models for referendum data the structure of discrete choice models for contingent valuation abstract in 1979 bishop and heberlein introduced an appealing variant of the contingent valuation method which required only yes or no responses hanemann developed a utility theoretic interpretation of the yes no responses which has helped popularize the approach recently cameron has offered another interpretation also utility theoretic which she argues is more general than the hanemann random utility model this paper compares the deterministic models suggested by hanemann and cameron showing them to be dual to each other it shows that correct specification of either function must exclude endogenous variables such as quantity demanded it also demonstrates that using utility theoretic models allows one to compare travel cost models and contigent valuation models on the basis of their implied behavior not on the unobservable surplus or variation measure

theoretical and empirical specifications issues in travel cost demand studies the ultimate objective of empirical travel cost demand studies is to obtain an estimate of the welfare derived from utilizing outdoor recreational resources thus it is apparent that travel cost demand equations must be linked to utility maximization deyak and smith freeman bockstael and mcconnell hanemann bockstael hanemann and strand we specify a model of utilitymaximizing recreation demand behavior which postulates that individuals choose the total number of days that they wish to spend at the recreation site this total number of recreation days is the product of the number of trips

does no mean no a protest methodology in this paper we propose a method of identifying and truncating protesters in contingent valuation surveys we propose using a system of willingness to pay wtp questions that value multiple goods and that use both discrete choice and open ended questions coupled with multiple questions about protest beliefs administered to the entire sample protesters can then be identified because they reject all bids declare zero on all open ended questions and hold protest beliefs the proposed procedure has been empirically tested on an air pollution data set from poland where 27 of the sample was identified as protesters the adjustment for protesters increased the estimated wtp values by a factor of more than 3

convergence in per capita carbon dioxide emissions among g7 countries a tar panel unit root approach the subject of this paper is the examination the convergence of per capita carbon dioxide emissions of the g7 countries during the 1960 2005 period in a nonlinear panel analysis framework in this approach first the linearity of the series was tested and when the linearity was rejected the threshold autoregressive tar panel unit root test which splits the data into two regimes was employed to examine the stationarity properties of the series because the null of linearity was rejected in the first step we tested the stationarity of the series using the tar panel unit root test in the tar panel unit root test we found that the united kingdom was the transition country whose per capita carbon dioxide co2 emissions determined the switch from one regime to the other the results showed that convergence existed in the first regime and divergence in the second when we tested whether absolute or conditional convergence existed we found that the per capita co2 emissions were conditionally converging in the first regime

investment decisions in finite lived monopolies abstract this paper studies the value and optimal timing for investment in finite lived monopolies extending the literature on real option games by considering the cases of random and certain lived monopolies under these settings firms face the risk of demonopolization that can occur as a random or a certain event we show that these new settings produce significantly different results when compared to the canonical monopolistic and duopolistic models in a certain lived monopoly the leader invests sooner than in a duopoly if there is a risk of being preempted and later than in a monopoly if the leader role is pre assigned in a random lived monopoly entry occurs somewhere between the duopoly and monopoly cases higher uncertainty delays investment in all cases

differences between continuous and discrete contingent value estimates in a split sample contingent valuation study of willingness to pay wtp for food safety improvements the dichotomous choice dc elicitation method consistently generated much larger estimates of wtp than did a continuous method little or none of these differences was due to bias introduced by the statistical techniques used with the dc data most or all of the difference was due to differences in respondent behavior in addition the continuous wtp responses showed a significant scope effect while the dc responses did not the observed difference in behavior may be attributable in part to yea saying by dc respondents

monte carlo benchmarks for discrete response valuation methods this paper argues that the belief that discrete contingent valuation cv questions yield substantially larger estimates of the mean and the median willingness to pay wtp for nonmarket resources in comparison to open ended cv questions is unfounded monte carlo experiments estimate the factors influencing the performance of wtp estimates based on discrete response models most of the error arises from the specification errors common to the empirical models in the literature these experiments suggest models where wtp is dominated by nonuse or passive use values are likely to have smaller errors than where large use values influence these decisions

