optimizing multinomial logit profit functions the multinomial logit model is a standard approach for determining the probability of purchase in product line problems when the purchase probabilities are multiplied by product contribution margins the resulting profit function is generally nonconcave because of this standard nonlinear search procedures may terminate at a local optimum which is far from the global optimum we present a simple procedure designed to alleviate this problem the key idea of this procedure is to find a path of prices from the global optimum of a related but concave logit profit function to the global optimum of the true but nonconcave logit profit function

marriage market divorce legislation and household labor supply this paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply in our approach the sex ratio in the marriage market and the rules governing divorce are examples of distribution factors these factors are defined as variables that affect the household members bargaining position but not preferences or the joint budget set we extend the collective labor supply model developed by chiappori to allow for distribution factors we show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process the model is estimated using psid data for the year 1988 our results do not reject the restrictions imposed by the model also the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects

rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

efficient intra household allocations and distribution factors implications and identification this paper provides an exhaustive characterization of testability and identifiability issues in the collective framework in the absence of price variation it thus provides a theoretical underpinning for a number of empirical works that have been developed recently we first provide a simple and general test of the pareto efficiency hypothesis which is consistent with all possible assumptions on the private or public nature of goods all possible consumption externalities between household members and all types of interdependent individual preferences and domestic production technology the test is proved to be necessary and sufficient we then provide conditions for the identification of the sharing rule and the engel curves of individual household members for a variety of different observational schemes

a utility consistent combined discrete choice and count data model assessing recreational use losses due to natural resource damage abstract a two stage budgeting approach can often be taken when analyzing consumer choice situations in this paper we examine the particular situation where a consumer makes purchases of a discrete commodity of which there are a number of brands in the first stage the consumer decides how many purchases to make in the second stage the consumer decides how to allocate these purchases across brands our econometric approach to this type of situation uses a utility consistent combined discrete choice and count data model the second stage which is specified as a multinomial choice model produces a price index for the commodity which is used to estimate the first stage which is specified as a count data model we apply the model to recreational demand behavior in alaska in order to estimate the welfare losses suffered by recreational users due to the exxon valdez oil spill these results may provide useful input to government agencies attempting to estimate the appropriate level of taxes fines or regulations for deterring damage to the environment

the performance of nested logit models when welfare estimation is the goal in this paper we examine the performance of nested logit models in the face of two specification errors the first specification error arises when a nested logit model is appropriate but the wrong nesting structure is chosen the second specification error occurs when the underlying stochastic process is not consistent with nested logit particular attention is placed upon the impact that these errors can have on welfare predictions monte carlo experiments are used together with analytical results to examine the resulting bias to welfare estimates in addition we explore the value of alternative model selection criteria in choosing nesting structures

estimating demand for local telephone service with asymmetric information and optional calling plans in this paper i study the theoretical and econometric implications of agents uncertainty concerning their future consumption when a monopolist offers them either a unique mandatory nonlinear tariff or a choice in advance from a menu of optional two part tariffs agents uncertainty is resolved through individual and privately known shocks to their types in such a situation the principal may screen agents according to their ex ante or ex post type by offering either a menu of optional tariffs or a standard nonlinear schedule the theoretical implications of the model are used to evaluate a tariff experiment run by south central bell in two cities in kentucky in 1986 the empirical approach explicitly accounts for the existence of informational asymmetries between local telephone users and the monopolist leading to different nested econometric specifications under symmetric and asymmetric information the empirical evidence suggests that there exists a significant asymmetry of information between consumers and the monopolist under both tariff regimes all expected welfare components failed to increase with the introduction of optional tariffs for the estimated value of the parameters copyright 2002 wiley blackwell

choosing a place to live and a workplace espanolen este trabajo se estudia como la politica fiscal y los costos de transporte determinan la distribucion geografica de los trabajadores y las familias se utiliza un modelo simple de dos regiones con costos de transporte bienes publicos locales e infraestructura local se presenta una breve revision de literatura relacionada que estudia otros factores determinantes de la localizacion de los agentes se argumenta que las cuestiones estudiadas juegan un rol importante en la distribucion geografica de la actividad economica en el area urbana del gran buenos aires englishwe study how fiscal policies and commuting costs determine the geographical distribution of workers and households in an economy we characterize equilibrium outcomes in a simple two region model with commuting costs local public goods and local infrastructure we also provide a short survey of the related economic literature that discusses other important factors driving the localization decisions of agents finally we argue that the issues raise in this paper play a significant role in the geographic distribution of economic activity in the greater buenos aires urban area of argentina

nonlinear income effects in random utility models random utility models rums are used in the literature to model consumer choices from among a discrete set of alternatives and they typically impose a constant marginal utility of income on individual preferences this assumption is driven partially by the difficulty of constructing welfare estimates in models with nonlinear income effects recently mcfadden 1995 developed an algorithm for computing these welfare impacts using a monte carlo markov chain simulator for generalized extreme value variates this paper investigates the empirical consequences of nonlinear rums in the case of sportfishing modal choice while refining and contrasting the available methods for welfare estimation

the effects of piracy on competition evidence from subscription tv abstract competition studies that focus on antitrust issues e g market definition market power are typically conducted in markets where all firms are assumed to operate legally competitors are tax abiding entities pay for all inputs used in their production process have paid the proper government licenses to do so etc we investigate competition issues in a market characterized by widespread piracy subscription tv in peru estimates suggest that 50 of subscription tv users in peru 30 in latin america use an illegal provider we make use of a unique dataset in which households provided crucial information regarding the il legality of their paid tv supplier using quantitative antitrust tools based on demand estimation techniques we study the impact that the presence of the informal sector has on competition our estimates suggest that the illegal operators constitute a close substitute for and henceforth significantly constrain the pricing power of legal operators this finding can have important antitrust implications the failure to account for piracy could lead to erroneous conclusions regarding market power measurement and the delineation of the relevant antitrust market this may be particularly important in several industries especially in the developing world where the leading operator may be cataloged as dominant only in the absence of illegal providers

