efficient tariff financing of public goods abstract for some countries tariff generated revenues may be the main method available for financing public goods there is a trade off between the distortionary effects of a tariff and the benefits of the public good which it finances this paper employs the heckscher ohlin samuelson model to examine that trade off the result is an efficiency rule for provision of the public good that rule is compared to the atkinson and stern 1974 rule it is found that the ranking of the factor intensities of production is crucially important in determining the marginal cost of the public good

intertemporal pricing and price discrimination a semiparametric hedonic analysis of the personal computer market we apply a smooth coefficient semiparametric model to a unique high frequency data set to examine the intertemporal pricing of personal computers furthermore we test whether firms charge differential component prices for their top performance personal computers and whether premium firms charge both a premium for all their computers and a premium for their top performance ones we find nonlinear effects in the pricing of personal computer components we also find that firms in general do not charge differential prices for the components of their top performance computers in addition high quality firms charge higher premia only for their most advanced products copyright 2006 john wiley sons ltd

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

the persistence of inferior cultural institutional conventions economic institutions and cultures including social norms are often dynamically complementary meaning that the persistence of each is facilitated by the presence of the other the term feudal society for example refers jointly to the economic relationship of lord and serf and to the norms of subordination and reciprocity that both contributed to the smooth functioning of the system and that were its cultural expression this complementarity provides one mechanism for the long term persistence of particular configurations of cultures and institutions given the institutional relationship of serf to lord to continue the example adopting the culturally prescribed norms of subordination and reciprocity was a best response for individuals in the two classes respectively and given this culture of subordination and reciprocity conforming to the institutional arrangements defining serf and lord was also a best response we refer to this pair of mutual best responses as a cultural institutional convention otherwise similar populations with differing recent histories may exhibit differing conventions free cities coexisting with feudal manors in germany and elsewhere during the thirteenth to fifteenth centuries for example historians and social scientists have long asked why some cultural institutional conventions appear independently multiple times in human history and persist over long periods monogamy markets and primogeniture for example while others rarely emerge and when they do tend to be short

warranty and price optimization in a competitive duopoly supply chain with parallel importation abstract gray market has always been an opposing challenge for manufacturers parallel markets tend to purchase the manufacturer s product at a lower price and resell it in another market with a higher price in order to ameliorate the effects of parallel importation the offering of a warranty for authorized channels is suggested as a competitive strategy this paper considers two markets with different levels of willingness to pay a manufacturer is present at both of these markets and offers the same product with different prices according to each market s willingness to pay in the market with a lower willingness to pay the manufacturer s product is not only purchased by a group of customers but also by the parallel importer who later attempts to sell this product in the market with a higher willingness to pay moreover in the market with lower willingness to pay the manufacturer competes with another manufacturer that offers a similar product a model for this problem is proposed when the manufacturer offers warranty as a competitive strategy against the parallel importer at the market with higher willingness to pay furthermore a numerical example and a sensitivity analysis for the model are presented additionally due to the practicality of this problem managerial insights are included at the end of this research work

progressive taxation and the social marginal cost of public funds abstract this paper describes the calculation of the social marginal cost of public funds smcf for a progressive tax system which distorts individuals labour supply decisions a formula for the smcf indicates that the income and substitution effects of the labour supply response are weighted by the changes in individuals average and marginal tax rates respectively other well known formulas for the smcf are shown to be special cases of this formula the difference between this formula and the mayshar 1991 formula is shown to be due to different but equally valid ways of computing the change in the average tax rate the condition under which a marginal tax rate increase may lead to a reduction in revenues is derived

multiproduct firms and environmental policy coordination the literature that analyzes the coordination of environmental taxes by governments considers that firms produce a single good at a single plant however in practice firms tend to produce several goods at various production plants multiproduct firms these firms may organize themselves in a centralized or decentralized fashion for purposes of decision making this affects their output and pollution levels this paper sets out to analyze the coordination of environmental taxes considering multiproduct firms we find that the organizational structure chosen by the owners of the firms depends on whether or not governments coordinate with one another in setting taxes and on whether the goods produced are substitutes or complements social welfare is greater if a supranational authority sets taxes in all countries in this case joint welfare is never lower if the authority is constrained to set the same tax in all countries