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

precision of dichotomous choice contingent valuation welfare measures some simulation results the purpose of this research is to examine the roles of individuals heterogeneous economic factors and model misspecification in dichotomous choice contingent valuation welfare measurement willingness to pay for an improvement of environmental quality is studied simulation results indicate that the precision of welfare estimates increases with individuals income levels and decreases with the price of the quality related good the dependence of the consumption of the quality related good on the environmental quality also affects the reliability of welfare estimates

combining contingent valuation and travel cost data for the valuation of non market goods the travel cost method tcm has long been used to infer the economic value of nonmarket resources and public goods more recently contingent valuation cvm survey methods have gained popularity for eliciting these values here cvm survey responses are combined with tcm data on actual market behavior to estimate jointly both the parameters of the underlying utility function and its corresponding ordinary demand function this is a prototypical empirical example of a new modeling strategy variants of which should prove useful in many applications especially where reliance on a single valuation method is undesirable

a test of the equality of closed ended and open ended contingent valuations a test is developed to find whether open ended and closed ended contingent valuation mechanisms lead to significantly different results the test is based on joint estimation of willingness to pay responses to open and closed ended questions asked of the same sample of individuals in a public good example individuals do respond differently depending on question format possible explanations include different incentives for strategic behavior and respondents lack of familiarity with the open ended question type no differences in willingness to pay were found in a private good example

stochastic divergence or convergence of per capita carbon dioxide emissions re examining the evidence this paper revisits the time series literature on the convergence of per capita carbon dioxide co2 emissions and examines the robustness of previous results using a sample of oecd countries for the period 1950 2002 we employ a battery of stationarity and unit root tests including those that allow for cross sectional dependencies within the panel we also correct for inaccuracies in previous studies that could result in a trend stationary series being labelled as converging even if it were actually diverging from the international average the body of evidence provided by our analysis suggests that per capita co2 emissions have not converged among oecd countries during the period under consideration this finding is of importance to both climate change policy makers and to those who construct climate change models

dynamic capacity planning using strategic slack valuation in this paper we analyze a particular aspect of capacity planning that is concerned with the active trading of production facilities for a homogenous product market we provide a theoretical rationale for the valuation and trading of these assets based on a metric of strategic slack we show that trading production assets with non additive portfolio profitability involves complex coordination with multiple equilibria and that these equilibria depend on the foresight in the planning horizon using the concept of strategic slack we have analyzed the dynamics of market structure the impact of asset trading on the level of production of the industry and to derive boundaries on the value of the traded assets moreover through computational learning the formulation is applied to a large oligopolistic electricity market showing that plant trading tends to lead to increased market concentration high prices lower production and a decrease in consumer surplus

sensitivity of willingness to pay estimates to bid design in dichotomous choice contingent valuation models this paper addresses the sensitivity of dichotomous choice contingent valuation method dc cvm based mean willingness to pay wtp estimates to the dc cvm sample design and to alternative measures of wtp this issue is examined both analytically and empirically the analysis of ten different dc cvm data sets revealed a sensitivity in estimated mean wtp to the sample design and to the measure chosen to calculate mean wtp

asset allocation with distorted beliefs and transaction costs abstract in this paper we study the problem of the optimal portfolio selection with transaction costs for a decision maker who is faced with knightian uncertainty the decision maker s portfolio consists of one risky and one risk free asset and we assume that the transaction costs are proportional to the traded volume of the risky asset the attitude to uncertainty is modeled by the choquet expected utility we derive optimal strategies and bounds of the no transaction region for both optimistic and pessimistic decision makers the no transaction region of a pessimistic investor is narrower and its bounds lie closer to the origin than that of an optimistic trader moreover under the choquet expected utility the structure of the no transaction region is not necessarily a closed interval as it is under the standard expected utility model

club convergence in carbon dioxide emissions we examine convergence in carbon dioxide emissions among 128 countries for the period 1960 2003 by means of a new methodology introduced by phillips and sul econometrica 75 6 1771 1855 2007a contrary to previous studies our approach allows us to examine for evidence of club convergence i e identify groups of countries that converge to different equilibria our results suggest convergence in per capita co2 emissions among all the countries under scrutiny in the early years of our sample however there seem to be two separate convergence clubs in the recent era that converge to different steady states interestingly we also find evidence of transitioning between the two convergence clubs suggesting either a slow convergence between the two clubs or a tendency for some countries to move from one convergence club to the other