gender based price discrimination in matching markets this paper develops a new model to analyze price discrimination in matching markets where agents have private information about their respective qualities on the basis of signals car clothing club membership etc purchased from profit maximizing firms men and women form beliefs about each other s qualities the matching must then be stable in the following sense there cannot be a man and woman who are unmatched and who both believe they would be better off if they were matched with one another the model enables an analysis of the impact of third degree or gender based price discrimination on welfare when third degree price discrimination is not feasible the cost of eliciting private information is higher but a monopoly intermediary may have stronger incentives to implement an efficient allocation i show that gender based price discrimination is more likely to have a positive impact the more symmetric the matching environment is

spatial boundaries and choice set definition in a random utility model of recreation demand we are concerned with the definition of choice set used in random utility models of recreation demand in particular we are concerned with the spatial boundaries used to define choice sets in this paper using a model of day trip fishing in maine we examine the sensitivity of parameter and welfare estimates to changes in the spatial boundary we find that there exists some threshold distance beyond which adding more sites to the choice set has negligible effects on the estimation results

local public works and intergovernmental transfers under asymmetric information abstract this paper studies local public works decisions in a hierarchical setting under bidimensional asymmetric information a local authority plans to undertake a public work and delegates its construction to a firm the federal government decides whether to fund the project without being informed of either the project s benefit or the constructor s efficiency the local authority knows these values to deal with this informational gap the federal government designs a public work contract specifying transfers to the local authority and to the firm we show under which circumstances cost sharing and compensations emerge as incentive devices then we identify which projects are effectively constructed more works with low high benefits are undertaken shut down than under full information

time allocation within the family welfare implications of life in a couple a collective model of leisure demand generalised to the production of a household public good is estimated on the british household panel survey the sharing rule is identified by using an original parametric framework based on the change of family status from single living to couple or from couple to single living womens ratios of private household expenditures are 40 on average the level of intra household inequality appears highly dependent on the intra household wage gap omitting household production in the model would overestimate the ratio by 7 percentage points on average

estimating the precision of welfare measures abstract three methods for constructing standard deviation and or confidence intervals for welfare estimates have been employed in the recreation demand literature a taylor s series approximation the bootstrap and a method proposed by krinsky and robb this paper presents the results of two sets of simulation experiments designed to examine the accuracy of these methods the first simulation examines the methods accuracy in estimating the standard deviation of welfare estimates the second simulation examines the accuracy of the methods in constructing confidence intervals

reconciling models of recreational route and site choices when employing travel cost models the unit cost of the essential input travel in the household s production of a recreation experience is central to obtaining the preference structure for the recreational good however little attention has been given to the choice of the route although the route defines the monetary and time costs used to compute travel costs conventional wisdom considers time and money costs in determining the cost per mile in the estimation of site choices but does not use both in determining the route choices and mileages this paper investigates whether models of recreational site and route choices can be reconciled

sharing budgetary austerity under free mobility and asymmetric information an optimal regulation approach to fiscal federalism in the present article tiebout meets laffont and tirole in the land of fiscal federalism a non trivial principal multi agent model is used to characterize the optimal intergovernmental grant schedule when the cost of local public goods depends on hidden characteristics and actions of local governments and under citizen free mobility we show how informational rents landlords interests and citizen mobility interact to produce distortions at both ends of the type space in particular the most efficient jurisdictions should overproduce and overtax in second best optimum informational asymmetries decrease the average production of public goods and increase the inter jurisdictional variance of taxes and public good production

modeling multiple objective recreation trips with choices over trip duration and alternative sites traditionally recreation demand studies have focused on single day single activity trips despite anecdotal and empirical evidence that many recreational trips involve overnight stays and multiple purposes this paper develops a random utility model that explores how visitors choose alternative sites and trip durations for multiple objective trips we focus on a recreational activity beach visits that appear to have significant proportions of the population taking single and multiple day trips and many of the multiple day trips involve multiple objectives multiple duration and multiple objective issues are incorporated in pricing trip costs the results of the research suggest that the accepted method for incorporating travel costs into random utility models can lead to biased estimates of the structural utility parameters and consequently biased measures of welfare in a multiple objective trip setting for single and multiple day users

residential broadband subscription demand an econometric analysis of australian choice experiment data the recent roll out of fibre optic cable suggests that the willingness of households in passed communities to subscribe to networked services is an important issue this paper studies the determination of the demand for network subscription through a discrete choice model the effect of installation and rental price on the likelihood of subscription is analysed the logit regression is based on choice experiment stated preference subscription data obtained from a national survey of households limitations of this preliminary work and suggestions for future research are discussed

a simple approach to investigate intrahousehold allocation of private and public goods abstract we adopt the collective approach to consumer behavior with egoistic agents and assume that household consumption is either private or public we then show that 1 household demand functions have to satisfy testable constraints and 2 some elements of the decision process can be retrieved from observed behavior these results are based on a conditional demand m demand framework in which household demand functions are directly derived from the individual marginal rates of substitution finally we present an empirical illustration of these theoretical results using the u s consumer expenditure survey

do husbands and wives pool their resources further evidence this paper replicates results of an article showing that families with children increased expenditures on women s clothing relative to men s after implementation of a policy that shifted a child subsidy payment from the father to the mother these results were interpreted as evidence that families do not pool their income but allocate consumption based on income source however the current paper also finds an increase in relative spending on women s clothing among childless couples a sample the policy change did not impact alternative explanations are explored for observing these patterns but none can rule out either bargaining or income pooling