the effects of a free repair warranty on the discrete time periodic replacement policy abstract this paper presents the effects of a free repair warranty on a periodic replacement policy with a discrete time process considering a repairable product that should be operational at the time over an indefinitely long operation cycle n n 1 2 under the discrete time periodic replacement policy a product is preventively replaced at pre specified operation cycles n 2 n 3 n n 1 2 when the product fails a minimal repair is performed at the time of failure and the failure rate is not disturbed by each repair the cost models from the customers perspectives are developed for both warranted and non warranted products the corresponding optimal replacement period n is derived such that the long run expected cost rate is minimized under the assumption of the discrete time increasing failure rate the existence and uniqueness of the optimal replacement period are shown and the impact of a free repair warranty on the optimal periodic replacement policies is investigated analytically the optimal n for a warranted product should be adjusted toward the end of the warranty period finally numerical examples are demonstrated for the optimal policy illustration and verification the observations from the numerical results provide valuable information for a buyer user to adjust the optimal periodic replacement policy if a product is operating in discrete time under a free repair warranty

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

the marginal welfare cost of public funds theory and estimates abstract we derive a general analytic formula for the marginal welfare cost mwc of public funds without imposing restrictive assumptions on preferences or technologies the framework encompasses the various special cases previously considered and reconciles the disparities among the reported estimates of mwc unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending further progress in measuring mwc requires empirical estimation of labor supply functions that include government spending as an explanatory variable

absentee ownership of immobile factors and environmental policies in a federation this paper studies the effects of absentee ownership of immobile factors on environmental policy of a jurisdiction in a federation an increase in emissions in a jurisdiction increases factor incomes but part of the increased factor incomes goes to absentee owners while only the residents of the jurisdiction bear the full disutility in addition the increase in emissions in a jurisdiction attracts capital and decreases capital in other jurisdictions reducing the incomes that the residents of the jurisdiction earn from owning immobile factors in other jurisdictions absentee ownership thus reduces the marginal benefit of an increase in emissions while it leaves the marginal cost unaffected from the jurisdiction s perspective as a consequence absentee ownership makes environmental policy of a jurisdiction too stringent relative to the efficient level the paper also considers the effects of absentee ownership on environmental policy when goods trade is allowed

utilities privatization and the poor lessons and evidence from latin america abstract the perception that privatization hurts the poor is growing and creating a backlash against the private provision of basic infrastructure services at the same time governments are finding themselves fiscally strapped searching for ways to finance the large investments needed to expand services to the poor in latin america a laboratory for privatization evidence exists which sheds light on the privatization experience this paper analyzes the channels through which the poor might either lose or gain from privatization examines the evidence accumulated on what has actually happened and then discusses the policy options available to decision makers who want to increase efficiency while at the same time dealing with the infrastructure needs of the poor that have been identified as being important for their welfare in that context the issue of whether welfare considerations should form part of the regulatory approach to privatized services is examined the paper s major aims are to shed light on the issue of who can and does benefit from privatization of utilities and to guide policy makers in the choices

conventional contracts intentional behavior and logit choice equality without symmetry abstract when coordination games are played under the logit choice rule and there is intentional bias in agents non best response behavior we show that the egalitarian bargaining solution emerges as the long run social norm without intentional bias a new solution the logit bargaining solution emerges as the long run norm these results contrast with results under non payoff dependent deviations from best response behavior where it has previously been shown that the kalai smorodinsky and nash bargaining solutions emerge as long run norms we complement the theory with experiments on human subjects results of which suggest that non best response play is payoff dependent and displays intentional bias this suggests the egalitarian solution as the most likely candidate for a long run bargaining norm

evolutionary bargaining with intentional idiosyncratic play abstract we study equilibrium selection in stochastic evolutionary bargaining games in which idiosyncratic play is intentional instead of random in contract games the stochastically stable state selected by intentional idiosyncratic play is the nash bargain rather than the usual kalai smorodinsky solution