testing for convergence in carbon dioxide emissions using a bayesian robust structural model we address international convergence in carbon dioxide emissions per capita and per value added derived from emission inventories based on production and consumption patterns we propose a bayesian structural model that accounts for heteroscedasticity and endogeneity between emissions and economic growth and tests for the existence of group specific convergence via shrinkage priors we find evidence for country specific conditional convergence in all emission inventories implying a half life of 2 7 3 1 years for production based emissions and 3 6 4 7 years for consumption based emissions when testing for global convergence without allowing for individual specific convergence paths the half life of hbox co 2 per capita increases to 15 26 years whereas emission intensities show a half life of 44 45 years our results highlight the current incompatibility between emission targets and economic growth and the need for faster diffusion of green technologies moreover there is no evidence for specific convergence dynamics in the european union the oecd or the countries that are subject to binding emission constraints specified in the kyoto protocol the institutional frameworks implemented in industrialized countries did not induce faster convergence among developed economies

what does an oligopoly maximize a monopolist maximizes a well defined objective function monetary profit in a competitive industry although each individual pursues selfish objectives the market behaves as if an agent was maximizing an objective function social welfare can we say the same for an oligopoly do firms pursuing selfish objectives and behaving strategically act as if an agent was maximizing a fictitious objective function necessary and sufficient conditions for nash equilibria of static and state space games to be observationally equivalent to single optimization problems are derived nash equilibria of the game that are not maxima of the function are shown to be generically unstable copyright 1994 by blackwell publishing ltd

convergence of per capita co2 emissions across the globe insights via wavelet analysis abstract this paper examines the convergence of per capita carbon dioxide co2 emissions for 162 countries across the globe covering all income groups high income oecd high income non oecd middle income and low income countries as categorized by the world bank the incidence of stochastic convergence is analysed by making use of recently developed wavelet based unit root tests the existing studies on this subject make use of conventional unit root tests using time series and or panel data a serious drawback of these tests is that they analyse the stochastic behaviour of any series in time domain only whereas the stochastic process may behave differently across different frequencies as well thus wavelet methods are an obvious solution as they consider frequency dimension as well in addition to time dimension when analyzing the stochastic behaviour of any data series and hence these methods encompass the conventional unit root testing methodologies by providing a clear and complete picture of the stochastic process our empirical findings based on latest available time series annual data from 1960 to 2010 lend support in favor of convergence among 38 countries including 18 high income oecd countries 2 high income non oecd countries 13 middle income countries and 5 low income countries while for the rest of 124 countries the co2 emission series is found to be non stationary suggesting the divergence in these countries these findings are in contrast with the most of the existing studies which may be due to the use of wavelet based unit root tests that are of course better alternatives some policy implications evolve from the empirical findings

house price uncertainty timing of development and vacant land prices evidence for real options in seattle abstract recent theoretical work suggests that land development exercises a real option this paper utilizes a rich data set of parcel characteristics and real property transactions for the seattle area to tests two predictions of real options with respect to land markets greater price uncertainty should delay the timing of development and raise land prices i find evidence in support of both predictions a one standard deviation increase in uncertainty lowers the likelihood of development by 11 percent and raises vacant land prices by 1 6 percent these findings suggest that developers consider their real option to future buildings when deciding to invest

a new paradigm for valuing non market goods using referendum data maximum likelihood estimation by censored logistic regression abstract this paper challenges the w m hanemann amer j agr econom 66 332 341 1984 and c sellar j p chavas and j r stoll j environ econom management 13 382 390 1986 utilizations of logit models to estimate the value of non market resources from referendum survey data these data are more informative than conventional choice data the random utility interpretation of logit models is therefore too restrictive bypassing the utility function entirely it will be shown that parameters and standard errors for utility theoretic inverse hicksian demand functions can be extracted directly and much more simply estimated demand functions need not be limited to those corresponding to the linear in parameters utility difference specifications which can be handled by packaged logit programs