identification of random resource shares in collective households without preference similarity restrictions abstractresource shares defined as the fraction of total household spending going to each person in a household are important for assessing individual material well being inequality and poverty

estimating consumption economies of scale adult equivalence scales and household bargaining power how much income would a woman living alone require to attain the same standard of living that she would have if she were married what percentage of a married couple s expenditures are controlled by the husband how much money does a couple save on consumption goods by living together versus living apart we propose and estimate a collective model of household behaviour that permits identification and estimation of concepts such as these we model households in terms of the utility functions of its members a bargaining or social welfare function and a consumption technology function we demonstrate generic non parametric identification of the model and hence of a version of adult equivalence scales that we call indifference scales as well as consumption economies of scale the household s resource sharing rule or members bargaining power and other related concepts copyright 2013 oxford university press

does less inequality among households mean less inequality among individuals abstract consider an income distribution among households of the same size in which individuals equally needy from the point of view of an ethical observer are treated unfairly individuals are split into two types those who receive more than one half of the family budget and those who receive less than one half we look for conditions under which welfare and inequality quasi orders established at the household level still hold at the individual one a necessary and sufficient condition for the generalized lorenz test is that the income of dominated individuals is a concave function of the household income individuals of poor households have to stand more together than individuals of rich households this property also proves to be crucial for the preservation of the relative and absolute lorenz criteria when the more egalitarian distribution is the poorest extensions to individuals heterogeneous in needs and more than two types are also provided

do husbands and wives pool their resources evidence from the united kingdom child benefit common preference models of family behavior imply income pooling a restriction on family demand functions such that only the sum of husband s income and wife s income affects the allocation of goods and time testing the pooling hypothesis is difficult because most family income sources are not exogenous to the allocations being analyzed in this paper we present an alternative test based on a natural experiment a policy change in the united kingdom that transferred a substantial child allowance to wives in the late 1970s using family expenditure survey data we find strong evidence that a shift toward greater expenditures on women s clothing and children s clothing relative to men s clothing coincided with this income redistribution

government intervention in production and incentives theory a review of recent contributions national science foundation the commissariat general du plan and the center for energy policy research at m i t

explaining deviations from equilibrium in auctions with avoidable fixed costs abstract bidders often face avoidable fixed costs or other synergies that can make bidding decisions complex and risky and market outcomes volatile if bidders deviate from risk neutral best responses either due to faulty optimization or a preference to avoid volatility then equilibrium predictions can perform poorly in this paper we confront laboratory bidders with three auction formats that make bidding difficult in different ways we find that measures of difficulty provide a consistent explanation of deviations from best response bidding across the three formats

ranking income distributions a large variety of policy questions involve choices between social states and a consequent ordering of the feasible alternatives when these social states are related to the levels of welfare experienced by individuals or households two central issues stand out in determining the relative desirability of different social outcomes one of these is the essentially positive exercise of achieving comparability between households with different characteristics such as composition or preferences operating in different environments for example facing different price structures the other concerns the normative judgments implicit in the evaluation of alternative allocations of resourcesthe emphasis placed on inequality between households and the extent to which greater inequality can be compensated by higher average living standards this paper focuses on the second of these issues and in doing so we abstract from the problem of household comparability by considering a population of n households identical in all respects except for their incomes the question of ordering social states then becomes one of ranking income distributions over a group of anonymous households or individuals borrowing the usual assumptions imposed on consumer preferences we may suppose that a social ordering of income distributions can be represented by a welfare function 2

an empirical investigation of the consistency of nested logit models with utility maximization global conditions under which nested logit models are consistent with utility maximization are provided by daly and zachary and by mcfadden recently borsch supan and herriges and kling have provided conditions under which a nested logit model is locally consistent however previous work has not discussed implementation of these conditions here three alternative approaches to checking and formally testing for the consistency conditions using classical statistics are investigated in addition a bayesian approach to interpreting and imposing the local consistency conditions is provided the application is based on anglers choices regarding sportfishing alternatives in southern california

identifying combinatorial valuations from aggregate demand abstract we study identification of combinatorial valuations from aggregate demand each utility function takes as arguments subsets or alternatively quantities of the multiple goods we exploit mathematical insights from auction theory to generically identify the distribution of utility functions in our setting aggregate demand for each item is observable while demand for bundles is not nevertheless our identification result allows us to recover the latter

household consumption when the marriage is stable we develop a novel framework to analyze the structural implications of the marriage market for household consumption we de ne a revealed preference characterization of e cient household consumption when the marriage is stable stability means that the marriage matching is individually rational and has no blocking pairs we characterize stable marriage with intrahousehold consumption transfers but without assuming transferable utility we show that our revealed preference characterization generates testable conditions even with a single consumption observation per household and heterogeneous individual preferences across households the characterization also allows for identifying the intrahousehold decision structure including the sharing rule under the same minimalistic assumptions an application to dutch household data demonstrates the usefulness of our theoretical results we nd that the female gets a higher income share when her relative wage increases which we can give a structural interpretation in terms of outside options from marriage that vary with individual wages

dissecting the tragedy a spatial model of behavior in the commons abstract much of the discussion of the tragedy of the commons focuses on aggregate impacts often in data poor developing country settings few non experimental empirical studies shed light on contextual circumstances driving the extent of rent dissipation and overexploitation we utilize a high resolution data set to estimate a behavioral model of fishermen s spatial choices a unique policy setting allows us to measure the degree to which individual fishermen s choices appear aimed at mitigating the tragedy of the commons in a small numbers setting we find evidence of partial mitigation in excess of what we would expect under pure self interest but short of what would occur under group maximizing behavior we also examine how contextual factors in the fishery shape the degree of cooperation within the fishing season and find evidence that competition for the common pool resource distorts fishermen s implicit cost of distance creating a form of common property inertia

