relative efficiency of specific and ad valorem tariffs in a model of monopolistic competition abstract the relative efficiency of ad valorem and specific tariffs is still an active debate in the international trade literature contrary to the general belief about the ad valorem tariff being superior under various imperfectly competitive market settings it is shown that the specific tariff generates more welfare under monopolistic competition we argue that this result is not general if we follow the empirical evidence that firms use variable mark ups and use a utility function that allows for it we find that the ad valorem tariff is more efficient when consumers love for variety is low the relative efficiency overturns to the specific tariff as consumers love for variety increases

movements towards free trade and domestic market performance with imperfect competition this paper studies the response of a dominant domestic oligopoly to the reduction in the rate of a protective tariff the issue here is whether domestic market performance is improved through a movement toward free trade alone put another way is free trade always a substitute for competition policy we find that the lower tariff may lead to inferior domestic market performance the direction of the change and its magnitude are functions of the shape of the import supply function the degree of competition between oligopolists and whether or not entry is possible thus there is reason to believe that a strong competition policy may in some markets be complementary to freer trade

strength in numbers group size and political mobilization abstract an important result in interest group theory and political economy is that small groups are more influential than their size would lead us to expect in this study we document that the opposite holds for political mobilization citizens are more likely to participate in elections if they belong to large groups we present evidence that both the absolute size of groups and their population share influence individual participation decisions the link between group size and political mobilization is in part due to the structure of media markets candidates find it easier to direct campaign messages at larger groups because many existing media outlets cater to them

media markets and localism does local news en espanol boost hispanic voter turnout the same time the availability of these products reduces the consumption of local news not only because some consumers prefer national and global content to local information but also because local media products that lose a significant number of consumers are forced to cut qual ity and they may even cease to exist if their audience falls below a critical threshold for these reasons some scholars claim that the rise of integrated media markets undermines local civic engagement robert d putnam 2000 against this backdrop many regulatory agencies including the federal communications commission fcc of the united states seek to protect local media and promote localism for instance by limiting ownership concentration 1 however localism is desirable only if there are in fact positive spillovers from the provision of local content that can help justify the loss of private welfare that integrated media markets would provide in this paper we propose a simple test for the existence of spillovers from local news pro gramming asking if the presence of local television news affects civic behavior the ubiq uity of local news programming across all us metro areas makes it impossible to study its effects on the general population in contrast the availability of spanish language news has increased considerably in recent years providing us with an experiment to study the effect of local news on one important measure of civic engagement voter turnout in local elections in particular we use a differencing approach asking whether hispanic voter turnout is higher in relation to non hispanic turnout in metro areas with spanish language local television news our results indicate that spanish language local television news raises hispanic turnout by more than 4 percentage points local news targeted at hispanics has no effect on the participa tion of non hispanics and as one would expect a significantly smaller effect in years with a presidential race in markets with spanish language news about a quarter of hispanics turn to these programs our estimates thus imply that news in spanish caused about a fifth of spanish language news viewers to start voting interestingly hispanics with access to news in spanish do not increase the time they spend watching news content analyses of spanish language news programs in the united states find that these shows are much more likely to report on

media competition and electoral politics we build a framework linking competition in the media market to political participation media outlets report on the ability of candidates running for office and compete for audience through their choice of slant citizens consume news only if the expected utility of being informed about candidates ability is sufficiently large for their group collectively our results can reconcile seemingly contradictory empirical evidence showing that entry in the media market can either increase or decrease turnout while information pushes up independent turnout partisans adjust their turnout to the ability of their preferred candidate and on average they vote less when informed

political advertising and election results we study the persuasive effects of political advertising our empirical strategy exploits fcc regulations that result in plausibly exogenous variation in the number of impressions across the borders of neighboring counties applying this approach to detailed data on television advertisement broadcasts and viewership patterns during the 2004 12 presidential campaigns our results indicate that total political advertising has almost no impact on aggregate turnout by contrast we find a positive and economically meaningful effect of advertising on candidates vote shares taken at face value our estimates imply that a one standard deviation increase in the partisan difference in advertising raises the partisan difference in vote shares by about 0 5 percentage points evidence from a regression discontinuity design suggests that advertising affects election results by altering the partisan composition of the electorate