per capita carbon dioxide emissions convergence or divergence understanding and considering the distribution of per capita carbon dioxide co2 emissions is important in designing international climate change proposals and incentives for participation i evaluate historic international emissions distributions and forecast future distributions to assess whether per capita emissions have been converging or will converge i find evidence of convergence among 23 member countries of the organisation for economic co operation and development oecd whereas emissions appear to be diverging for an 88 country global sample over 1960 2000 forecasts based on a markov chain transition matrix provide little evidence of future emissions convergence and indicate that emissions may diverge in the near term i also review the shortcomings of environmental kuznets curve regressions and structural models in characterizing future emissions distributions

continuous time methods in finance a review and an assessment i survey and assess the development of continuous time methods in finance during the last 30 years the subperiod 1969 to 1980 saw a dizzying pace of development with seminal ideas in derivatives securities pricing term structure theory asset pricing and optimal consumption and portfolio choices during the period 1981 to 1999 the theory has been extended and modified to better explain empirical regularities in various subfields of finance this latter subperiod has seen significant progress in econometric theory computational and estimation methods to test and implement continuous time models capital market frictions and bargaining issues are being increasingly incorporated in continuous time theory the roots of modern continuous time methods in finance can be traced back to the seminal contributions of merton 1969 1971 1973b in the late 1960s and early 1970s merton 1969 pioneered the use of continuous time modeling in financial economics by formulating the intertemporal consumption and portfolio choice problem of an investor in a stochastic dynamic programming setting merton 1973b also showed how such a framework can be used to develop equilibrium asset pricing implications thereby significantly extending the asset pricing theory to richer dynamic settings and expanding the scope of applications of continuous time methods to study problems in financial economics 1 within a span of about 30 years from the publication of merton s inf luential papers continuous time methods have become an integral part of financial economics indeed in certain core areas in finance such as e g asset pricing derivatives valuation term structure theory and portfolio selection continuoustime methods have proved to be the most attractive way to conduct research and gain economic intuition the continuous time approach in these areas has produced models with a rich variety of testable implications the econometric theory for testing continuous time models has made rapid strides in the last decade and has thus kept pace with the impressive progress on the theoretical front one hopes that the actual empirical investigations and estimation using the new procedures will follow suit soon

convergence in carbon dioxide emissions among industrialised countries revisited this paper examines the existence of stochastic and deterministic convergence of carbon dioxide co2 emissions in 23 countries over the period 1960 2002 for that purpose we conduct unit root testing by employing the recently developed panel stationarity test of carrion i silvestre et al carrion i silvestre j l del barrio castro t lopez bazo e 2005 breaking the panels an application to the gdp per capita econometrics journal 8 159 175 which assumes a highly flexible trend function by incorporating an unknown number of structural breaks we accommodate general forms of cross sectional dependence as well as control for finite sample bias through bootstrap methods overall our analysis provides strong evidence supporting both stochastic and deterministic convergence in co2 emissions thus confirming strazicich and list strazicich m c list j a 2003 are co2 emission levels converging among industrial countries environmental and resource economics 24 263 271 and westerlund and basher westerlund j basher s a 2007 testing for convergence in carbon dioxide emissions using a century of panel data environmental and resource economics forthcoming findings of convergence

on the stationarity of co2 emissions in oecd and brics countries a sequential testing approach abstract this study examines the non stationary properties of the per capita carbon dioxide emissions of 29 selected oecd countries plus brazil china india and south africa over the period 1960 2014 following a sequential testing procedure we analyze the historical path of the variable regarding the possible presence of abrupt ruptures and then carry out appropriate unit root tests the results show that the co2 emissions per capita are better characterised by a random walk for all the different countries furthermore the break dates and the growth rate were estimated as well for each country under study finally we decompose the carbon emissions into a secular or trend component and a cyclical component and propose a chronology of cycles in growth rates

