price discrimination in broadway theater a common thread in the theory literature on price discrimination has been the ambiguous welfare effects for consumers and the rise in profit for firms relative to uniform pricing in this study i resolve the ambiguity for consumers and quantify the benefit for a firm i describe a model of price discrimination that includes both second degree and third degree price discrimination using data from a broadway play i estimate the structural model and conduct various experiments to investigate the implications of alternative pricing policies the observed price discrimination may improve the firm s profit by approximately 5 relative to uniform pricing while the difference for aggregate consumer welfare is negligible also i show that the gain from changing prices in the face of fluctuating demand is small under the observed price discrimination

nonlinear pricing in an oligopoly market the case of specialty coffee firms that use nonlinear pricing may distort product characteristics away from their efficient levels this paper offers the first empirical study of this issue using data from a specialty coffee market i estimate a structural utility model to compute consumers benefits from changing products sizes i then compare the estimated benefits to cost data design distortions are relatively large for products not targeted to the highest demand consumers distortions decrease toward zero with drink size for products with the largest profit margins these results support some of the central predictions from nonlinear pricing theory including no distortion at the top

the role of the state in skill formation evidence from the republic of korea singapore and taiwan we propose a new interpretation of the role of the state in skill formation with reference to three east asian newly industrialized economies rather than see the state as simply redressing externalities we interpret the state as matching the supply and demand for skills in a rapidly growing economy this role can be superior to a strategy of allowing education and training institutions to be driven by autonomous processes the role is most likely to be observed in developmental states we examine the political mechanisms that have helped to ensure that educational and training policy formation are subordinated to the imperatives of economic growth while the east asian model cannot be imported wholesale to western countries such as britain in different historical circumstances the example lends credence to the value of the state taking a strategic approach to education and training policy

the welfare effects of fuel conservation policies in a dual fuel car market evidence from india we estimate a model of vehicle choice and kilometers driven to analyze the long run impacts of fuel conservation policies in the indian car market we simulate the effects of petrol and diesel fuel taxes and a diesel car tax taking into account their interactions with the pre existing petrol fuel tax and car sales taxes at levels sufficient to reduce total fuel consumption by 7 the increased diesel and petrol fuel taxes both yield deadweight losses net of externalities of about 4 2010 rs l however at levels sufficient to reduce total fuel consumption by 2 the increased petrol fuel tax results in a deadweight loss per liter of fuel conserved that is greater than that caused by the diesel fuel tax this reflects both the high pre existing tax on petrol fuel and the high own price elasticities of fuel demand in india a tax on diesel cars that results in the same diesel market share as the large diesel fuel tax actually has a negative deadweight loss per liter of fuel conserved the welfare effects of all three policy instruments are positive once the external benefits of reducing fuel consumption are added to the excess burden of taxation

does consumer sentiment forecast household spending if so why in the three months following the iraqi invasion of kuwait the university of michigan s index of consumer sentiment ics fell an unprecedented 24 3 index points to its lowest level since the 1981 1982 recession this collapse in household confidence became the focus of a great deal of economic commentary and indeed frequently was cited as an important if not the leading cause of the economic slowdown that ensued concern was fueled by the well known contemporaneous correlation between the ics and the growth of household spending figure 1 shows quarterly averages of the index 1978 1993 together with the quarterly growth in real personal consumption expenditures as measured in the national income accounts bureau of economic analysis the correlation is impressive of course it is not surprising that sentiment and the growth of spending are positively correlated this correlation may simply reflect that when economic prospects are poor households curtail their spending and also give gloomy responses to interviewers thus the contemporaneous correlation between sentiment and spending does not refute traditional life cycle or permanentincome models of consumption nor does it necessarily make the job of forecasting changes in consumption any easier from the point of view of an economic forecaster the questions of interest are first whether an index of consumer sentiment has any predictive power on its own for future changes in consumption spending and second whether it contains information about future changes in consumer spending aside from the information contained in other available indicators in section i we present evidence that the answer to the first question is a clear yes we find that lagged values of the ics taken on their own explain about 14 percent of the variation in the growth of total real personal consumption expenditures over the post1954 period further investigation shows that the answer to the second question is probably yes as well though here the margin is narrower and the evidence more murky the ics contributes about 3 percent to the r2 of a simple reduced form equation for total personal consumption expenditures in the longer of the two sample periods we examine but nothing in the shorter sample period though the latter result is heavily influenced by the observation for 1980 2 for the major subcategories of spending the contribution generally ranges between 1 percent and 8 percent overall we read the evidence as pointing toward at least some significant incremental explanatory power therefore we take as given for the remainder of the paper that sentiment forecasts spending and we turn to the issue of how that statistical relationship should be interpreted one possible interpretation is that sentiment is an independent driving factor in the economy and that changes in carroll division of research and statistics stop 80 federal reserve board washington dc 20551 fuhrer research department federal reserve bank of boston boston ma 02106 wilcox division of monetary affairs stop 71 federal reserve board washington dc 20551 we have benefited from the research assistance of stephen helwig and christopher geczy and the comments of an anonymous referee the views expressed in this paper are those of the authors and not of the federal reserve board the federal reserve bank of boston or the other members of the staff of either institution ithe conference board s consumer confidence index also plunged at the same time