the price effects of spatial competition a recent paper by capozza and van order cvo 1977 proposed a generalization of the greenhut hwang ohta gho 1975 analysis of pricing under three alternative types of spatial competition the gho analysis was based on a short run model in which the locations of firms are assumed to be fixed cvo accordingly proposed relaxation of this rigid assumption to examine if the gho results also apply to the long run zero profit industry equilibrium they confirmed the gho results which however they also contended require certain particular modifications as well in the light of their own models the cvo contribution lies in their simple model analysis of long run industry equilibrium conditions a generalization of the gho analysis however they failed to recognize that the gho analysis is based on another restrictive assumption regarding the form of the demand function moreover they assumed even more restrictive demand conditions and misled themselves to a conclusion that l6schian competition never results in a lower price than spatial monopoly their conclusion is invalid since loschian competition can be shown to result in a lower not higher mill price if only the demand function is assumed to be sufficiently convex to the origin ohta 1980 this calls for a more general examination of conditions under which the firm s f o b mill price may rise or fall due to spatial entry of rival firms the present paper presents selected results of such examination section 2 briefly reviews the theory of spatial monopoly initially some fundamental assumptions are set forth this is followed by derivation of the market demand function for the spatial monopolist the market demand in turn is shown to be more or less elastic than the assumed basic demand function depending on the curvature of the latter curve we also comment on the so called paradox of spatial monopoly which we claim is a misnomer the analytical framework of section 2 is employed in section 3 as we generalize previous analyses and present a concise cataloguing of comparative static results of spatial competition 1 again the basic demand characteristics in combination with alternative types of spatial competition are shown to play an important role in yielding the distinct elasticity results and for that matter competitive equilibrium prices in the process a counter example to cvo s aforementioned argument on l6schian pricing is presented also discussed is the conceptual distinction between perceived and realized elasticities of demand under spatial competition which cvo also failed to recognize as a result they erred in speculating that equilibrium mill prices would be the same under alternative types of spatial competition given the size of the market area we will show that they in fact are not section 4 concludes the paper by summarizing the basic results of our analysis

media and gridlock abstract i develop a model of the relation between the media environment and political obstructionism i show that when voters are less informed by media obstructionism becomes a more effective political signal for the minority party the model thus implies that media change can cause gridlock via signaling by contrast the previous literature on causes of gridlock focuses on polarization and other factors the model also makes several auxiliary predictions consistent with recent trends in u s politics

history s role in coordinating decentralized allocation decisions what causes individual suppliers to allocate goods in such a way that the aggregate allocation satisfies the law of one price a satisfactory answer to this question must confront two related problems equal net prices at all allocations provide no information to suppliers about the quantity to deliver to a specific location and strategic uncertainty makes an observed violation of the law of one price an unreliable indicator of a profit opportunity this paper develops a simple analytical framework to formalize these two problems reviews some solutions found in the literature and reports laboratory evidence on how people solve them in addressing these issues we focus on the role historical prices play in coordinating decentralized allocation decisions

electoral competition and politician turnover abstract in this paper we analyze the selection by opportunistic parties of the candidates who run for election we consider a setting with incomplete but symmetric information about the candidates abilities in which electoral campaigns provide voters with additional information about candidates parties care only about selecting an appropriate candidate to win the election while voters elect the best candidate conditional on their information we first argue that in order to defeat an established very good candidate of its rival a party may favor a new candidate with highly uncertain ability rather than an established good candidate next we establish that the discrepancy between the objective of parties and the objective of the electorate leads to inefficient conservatism in the selection of candidates i e each party keeps its incumbents too often from the voters viewpoint

simple and clever decision rules for a model of evolution abstract under the decision rule specified by kandori mailath and rob 1993 kandori m mailath g j rob r 1993 learning mutation and long run equilibria in games econometrica 61 29 56 myopic adjustment can lead to surprising results including coordination on strictly dominated strategies we show that under an alternative decision rule convergence to nash equilibrium is guaranteed moreover if rare mutations are introduced risk dominant equilibria always correspond to long run equilibria