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

convergence of per capita carbon dioxide emissions in the eu legend or reality abstract designing appropriate environmental and energy policies in order to meet the kyoto protocol s carbon dioxide co 2 reduction targets in the european union eu requires a detailed examination and thorough understanding of co 2 emission trends across the eu member states this paper investigates whether co 2 emissions have converged across 22 european countries over the 1971 to 2006 period the bayesian shrinkage estimation method is employed to do this work and the results reveal the following first the hypothesis of absolute convergence in per capita co 2 emissions is supported and a slight upward convergence is observed second the fact that countries differ considerably in both their speed of convergence and volatility in emissions makes it possible to identify different groups of countries third the results with respect to convergence do not vary much once the share of industry in gdp is accounted for in a conditional convergence analysis however a decreasing share of industry in gdp seems to contribute to a decline in per capita emissions these findings may carry important implications for both national and eu environmental policies

stochastic convergence in per capita co2 emissions an approach from nonlinear stationarity analysis abstract this paper studies stochastic convergence of per capita co 2 emissions in 28 oecd countries for the 1901 2009 period the analysis is carried out at two aggregation levels first for the whole set of countries joint analysis and then separately for developed and developing states group analysis a powerful time series methodology adapted to a nonlinear framework that allows for quadratic trends with possibly smooth transition between regimes is applied this approach provides more robust conclusions in convergence path analysis enabling a robust detection of the presence and if so the number of changes in the level and or slope of the trend of the series b inferences on stationarity of relative per capita co 2 emissions conditionally on the presence of breaks and smooth transitions between regimes and c estimation of change locations in the convergence paths finally as stochastic convergence is attained when both stationarity around a trend and convergence simultaneously hold the linear approach proposed by tomljanovich and vogelsang 2002 is extended in order to allow for more general quadratic models overall joint analysis finds some evidence of stochastic convergence in per capita co 2 emissions some dispersion in terms of convergence is detected by the group analysis particularly among developed countries this is in accordance with per capita gdp not being the sole determinant of convergence in emissions with factors like search for more efficient technologies fossil fuel substitution innovation and possibly industry outsourcing also having a crucial role

equilibrium pricing and trading volume under preference uncertainty information collection processing and dissemination financial institutions is challenging this can delay the observation by traders of the exact capital charges and constraints of their institution during this delay traders face preference uncertainty in this context we study optimal trading strategies and equilibrium prices in a continuous centralized market we focus on liquidity shocks during which preference uncertainty is likely to matter most preference uncertainty generates allocative ineficiency but need not reduce prices traders progressively learning about the preferences of their institution conduct round trip trades which generate excess volume relative to the frictionless market in a cross section of liquidity shocks the initial price drop is positively correlated with total trading volume across traders the number of round trips is negatively correlated with trading profits and average inventory

transactions costs and portfolio choice in a discrete continuous time setting abstract this paper makes the following observation concerning a new formulation of the consumption and portfolio choice model of merton 1971 with transaction costs suppose an investor observes his or her current wealth only when making a transaction that transactions are costly and that decisions to transact can be made at any time based on all current information if at each transaction the agent is charged a fixed fraction of current portfolio value an optimal policy exists and the optimal interval of time between transactions is fixed independent of time and current wealth

irreversible investment under uncertainty in oligopoly abstract an oligopoly is studied where firms facing a stochastic inverse demand curve use capacity as strategic variable capacity may be adjusted continuously over time with linear cost the analysis uses the technique of a fictitious social planner and the theory of irreversible investment under uncertainty examples indicate that qualitatively the price process will be similar in oligopoly and competitive equilibrium when firms are nonidentical e g in initial size and even if they are alike in other respects substantial time may pass until they are all the same size much of that time one firm may dominate the market

does question format matter valuing an endangered species a three way treatment design is used to compare contingent valuation response formats respondents are asked to value an endangered species the red cockaded woodpecker and the restor ation of its habitat following a natural disaster for three question formats open ended payment card and double bounded dichotomous choice differences in survey response rates item non response rates and protest bids are examined bootstrap techniques are used to compare means across formats and to explore differences in willingness to pay wtp distribution functions convergent validity is found in a comparison of mean wtp values although some differences are apparent in the cumulat ive distribution functions differences across formats are also identified in item non response rates and proportion of protest bids overall the payment card format exhibits desirable properties relative to the other two formats