the travel cost model for lake recreation a comparison of two methods for incorporating site quality and substitution effects this paper empirically illustrates how different assumptions regarding recreationists decision making behavior affect the predicted changes in recreational activity given a water quality improvement a multinomial logit model which reallocates visits away from other sites to the improved site predicts a smaller outward shift of the recreationist s demand curve than the more traditional travel cost model which does not assume any reallocation of visits among sites

the effect of nesting structure specification on welfare estimation in a random utility model of recreation demand an application to the demand for recreational fishing nested logit has become common in estimating random utility models of recreation demand because welfare analysis is often the objective of estimating these models it seems natural to ask what effect does the choice of nesting structure have on the welfare estimates generated by these models therefore we compare the results of nine nesting structures andfindthat the variation in welfare estimates across the models is not large our results are contrary to those of kling and thomson and shaw and ozog the difference appears to originate with differences in the estimated dissimilarity coefficients in the nested models

the implications of model specification for welfare estimation in nested logit models nested logit models are increasingly being used to value environmental amenities the implications of nesting structure choice of estimator fiml or sequential and restrictions on parameters across nested groups on welfare estimates are examined these issues have received little previous attention model selection criteria that can be used to distinguish among the models are extended and applied additionally a simulation procedure is implemented to construct standard errors for the welfare measures

bootstrapping in applied welfare analysis bootstrapping procedures are used to estimate the statistical properties of common empirical welfare measures results from a monte carlo experiment indicate that welfare estimates such as marshallian consumer surplus often exhibit significant bias standard errors of welfare estimates are found to often exceed the magnitude of the point estimate for typical cross section data sets and are generally larger than the difference between comparable hicksian and marshallian measures precision of welfare estimates can be markedly enhanced through generating larger data sets obtaining better model fits and through imposition of innocuous inequality restrictions on the demand function parameters

price elasticities for local telephone calls price elasticities are estimated for local telephone calls and minutes of conversation using data from a pricing experiment in central illinois conducted by general telephone and electronics the experiment charges separately for calls and for minutes using a model that is consistent with the theory of telephone demand the authors estimate the effects of both prices the nonlinear generalized least squares estimates of the elasticities are fairly small about 0 1 or less in absolute value at experimental price levels but they are estimated with high precision the report briefly considers the application of these results to predict the effects of introducing measured service telephone rates in other cities residential telephone subscribers in the united states typically pay a flat monthly rate for local service with no extra charge for calls within the local area the alternative of explicitly charging for local calls commonly referred to as usage sensitive pricing or local measured service is of increasing interest to u s telephone companies and regulatory commissions cosgrove and linhart 5 garfinkel and linhart 8 baude ed 2 3 charging for calls that are now free clearly holds promise of increasing economic efficiency alleman 1 mitch

how serious is the neglect of intrahousehold inequality in this report the authors develop a framework for assessing the consequences of ignoring intrahousehold inequality in the measurement and analysis of poverty and inequality they apply this framework to data for the philippines and conclude that 1 the result of neglecting intrahousehold inequality will probably be considerable understatement of the levels of poverty and inequality with the philippine data measured levels of inequality and poverty were off 30 percent as a result of ignoring intrahousehold variation and 2 patterns of inequality revealed by household level data are somewhat different from patterns revealed by individual level data but the differences seem not to be dramatic to confirm these results the exercise should be repeated with data from other countries

nonparametric engel curves and revealed preference this paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand knowledge of expansion paths is shown to improve the power of nonparametric tests of revealed preference the tightest bounds on indifference surfaces and welfare measures are derived using an algorithm for which revealed preference conditions are shown to guarantee convergence nonparametric engel curves are used to estimate expansion paths and provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory an application is made to a long time series of repeated cross sections from the family expenditure survey for britain the consistency of these data with revealed preference theory is examined for periods of consistency with revealed preference tight bounds are placed on true cost of living indices

sharing rule identification for general collective consumption models we propose a method to identify bounds i e set identi cation on the shar ing rule for a general collective household consumption model unlike the eects of distribution factors it is well known that the level of the sharing rule cannot be uniquely identi ed without strong assumptions on preferences across households of dierent compositions our new results show that though not point identi ed without these assumptions narrow bounds on the sharing rule can be obtained we get these bounds by applying revealed preference restrictions implied by the collective model to the household s continuous aggregate demand functions we obtain informative bounds even if nothing is known about whether each good is public private or assignable within the household though having such infor mation tightens the bounds we apply our method to us 1999 2009 psid data this application obtains tight sharing rule bounds that yield useful conclusions regarding the eects of income and wages on intrahousehold resource sharing and on the prevalence of individual as opposed to household level poverty

attribute causality in environmental choice modelling when selecting attributes in environmentalchoice modelling studies preference should begiven to those attributes that aredemand relevant policy relevant andmeasurable the use of these criteria willoften result in a short list of environmentalattributes of which some are causally related the inclusion of attributes that have a cause effect relationship may stimulate somerespondents to seek to understand the causalrelations among attributes in order to assigngreater meaning to the alternatives andpotentially simplify the decision makingprocess this may have implications for theweights they assign to each of the attributeswhen identifying the preferred alternatives and subsequently for the implicit prices and orwelfare estimates a test of the impact ofincluding an attribute that causesimpacts on ecosystem health as well as anattribute relating to ecosystem health effectson parameter estimates implicitprices and welfare estimates is conducted twoquestionnaires are developed one with the causal attribute included and one without acomparison of results indicates that when the causal attribute is included in the vector ofchoice attributes the implicit value of asingle endangered species falls by 34 per centwhilst no significant difference is detected inthe parameter estimates importantly however estimates of compensating surplus for a givenpolicy package do not differsignificantly across the two treatments thisimplies that to the extent that the inclusionof a causal attribute reduces the implicitprices for one or more of the effect attributes the associated loss in utility isapproximately offset by the utility nowassociated with the new attribute