annual miles drive used car prices this paper investigates whether the net benefits from owning a vehicle proxied by annual miles driven explain the price declines observed over a vehicle s life we first model the household decision on how much to drive each of its vehicles then we empirically establish that variation in household annual miles across brands explains observed price declines furthermore the effect of vehicle age on annual miles decisions and consequently on market value depends on household characteristics and the composition of the vehicle stock owned

fuel prices and new vehicle fuel economy comparing the united states and western europe abstract several recent papers have documented an effect of fuel prices on new vehicle fuel economy in the united states this paper estimates the effect of fuel prices on average new vehicle fuel economy for the eight largest european markets the analysis spans the years 2002 2007 and uses detailed vehicle registration and specification data to control for policies consumer preferences and other potentially confounding factors we find fuel prices to have a statistically significant effect on average new vehicle fuel economy in europe the effect estimated for europe is much smaller than comparable estimates for the united states

price discrimination and retail configuration the hypothesis that price discrimination based on willingness to pay for quality can occur in multifirm markets is confirmed using microdata on gasoline retailing a test that discriminates between price structures associated with discrimination and with cost driven competitive differentials is developed and implemented with controls for variation in outlet and market characteristics a second test based on profitability variation rejects a competitive peak load pricing explanation for the observed price dispersion the data suggest that price discrimination at the retail level adds at least 9 a gallon to the average price of full service gasoline

the evolution of price dispersion in china s passenger car markets this research identified the rising price dispersion of passenger cars in chinese cities during the period from 2004 to 2006 the sources of the price differentials were then further explored the theoretical and empirical analyses suggest that the income effect as reflected by income differentials across chinese cities and the competition effect as reflected by car supply differentials across chinese cities largely account for regional automobile price differentials across china

an equilibrium model with involuntary unemployment at flexible competitive prices and wages this paper presents a general equilibrium model in which all prices and quantities transacted are the direct choices of econom ic agents there is no walrasian auctioneer multiple subgame perfect equilibria exist with prices and wages at their walrasian levels among the equilibrium allocations are the walrasian ones but there a re also outcomes in which price and wage taking workers are rationed in the labor market and are unable to sell all the labor they want a t the prevailing wage this involuntary unemployment results from sel f fulfilling expectations of inadequate excess demand as in some inte rpretations of keynes s ideas copyright 1987 by american economic association

competitive price discrimination we model firms as supplying utility directly to consumers the equilibrium outcome of competition in utility space depends on the relationship u between profit and average utility per consumer public policy constraints on the deals firms may offer affect equilibrium outcomes via their effect on u f rom this perspective we examine the profit utility and welfare implications of price discrimination policies in an oligopolistic framework we also show that an equilibrium outcome of competitive nonlinear pricing when consumers have private information about their tastes is for firms to offer efficient two part tariffs