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

real options and preemption under incomplete information abstract this paper introduces incomplete information and preemption into an equilibrium model of firms facing real investment decisions the optimal investment strategy may lie anywhere between the zero npv trigger level and the optimal strategy of a monopolist depending on the distribution of competitors costs and the implied fear of preemption our model implies that the equity returns of firms which hold real options and are subject to preemption will contain jumps and positive skewness

an exact solution to a dynamic portfolio choice problem under transactions costs the presence of any friction in financial markets qualitatively changes the nature of the optimization problem faced by an investor it requires one to either act or do nothing an issue which of course does not arise in frictionless situations the investor considered here accumulates wealth without consuming until some terminal point in time when he consumes all his objective is to maximize the expected utility derived from that terminal consumption we postpone the terminal point far into the future to obtain a stationary portfolio rule the portfolio policy is in the form of two control barriers between which portfolio proportions are allowed to fluctuate we show how to calculate them

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

convergence of carbon emissions at the household level in china a distribution dynamics approach abstract since household carbon emissions hces have become a new growing source and a significant contributor to global emissions the reduction of hces is crucial to formulate targeted and effective emission mitigation policies we need to fully understand the characteristics of the distribution and evolution of per capita hces and their urban rural and regional heterogeneity this paper explores the transitional dynamics of per capita hces in china by employing the distribution dynamics approach with panel data compiled at the household level we find that the overall per capita hces are unimodal distribution in the long run and the distribution dynamics of the per capita hces between the urban and rural areas or among the regional subgroups are quite different however the speed of convergence has accelerated over time moreover our findings indicate that the per capita hces in the urban areas will achieve convergence to an emission level much higher than that of the rural areas meantime the per capita hces in northeast china will converge to an emission level much higher than those of the other three regions these findings provide valuable insights for policymakers in implementing differentiated environmental policies for different regions and between urban and rural households in china

an independent sample test of yea saying and starting point bias in dichotomous choice contingent valuation abstract we developed several diagnostic tools to test the convergent validity of two common contingent valuation elicitation procedures data were collected from independent samples receiving dichotomous choice and payment card questions we compared actual with counter factual responses using deterministic and monte carlo methods and we found that wtp distributions and mean values varied by the value elicitation method we also developed a paired comparison test for procedure variance which indicated that yea saying and starting point bias influenced dichotomous choice responses

testing willingness to pay models of discrete choice contingent valuation survey data this paper considers models of willingness to pay wtp based on dichotomous choice contingent valuation survey data and examines the effect of the survey design on tests of goodness of fit simulations show that eliciting single binary responses result in tests that have low power in detecting departures from the maintained distribution of wtp unless the sample size is truly large the power of the tests improves if a follow up question and a moderate number of sets of bid values are used and if the bids are not placed on the extreme tails of the wtp distribution

comparing welfare estimates of environmental quality changes from recreation demand models abstract this paper presents a procedure for examining the reliability of welfare estimates resulting from the estimation of multiple site recreation demand models a simulation approach is suggested where a utility function is combined with observations on individual and site characteristics to generate simulated data sets welfare measures associated with an improvement in site quality are calculated recreation demand models are estimated using the simulated data sets estimated welfare measures resulting from the recreation demand models are then compared to the true welfare measures calculated from the simulated data the procedure is demonstrated using two commonly employed recreation demand models

are co2 emission levels converging among industrial countries time paths of carbon dioxide emissions intwenty one industrial countries are examinedfrom 1960 1997 to test for stochastic andconditional convergence both panel unit roottests and cross section regressions areperformed overall we find significantevidence that co2 emissions haveconverged

option pricing and replication with transactions costs transactions costs invalidate the black scholes arbitrage argument for option pricing since continuous revision implies infinite trading discrete revision using black scholes deltas generates errors which are correlated with the market and do not approach zero with more frequent revision when transactions costs are included this paper develops a modified option replicating strategy which depends on the size of transactions costs and the frequency of revision hedging errors are uncorrelated with the market and approach zero with more frequent revision the technique permits calculation of the transactions costs of option replication and provides bounds on option prices

contingent valuation and social choice the contingent valuation method for estimating the existence value of natural resources is examined for psychophysical robustness statistical reliability and economic sensibility extensions of standard models for willingness to pay and suitable econometric techniques for analyzing these models are developed the analysis is applied to a series of experiments on the value of preserving wilderness areas in the western united states the results call into question the reliability of the cv method for estimating existence values

