism for dh systems have been offered

information transmission in regulated markets the seminal papers of vincent p crawford and joel sobel 1982 and jerry green and nancy stokey 1980 study models in which a signal about the state of the world is transmitted from a perfectly informed sender to an uninformed receiver the authors study a model in which multiple signalers compete for consumers the authors ask how much information is revealed how consumers shopping around affects this information and how each is affected by incentives an implication of the model is that in a price regulated market for health care patients should not be prohibited from gathering more than one opinion

roles and potentials of renewable energy in less developed economies the case of nepal increasing the share of renewable energy in the national energy mix remains one of the major energy policy goals across many economies this paper assesses the roles and potentials of renewable energy sources in less developed economies while citing nepal as an example renewable energy has a significant role to play in the electrification of rural areas in developing economies and contribute towards sustainable development realizing full potentials of renewable however requires addressing both the associated demand side and supply side constraints innovative subsidies and tax incentives adequate entrepreneurial support strengthening institutional arrangement and promoting local community based organizations such as the cooperatives are the necessary factors in promoting the green technologies in countries like nepal international factors such as large scale investment and adequate technology transfer are equally crucial to create a rapid spread and increase affordability of decentralized renewable energy technologies in less developed economies

information in cournot signaling with incomplete control abstract we embed signaling in the classical cournot model in which several firms sell a homogeneous good the quality is known to all the firms but only to some buyers the quantity setting firms can manipulate the price to signal quality because there is only one price in a market for a homogeneous good each firm incompletely controls the price signal through the quantity decision we characterize the unique signaling cournot equilibrium in which the price signals quality to the uninformed buyers we then compare the signaling cournot equilibrium with the full information cournot equilibrium signaling is shown to increase the equilibrium price moreover under certain conditions regarding the composition of buyers the number of firms and the distribution of costs across firms the effects of signaling and market externality cancel each other in other words the profits under signaling cournot equal the profits of a cartel in a full information environment

report cards the impact of providing school and child test scores on educational markets this paper studies study the impact of providing school and child test scores on subsequent test scores prices and enrollment in markets with multiple public and private providers a randomly selected half of the sample villages markets received report cards this increased test scores by 0 11 standard deviations decreased private school fees by 17 percent and increased primary enrollment by 4 5 percent heterogeneity in the treatment impact by initial school quality is consistent with canonical models of asymmetric information information provision facilitates better comparisons across providers improves market efficiency and raises child welfare through higher test scores higher enrollment and lower fees

regulating district heating in romania legislative challenges and energy efficiency barriers abstract many states in eastern and central europe ece possess extensive district heating dh networks that were constructed during the days of communist rule in order to provide a universally accessible energy service that supported soviet development policies but the post communist transition was marked by the exacerbation of the sector s numerous technical economic regulatory and environmental problems accompanied by its abandonment in favour of alternative methods of domestic heating recent efforts to increase the use of dh in ece as a result of environmental and energy security concerns have taken place in an absence of critical context sensitive research the purpose of this paper is to explore the legal aspects of post communist dh reforms in romania with the aim of identifying some of the governance challenges faced by state authorities in managing the sector in broader terms we seek to explore the extent to which the romanian legislative framework is in a position to promote energy efficiency in dh this has been achieved via an analysis of formal policy documents government decrees strategic documents and laws pertaining to this sector as published and subsequently amended in the official gazette the conclusions of the paper identify the key regulatory issues in the sector especially with respect to the tariff setting process and the division of competences among different organisations in it while suggesting a set of policy steps and general restructuring approaches that could help overcome the current situation

fossil fuel subsidies and environmental constraints fossil fuel subsidies are applied in many countries for different policy reasons such as maintaining jobs in fossil fuel sectors securing national energy supply or lowering the energy costs of selected industries to strengthen competitiveness the current economic costs of fossil fuel subsidy policies can be substantially increased by future environmental constraints we illustrate this point in the framework of a general equilibrium analysis for germany where we quantify the economic costs of alternative hard coal subsidy policies at different co2 reduction levels our calculations show that german hard coal subsidies as a means of retaining jobs can get very expensive with additional specific costs of up to annual 70 000 dm per job for a given co2 reduction target of 35 though the empirical analysis is focused on germany the general conclusion that current subsidy policies of fossil fuels must be fundamentally reconsidered in view of forthcoming environmental constraints is also relevant for other countries

environmental financing in european economies in transition the paper offers a perspective on environmental predicament of economies in transition emphasis is put on how these economies finance their environmental needs it is observed that the demand for environmental financing can be affected both by environmental policy measures such as internalization of externalities and by other factors such as the softness of budget constraints faced by firms the role of subsidies in many countries of the central and eastern european region provided through special purpose environmental funds is then scrutinized in particular the question is asked whether such funds crowd out commercial capital from the market conditions are discussed that would allow the funds to play their constructive environmental roles without crowding out private financing