optimal production run length and warranty period for an imperfect production system under selling price dependent on warranty period abstract this paper extends the extant literature to consider that the selling price of the product sold with warranty policy is a function of the length of the warranty period for an imperfect production system a product under a free replacement repair warranty policy is considered and the lifetime distribution of the product is assumed to be exponentially distributed we seek to maximize the total profit per item through optimal determinations of the production run length and the warranty period based on the proposed mathematical model we will derive some lemmas and the propositions to carry out an efficient solution procedure to determine the optimal warranty period and production run length the numerical examples are given to illustrate the features of the proposed maximizing profit model and to show all of the possible cases of the solution procedure

an evolutionary model of bargaining abstract individuals from two populations of bargainers are randomly matched to play the nash demand game they make their demands by choosing best replies based on an incomplete knowledge of the precedents and occasionally they choose randomly there is no common knowledge over the long run typically one division will be observed almost all of the time this stochastically stable division is close to the nash solution when all agents in the same population are alike when the populations are heterogeneous a generalization of the nash solution results if there is some mixing between the two populations the stable division is fifty fifty journal of economic literature classification number c78

discounted and per unit costs of product warranty this paper proposes a detailed model of the costs and benefits to producers and consumers of product warranty three common types of product warranty contract are considered in addition we explicitly allow for randomness in consumer repurchase behavior and for the possibility of an independent damage process acting on products sold under warranty the cost criteria considered are discounted costs profits and per unit costs and profits the model is used to analyze the trade off between warranty and quality control and to illustrate the sensitivity of warranty costs to environmental variables

a prospect theory nash bargaining solution and its stochastic stability abstract we consider the long run outcomes of bargaining games when players obey prospect theory we extend the evolutionary bargaining model of young 1993 to a two stage nash demand game two players simultaneously choose whether to exercise an outside option in the first stage and play the nash demand game in the second stage which will be reached only if neither player exercises the outside option we address the influence on the stochastically stable division of reference dependent preferences where the reference point is the value of the outside option we show that the division consistently differs from the nash bargaining solution under expected utility theory inspired by this we propose a prospect theory nash bargaining solution which coincides with the stochastically stable division

redistribution and the marginal cost of public funds abstract discussions of the marginal cost of public funds with distortionary taxation are often cast in the framework of a one consumer economy while the main justification of distortionary taxes is that they are needed for redistribution this paper analyzes the issue in a model with heterogeneous consumers and a linear income tax focusing on the tradeoff between labour market distortions and the redistribution from high wage to low wage workers in an optimal tax system the mcf will be the same for all sources of funds and under certain assumptions less than one without optimality the mcf will in general differ between different sources of finance

local versus central wage bargaining with endogenous investments investment behavior may depend on whether wage bargaining takes place centrally or locally at the firm level the outcome of the wage bargain will in turn depend on previous investments ignoring other differences between the two bargaining regimes endogenous investments imply that wages are lower and profits higher under local wage bargaining than under central bargaining this does not necessarily imply that employment is highest under local bargaining since investments may differ in the two cases with a nash bargaining solution however reasonable assumptions imply that employment is highest under local wage bargaining

stochastic stability under logit choice in coalitional bargaining problems abstract this study examines a dynamic process of n person coalitional bargaining problems we investigate the evolution of social conventions by embedding a coalitional bargaining setting in a dynamic process in each period a group of players may make some coalitional move that is forming a new team or negotiating the division of a surplus players revise their coalitions and surplus divisions over time in the presence of stochastic noise which leads players to make a suboptimal decision under a logit specification of choice probabilities we find that the stability of a core allocation decreases in the wealth of the richest player furthermore stochastically stable allocations are core allocations that minimize the wealth of the richest player

coalitions tipping points and the speed of evolution this study considers pure coordination games on networks and the waiting time for an adaptive process of strategic change to achieve ecient coordination although it is in the interest of every player to coordinate on a single globally ecient norm coalitional behavior at a local level can greatly slow as well as hasten convergence to eciency