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

efficient intra household allocations a general characterization and empirical tests the neoclassical theory of demand applies to individuals yet in empirical work it is usually taken as valid for households with many members this paper explores what the theory of individuals implies for households that have more than one member we make minimal assumptions about how the individual members of the household resolve conflicts all we assume is that however decisions are made outcomes are efficient we refer to this as the collective setting we show that in the collective setting household demands must satisfy a symmetry and rank condition on the slutsky matrix we also present some further results on the effects on demands of variables that do not modify preferences but that do affect how decisions are made we apply our theory to a series of surveys of household expenditures from canada the tests of the usual symmetry conditions are rejected for two person households but not for one person households we also show that income pooling is rejected for two person households we then test for our collective setting conditions on the couples data none of the collective setting restrictions are rejected we conclude that the collective setting is a plausible and tractable next step to take in the analysis of household behavior

is power more evenly balanced in poor households abstract the structure of intra household allocation is crucial to know whether a transfer from a rich household to a poor one translates into a transfer from a rich individual to a poor one if rich households are more unequal than poor ones then a progressive transfer among households reduces intra household inequality hence inequality among individuals more specifically two conditions have to be satisfied for extending generalized lorenz judgments from household level to individual one the fraction of the couple s expenditures devoted to goods jointly consumed should decrease at the margin with the couple s income as well as the part of private expenditure devoted to the disadvantaged individual this double concavity condition is non parametrically tested on the french household expenditure survey 2000 it is not rejected by the data and supports the view that power is more evenly distributed in poor households

the effects of male and female labor supply on commodity demands we examine the effects of male and female labor supply on household demands and present a simple and robust test for the separability of commodity demands from labor supply using data on individual households from six years of the uk fes we estimate a demand system for seven goods which includes hours and participation dummies as conditioning variables allowance is made for the possible endogeneity of these conditioning labor supply variables we find that separability is rejected furthermore we present evidence that ignoring the effects of labor supply leads to bias in the parameter estimates

pricing information goods a strategic analysis of the selling and pay per use mechanisms we analyze two pricing mechanisms for information goods these mechanisms are selling where up front payment allows unrestricted use and pay per use where payments are tailored to use we analytically model a market where consumers differ in use frequency and where use on a pay per use basis invokes a psychological cost associated with the well known ticking meter effect we demonstrate that pay per use yields higher profits in a monopoly provided the associated psychological cost is low in a duopoly one firm uses selling and the other uses pay per use here in contrast to the monopoly selling yields higher profits than pay per use we demonstrate that surprisingly the profits of both duopolists can increase as the psychological cost associated with pay per use increases next we show that uncertainty in consumer use frequency does not affect pay per use in a monopoly but lowers profits from selling in a duopoly both the seller and the pay per use provider obtain lower profits when use frequency is uncertain we also analyze how pricing mechanism performance is affected if the firms cannot commit to prices if the pay per use provider offers a two part tariff and if consumers are risk averse

collective household labor supply nonparticipation and income taxation in this paper we adopt the usual assumptions of the collective approach i e individualism and efficiency to study household labor supply the theoretical innovation is 2 fold first we incorporate the decision to participate in the labor market in the initial setting second we abandon the assumption of linearity of the budget constraint we show that i structural elements such as preferences or the outcome of the decision process can be recovered and ii testable restrictions are generated from the observation of the household labor supplies we also examine for this model how to simulate the incidence of fiscal reforms

external benefits of waste to energy in korea a choice experiment study abstract the korean government has planned to expand a variety of waste to energy wte facilities in order to reduce waste disposal decrease the crude oil imports and mitigate greenhouse gases ghgs emissions one response to this concern is to measure the external benefits of wte to this end this study attempts to apply a choice experiment ce to four attributes or types of benefits such as the improvement of energy security reduction of ghg emissions job creation and extension of landfill life expectancy a survey of 500 households was undertaken in seoul korea the trade offs between price and the four attributes for selecting a preferred alternative are considered in the ce survey and a marginal willingness to pay mwtp estimate for each attribute is derived a nested logit nl model is employed in this study rather than a multi nomial logit mnl model since two specification tests indicate that the nl model outperforms the mnl model the estimation results for the nl model show that the mwtps for a 1 increase in energy security a 1 reduction in ghg emissions the creation of 10 000 new jobs and the doubling of landfill life expectancy as a result of expanding wte facilities is estimated to be krw 437 usd 4 5 1763 1 5 598 0 5 and 89 0 1 per household per month respectively the findings can provide policy makers with useful information for evaluating and planning wte policies and projects

the value of changes in deer season length an application of the nested multinomial logit model increasing deer populations can be controlled through manipulatingharvest limits or season length while such actions often result in benefitsto hunters both motorists and the agricultural sector also benefit as alower deer population leads to fewer incidences of harmful human deerencounters traditional recreation demand models are often employed toexamine the welfare implications of changes in daily hunting bag limits studies measuring the effects of changes in season length however arenoticeably absent from the literature this study uses a nested randomutility model to examine hunter choice over site and season selection toderive the values of changes in season length

equilibrium and inefficiency in a community model with peer group effects public service output depends on input expenditures on own personal characteristics and on the characteristics of the other residents in the community the peer group effect in a community model with public expenditures set by voting with migration between communities and with land price differentials capitalization it is shown that communities may become heterogeneous in composition and second best inefficient this equilibrium occurs when the peer group effect is neither too strong nor too weak the inefficiency arises because an externality is created by migration the land price differential does not play the part of the price of the better peer group but of a transfer payment

