effluent regulation and long run optimality a regulator faced with free entry of firms is concerned not only with the implications of public policy for the discharges from a representative firm but also with the total pollution observed at the long run market equilibrium the regulator must take into account not only the effects of regulations upon the net marginal returns of the firm but must also consider the total profit of the firm and incentives for entry and exit this paper shows that effluent charges and tradeable effluent permits lead to long run optimality with entry of small firms the difference between firm payments and environmental damages is interpreted as the rent accruing to the environmental resource this result applies only to the competitive case with small polluters the analysis presented here allows a comparison and clarification of the literature on small and large polluters in a multi input framework with social damages dependent upon total effluents effluent charges are shown here to result in socially optimal entry confirming an assertion of baumol and oates 2 p 179 fn 161 and the important result of schulze and d arge 15 by taking average as well as marginal damages into account the effluent charge results in optimal firm scale levels and the correct input mix at the free entry market equilibrium the firm subject to an effluent tax will operate above or below the private minimum efficient scale depending upon whether average external costs exceed or are less than marginal external costs since public policy to reduce effluents is often directed at reducing the effluentgenerating activity some policy recommendations include a tax on the final output of the polluting firm in some theoretical analyses a relation between the output of the firm and the effluent level is identified and a pigouvian output tax is applied this approach should not be followed by policymakers since an output tax does not provide firms with the correct incentives for either input substitution or market entry it is shown that while a lump sum transfer is needed to provide correct entry incentives when a pigouvian output tax is applied no such transfer is needed if the tax is correctly applied to effluents contrary to 5 even if optimal firm scale and i thank the referees for helpful suggestions the support of the national science foundation under grant ses 82 19121 is gratefully acknowledged any errors are my responsibility 103

demand information and competition why do food prices fall at seasonal demand peaks prices for seasonal food products fall at demand peaks price declines are not driven by falling agricultural input prices indeed farm to retail margins narrow sharply i use electronic scanner data from a sample of us supermarkets to show that seasonal price declines are closely linked to market concentration and are much larger in markets with several rivals than where a single brand dominates seasonal demand increases reduce the effective costs of informative advertising and increased informative advertising by retailers and manufacturers in turn may allow for increased market information and greater price sensitivity on the part of buyers

optimal mix of emissions taxes and cap and trade abstract in practice different emitters of a particular pollutant are sometimes subjected to different control mechanisms this paper focuses on the situation where a part of the economy is regulated by a cap and trade program while the rest is subjected to an emissions tax using an extended version of weitzman s prices vs quantities model m l weitzman prices vs quantities revi econ stud 41 1974 477 491 we analyze the conditions under which this is superior from an efficiency point of view to subjecting the whole economy to either of these control mechanisms the paper addresses a crucial trade off between two sources of efficiency loss one due to cost effectiveness issues and another due to emissions volume this trade off determines the optimal size of each sector it is shown that the size of the taxed sector at an optimum increases with the relative steepness of the aggregate marginal abatement cost function

patterns of retail price variation we examine retail price variation across a range of goods and regions of the united states we find that the typical grocery product has a regular price and stays at that price at least 50 of the time and that most deviations from that regular price are downward temporary discounts or sales while infrequent account for 20 to 50 of the annual variation in retail prices for most product categories although existing models of retail sales yield predictions consistent with some aspects of the retail pricing distributions all of these models fail to explain other important aspects of retail pricing identified here

should sliding controls be the next generation of pollution controls abstract the desirability of imposing a set of sliding effluent charges is investigated in a stochastic multifirm model that explicitly includes not only emissions but also a positively valued product and the amount of pollution removed from the effluent before it is emitted drawing upon the intuition developed in the literature of comparative economics it is urgued that if the cost variables are positively correlated across firms then the best sliding control for each firm closely approximates a quantity standard when many firms are to be regulated other possibilities are also considered and the slope of the best sliding control is suggested in each case