a marginal cost of funds approach to multi period public project evaluation implications for the social discount rate abstract although the use of marginal cost of funds mcf has been widely appreciated in public finance literature discussions of mcf have been confined to a static setting this paper develops a multi period project evaluation rule that is based on mcf unlike previous approaches the parameters required for implementing the mcf rule are independent of projects under consideration a lesson from this paper is that the government discount rate policies that are largely based on the concepts of social discount rate and shadow price of capital should be rewritten with the use of parameters representing mcf

coordination of environmental policy for transboundary environmental problems abstract in order to reach a pareto optimal outcome with transboundary environmental problems there must be some kind of international environmental agreement one possibility is to have an international environmental agreement focusing directly on emissions in each country given such an agreement an important issue is whether one ought to supplement the agreement with some kind of policy coordination or if the choice of environmental policies should be left to each country to decide on unilaterally it is shown that under ideal conditions pareto optimality will be achieved without policies being coordinated across countries such ideal conditions include among other things that all markets including the labour market are competitive however if one has imperfect competition in goods markets or unemployment decentralized policy making may give an outcome which is not pareto optimal

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

optimal public good provision with limited lump sum taxation it is often argued that the use of distortionary taxation lowers the optimal provision of public goods below its optimal level in a first best economy which contains no restrictions on lump sum taxation however this issue is usually investigated using commodity tax models that contain no lump sum taxes this paper examines a many consumer economy in which the only tax instruments are commodity taxes and a poll tax subsidies are negative taxes the optimal level of public good provision in this economy typically exceeds the first best level at least for distributionally neutral public goods copyright 1991 by american economic association

an analysis of coordination mechanisms for the u s cash supply chain the overuse of its currency processing facilities by depository institutions dis has motivated the federal reserve fed to impose its new cash recirculation policy this overuse is characterized by the practice of cross shipping where a di both deposits and withdraws cash of the same denomination in the same business week in the same geographical area under the new policy which came into effect july 2007 the fed has imposed a recirculation fee on cross shipped cash the fed intends to use this fee to induce dis to effectively recirculate cash so that the societal cost of providing cash to the public is lowered to examine the efficacy of this mechanism we first characterize the social optimum and then analyze the response of dis under a recirculation fee levied on cross shipped cash we show that neither a linear recirculation fee which is the fed s current practice nor a more sophisticated nonlinear fee is sufficient to guarantee a socially optimal response from dis we then derive a fundamentally different mechanism that induces dis to self select the social optimum our mechanism incorporates a fairness adjustment that avoids penalizing dis that recirculate their fair share of cash and rewards dis that recirculate more than this amount we demonstrate that the mechanism is easy to implement and tolerates a reasonable amount of imprecision in the problem parameters we also discuss a concept of welfare preserving redistribution wherein the fed allows a group of dis to reallocate amongst themselves their deposits and demand if such a possibility does not increase societal cost finally we analyze the impact of incorporating the custodial inventory program another component of the fed s new policy

optimal age for preventive replacement under a combined fully renewable free replacement with a pro rata warranty abstract this paper focuses on an age replacement policy for products under a new warranty strategy which combines a fully renewable free replacement with a pro rata warranty policy called fully renewable frw prw policy for this combined warranty strategy whenever a product fails within the warranty period it is replaced by a new one and a new warranty is issued meanwhile if the failure occurs during the first time interval i e the free replacement warranty frw interval replacement is made at no cost to the buyer however if the failure occurs during the second time interval i e the pro rata warranty prw interval replacement is made at a pro rata cost to the buyer dividing the replacement age into three separate periods within frw during prw and post warranty then given that the replacement age is in a certain interval the cost model from the user buyer perspective is developed and the corresponding local optimal replacement age is derived such that the long run expected cost rate is minimized afterward the global optimal replacement age is determined structural properties of these optimal policies are obtained and presented and special cases of the model are discussed finally a numerical example is given for illustration