closeness expenditures and turnout in the 1982 u s house elections students of elections have repeatedly found that the closeness of an election is modestly correlated with turnout this may be due to a direct response of instrumentally motivated voters but recent theoretical work casts doubt on the adequacy of this explanation another possibility is that elite actors respond to closeness with greater effort at mobilization we explore the latter possibility by using fec and state data on campaign expenditures in house senate and gubernatorial races our results indicate that closeness has an effect at both the mass and elite levels we also provide quantitative estimates of the effect of senate and gubernatorial expenditure on house turnout

the case for nil votes voter behavior under asymmetric information in compulsory and voluntary voting systems in an informational voting environment we study the impact of an explicit nil vote option on the ballot when some voters are uninformed and face the swing voters curse we postulate a simple model of strategic voting in which voters entertain heterogeneous thresholds on legitimacy of different voting actions we predict that introducing a nil vote option reduces the number of uninformed and invalid votes increasing expected welfare in both voluntary and compulsory voting we test our model in a pen and paper laboratory experiment and find that the predictions of the model hold in the data for both voting systems

citizen editors endogenous information acquisition and news accuracy abstract this paper provides a model of the market for news where profit maximizing media outlets choose their editors from a population of rational citizens the analysis identifies a novel mechanism of media bias the bias in a media outlet s news reports is the result of the slanted endogenous information acquisition strategy of its editor in particular the results show that the expected accuracy of news reports is lower the more ideological an editor is nevertheless citizens find it optimal to acquire information from a media outlet whose editor has similar ideological preferences depending on the distribution of citizens ideological preferences a media outlet may choose an ideological editor even in a monopolistic market moreover ideological editors are more likely to be present in the market for news i the higher the number of media outlets competing in the market for news ii the lower the opportunity cost that citizens have to incur to acquire information

the effect of newspaper entry and exit on electoral politics we use new data on entries and exits of us daily newspapers from 1869 to 2004 to estimate effects on political participation party vote shares and electoral competitiveness our identification strategy exploits the precise timing of these events and allows for the possibility of confounding trends we find that newspapers have a robust positive effect on political participation with one additional newspaper increasing both presidential and congressional turnout by approximately 0 3 percentage points newspaper competition is not a key driver of turnout our effect is driven mainly by the first newspaper in a market and the effect of a second or third paper is significantly smaller the effect on presidential turnout diminishes after the introduction of radio and television while the estimated effect on congressional turnout remains similar up to recent years we find no evidence that partisan newspapers affect party vote shares with confidence intervals that rule out even moderate sized effects we find no clear evidence that newspapers systematically help or hurt incumbents

a folk theorem for minority games we study a particular case of repeated games with public signals in the stage game an odd number of players have to choose simultaneously one of two rooms the players who choose the less crowded room receive a reward of one euro whence the name minority game the players in the same room do not recognize each other and between the stages only the current majority room is publicly announced we show that in the infinitely repeated game any feasible payoff can be achieved as a uniform equilibrium payoff and as an almost sure equilibrium payoff in particular we construct an inefficient equilibrium where with probability one all players choose the same room at almost all stages this equilibrium is sustained by punishment phases which use in an unusual way the pure actions that were played before the start of the punishment

rules of thumb for social learning this paper studies agents who consider the experiences of their neighbors in deciding which of two technologies to use we analyze two learning environments one in which the same technology is optimal for all players and another in which each technology is better for some of them in both environments players use exogenously specified rules of thumb that ignore historical data but may incorporate a tendency to use the more popular technology in some cases these naive rules can lead to fairly efficient decisions in the long run but adjustment can be slow when a superior technology is first introduced

explaining voter turnout patterns an information theory voting research is rich in empirical regularities yet a parsimonious theory of voter turnout that can match the facts has proven to be elusive this paper argues that voter turnout patterns can be explained by extending the traditional rational voter model to include limited information a model is presented in which utility maximizing consumers receive higher payoffs from voting the more confident they are of their vote choice the model provides an explanation for the most important cross sectional voter turnout patterns in addition it suggests a novel explanation for the post 1960 decline in u s participation

knowledge is power a theory of information income and welfare spending no voters cast their votes based on perfect information but better educated and richer voters are on average better informed than others we develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters and cause parties to choose political platforms that are better aligned with the preferences of rich voters in us election survey data we find that income is more important in affecting voting behavior for more informed voters than for less informed voters as predicted by the model further in a panel of us states we fi nd that when there is a strong correlation between income and political information congress representatives vote more conservatively which is also in line with our theory