consumer confidence and rational expectations are agents beliefs consistent with the theory consumer confidence is found to have predictive content for a wide range of macroeconomic variables including consumption growth contrary to standard repih we find that on uk data the repih is rejected due to the predictive content of consumer confidence and not labour income we explain this finding in terms of precautionary behaviour extending the hansen and singleton consumption capm model to allow a conditional variance we find a high level of confidence is associated with both greater optimism about the level of consumption and greater uncertainty about the forecaster variance once allowance is made for time aggregation the over identifying restrictions implied by this model are accepted we estimate a small but statistically significant intertemporal elasticity of substitution

confidence and the real economy the japanese case this paper empirically analyses whether consumer confidence has an effect on the real economy in japan this paper uses vector autoregressions including variables which represent consumer confidence it is shown that in the cases of quarterly and monthly data consumer confidence has a significant effect on gdp fluctuations whereas in the case of semiannual data it has no effect in other words consumer confidence has an effect on only short term economic fluctuations

voluntary export restraints on automobiles evaluating a trade policy the authors evaluate the voluntary export restraint that was initially placed on exports of automobiles from japan in 1981 they evaluate the impact this policy had on u s consumer welfare firm profits and foregone tariff revenue from its initiation through 1990

consumer myopia imperfect competition and the energy efficiency gap evidence from the uk refrigerator market abstract the empirical literature on the energy efficiency gap concentrates on demand inefficiencies in the energy using durables markets and finds evidence that consumers underestimate future energy costs when purchasing a new appliance we take a broader view and also consider the impact of imperfect competition using data on the uk refrigerator market 2002 2007 we find that the average energy consumption of appliances sold during this period was only 7 2 higher than what would have been observed under a scenario with a perfectly competitive market and non myopic consumers one reason for this small gap is that market power actually reduces energy use

will a radical transport pricing reform jeopardize the ambitious eu climate change objectives abstract this paper examines the effects of replacing current fuel taxes by a system of taxes that account better for all the different external costs of the different transport modes one of the important implications of this reform is that current fuel taxes are decreased to a level of 80 euro ton of co 2 but that the mileage related taxes on car and truck use increase using the tremove model for the transport sector of 31 european countries one finds that the volume of transport will decrease because current taxes on transport are too low compared to overall external costs overall co 2 emissions will decrease slightly using the markal times model for the belgian energy sector putting all sectors and technologies on equal footing shows that a fuel tax reform makes that it is not cost efficient to require large co 2 emission reductions in the transport sector and that traditional car technologies will continue to dominate the car market in 2020 2030

not fully charged welfare effects of tax incentives for employer provided electric cars more than 15 million cars are provided as fringe benefits by employers in europe the company car market is the driving force of changes in european car fleets and one of the main channels for the penetration of low emission vehicles policies in support of low emission vehicles through this channel have been popular this paper introduces an approach to estimate the welfare effects of policies linking company car tax base rates with vehicles environmental impact the approach is applied to evaluate the effects of tax advantages for electric company cars in the netherlands we find that the welfare losses caused by these policies are substantial and even outweigh the foregone tax revenue this result also holds if we assume that there are substantial future benefits from the adoption of electric company cars e g in terms of positive network externalities technological innovation and concomitant environmental benefits

economic development strategies and macro and micro level human resource policies the case of india s outsourcing industry this detailed case study of india s outsourcing industry illustrates the challenges in linking macro and micro human resource policies with an economic development strategy based on export oriented services the rapid expansion in the outsourcing of services to india has raised the possibility that this sector will be a key engine of india s economic growth based on extensive field research carried out over a four year period the authors of this study argue that four interrelated human resource policy challenges threaten the outsourcing industry s growth two macro problems current skill shortages and the inability of the country to produce higher levels of skills for the long term growth and sustainability of the industry and two micro problems very high levels of employee turnover and rapidly increasing employee costs the authors evaluate current policy responses and suggest options

tax design in the presence of imperfect competition an example abstract this paper studies the effects upon price output and entry in an oligopolistic market induced by tax policy elsewhere in the economy the results derived are applied to a model of copying to find conditions for which subsidisation of the manufacturers of originals is welfare improving the critical factor is found to be the distribution of consumers tastes