public goods tax policies and unemployment in ldcs 1 introduction traditionally an analytically convenient and widely used assumption in the international trade and development economics literature has been that of lump sum distribution of direct e g income or indirect e g consumption tariff tax revenue when various policy implications of such instruments e g terms of trade or welfare effects were to be examined this analytical shortcut however hardly ever constitutes a real world practice either in rich developed or in poorer developing economies on the other hand another extensive branch of economics the public finance literature has adopted a more realistic approach regarding the economic activity of a government a government is viewed among other things as a provider of public collective consumption goods and or of public inputs that enhance the productive capacity of the private sector being so it can use revenues from nondistortionary e g lump sum taxes or distortionary e g consumption taxes to finance the provision of such goods and services within this public finance context a long standing proposition states that when nondistortionary taxes are used to finance the provision of a public good the first best efficiency rule requires that the sum of the marginal rates of substitution i e the social marginal benefit equal the marginal rate of transformation i e the social marginal cost e g see samuelson 1954 when distortionary taxes are used to finance the provision of the public good pigou 1947 argued that the social marginal cost exceeds the private marginal cost because of the induced indirect cost from raising tax revenue through distortionary taxation stiglitz and dasgupta 1971 atkinson and stem 1974 and wildasin 1984 among others demonstrate that in certain cases e g when the taxed and the public goods are complements in consumption pigou s argument fails to hold and the social cost may fall short of the private marginal cost because of its more realistic appeal this public finance approach to the use of tax revenue has been subsequently adopted by the relevant international trade and development economics literature recently the efficiency rule for public good provision has been examined in the context of a small open economy by among others feehan 1988 when tariff revenue finances the provision of the public good in an economy producing two traded goods and a nontraded public consumption good michael and hatzipanayotou 1995 examine the same issue and derive the formulae for the optimal tax rates on traded or nontraded goods in an economy producing many traded and nontraded goods and where consumption tax revenue finances the provision of the public good michael and hatzipanayotou 1997 demonstrate the failure of the first best efficiency rule when lump sum taxes are used to finance the provision of a public good in a small open economy in the presence of trade restrictions i e a tariff or a ver two features in the above reviewed studies of the international trade development economics and public finance literature motivate the present paper first all these studies derive the efficiency rule for public good provision in the context of a small open or closed economy with full employment unemployment however to a lesser or to a larger extent remains a structural feature of many developed or developing economies from an analytical standpoint the existence of such a distortion may alter both the optimal tax formulae and the efficiency rule for public good provision second the above reviewed literature considers the case where a government uses a single policy instrument e g lump sum taxes income taxes tariffs to finance the provision of the public good more than often however governments may have at their disposal several tax instruments that they can simultaneously use in order to raise revenue for financing the provision of public consumption goods

risk preferences and demand drivers of extended warranties we disentangle and study the relative importance of different risk preferences in explaining extended warranty purchases and the high premia paid for them empirical and behavioral research on insurance is at odds with whether diminishing returns curvature of the utility function or loss aversion and nonlinear probability weighting lead to observed consumer behavior this lack of consensus is primarily due to the inability of standard choice data to separate different risk preferences and the consequent need to rely on strong parametric assumptions we design two conjoint studies consistent with simultaneous and sequential decision making with choices about washing machines and extended warranties where subjects are given failure probabilities and repair costs using stated choice data from the surveys we can nonparametrically identify product and risk preferences we find that loss aversion is significantly more important than curvature and probability weights in explaining extended warranty choices importantly failure to decompose risk averse behavior into that arising from curvature loss aversion and probability weighting leads to lower washer prices and profits these findings are robust to alternate reference point assumptions we rationalize the premia paid for warranties by exploring retailer incentives to price discriminate and test the theory on complementary goods pricing finally based on counterfactual analysis forcing separate retailers to sell washers and extended warranties is not necessarily welfare enhancing as cited in the media and previous literature