radio s impact on public spending if informed voters receive favorable policies then the invention of a new mass medium may affect government policies since it affects who is informed and who is not these ideas are developed in a voting model the model forms the basis for an empirical investigation of a major new deal relief program implemented in the middle of the expansion period of radio the main empirical finding is that u s counties with many radio listeners received more relief funds more funds were allocated to poor counties with high unemployment but controlling for these and other variables the effects of radio are large and highly significant

advertising effects in presidential elections presidential elections provide both an important context in which to study advertising and a setting that mitigates the challenges of dynamics and endogeneity we use the 2000 and 2004 general elections to analyze the effect of market level advertising on county level vote shares the results indicate significant positive effects of advertising exposures both instrumental variables and fixed effects alter the ad coefficient advertising elasticities are smaller than are typical for branded goods yet significant enough to shift election outcomes for example if advertising were set to zero and all other factors held constant three states electoral votes would have changed parties in 2000 given the narrow margin of victory in 2000 this shift would have resulted in a different president

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

public protests and policy making technological advances and the development of social media have made petitions public protests and other form of spontaneous activism increasingly common tools for individuals to influence decision makers to study these phenomena in this article i present a theory of petitions and public protests that explores their limits as mechanisms to aggregate information the key assumption is that valuable information is dispersed among citizens through petitions and protests citizens can signal their private information to the policy maker who can then choose to use it or not i first show that if citizens individual signals are not sufficiently precise information aggregation is impossible no matter how large is the population of informed citizens even if the conflict with the policy maker is small i then characterize the conditions on conflict and the signal structure that guarantee information aggregation when these conditions are satisfied i show that full information aggregation is possible as the population grows to infinity when they are not satisfied i show that information aggregation may still be possible if social media are available

media and political persuasion evidence from russia this paper compares electoral outcomes of 1999 parliamentary elections in russia among geographical areas with differential access to the only national tv channel independent from the government it was available to three quarters of russia s population and its signal availability was idiosyncratic conditional on observables independent tv decreased aggregate vote for the government party by 8 9 percentage points increased the combined vote for major opposition parties by 6 3 percentage points and decreased turnout by 3 8 percentage points the probability of voting for opposition parties increased for individuals who watched independent tv even controlling for voting intentions measured one month before elections jel d72 l82 p26

performance competition in local media markets abstract this paper investigates the impact of tax and public service performance on english local government popularity by using data on local property taxes service performance ratings and local election results after the introduction of a system of evaluation of local government performance comprehensive performance assessment the evidence emerging from estimation of a re election equation offers a somewhat more rounded portrait of the voter than the conventional fiscal conservative icon by highlighting the beneficial consequences of public service performance on government popularity and pointing to the role of local media networks the bbc regional television local radio and web network in shaping consensus by spreading tax related information

anonymous games with binary actions abstract in many economic decision problems the preferences of economic agents depend on the numbers or proportions of individuals choosing the same decision or other decisions examples include network or congestion externalities location choices of firms the tourist s choice of a vacation destination the visit of public events like concerts or the purchase of goods that are subject to fashion in this article the relating equilibrium characterization and selection questions are formulated and solved in terms of anonymous games with a continuum of players facing a binary decision problem journal of economic literature classification numbers c72 d62

learning information and sorting in market entry games theory and evidence previous data from experiments on market entry games n player games where each player faces a choice between entering a market and staying out appear inconsistent with either mixed or pure nash equilibria here we show that in this class of game learning theory predicts sorting that is in the long run agents play a pure strategy equilibrium with some agents permanently in the market and some permanently out we conduct experiments with a larger number of repetitions than in previous work in order to test this prediction we find that when subjects are given minimal information only after close to 100 periods do subjects begin to approach equilibrium in contrast with full information subjects learn to play a pure strategy equilibrium relatively quickly however the information which permits rapid convergence revelation of the individual play of all opponents

elections with privately informed parties and voters this paper studies a situation in which parties are betterinformed than voters about the optimal policies for voters weshow that voters are able to infer the parties information byobserving their electoral positions even if parties have policypreferences which differ substantially from the median voter s unlike previous work that reach opposite conclusions we assumethat voters have some private information of their own if theinformation available to voters is biased parties attempts toinfluence voters beliefs will result in less than fullconvergence even if parties know with certainty the optimalpolicy for the median voter