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

expectations heterogeneous forecast errors and consumption micro evidence from the michigan consumer sentiment surveys the household data underlying the michigan index of consumer sentiment are used to test the rationality of consumer expectations and their usefulness in forecasting expenditure the results can be interpreted as characterizing the shocks that hit different types of households over time expectations are found to be biased and inefficient at least ex post people underestimated the disinflation of the early 1980s and the severity of recent business cycles people s forecast errors are also systematically correlated with their demographic characteristics in part because of time varying group level shocks further sentiment helps forecast consumption growth some of this rejection of the permanent income hypothesis is due to the systematic demographic components in forecast errors

modifying the rebound it depends explaining mobility behavior on the basis of the german socio economic panel abstract we address the empirical question of the extent to which higher fuel efficiency of cars affects additional travel and the way this behavioral aspect is modified by additional variables the data set used to estimate a theoretical model of the rebound effect covers two panel waves 1998 and 2003 taken from the german socio economic panel soep to take full advantage of the information in the data available and to avoid problems due to possible selection effects we estimated an unbalanced two wave random effects panel model our results suggest that in line with the rebound hypothesis car efficiency has a negative effect on the kilometers driven that is the lower the fuel consumption the greater the distance driven however contrasting recent empirical literature about the rebound effect in the transportation sector this seems to be true only for cars with a consumption of more than roughly 8 l per 100 km in addition we find a positive diesel effect which implies that owning a diesel engine car is positively correlated with the distance driven both effects can be interpreted as support for the rebound hypothesis although not in a simple linear way moreover it can be shown that some soft variables such as certain attitudes towards the environment tend to amplify this non linear rebound effect

nonlinear pricing with random participation the canonical selection contracting programme takes the agent s participation decision as deterministic and finds the optimal contract typically satisfying this constraint for the worst type upon weakening this assumption of known reservation values by introducing independent randomness into the agents outside options we find that some of the received wisdom from mechanism design and nonlinear pricing is not robust and the richer model which allows for stochastic participation affords a more general empirical specification we develop a multidimensional methodology for addressing this class of problems providing two important applications to nonlinear pricing first with nonlinear pricing by a monopolist the familiar nodistortion at the top result persists but in tandem with the surprising conclusion that there is either no distortion at the bottom or bunching second in a simple model of product differentiated duopolists competing with nonlinear pricing we show that generally the duopoly outcome is qualitatively similar to the monopoly outcome however when marginal costs are symmetric and competition is sufficiently intense distortions disappear and the equilibrium outcome takes a remarkably simple form efficient quality allocations with cost plus fee pricing