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

dynamic environmental policy with strategic firms prices versus quantities abstract environmental regulators often have imperfect information about regulated firms abatement costs in this paper we compare taxes and emissions permits in a dynamic setting in which firms behave strategically the regulator updates policy over time based upon previous aggregate industry performance assuming that firms are not strategic we find that strategic firms facing an emissions tax have an incentive to overabate in order to obtain a lower tax in the future firms that trade emissions permits have a strategic incentive to reveal an artificially high permit price to obtain more permits in the future whether permits or taxes are preferred from a welfare standpoint depends upon how permit prices are determined taxes generate higher welfare when the low cost firm sets the permit price but permits generate higher welfare when the high cost firm sets the permit price

price volatility in niger millet markets price volatility of food staples is one of the most complex factors affecting food security recent food price crises have raised academic interest in improved volatility assessment the widely held assumption in econometric volatility models that long run volatility is constant has been recently questioned and partly blamed for these crises a multiplicative mgarch model recently proposed by bauwens et al is used in this article to model price volatility transmission along the niger millet marketing chain results suggest important volatility links between consumer and producer prices as well as noteworthy differences between short and long run price dynamics

asymmetry and rigidity in farm retail price transmission this article demonstrates how retail price transmission asymmetry can arise from intertemporal optimizing behavior among spatially competitive retailers facing concave spatial demand and shows that vigorous competition among retailers may not necessarily result in the larger retail price declines farmers expect during periods of declining farm prices it also shows that when this particular class of retailers incurs repricing costs retail prices can be rigid over a range of upward and downward movements in the farm price this suggests that the rigidity of retail prices during periods of declining farm prices could be due to repricing costs it also suggests that the appropriate econometric model of price transmission is the model of friction where tobit analysis is the proper method of estimation rather than nonreversible functions

tax versus emissions trading scheme in the long run in this paper we compare the performance of emission taxes and tradable permits under free market entry when firms face idiosyncratic ex ante cost uncertainty we show that under auctioned permits insufficient entry occurs while under a linear emission tax scheme depending on parameters market entry can be either excessive or insufficient our long run analysis thus contrasts with spulber s 1985 equivalence result and also modifies weitzman s result in favor of an ets in that the superiority of a tax over an ets is not guaranteed even when the weitzman condition favors a tax we also show that an ets is superior to a tax scheme when the entry cost is low and the magnitude of uncertainty asymmetric information and the size of the output market are large

prices rise faster than they fall output prices tend to respond faster to input increases than to decreases this tendency is found in more than two of every three markets examined it is found as frequently in producer goods markets as in consumer goods markets in both kinds of markets the asymmetric response to cost shocks is substantial and durable on average the immediate response to a positive cost shock is at least twice the response to a negative shock and that difference is sustained for at least five to eight months unlike past studies which documented similar asymmetries in selected markets gasoline agricultural products etc this one uses large samples of diverse products 77 consumer and 165 producer goods accordingly the results suggest a gap in an essential part of economic theory as a start on filling this gap the study finds no asymmetry in the resonse of an individual decision maker a supermarket chain to its costs but it finds above average asymmetry where a cost shock is filtered through a fragmented w

understanding long run price dispersion abstract a unique panel of retail prices spanning 123 cities in 79 countries from 1990 to 2005 is used to uncover the novel properties of long run international price dispersion at the ppp level almost all of price dispersion is attributed to unskilled wage dispersion at the level of individual goods and services the average contribution of these wages is significantly reduced reflecting that good specific sources of price dispersion such as trade costs and good specific markups tend to average out across goods at the lop level borders and distance contribute about equally to price dispersion that is rising in the distribution share

pollution control by options trading abstract for pollution control with imperfect information about aggregate abatement costs we propose a combination consisting of free permits and a menu of call options for additional permits with different striking prices by appropriately choosing permits and corresponding striking prices the regulator can approximate the marginal damage function arbitrarily well

on the long run efficiency of auctioned vs free permits abstract when marketable permits affect the entry exit decisions of competitive firms the efficient proportion of auctioned vs free permits depends on the pollutant s nature all permits should be auctioned for global pollutants and some should be free for local pollutants

prices vs quantities with multiple pollutants abstract we examine the choice of policy instruments price quantity or a mix of the two when two pollutants are regulated and firms abatement costs are private information whether abatement efforts are complements or substitutes is key determining the choice of policies when pollutants are complements a mixed policy instrument with a tax on one pollutant and a quota on another is sometimes preferable even if the pollutants are identical in terms of benefits and costs of abatement yet if they are substitutes the mixed policy is dominated by taxes or quotas