abstention in elections with asymmetric information and diverse preferences we analyze a model of a two candidate election with costless voting in which voters have asymmetric information and diverse preferences we demonstrate that a strictly positive fraction of the electorate will abstain and that nevertheless elections effectively aggregate voters private information using examples we show that more informed voters are more likely to vote than their less informed counterparts increasing the fraction of the electorate that is informed however may lead to higher levels of abstention we conclude by showing that a biased distribution of information can lead to a biased voting population but does not lead to biased outcomes

television and voter turnout i use variation across markets in the timing of television s introduction to identify its impact on voter turnout the estimated effect is significantly negative accounting for between a quarter and a half of the total decline in turnout since the 1950s i argue that substitution away from other media with more political coverage provides a plausible mechanism linking television to voting as evidence for this i show that the entry of television in a market coincided with sharp drops in consumption of newspapers and radio and in political knowledge as measured by election surveys i also show that both the information and turnout effects were largest in off year congressional elections which receive extensive coverage in newspapers but little or no coverage on television

bayesian learning in social networks we study the perfect bayesian equilibrium of a sequential learning model over a general social network each individual receives a signal about the underlying state of the world observes the past actions of a stochastically generated neighbourhood of individuals and chooses one of two possible actions the stochastic process generating the neighbourhoods defines the network topology we characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning convergence in probability to the right action as the social network becomes large we show that when private beliefs are unbounded meaning that the implied likelihood ratios are unbounded there will be asymptotic learning as long as there is some minimal amount of expansion in observations we also characterize conditions under which there will be asymptotic learning when private beliefs are bounded

media slant against foreign owners downsizing abstract using a unique data set from nationally distributed quality newspapers in germany we find evidence for both quantitative and qualitative media slant against foreign firms a downsizing foreign firm receives almost twice as much attention as a domestic firm and the tone of media reports is more negative media slant is a measure for economic xenophobia directed against foreign owners which constitutes an obstacle to foreign direct investment

continuous decisions by a committee median versus average mechanisms abstract a group of strategic agents with diverse private information and interdependent preferences has to take a continuous collective decision i study the design of the decision making procedure from the viewpoint of a utilitarian social planner for uniformly distributed information the implementation of the average report as decision dominates the implementation of the median report when the set of admissible reports is optimally designed this is true for any number of agents and for any degree of interdependence the result extends to a general class of distributions when the number of agents is large

get out the costly vote institutional design for greater participation institutions designed to increase turnout appeal to democratic sentiments but are highly debated as they entail two potentially countervailing eects while generating more pieces of information they may decrease the average voter s information quality we examine two commonly discussed institutions inducing participation abstention penalties used in 32 countries around the world and lotteries providing a prize to one randomly chosen participant as proposed on the 2006 arizona ballot we analyze a benchmark rational choice model in which voters vary in their information quality and participation is costly we illustrate that both institutions can improve collective outcomes though lotteries are a more eective instrument asymptotically in an array of lab experiments we empirically assess institutional performance we nd strong evidence for selective participation lab voters participate more when better informed or when institutionally induced however because subjects vote more often than the equilibrium predictions these institutions entail less welfare benets than theory prescribes lotteries do fare better than nes suggesting that they may be a useful alternative to commonly used compulsory

how segregated is urban consumption we provide measures of ethnic and racial segregation in urban consumption using yelp reviews we estimate how spatial and social frictions influence restaurant visits within new york city transit

politics information and the urban bias abstract governments in many ldcs skew public resources towards urban sectors despite a majority of citizens residing in rural areas this paper develops a novel political argument for this urban bias phenomenon in a framework where all voters rural and urban have equal voice but differ in their access to information we argue that this difference is sufficient to give governments an incentive to inefficiently over allocate resources towards urban areas the bias is shown to worsen during adverse economic times leading to increased migration we also examine how voter informativeness affects efficiency of the electoral process in weeding out incompetent governments