response to competitive entry a rationale for delayed defensive reaction empirical studies examining responses to new product entries come to the puzzling conclusion that in general an incumbent reacts to a new entrant after a significant delay even easy to implement price cuts are observed after significant lag following entry these findings seem to contradict the existing literature that either implicitly assumes or strongly advocates immediate defensive responses to limit competitive encroachment when a competing firm enters the market consumers may be uncertain about the entering firm s product quality the incumbent firm through rigorous tests may fully know the entrant s quality suppose the incumbent aggressively lowers price this may cause the consumers to wonder if indeed the entrant s quality is high in other words an incumbent s reaction may cause the consumers to make inferences about the entrant s quality such strategic implications of the incumbent s reactions have to be carefully analyzed before determining the optimal response by the incumbent in this paper we propose a conceptual framework for understanding differences in the magnitude and timing of incumbents responses to competitive entries we consider a model in which a monopolist incumbent firm faces competitive entry the incumbent firm knows the true quality of the entrant with certainty although consumers are aware of the incumbent s product quality through their prior experience they are initially uncertain of the entrant s product quality in such a situation a high quality entrant has the incentive to signal her true quality through her strategic price choice however the uncertainty about the entrant s quality is favorable to the incumbent in the sense that consumers believe with a high probability that the entrant s quality is low as a result the strategic incentives facing the incumbent and the entrant oppose each other while the entrant wants to signal her high quality the incumbent wants to prevent her from doing so we demonstrate that one way the incumbent can prevent the quality signaling is to select a higher than his optimal competitive duopoly price in other words the incumbent can prevent or jam the entrant s quality signaling by choosing a price higher than his optimal competitive price when consumers are fully informed about the entrant s true quality though the signal jamming price is lower than the monopoly price the price is substantially higher than the competitive price this marginal reduction in the incumbent s price from the pre entry monopolistic price represents a muted or lack of response by the incumbent to the competitive entry however once the entrant s quality gets revealed in subsequent periods through consumer usage and word of mouth the entrant has no incentive to engage in quality signaling and the incumbent has no incentive to jam it therefore the market reverts to the complete information competitive prices and the incumbent lowers his price considerably this temporal pattern of muted price reduction in the first period followed by a sharp price reduction in the second period corresponds to a delayed defensive reaction in our model although the empirical studies suggest that the delayed reaction may arise due to factors such as managerial inertia or indecision we demonstrate that such a behavior is indeed an optimal strategy for a profit maximizing firm thus our model reconciles empirical results with the equilibrium outcome of a strategic analytical framework furthermore in an experimental setting we test the predictive power of our framework and establish that consumers indeed form conjectures about the entrant s quality based on the incumbent s reactions in the first experimental study we find strong support for the notion that the incumbent s price reaction may indicate entrant s quality in a follow up study we observe that whenever the incumbent lowers prices respondents judge the quality of the entrant to be higher as compared to the case when prices are the same or increased the managerial implication of this paper is that well established incumbent firms should be cautious in the implementation of their defensive responses to product introductions of uncertain quality by competitors of particular concern are situations where the reactions are easily observable by consumers a strong reaction may suggest that the incumbent takes the competitive threat seriously leading consumers to believe in the quality of the competitor s product

trade capital and the transition in central europe the potential for export oriented growth and the impact of official capital injections is assessed for five central european countries in the years 1990 2000 by means of a neoclassical simulation model export growth is essential for the transition to a market oriented economy and the recovery of central europe implying the need for trade liberalization by both the east and the west if this condition is being met satisfactory gdp growth rates appear possible even without external financial support

imported materials prices wage policy and macroeconomic stabilization this paper analyses two simple wage rules that keep employment constant when there are shocks to the prices of imported materials one rule ties nominal wages to the gnp deflator rather than the consumer price index the second rule followed by japan after the second oil price shock ties the real wage to real gnp the paper shows the effects on output real income and other macro economic variables of choosing either rule in place of the real wage stability provided by conventional wage indexation

prices product qualities and asymmetric information the competitive case recent developments in the economics of information emphasize the informational content of prices we examine the degree to which prices convey information on product quality to uninformed agents under perfect competition we show that a rational expectations equilibrium may not exist when an equilibrium does exist the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents

selective reporting of factual content by commercial media the authors study the market for factual content and examine whether competition increases or decreases its provision factual content is supplied by commercial media firms which observe a set of facts depicting the state of the world and selectively decide how to report them consumers value content that matches their opinion which incentivizes media firms to slant their reports by omitting certain facts novel features in the authors model include consumers ability to anticipate the media s incentives for slant and the requirement that all media stances must be supported by facts furthermore consumers find reports with more facts to be more convincing despite consumers ability to detect slant and their demand for factual support the research shows that competition results in consumers reading fewer facts and being unable to update their prior beliefs about the state of the world the authors also find that a monopoly medium may be more polarizing than competitive media and that polarized report

the assessment microeconomics of transition in eastern europe the dramatic political events of 1989 and 1990 when almost all the communist governments of eastern europe collapsed and new democratic governments were elected into office gave rise to a brief spell of euphoria the dead or dying hand of communism was lifted from the region and a future of capitalist abundance was supposedly as sured this naive but perfectly understandable euphoria was quickly dispelled by the grim economic reality facing the new governments al though nearly everywhere there was a commit ment more or less strong to bring about a transition to a market type economy a transition typically requiring stabilization extensive liberalization and privatization there was far less agreement on the speed sequencing and precise modalities of the process at the same time in certain countries much needed reform programmes could neither be agreed nor implemented effectively because of political disputes over the very nature and existence of the states concerned table 1 summarizes the economic and political situation in the whole re gion as of summer 1991

sweet lemons illusory quality self deceivers advertising and price the author s study suggests that competition can lead to low quality advertisers competing against and gaining market shares from lower priced high quality non advertisers evidence in support of

are the costs of cleaning up eastern europe exaggerated economic reform and the environment widespread concern has been expressed that the costs of reducing environmental pollution in eastern europe will divert substantial investment resources from the pool available for industrial modernization in fact apart from a number of severely damaged areas the general level of exposure to major pollutants in eastern europe is not high by comparison with the oecd countries even without specific environmental policies the process of general economic reform combined with energy conservation induced by higher energy prices will reduce emissions by nearly 50 percent a modest fraction of general investment in industrial modernization will deal with the remaining problems of current emissions provided that sensible systems of environmental charges are enforced the countries will then be faced with the problem of cleaning up the debris of past industrial activity which can be tackled over an extended period of years as in other industrial economies copyright 1991 by oxford university press

economic reform in eastern europe abstract since the early 1960s reforms in the traditional centralized model of a planned economy have been debated in most of eastern europe reforms have been confined to cautious ones seeking to improve central planning but in hungary and to a small degree elsewhere more radical reforms have taken root these retain elements of planning but also introduce the institutions and policies needed to support a more active market orientation for the economy such reforms encounter limits when they begin to threaten or call into question established political structures and it is an open question how much further reforms can proceed in hungary without political change

electricity sector reform in cameroon is privatization the solution abstract the economic difficulties of cameroon and of its government owned companies led the international monetary fund imf and the world bank to set up a vast privatization program with the government s collaboration in the electricity sector the state had a complete control over the industry through the societe national d electricite sonel an integrated monopoly utility under the imf world bank program sonel has been sold to foreign interests this article presents cameroon s electricity sector the proposed reform and the importance of electricity in economic development an evaluation of the reform is presented from two different perspectives first we consider the reform from a theoretical and market design point of view second we challenge the reform from a more fundamental level by questioning the relevance of privatization at this stage of the electricity sector development this brings us to review the strategic place of electricity in economic growth how different countries have dealt with their electricity industry in early development stage and how the objective of multinational corporations could be in conflict with specific electricity sector goals from these two different perspectives we conclude that the imf and the world bank have set up a reform process that is against good public policy we conclude with some suggestions for improving the reform process

the arguments for and against ownership unbundling of energy transmission networks abstract the question this paper addresses is what is the evidence for the superiority of the ownership unbundled transmission models i e uk or nord pool hybrid over other models we assess the theoretical costs and benefits of ownership unbundling and judge these to be generally positive though these may be potentially offset by the actual reorganisation costs of the ownership unbundling process next we assess the empirical evidence this is in two forms econometric evidence from samples of countries and case studies of reforms in particular jurisdictions the econometric evidence is weak due to problems with simultaneity of reform steps and a lack of studies but the case study evidence is compelling we conclude with a discussion of the issues faced by countries considering implementing ownership unbundling we conclude that evidence seems to be that ownership unbundling of transmission is a key part of energy market reform in the most successful reform jurisdictions