effect of risk aversion on single sample attribute inspection plans the impact of a decision maker s risk aversion on the choice of an optimal sampling plan is empirically examined for various batch sizes and prior distributions of the process quality level these plans are compared to those of the classical linear cost model the comparisons show that substantial differences in the characteristics of an optimal sampling plan i e probability of acceptance optimal sample size and expected total cost occur when risk aversion is considered a discussion of the optimization characteristics involved in the selection of a sampling plan is also presented an optimization algorithm which obtains an optimal sampling plan based on the criterion of maximizing expected utility is proposed and evaluated

replacement costs under warranty cost moments and time variability we consider a product that is sold under one of the two common warranty policies under the pro rata warranty policy a failed item is replaced by a new one or is repaired at a cost prorated to the age of the failed item under the free replacement warranty policy replacements or repairs during the warranty period are provided by the supplier free of charge to the buyer assuming that successive failure times form a renewal process we derive moments of the total replacement cost for both policies during the product life cycle 0 t we also provide an extension to time varying failure time distributions in the case of the pro rata warranty policy

determining the optimal warranty price based on the producer s and customers risk preferences we propose a warranty model for the free replacement fixed period warranty policy that determines the optimal warranty price for a given warranty period we assume a constant failure rate for the product constant repair costs throughout the warranty period and a producer s and customers risk aversion for future repair costs using the exponential utility function and the gamma failure rate distribution we derive the decision model that maximizes the producer s certainty profit equivalent furthermore the sensitivity of the optimal warranty price is analyzed with a numerical example with respect to such factors as 1 the producer s and customers risk preferences 2 their perceptions about the product failure rate 3 the customers loyalty to the original producer in repairing failed products and 4 the customers repair price

a generalized approach to multigeneration project evaluation 1 introductionit is well known that the choice of discount rate plays a significant role in the ranking of projects with varying time paths of costs and benefits for public projects the choice of the appropriate social discount rate sdr is not clear cut even in the context of short lived projects in which costs and benefits occur within a single generation in particular when capital taxes produce a wedge between gross and net rates of return should one discount at the economy s rate of return the before tax rate or the individual s rate of return the after tax rate in the single generation context the literature falls in two camps 1 one camp argues that the appropriate sdr is a weighted average of the gross and net rates of return with weights typically determined by the fractions of resources drawn from consumption and private investment respectively 2 a second camp argues that future benefits should be discounted at the net rate of return but that the initial investment should be multiplied by a scale factor so that the direct costs of the project can be expressed in terms of consumption units 3both approaches suffer from severe implementation problems for the first approach there is no general formula for the weights needed to calculate the sdr as a weighted average of two market rates of return dreze 1974 indeed the appropriate sdr to use is project specific stiglitz 1982 without a systematic methodology to derive project specific sdrs the weighted average approach is hard to implement for the second approach which equalizes the sdr to the net rate of return the scale factor the opportunity cost of public investment must be quantified the opportunity cost of public investment depends on whether resources come from private investment or consumption and on the calculation of the present value of the future consumption yielded by a unit of capital discounted at the net rate of return that is the shadow price of capital as lind 1997 points out however there is no general agreement on a specific procedure for calculating the shadow price of capital indeed the concept of the opportunity cost of public investment suffers the same project dependence problem as the first view of the sdr diamond 1968 multigeneration projects such as nuclear waste disposal natural resource conservation or even social security reform further complicate discount rate choice specifically intergenerational equity in addition to intertemporal efficiency plays a role in determining the appropriate social discount rate for multigeneration public project evaluation 4 as in the single generation context there are two competing views on the appropriate discount rate when evaluating multigeneration projects the descriptive and the prescriptive approaches 5the descriptive approach to discounting is a market based approach it does not rely on an explicit social welfare function swf or the pure time preference rate embedded in the swf however the descriptive approach works under the assumption that intergenerational compensation through changes in the tax debt policy is available 6 it is argued that under appropriate intergenerational compensation the market rates of return are still relevant for calculating the sdr for multigeneration project evaluation and in general the sdr should be a weighted average of the gross and net rates of return this descriptive view of setting the sdr equal to the market return appears to underlie the office of management and budget s omb adoption of 7 as the appropriate discount rate for federal programs 7the intent of the prescriptive approach is to use the social discount rate as an expression of ethical judgment on how consumption of future generations should be compared to consumption of current generations