spatial dispersion of retail margins evidence from turkish agricultural prices the farmer share of retail prices is shown to be about 16 percent corresponding to about 84 percent of a distribution share on average across agricultural products and regions within turkey the share of transportation costs in retail prices is only about 7 percent while the share of retail margins is about 77 percent of retail prices the dispersion of retail prices across regions is shown to be mostly due to local wages and variable markups while the contribution of traded input prices is relatively small accordingly the high dispersion of farmer prices across locations is not reflected in the dispersion of retail prices due to the high contribution of retail margins these retail margins are also shown to account for about one third of the consumer welfare dispersion across regions and more than half of the consumer welfare dispersion across products

emission taxes and tradable permits a comparison of views on long run efficiency we compare three different views on the long runefficiencies of emission taxes which includethresholds inframarginalexemptions and of tradeable emission permitswhere some permits areinitially free the differences are caused bydifferent assumptions aboutwhether thresholds and free permits should besubsidies given only to firmsthat produce or full property rights treatingtax thresholds as well asfree permits as property rights would departfrom the conventional view but would allow greater flexibility in makingeconomic instruments bothefficient and acceptable such flexibilitycould be very important inachieving efficient control of greenhouse gasemissions

environmental policy a la carte letting firms choose their regulation under uncertainty the optimal choice between price and quantity instruments depends on the technology of the regulated firms which is often private information we consider an environmental policy that delegates the prices versus quantities decision to the firms by offering them the choice between an emissions tax and permit trading such an approach is currently used in swiss climate policy we provide a detailed characterization of the optimal policy and show that this approach reduces expected social costs compared to a pure tax or permit trading regime we demonstrate that an optimal allocation of firms to instruments can be achieved despite substantial informational constraints and that all firms gain from the introduction of the instrument choice compared to optimally designed single instrument policies furthermore we discuss the conditions under which this approach is likely to be preferable to a hybrid regulation

lock in effect of emission standard and its impact on the choice of market based instruments abstract a country s existing emission standard policy will lead to a lock in effect when the country plans to adopt new market based instruments to control greenhouse gas emissions it must consider this effect as it chooses among instruments to avoid larger efficiency loss in this paper we find that the lock in effect will cause a kink point to occur on the marginal abatement cost mac curve this change of shape for the mac curve reminds us to be cautious in choosing market based instruments when applying weitzman s rule we also introduce this concept into a dynamic multi regional computable general equilibrium cge model for china and simulate mac curves for all regions after applying weitzman s rule we propose a timeline for introducing price instruments under different marginal benefit mb curve scenarios

efficiency in pollution control in the short and long runs a system of rental emission permits efficiency in pollution control in the short and long runs a system of rental emission permits author s robert a collinge and wallace e oates source the canadian journal of economics revue canadienne d economique vol 15 no 2 may 1982 pp 346 354 published by blackwell publishing on behalf of the canadian economics association stable url http www jstor org stable 134787 accessed 05 05 2008 21 07

optimal design of a phase in emissions trading program abstract this paper studies a phase in emissions trading program with voluntary opt in possibilities for non affected firms and derives optimal permits allocations to affected and opt in firms when the environmental regulator has incomplete information on individual unrestricted emissions and control costs the regulator faces a trade off between production efficiency minimization of control costs and information rent extraction reduction of excess permits allocated to opt in firms the first best equilibrium can be attained if the regulator can freely allocate permits to affected and opt in firms otherwise a second best equilibrium is implemented the latter is sensitive to uncertainty in control costs and benefits

market structure and cost pass through in retail abstract we examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass through to answer this question we use scanner data from a large u s retailer to estimate product level pass through for three vertical structures national brands private label goods not manufactured by the retailer and private label goods manufactured by the retailer our approach circumvents issues associated with internal firm prices and demonstrates that accounting for horizontal market structure is important for measuring the effects of vertical integration and reduced double marginalization on pass through

the impact of grain self sufficiency regime on regional welfare and agricultural productivity in china the nineties agricultural reforms in china that were aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural input prices this apparently motivated the government to introduce the grain self sufficiency regime in 1998 we examine how and to what extent this reform affected the productivity and welfare of grain farmers in china at the regional level we find that the price regulations that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers welfare although the price regulations resulted in short term improvement in welfare across all the regions in the long run such regulations can potentially result in larger drop in agricultural production because of its negative impact on the incentives to produce more