a 100 year review of electricity policy in ireland 1916 2015 abstract over the past century ireland s electricity sector has undergone a significant transformation this paper documents the nation s struggle to build an electricity system to improve security of electricity supply through portfolio diversification and to promote indigenous energy sources this was a challenge for an electrically isolated island with little natural resources the paper also identifies the ineffective policy decisions that left ireland exposed to the 1970s energy crises the crises did however provide a clear impetus for focusing irish energy policy going forward the successful deployment and integration of large scale wind power was due to strong national and supranational policy decisions in 2015 ireland had the third highest wind energy share of national electricity demand 22 8 of all iea wind member countries the paper also traces ireland s transition through market reform regional fragmentation and looks onwards to the eu internal market for electricity in essence this paper provides a holistic view of the implications of various policy decisions on the electricity sector along with the stresses of external factors on the electricity market and should be useful for policy makers elsewhere faced with similar decisions

exploiting naivete about self control in the credit market we develop a model of the credit market where competitive lenders oer long term contracts specifying a non linear schedule of possible repayment schedules to borrowers who may dier both in their taste for immediate gratication and their prior beliefs about that taste the equilibrium contract to a borrower with given beliefs is discontinuous it features an advantageous option involving fast repayment and a penalty for deviating and repaying later these predictions seem to resemble some salient features of many credit card and mortgage contracts for fully sophisticated borrowers the discontinuity acts as a commitment device and yields fast repayment but all other borrowers even those with an arbitrarily small amount of naivete end up delaying repayment despite the penalty and receive little benet from commitment furthermore because they believe they will repay early they underestimate the cost of credit and hence borrow too much non sophisticated borrowers cross subsidize sophisticated borrowers while sophisticated borrowers discipline rms by preventing very exploitative contracts we identify natural conditions under which the above results obtain even if

modeling competitive marketing strategies the impact of marketing mix relationships and industry structure this paper empirically analyzes the formulation of competitive marketing strategies consisting of product quality levels promotional expenditures and prices using a simultaneous equation model we examine the use of prices and promotional spending as signals or indications of product quality the impact of promotional spending on prices and the impact of industry structure on the formulation of the complete marketing mix the structural equations are developed using a theoretical model of optimal competitive marketing mix and are estimated using business level pims data which consists largely of industrial durable goods producers for a cross section of 1 100 of these businesses three results of the estimation are especially interesting price cost margins are high for high quality products suggesting that high prices indicate or signal high quality promotional intensity is unrelated to product quality suggesting that promotional effort provides no reliable signals of quality intensely promoted products earn low price cost margins however indicating that promotional spending is associated with high price sensitivity quality levels promotional intensity and price cost margins vary significantly with competitive and market conditions such as the concentration of competitors and the stability of market shares although these relationships are generally weaker than relationships between quality promotion and price cost margins quality levels are high and margins low in markets with unstable shares or unconcentrated competitors

strategic pricing with rational inattention to quality this paper studies both theoretically and experimentally the pricing strategy of a rm that faces a consumer who is rationally inattentive to product quality sims 2003 in a standard sequential pricing game rational inattention to quality produces two types of mixed strategy perfect bayesian equilibria one where sellers pool at a low price and buyers are fully inattentive to quality and one where there is semi pooling at a high price and buyers are selectively attentive to quality i characterize these

reforming small electricity systems under political instability the case of nepal this paper assesses the issues and options in reforming small electricity sector systems in general while citing nepal as a specific case political instability and increasing electricity demand are two major complicating factors in power sector reform of small systems such as that of nepal lessons from international experience suggest that measures such as cost reflecting pricing restructuring and independent regulation are important for the success of reforms in small systems the creation of an independent regulatory authority is more important than unbundling of the sector in the present context of nepal accounting separation of the main activities may be a pragmatic restructuring approach given the present political and market condition as the systems gradually grow larger vertical separation of the system and horizontal splitting of the generation segment and competition in organised wholesale market followed by privatisation remains an option in the long run

costing an international public good the case of the baltic sea abstract the paper discusses an economically efficient and internationally equitable provision of a specific public good the good in question the baltic sea satisfies a number of needs but economic values implied may be different in various countries polluting and using the sea the level of eutrophication has been identified as a key characteristic of the baltic sea relevant for its value the chander tulkens model of cost sharing is used to determine a hypothetical allocation of abatement costs across the countries around the sea the application of the model is based on estimates of national abatement costs as well as national willingness to pay for reduced eutrophication estimating willingness to pay in a collection of countries some of which undergo a transition from centrally planned systems has been the main challenge of this study the results were derived from a coordinated series of contingent valuation surveys in lithuania poland and sweden combined with benefit transfer studies to cover the rest of the region predictions of cost sharing schemes obtained from the chander tulkens model are confronted with actual data on abatement expenditures and international assistance several recommendations on how to optimize the baltic wide programmes conclude the paper