does buffer stock saving explain the smoothness and excess sensitivity of consumption one of the lasting contributions to modernday consumer theory is the idea that consumption is determined by the expected value of lifetime resources or permanent income the modern day specification of this concept is typically presented as a special case of intertemporalchoice theory where felicity functions are quadratic labor income is stochastic there are no restrictions on borrowing consumers have infinite horizons and expectations are formed rationally we refer to this model as the permanentincome hypothesis pih although the pih has considerable intuitive appeal a series of influential papers published after its inception revealed two notable discrepancies between the model s predictions and aggregate data first the model predicts that consumption growth should be more volatile than income growth if aggregate income growth has positive serial correlation as the quarterly data suggest it does yet aggregate consumption growth is in fact much smoother than aggregate income growth angus deaton 1987 john y campbell and deaton 1989 jordi gali 1991 second the pih predicts that consumption changes should be orthogonal to predictable or lagged income changes yet the coffelation between consumption growth and lagged income growth has been found to be one of the most robust features of aggregate data for example marjorie a flavin 1981 alan s blinder and deaton 1985 campbell and n gregory mankiw 1989 orazio p attanasio and guglielmo weber 1993 thus aggregate consumption growth has been described as exhibiting two puzzles it is both excessively smooth relative to current labor income growth and excessively sensitive to lagged labor income growth 2 in response to these and other empirical anomalies researchers have recently sought out modifications of the pih framework chief ludvigson federal reserve bank of new york 33 liberty street new york ny 10045 michaelides university of cyprus p o box 20537 1678 nicosia cyprus a previous version of this paper appeared under the title can we explain the consumption excesses yet aggregate consumption implications of buffer stock saving behavior for many helpful comments we thank orazio attanasio dave backus ben bernanke john y campbell christopher carroll todd clark angus deaton pierreolivier gourinchas bo honore james kahn martin lettau costas meghir christina paxson steve pischke andrew samwick christopher sims mark watson guglielmo weber michael woodford steve zeldes and two anonymous referees conference participants at the national bureau of economic research summer workshop on the aggregate implications of microeconomic consumption behavior july 1998 the tmr workshop on saving and pensions center tilburg university march 1999 and the new york area macroeconomics workshop october 1998 seminar participants at columbia university insead the new york federal reserve university college london london business school city university business school university of cyprus tel aviv university and jeffrey brown for excellent research assistance the views expressed are those of the authors and do not necessarily reflect those of the federal reserve bank of new york or the federal reserve system any errors or omissions are the responsibility of the authors 1 note that the important insight of danny quah 1990 that individuals may be better able than econometricians to distinguish short run from long run innovations to their income cannot resolve the excess smoothness puzzle laid out in campbell and deaton 1989 these authors show that in the context of the pih excess sensitivity and excess smoothness are the same phenomena in addition campbell 1987 demonstrates that superior information of the type emphasized by quah will show up in households saving behavior and using this information allows the econometrician to control for the agent s private information when predicting income since excess sensitivity is well established and controlling for saving does not eliminate it see campbell and deaton 1989 the observed smoothness of consumption cannot be explained by superior information on the part of permanent income consumers see deaton 1992 for further discussion 2 philippe bacchetta and stefan gerlach 1997 and ludvigson 1999 document another kind of excess sensitivity the correlation between consumption growth and predictable changes in consumer credit although we do not explore these findings here ludvigson finds that a bufferstock model with time varying liquidity constraints can replicate such a correlation

an assessment of the singapore skills development system does it constitute a viable model for other developing countries abstract in this paper we briefly describe the institutional background of singapore s successful national skills development model we devise a tentative framework to evaluate national level skills development efforts and we use it to assess the singapore model we argue that the model has the potential to move constantly toward higher skills equilibria we question however the long term sustainability of the model and whether it is transferable to other developing countries we conclude with some principles that other countries might use in organizing their own skills development systems

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

package size and price discrimination in the paper towel market abstract estimates from a structural model of consumer behavior and firm conduct are used to decompose the extent to which quantity discounts for paper towels are consistent with second degree price discrimination as opposed to cost differences across sizes counterfactual exercises assuming that firms offer only one package size or charge uniform prices across sizes indicate that competition in the multi roll package size segment results in increased consumer surplus and lower prices for all consumers

psychology consumer sentiment and household expenditures the aim of this article is to assess the role of the italian consumer sentiment index csi as an autonomous driving force of consumption decisions we test for the presence of rule of thumb consumers as originally proposed by campbell and mankiw 1991 using sentiment measures distinguished by respondent s working condition and consumption data disaggregated according to durability over the period 1982 2004 the consumption sentiment relationship is found to be stronger for some groups of households and for some particular categories of expenditures moreover sentiment seems to be not well explained by economic fundamentals alone capturing also the effects of the political cycle and exceptional circumstances

competitive screening under heterogeneous information we study the interplay between informational frictions and second degree price discrimination our theory recognizes that consumers differ in their tastes for quality as well as in the information they possess about available offers which leads to dispersion over price quality menus in equilibrium while firms are ex ante identical we show that their menus are ordered so that more generous menus leave more surplus to consumers of all valuations we explore the cross section of equilibrium menus and variations in market conditions to generate empirical predictions on prices qualities and markups across firms and within a firm s product line for instance more competition may raise prices for low quality goods yet consumers are better off as the qualities they receive also increase the predictions of our model illuminate empirical findings in many markets such as those for cell phone plans yellow pages advertising cable tv and air travel