optimality of myopic strategies for multi stock discrete time market with management costs the paper studies multi stock discrete time market models with serial correlations and with some management costs we found a market structure that ensures that the optimal strategy is myopic for the case of either power or log utility function

developing real option game models by mixing concepts from both game theoretic analysis and real options theory an investment decision in a competitive market can be seen as a game between firms as firms implicitly take into account other firms reactions to their own investment actions we review two decades of real option game models suggesting which critical problems have been solved by considering game theory and which significant problems have not been yet adequately addressed we provide some insights on the plausible empirical applications or shortfalls in applications to date and suggest some promising avenues for future research

time trends and persistence in the global co2 emissions across europe we analyze the evolution across time of co2 emissions in the european union eu using advanced econometric techniques in time series analysis we estimate the time trends along with the orders of integration of series corresponding to global co2 emissions in eu member states using both parametric and semiparametric methods the results show that there is a significantly negative trend only in the case of the uk this being also a country where the trend shows mean reversion at the other extreme spain italy greece and bulgaria are some of the countries where co2 emissions show positive trends and orders of integration that are substantially above unity moreover we examine the co2 emissions of the eu as a whole china and the us finding some support for mean reversion only in the second case therefore there is less urgent need for policy reforms in the u k and somehow china than in the rest of the eu or the us

efficient trading strategies in the presence of market frictions we provide a price characterization of efficient contingent claims that is chosen by at least a rational agent in multiperiod economies with market frictions frictions include market incompleteness transaction costs short selling and borrowing costs we characterize the inefficiency cost of a trading strategy its required investment minus the largest amount necessary to obtain the same utility level and we propose a measure of portfolio performance we show that arbitrage bounds cannot be tightened based on efficiency without restricting preferences or endowments we observe common investment strategies becoming inefficient with market frictions and others rationalized by them in this article we characterize efficient contingent claims to future consumption consumption bundles in multiperiod economies with uncertainty taking a wide range of market frictions into account 1 such as dynamic market

investments of uncertain cost abstract this paper examines irreversible investment decisions when projects take time to complete and are subject to two types of cost uncertainty the first is technical uncertainty i e uncertainty over the physical difficulty of completing a project which is only resolved as the investment proceeds the second is input cost uncertainty i e uncertainty over the prices of construction inputs or over government regulations affecting construction costs which is external to the firm these two types of uncertainty have very different effects on the investment decision a simple investment rule is derived that maximizes firm value and is used to analyze the decision to start or continue building a nuclear power plant during the 1980s

a general equilibrium model of international portfolio choice we investigate in a two country general equilibrium model whether a bias in consumption towards domestic goods will necessarily lead to a preference for domestic securities we develop a model where investors are constrained to consume only from their domestic capital stock and where it is costly to transfer capital across countries in this model investors less risk averse than an investor with log utility bias their portfolios towards domestic assets investors more risk averse than log however prefer foreign assets thus this model suggests that it is unlikely that the portfolios observed empirically can be explained by the high proportion of domestic goods in total consumption we investigate in a two country general equilbrium model whether a bias in consumption toward domestic goods will necessarily lead to a preference for domestic assets in an investor s optimal portfolio we constrain investors to consume only from their domestic capital stock and introduce a proportional cost for transferring goods from one country this cost gives rise to endogenous deviations from the law of one price lop thus the home and foreign investors do not hold identical portfolios we show that an investor s optimal portfolio is biased towards domestic equity only if she is less risk averse than an investor with log utility investors with relative risk aversion greater than one exhibit a preference for the foreign asset this is because the exchange rate derived endogenously is negatively correlated with the return on the foreign asset and therefore the translated return on the foreign stock is less risky than that on the domestic stock thus the results of this model suggest that it is unlikely that the preference for domestic assets that is observed empirically can be explained by the high proportion of domestic goods in total consumption there exists a considerable body of literature documenting the gains from international diversification grubel 1968 was the first to propose that international diversification allows investors to attain lower return variances than those achievable by diversifying domestically this proposition relies on the correlation between stock indices across countries being significantly less