local public goods inter regional transfers and private information abstract suppose that the centre wishes to make transfers between member states of a federation to reduce inequality however it lacks precise information concerning the cost differences that are responsible for the initial income inequality we examine the implications of asymmetric information for the design of the transfer scheme we show that if member states inherent cost levels as local public good providers take discrete values the first best or complete information transfer scheme may or may not violate incentive compatibility if inherent cost is a continuous random variable such a scheme certainly violates incentive compatibility we also explore the possibility of binding participation constraints in our model a binding incentive compatibility constraint leads to a reduction in effort devoted to cost reduction and a binding participation constraint will also lead to a violation of samuelson s optimality condition for public good provision

distributive implications of european integration one of the main pitfalls of european construction is undoubtedly the alleged charge that it impedes redistributive policy at the national level this charge is indeed widespread in political circles and in the medias yet it had received little attention among economists up to recently over the last few years an increasing amount of research has been devoted to that accusation or to be more neutral to that conjecture the purpose of our paper is to survey this literature we first present the conventional wisdom according to which mobility makes redistribution difficult if not impossible we also discuss the most important qualifications to this result and the solutions that are generally advocated and that imply some sort of cooperation in a second part we consider a different issue that of redistribution across countries it assumes the existence of some supranational government which is not trivial in addition informational differences between the national and the supranational governments are shown to play a crucial role

the subsidiarity bias in regulation abstract we study the choice of the regulatory structure when a firm engages in different activities for different countries under decentralization regulatory contracts suffer from two opposite distortions the competition between regulatory authorities leads to too high powered contracts however with a dispersed ownership structure contracts tend to be too low powered for sufficiently substitutable activities decentralization always leads to an inefficient drift towards fixed price contracts nonetheless when regulators have private agendas and possess the discretion to distort their policy to gain the support of some interest groups decentralization may be preferred to centralization as competition between regulatory authorities mitigates their discretionary power

do customers learn from experience evidence from retail banking we study customers adoption and subsequent switching decisions with regard to a menu of three part tariff plans offered by a commercial bank using a rich panel data set covering 70 510 fee based checking accounts over 30 months before and after the introduction of the plans we find that most customers adopt non cost minimizing plans preferring plans with large monthly allowances and high fixed payments furthermore after adoption customers who exceed their allowances and consequently pay overage fees are more likely to switch to plans with larger allowances than customers who do not experience such fees notably after switching these overage paying customers pay higher monthly payments than before in contrast switching customers who did not pay overage payments before switching pay less after switching our findings unlike those of previous research on experience based learning suggest that the behavior of experienced customers does not converge to the predictions of neoclassical models we p

can decentralization be beneficial abstract a conventional justification for government hierarchy in the fiscal federalism literature is based upon asymmetry in policy tools or in information access that is available to different levels of government this paper demonstrates that even if these asymmetries are eliminated addition of local regional governments to a one tier central government can be strictly welfare improving

a welfare estimation of beach recreation with aggregate data a single site travel cost recreation demand model for a representative agent visiting a beach is employed that uses an indirect utility function alternative specifications of the expected demand function are estimated with aggregate time series data from a local beach park the estimated parameters are used to compute the value of the consumer surplus the recreational value of the park is expectedly sensitive to the functional form used also own price and income elasticities for various functional forms vary the results from the box cox procedure suggest that the semi log function is the most appropriate for the data used in this study confidence intervals are calculated to deal with the reliability problem of the consumer surplus estimates an alternative algorithm which assumes omitted variable as the source of the error in the demand function is also presented

commitment in utility regulation a model of reputation and policy applications abstract this paper builds a dynamic model of utility regulation where a government cannot commit to a time inconsistent policy of not expropriating investment by allowing the government s type to change over time i explore how reputation concerns may generate partial commitment restricting attention to equilibria that are strongly renegotiation proof i show that there is a unique perfect bayesian equilibrium this contains episodes of investment and good behaviour followed by periods of expropriation and non investment i then apply the model to consider how the power of the incentive scheme and decentralization may influence the properties of this equilibrium in the case of the power of incentives the model suggests that price caps may worsen commitment in developing countries but not in developed ones similarly the model suggests that decentralisation is likely to have a significant effect on commitment but that this effect will depend on the general ability of the government to commit overall we conclude that the effect of such policies on commitment will be different across countries depending on the institutional environment

modeling preference heterogeneity in stated choice data an analysis for public goods generated by agriculture stated choice models based on the random utility framework are becoming increasingly popular in the applied economics literature the need to account for respondents preference heterogeneity in such models has motivated researchers in agricultural environmental health and transport economics to apply random parameter logit and latent class models in most of the published literature these models incorporate heterogeneity in preferences through the systematic component of utility an alternative approach is to investigate heterogeneity through the random component of utility and covariance heterogeneity models are one means of doing this in this article we compare these alternative ways of incorporating preference heterogeneity in stated choice models and evaluate the sensitivity of estimated welfare measures to which approach is selected we find that a latent class approach fits our data best but all the models perform well in terms of out of sample predictions finally we discuss what criteria a researcher can use to decide which approach is most appropriate for a given data set

incentives and optimal size of local jurisdictions abstract a model of optimal territorial decentralization is presented in which smaller local governments have an informational advantage concerning public goods production costs and the central government has imperfect information on spillover effects induced by local projects the attention is focused on the optimal size of local entities and on the shape of transfer schedules from the central government to local jurisdictions the optimal territorial organization is a compromise between small jurisdictions so as to benefit from the geographical proximity effect on information and large entities in which spillover effects are more easily internalized by means of linear or non linear taxation schemes implemented by the centre