third degree price discrimination in a short stay accommodation industry this article analyses the pricing in the short stay accommodation industry in tasmania it utilizes a novel 2008 survey of tasmanian short stay accommodation firms in which business managers were asked about their perception of the elasticity of their firm s demand in each of the market segments that their firm supplied this direct observation of elasticity allows us to demonstrate that firms price across market segments act in a manner consistent with the lerner index and the theory of third degree price discrimination further we show in line with expectations based on the literature that increased quality of the accommodation lowers the elasticity of demand while the elasticity of demand is higher in winter surprisingly internet sales channels do not exhibit a different elasticity of demand to other sales channels

price discrimination with differentiated products definition and identification i introduction price discrimination is said to exist when the same product is sold to different consumers at different prices most economists also agree that price discrimination is at work when similar but not identical products are sold at prices that do not reflect differences in costs economics textbooks are rife with examples such as student or senior citizen discounts hardcover and paperback versions of books dinner versus lunch prices at restaurants airfares with various restrictions and price spreads of retail gasoline products on the other hand some economists have criticized the identification of such apparent price anomalies as price discrimination for example lott and roberts 1991 argue that there are usually cost based explanations for these phenomena and propose such explanations for the cases of airfare gasoline and restaurant prices nevertheless the authors do not challenge the conventional wisdom that price differences that cannot be explained by cost differences are discriminatory in recent years a number of papers have set out to empirically assess instances of alleged price discrimination the literature goes to great lengths to control for potential sources of cost variation among different products and thus to the extent that it is successful is not subject to the lott roberts critique almost all studies conclude that price discrimination is practiced in the particular market they analyze a skeptic of course could always argue that some sources of cost variation have not been accounted for and thus dismiss the results as erroneous despite the mild controversy over the methodology and its effectiveness the basic premise seems universally accepted the existence of price variation that cannot be explained by cost differences constitutes price discrimination this is not however a formal definition in fact there is no single widely accepted definition of price discrimination when products are not homogeneous some authors define price discrimination to exist when price cost margins absolute differences between differentiated products are unequal whereas others prefer to compare price cost markups percentage differences few authors have discussed the relative merits of one measure over the other 1 the relationship between the two has never been spelled out and the choice among them remains arbitrary in this article i aim to shed some light on this issue and provide some guidelines to empirical researchers interested in price discrimination i start by providing an overview of the current state of the literature in section ii i introduce the two competing definitions of price discrimination and briefly discuss the justification that has been provided for each i then review the empirical literature that uses one or the other definition as the basis of testing for price discrimination i present the basic methodology and discuss the definitional choices made by researchers investigating different market environments the picture that emerges from this overview is murky and provides little guidance to the empirical practitioner the absence of controversy on the choice of definition might simply reflect the fact that the two commonly used definitions are equivalent in section iii i show that this is not the case specifically it is possible for one definition to indicate the presence of price discrimination and for the other one to reject it it is also possible for the two measures to take opposite signs that is one product may have a higher markup and a lower margin than the other i also show that in general the margin criterion is more likely to indicate the presence of price discrimination i conclude that the choice of definition has important implications and should be given careful consideration the challenge is to come up with a consistent way of thinking about price discrimination that can easily be applied in a variety of settings

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

evidence of asymmetric behavioral responses to changes in gasoline prices and taxes for different fuel types abstract using monthly data from the spanish gasoline retail market we explore asymmetries in consumers behavioral responses to changes in gasoline prices and taxes in particular we are interested in investigating whether an increase in gasoline taxes has a more negative impact on the demand than a similar in magnitude increase in the pre tax price of gasoline for different fuel types we estimate fuel consumers responses using a rich set of robust panel data models considering potential dynamic effects and endogeneity problems we find evidence to confirm the existence of asymmetric responses for the demand of unleaded fuels and agricultural diesel fuel however we cannot support this statement for the regular diesel case for this fuel both the tax exclusive price and the tax elasticities are roughly the same this result agrees with the fact that diesel drivers tend to be better informed about changes in both fuel prices and taxes some implications in terms of fiscal policy and pollution and climate change policy are also discussed