functional form and the statistical properties of welfare measures this paper uses monte carlo analysis to compare the variance of consumer s surplus for several functional forms for demand although the semilog and linear forms fit the data well by statistical criteria the coefficients of variation for consumer s surplus generated by these forms were substantially larger than for the double log and linear log forms while this paper is framed in the travel cost approach to recreational demand there are implications for the choice of functional form whenever the measure of interest is a nonlinear transformation of the estimated parameters in an influential article ziemer musser and hill note the importance of the choice of functional form for the magnitude of estimated measures of welfare change in a study of the demand for a recreation site based on the travel cost model they report nearly a fourfold difference between consumer s surplus based on a linear demand curve and surplus computed from a semilog demand their research emphasizes that good estimates of demand may not yield good estimates of welfare the estimate of consumer s surplus is a

convergence of carbon dioxide performance across swedish industrial sectors an environmental index approach the overall objective of the paper is to analyze convergence of co2 emission intensity across manufacturing sectors in sweden our approach differs from previous work on carbon convergence in that

valuing public goods discrete versus continuous contingent valuation responses independent applications of open ended and dichotomous choice formats are compared using tests of means estimating joint likelihood functions and nonparametric tests of distributions the null hypothesis of no difference in the open ended and dichotomous choice estimates of central tendency cannot be rejected for two out of three data sets while estimated standard deviations are significantly different for all three data sets in addition actual dichotomous choice means and standard deviations exceed those from comparable synthetic dichotomous choice data sets suggesting either open ended questions underestimate values or dichotomous choice bid structures may lead to systematic overestimates

comparing continuous and discrete contingent valuation questions this paper explores two commonly used methods to elicit an individual s willingness to pay wtp for a public good in contingent valuation studies currently the most preferred method is the take it or leave valuation question or discrete valuation question dvq where the respondent accepts or rejects a suggested cost for the good the traditional method the continuous valuation question cvq simply asks an individual to state his wtp for the suggested change in the provision of a public good like cleaner air we introduce a simple way to compare the results from these two methods we also test the anchoring behavior suggested in the psychological literature on choice under uncertainty the results do not support the anchoring hypothesis but suggest the hypothesis that people perceive the two tested valuation questions differently

time to build option value and investment decisions abstract investment decisions and outlays are often made sequentially for example the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project this paper uses contingent claims analysis to derive optimal decision rules and to value such investments we determine the effects of time to build opportunity cost and uncertainty on the investment decision for reasonable parameter values we show how a simple npv rule can lead to gross errors

strategic entry and market leadership in a two player real options game abstract we analyse the entry decisions of competing firms in a two player stochastic real option game when rivals earn different but correlated uncertain profitabilities from operating in the presence of entry costs decision thresholds exhibit hysteresis the range of which is decreasing in the correlation between competing firms a measure of the expected time of each firm being active in the market and the probability of both rivals entering within a finite time are explicitly calculated the former latter is found to decrease increase with the volatility of relative firm profitabilities implying that market leadership is shorter lived the more uncertain the industry environment in an application of the model to the aircraft industry we find that boeing s optimal response to airbus launch of the a380 super carrier is to accommodate entry and supplement its current product line as opposed to the riskier alternative of committing to the development of a corresponding super jumbo

testing for convergence in carbon dioxide emissions using a century of panel data this paper tests the convergence in per capita carbon dioxide emissions for a collection of developed and developing countries using data spanning the period 1870 2002 for this purpose three recently developed panel unit root tests that permit for dependence among the individual countries are employed the results lend strong support in favor of convergence for the panel as a whole estimates of the speed of this convergence is also provided

optimal dynamic trading with leverage constraints we solve for the optimal dynamic trading strategy of an investor who faces a leverage constraint i e a limitation on his ability to borrow for the purpose of investing in a risky asset we assume that the investor has constant relative risk aversion and that the value of the risky asset follows a geometric brownian motion in the absence of the leverage constraint the optimal strategy involves investing a fixed proportion of wealth in the risky asset we prove that in the presence of the leverage constraint the optimal investment also involves investing a fixed proportion of wealth in the risky asset when the leverage constraint is not binding however the two proportions are different reflecting the extent to which the investor alters his strategy even when the leverage constraint is not binding because of the possibility that the leverage constraint will become binding in the future