customer preferences for reliable power supply using data on actual choices of back up equipment this paper empirically examines customer preferences for the reliable sources of electricity using data obtained from a survey of back up systems owned by large computer users in japan the empirical results based on probabilistic discrete choice models indicate that 1 customers face a trade off between the price and the reliability of the power supply and 2 customer characteristics such as types of business and levels of electricity usage have significant impacts on the choice of back up apparatuses the estimates of cost changes that would offset reliability changes imply that the financial and communications sectors are more concerned about reliability than are other sectors copyright 1994 by mit press

fiscal decentralization and intergovernmental fiscal relations a cross country analysis abstract fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government by bringing the government closer to the people fiscal decentralization is expected to boost public sector efficiency as well as accountability and transparency in service delivery and policy making decentralization also entails greater complexity in intergovernmental fiscal relations and coordination failures in fiscal relations are likely to have a bearing on fiscal positions nationally and subnationally evidence provided in this paper for a sample of 30 countries suggests that coordination failures in intergovernmental fiscal relations are likely to result in a deficit bias in decentralized policy making particularly in the case of developing countries which may not meet important requirements for successful decentralization

decentralization and the productive efficiency of government evidence from swiss cantons advocates of fiscal decentralization argue that among other benefits it can increase the efficiency of delivery of government services this paper is one of the first to evaluate this claim empirically by looking at the association between expenditure decentralization and the productive efficiency of government using a data set of swiss cantons we first provide careful evidence that expenditure decentralization is a powerful proxy for legal local autonomy further panel regressions of swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment we also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing for the swiss case the gender education gap

a test of policy labels in environmental choice modelling studies abstract a question that arises in the application of environmental choice modelling cm studies is whether to present the choice sets in a generic or labelled form the former involves labelling the policy options to be presented to respondents in a generic way for example as option a option b etc the labelled approach assigns alternative specific descriptors to each option these may relate to the names of proposed policies different locations or any other policy relevant details both approaches have their advantages a potential advantage of using alternative specific labels is that respondents may be better able to base their choices on the true policy context this can increase predictive validity whilst at the same time reducing the cognitive burden of the cm exercise a potential advantage of the generic labelling approach is that respondents may be less inclined to base their choices wholly or largely on the labels and as a consequence may provide better information regarding trade offs among attributes the two approaches to choice set design are compared in the context of a cm study of the values of remnant vegetation in the desert uplands of central queensland results indicate a difference in the cognitive processes generated by choice models using the different approaches this difference is reflected in both the alternative specific constants and the taste parameters and cannot be accounted for by differences in error variance across the two treatments the implications for environmental valuation are discussed

optimal pricing of local telephone service although payment for nearly all other goods and services including toll long distance telephone calls increases with greater consumption nearly 90 percent of the residential telephone subscribers and more than half the business subscribers in the united states now pay a flat monthly rate for local calls see larry garfinkel recently however the telephone companies and regulatory commissions have been moving cautiously toward imposing usage charges for local telephone calls there is renewed interest in what is currently termed usage sensitive pricing t usp it is due to the combined forces of inflation increased local usage and competition from independent firms that sell telephone terminal equipment and supply private toll lines to business customers under usp the pricing of such services as telephone installation directory assistance and minutes of calling is based on incremental rather than average costs since world war ii technological advances have benefited long distance far more than local telephone calling development in microwave communications coaxial cable satellites and waveguides have dramatically lowered the costs of long distance transmission in contrast the costs of local service have moved upward since the late 1960 s at a rate not far below the general price index see at t 1975 faced with a continuing stream of requests for local telephone rate increases state regulatory commissions are finding the concept of tying prices to usage increasingly attractive at t and some of the independent telephone carriers are beginning to test usp plans in several cities with flat rate tariffs increases in local calling add to carrier costs but not to their revenues the local calling rate per subscriber has increased by an average of 2 percent for the past seven years at t s chairman has stated we are moving more and more in the direction of usage sensitive pricing see washington star news p a12 and according to newspaper accounts of at t management documents the bell system plans to phase out flat rate telephone service and begin charging for each local call in major metropolitan areas in 1978 80 see seattle postintelligencer pp 1 10 still regulatory commissions consumer groups and the carriers themselves remain cautious about requiring usage sensitive tariffs for all subscribers the prospective gains from prices more closely related to costs are at least partially offset by the added costs of metering equipment and billing most telephone subscribers prefer flat rates according to bell system marketing surveys see garfinkel p 28 and it is by no means clear which groups of subscribers will be helped and which harmed by such revisions in local tariff structures will the poor end up paying more because they use their phones more should different prices be charged for calls at different times of day on what bases should the monthly and per call rates be determined the purpose of this paper is to sort out some of the questions of economic efficiency and equity that arise when changes are considered in the methods of pricing local telephone services in section i i construct a department of economics the rand corporation and the international institute of management berlin this study was supported under a grant from the john and mary r markle foundation i am indebted to walter s baer for numerous contributions to this paper to s c littlechild and patricia munch and to the managing editor and a referee of this review for critical and constructive review of a draft i have benefited as well from the comments and suggestions of james h alleman stanley m besen william s comanor john m drew leland l johnson john a kay edward d lowry carl pavarini john rolph ralph turvey and chris witze bryant mori assisted with the computer programming see my 1976 paper for a more extensive version of this paper which also discusses optimal flat rate and optimal peak load tariffs