information aggregation in polls we study information transmission via polling a policymaker polls constitu ents who differ in their information and ideology to determine policy full rev elation is an equilibrium in a poll with a small sample but not with a large one in large polls full information aggregation can arise in an equilibrium where constituents endogenously sort themselves into centrists who respond truth fully and extremists who do not we find polling statistics that ignore strate gic behavior yield biased estimators and mischaracterize the polvs margin of error we construct estimators that account for strategic behavior finally we compare polls and elections jel c42 d83

regret in the on line decision problem abstract at each point in time a decision maker must make a decision the payoff in a period from the decision made depends on the decision as well as on the state of the world that obtains at that time the difficulty is that the decision must be made in advance of any knowledge even probabilistic about which state of the world will obtain a range of problems from a variety of disciplines can be framed in this way in this paper we survey the main results obtained as well as some of their applications journal of economic literature classification numbers c70 c73

mass media competition political competition and public policy if better informed voters receive favourable policies then mass media will affect policy because mass media provide most of the information people use in voting this paper models the incentives of the media to deliver news to different groups the increasing returns to scale technology and advertising financing of media firms induce them to provide more news to large groups such as taxpayers and dispersed consumer interests and groups that are valuable to advertisers this news bias alters the tradeoff in political competition and therefore introduces a bias in public policy the paper also discusses the effects of broadcast media replacing newspapers as the main information source about politics the model predicts that this change should raise spending on government programmes used by poor and rural voters

follow the leader theory and evidence on political participation using state by state voting data for u s presidential elections the authors observe that voter turnout is a positive function of predicted closeness to explain the strategic component of political participation they develop a follow the leader model political leaders expend effort according to their chance of being pivotal which depends on the expected closeness of the race at both state and national levels and how voters respond to their effort structural estimation supports this model for example a 1 percent increase in the predicted closeness at the state level stimulates leaders efforts which increases turnout by 0 34 percent

learning with fixed rules the minority game abstract this paper gives a critical account of the literature on adaptive behaviour in the minority game a simple congestion game the literature has proposed a model which differs markedly from many standard learning models in that players are endowed with a fixed subset of behavioural rules or response modes which map the observed history to actions these rules need not have a behavioural interpretation or be derived from some form of optimizing behaviour nonetheless this model gives rise to behaviour that is close to equilibrium behaviour at the aggregate level the individual level behaviour predicted by the model seems to capture some aspects of observed experimental behaviour that are difficult to explain using standard models

the swing voter s curse the authors analyze two candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters they demonstrate the existence of a swing voter s curse less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless the swing voter s curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another copyright 1996 by american economic association

spatial pricing with a general cost function the effects of taxes on imports one of the authors of this paper referred some years ago in a somewhat different context to a mislaid maxim in the hope that the maxim in question will not be permanently mislaid greenhut and ohta 1976 p 267 much the same hope can be expressed with respect to one of our objectives in this paper it is a familiar principle in microeconomics that specific or unit taxes act somewhat differently from ad valorem taxes although we would suggest that the full extent of this difference has not been investigated there is also the suggestion in international trade theory that tariff barriers and by implication local sales taxes operate very much like transport costs and so can be analyzed like transport costs in particular just as we might expect spatial price discrimination through freight absorption so we can expect spatial price discrimination through tariff or sales tax absorption what is not made clear is that there is a potential conflict between these two accepted wisdoms determined by whether the tariff or sales tax is specific or ad valorem we examine this conflict in some detail in this paper we shall show that just as the profit maximizing producer can be expected to absorb some proportion of transport costs so we can also expect him to absorb some proportion of the tariffs or taxes to which his goods are subject but the precise nature of tariff absorption depends crucially on the particular tariff barriers that exist only specific tariffs impact the same way as do transport costs ad valorem tariffs will be shown to have a very different effect they will appear at least in part as a change in convexity of the individual demand function a related objective of the paper and one with which we shall deal first in the analysis is to show how an optimal spatial pricing rule can be derived when marginal production costs take a general form the analysis of spatial competition and of spatial price discrimination has relied quite heavily on the assumption of constant marginal production costs it follows naturally from this assumption that the price quantity decisions applicable to a market at location i are independent of the price quantity decisions at location j the optimal discrimination pricing policy over a series of distinct markets under conditions of constant marginal production costs would be the one that maximizes profit at each market point what happens when this assumption is relaxed consider the simple example