market power and second degree price discrimination in retail gasoline markets abstract empirical evidence of quality based second degree price discrimination is scarce the co existence of regular grade 10 ethanol blended gasoline e10 and regular grade non blended gasoline e0 in a major metropolitan city allows for second degree price discrimination to be examined while eliminating the issue of endogenous product differentiation because the two blends of gasoline are near perfect substitutes using a unique data set including daily price information for 402 retailers that sell only e0 gasoline only ethanol blended e10 gasoline or both blends simultaneously i find evidence that retailers use second degree price discrimination to segment the population between perceived lower and higher quality gasoline despite the fact that both blends can safely be used in nearly all vehicles additionally i uncover two elasticities of demand for gasoline and discuss the welfare effects of price changes and market segmentation

multiple expectational equilibria under monopolistic competition this paper shows that a monopolistically competitive economy with real investment can have multiple rational expectations equilibria one is associated with entrepreneurs optimistic expectations about future demand another with entrepreneurs pessimism it also shows that an optimistic expectational equilibrium pareto dominates a pessimistic equilibrium an investment subsidy can be beneficial both by reducing the original underinvestment distortion and by changing firms expectations from pessimistic to optimistic the most important assumption is increasing returns to scale and monopolistic competition makes increasing returns consistent with each producer s optimization

the impact of tax reform on new car purchases in ireland we examine the impact of recent tax reforms in ireland on private car transport and its greenhouse gas emissions a carbon tax was introduced on fuels and purchase vehicle registration and ownership motor taxes were switched from engine size to potential emissions we use a demographic model of the car stock by age size and fuel and a car purchase model that reflects the heterogeneous distribution of mileage and usage costs across various engine sizes the model shows a dramatic shift from petrol to diesel cars particularly for large engines the same pattern is observed in the latest data on car sales this has a substantial impact on tax revenue as car owners shift to the lower tax rates the tax burden has shifted from car ownership to car use and that the overall tax burden on private car transport falls as diesel engines are more fuel efficient than petrol engines carbon dioxide emissions fall modestly or if we consider the rebound effect of travel costs on mileage minimally from the perspective of the revenue the costs per tonne of carbon dioxide avoided are very high

product line pricing in a vertically differentiated oligopoly this paper examines the joint pricing decision of products in a firm s product line when products are distinguished by a vertical characteristic those with higher values of that characteristic will command higher prices we investigate whether holding the value of the characteristic constant there is an additional price premium for products on the industry and or the firm frontier that is for the products with the highest value of the characteristic in the market or in a firm s product line we also investigate the existence of price premia for lower ranked products and other product line pricing questions using personal computer price data we show that prices decline with the distance from the industry and firm frontiers even after holding absolute quality constant we find evidence that consumer tastes for brands is stronger for the consumers of frontier products and thus competition between firms weaker in the top end of the market there is also evidence that a product s price is higher if a firm offers products with the immediately faster and immediately slower computer chip holding the total number of a firm s offerings constant possibly as an attempt to reduce cannibalization finally a product s price declines with the time it is offered by a firm suggesting intertemporal price discrimination ce memoire examine la decision conjointe de tarification des produits dans la ligne de produits d une firme quand les produits se distinguent par une caracteristique verticale ceux qui ont de plus grandes valeurs pour cette caracteristique commanderont de plus forts prix on se demande si gardant la valeur de cette caracteristique constante il y a une prime additionnelle des prix pour les produits de l industrie ou pour les produits de pointe de la firme i e les produits avec la plus haute valeur de cette caracteristique dans le marche ou dans la ligne de produits de la firme on examine aussi s il existe une prime de prix pour les produits qui se classent moins bien ou d autres questions sur la tarification des lignes de produits en utilisant des donnees de prix pour les ordinateurs personnels on montre que les prix chutent a mesure qu on s eloigne de la frontiere des produits de pointe pour l industrie et la firme meme si on garde la qualite absolue constante les resultats montrent que le gout des consommateurs pour les marques est plus fort pour les consommateurs des produits de pointe et que la concurrence entre firmes est plus faible dans cette section du marche on montre aussi que le prix d un produit est plus eleve si une firme offre des produits avec une puce juste plus rapide et plus lente tout en gardant le nombre total de produits de la firme constant possiblement dans un effort pour reduire la cannibalisation enfin le prix d un produit decline a proportion que la periode de temps ou il est offert par une firme s allonge ce qui suggere qu il y a discrimination intertemporelle par les prix