individual welfare analysis for collective households abstract we propose novel tools for the analysis of individual welfare on the basis of aggregate household demand behavior the method assumes a collective model of household consumption with the public and private nature of goods specified by the empirical analyst a main distinguishing feature of our approach is that it builds on a revealed preference characterization of the collective model that is intrinsically nonparametric we show how to identify individual money metric welfare indices from observed household demand along with the intrahousehold sharing rule and the individuals willingness to pay for public consumption i e lindahl prices the method is easy to use in practice and yields informative empirical results which we demonstrate through both a simulation exercise and an empirical application to labor supply data drawn from the panel study of income dynamics

what s mine is yours the influence of male and female incomes on patterns of household expenditure this paper uses microdata from the 1992 statistics canada family expenditure survey to provide evidence that male and female incomes do not always exert identical influences on household expenditures the novelty of the paper lies in its demonstration that while incomes may be pooled for some categories of consumption e g housing the income pooling hypothesis must be rejected for others we also go beyond simply rejecting the pooling hypothesis to ask how male versus female income is used our results stress the on going importance of traditional gender roles for example we find that expenditures on child care increase only with women s incomes higher male income is not associated with higher expenditure on child care even when both spouses are full time full year paid workers

how wrong can you be implications of incorrect utility function specification for welfare measurement in choice experiments despite the vital role of the utility function in welfare measurement the implications of working with incorrect utility specifications have been largely neglected in the choice experiments literature this paper addresses the importance of specification with a special emphasis on the effects of mistaken assumptions about the marginal utility of income monte carlo experiments were conducted using different functional forms of utility to generate simulated choices multi nomial logit and mixed logit models were then estimated on these choices under correct and incorrect assumptions about the true underlying utility function estimated willingness to pay measures from these choice modeling results are then compared with the equivalent measures directly calculated from the true utility specifications results show that for the parameter values and functional forms considered a continuous quadratic or a discrete linear attribute specification is a good option regardless of the true effects the attribute has on utility we also find that mistaken assumptions about preferences over costs magnify attribute mis specification effects

modeling overnight recreation trip choice application of a repeated nested multinomial logit model in this paper we apply the repeated nested multinomial logit model a version of a random utility model rum to estimate the choice of an overnight versus single day recreation trip along with the other usual choice of which of the sites to visit and less typically the choice of whether to participate in our application to fish at all we also find statistically significant income effects in the empirical results the application is to atlantic salmon fishing and the data set is for maine resident angler s fishing trips to rivers in maine and canada

national vs european incentive policies bargaining information and coordination abstract we build a hierarchical model of contractual relationships under moral hazard to address issues about subsidiarity i e optimal de centralization of incentive industrial policies at the national level or at the european community level incentive policy is viewed as an incentive contract for producers who take unobservable decisions that have spillover effects across member states a community agency designs contracts for producers and contractual compensatory transfers between states on the basis of its observations then national regulators and their home producers negotiate according to a generalized nash bargaining a national contract that complements the community contracts given that national regulators will have access to more observations on the producers activities in this setting we show that full centralization is never optimal we give sufficient conditions for complete decentralization to be optimal and when both policies are present we characterize how they interact to provide incentives to producers

the demand for local telephone service a fully discrete model of residential calling patterns and service choices we present an empirical model of households choices among local telephone service options for example between flat rate and measured service and the interrelation of these choices with the number and average duration of local calls households make at each time of day to each geographical zone using a nested logit model with estimation performed on a randomly selected subset of the households calling patterns we calculate elasticities of demand for each local service option number of calls average duration and revenues with respect to the fixed monthly charges and the usage charges for calling under each option we find moderate price elasticities of number of calls with respect to usage charges for households subscribing to measured service nevertheless raising usage charges has a negligible effect on revenues since a sufficient number of households either originally subscribe to flat rate service or convert to flat rate service in response to higher usage charges we find a high elasticity of demandfor each service option with respect to itsfixed monthlyfee this indicates high substitutability among service options the shift among service options induces new calling patterns which wefind to be a small but not negligible indirect effect e most telephone operating companies offer residential customers several options for local service there are two general categories of service flat rate service under which a household can for a fixed monthly charge make an unlimited number of calls within a specified geographical area and measured service for which the household pays a lower fixed monthly fee but can make only a specified number or dollar value of calls at no extra charge after which charges are incurred for additional calls various flat rate services differ in the size of the geographical area in which calling is at no extra charge with higher monthly fees for larger areas measured services differ with respect to the threshold number or dollar value of calls beyond which the customer is charged

income and outcomes a structural model of intrahousehold allocation there is evidence from several sources that one cannot treat many person households as a single decision maker if this is the case then factors such as the relative incomes of the household members may affect the final allocation decisions made by the household we develop a method of identifying how incomes affect outcomes given conventional family expenditure data the basic assumption we make is that household decision processes lead to efficient outcomes we apply our method to a sample of canadian couples with no children we find that the final allocations of expenditures on each partner depend significantly on their relative incomes and ages and on the level of lifetime wealth

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

modelling choice and switching behaviour between scottish ski centres the paper identifies the need to model the skier s choice of centre and the basic ideas underlying discrete choice models and their estimation it then identifies data requirements and sources the final choice of specification and the estimated parameters of the resultant nested multinomial logit model the results indicate two quite distinct markets for day trippers snow cover cost and to a lesser extent the journey length were the critical factors for those staying overnight the key determinant in this market seems to be accommodation interestingly centres which for the day tripper are competitors become for the overnight customer complementary

nonlinear income taxation and matching grants in a federation with decentralized in kind transfers we extend to a fiscal federalism setting the literature on redistributive in kind transfers in the presence of nonlinear income taxation local governments have a cost advantage motivating decentralization of the in kind transfer the cost structure varies across regions and the central government cannot observe which region is which we show that decentralized in kind transfers can in this setting be an even more important instrument for relaxing self selection constraints thus helping redistribution than in single government models we characterize the optimal marginal tax rates and matching grants the grants have a very different structure than the one derived in earlier studies