the macroeconomic effects of false announcements suppose that the government were to announce the economy will be booming in six months and this announcement is based on false data what effect would such an announcement have on future aggregate activity this paper employs revisions of the series of leading economic indicators to test the hypothesis that such an announcement would have a positive effect on future activity we find that the evidence is generally consistent with the hypothesis and that for the time period 1976 1988 the expectational shocks measured by these revisions explain over 20 percent of the fluctuation in the quarterly growth rate of industrial production

consumer confidence and rational expectations in the united states compared with the united kingdom this paper examines the relationship between consumer confidence and the rational expectations permanent income hypothesis in the usa and compares the results with those obtained for the uk the study expands previous analysis by defining consumption as motor vehicles goods excluding motor vehicles and services the results suggest that predictive ability of the usa s consumer confidence is less than that of the uk but that contrary to the uk study confidence does not predict future consumption growth of services and is therefore consistent with rational expectations permanent income hypothesis

estimating the effect of tax reform in differentiated product oligopolistic markets abstract the incidence of taxation has been extensively discussed in the public finance literature but mainly within a competitive market setting or within a homogenous good cournot type oligopoly in a differentiated product oligopoly the effect of taxation can be more complex as the rate of taxation may affect not only the prices but also the profile and quality of products that are sold in the market in this paper we examine the effects of changing tax regimes in a differentiated product oligopoly in order to illustrate our approach we employ data from one such market the automobile market in israel

welfare implications of car feebates a simulation analysis vehicle taxation based on emissions is increasingly being adopted worldwide to shift consumer purchases to low carbon cars yet evidence on its effectiveness and economic impact is limited we focus on feebate schemes which impose a fee on high carbon vehicles and give a rebate to low carbon cars we estimate demand for passenger cars in germany and simulate the impact of alternative feebate schemes on emissions consumer welfare public revenues and firm profits we find that revenue neutral feebate schemes are welfare decreasing welfare can only increase with schemes that increase tax revenues at the expense of consumer and producer surplus

product line rivalry with brand differentiation competition with product rivalry is examined in a model where products are differentiated by both quality and brand name with no commitment firms produce a full product line when firms can commit to restrict their product offerings firms specialize if the degree of brand specific differentiation is small and they produce a full product line if brand specific differentiation is large relative to intrafirm differentiation firms may crowd a product space when all competitors would be better off with specialization brand proliferation is a credible entry deterring strategy if the degree of brand specific differentiation is not too large copyright 1993 by blackwell publishing ltd

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

product differentiation and oligopoly in international markets the case of the u s automobile industry this paper develops and estimates a model of the u s automobile industry on the demand side a discrete choice model is adopted that is estimated using micro data from the consumer expenditure survey the estimation results are used in conjunction with population weights to derive aggregate demand on the supply side the automobile industry is modelled as an oligopoly with product differentiation equilibrium is characterized by the first order conditions of the profit maximizing firms the estimation results are used in counterfactual simulations to investigate two trade policy issues the effects of the ver and exchange rate pass through

quality based price discrimination and tax incidence the market for gasoline and diesel cars in europe the existing tax policies toward gasoline and diesel cars in european countries provide a unique opportunity to analyze quality based price discrimination and the implied tax incidence in my econometric framework consumers choose the type of engine based on their annual mileage prices are set by the manufacturers the relative pricing of gasoline and diesel cars appears to be consistent with monopolistic price discrimination effectively segmenting low mileage from high mileage consumers on average about 75 to 90 of the price differentials between gasoline and diesel cars can be explained by markup differences i draw implications for the effectiveness and the revenue effects of tax policy