a pigovian rule for the optimum provision of public goods abstract the integrated treatment of optimal taxation and public expenditure presented here is based on the dual relationship between the prices of private goods and the quantities of public goods the conditions for optimum public good provision can be expressed as a modification of the samuelson conditions with extra terms representing a the distortionary effect of taxes on the willingness to pay for the public good and b distributional effects the former captures pigou s notion of the indirect damage caused by the need to finance public expenditure out of distortionary taxes and we call this the pigou term in certain cases a very simple benefit cost ratio for public projects emerges that is equivalent to measuring benefits as if they were taxed

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

coalitional stochastic stability abstract this paper takes the idea of coalitional behavior groups of people occasionally acting together to their mutual benefit and incorporates it into the framework of evolutionary game theory that underpins the social learning literature an equilibrium selection criterion is defined which we call coalitional stochastic stability css this differs from existing work on stochastic stability in that profitable coalitional deviations are given greater importance than unprofitable single player deviations a general characterization of css is given together with more detailed characterizations for specific classes of games applications include contracting asymmetric social norms and collusive price setting the latter of which is shown in some circumstances to facilitate competitive outcomes

intergovernmental versus intersource emissions trading when firms are noncompliant abstract this paper analyzes the relative cost effectiveness of intergovernmental versus intersource cross border emissions trading when polluting firms are noncompliant a special focus is placed on the presence of enforcement costs and the associated credibility problem of governmental monitoring it is shown that without inspection commitment the intergovernmental system is more cost effective because the endorsed flexibility in domestic emission taxation serves as a commitment device for building credibility of monitoring

evolution in games with endogenous mistake probabilities abstract j bergin and b lipman econometrica 64 1996 943 956 show that the selection effect from the random mutations in the adaptive population dynamics in m kandori g mailath and r rob econometrica 61 1993 29 56 and p young econometrica 61 1993 57 84 is due to restrictions on how these mutation rates vary across population states we here model mutation rates as endogenously determined mistake probabilities by assuming that players with some effort can control the probability of implementing the intended strategy this is shown to corroborate the results in kandori mailath rob 1993 and under certain regularity conditions those in young 1993 journal of economic literature classification number c72

financing of public goods through taxation in a general equilibrium economy experimental evidence abstract we use a laboratory experiment to compare general equilibrium economies in which agents individually allocate their private goods among consumption investment in production and replenishing or refurbishing a depreciating public facility in a dynamic game with long term investment opportunities the public facility is financed either by voluntary anonymous contributions vac or taxes we find that rates of taxation chosen by majority vote remain at an intermediate level close to the finite horizon optimum and the experimental economies sustain public goods at levels between the finite and infinite horizon optima this contrasts with a rapid decline of public goods under vac both the payoff efficiency and production of private goods are higher when taxes are set endogenously instead of being fixed at the infinite horizon optimum level externally when taxes are adjusted to the respective finite horizon optimum each period production levels and efficiency remain as high as in the voting treatments at least in the latter half of the sessions when subjects choose between vac and taxation 23 out of 24 majority votes favor taxation demonstrating a clear preference for enforceable taxes to finance public goods in this setting

wage setting and the tax system theory and evidence for the united kingdom abstract this paper analyses the effects of a non linear tax system on wage bargaining the main conclusions are an increase in the marginal income or payroll tax rate reduces the pre tax wage in the isoelastic case an increase in the average tax rate increases the pre tax wage by more than the tax increase and a measure of the progressivity of the tax system residual income progression is a sufficient measure of the effect of the tax system on wage pressure empirical evidence is presented to support these propositions and the predictions of the model regarding the effect of recent changes to the u k tax system on the distribution of earnings discussed

are uniform solutions focal the case of international environmental agreements the application of uniform solutions has several drawbacks notably their lack of cost efficiency and their inability to guarantee individual rationality a proper specification of uniform solutions however reveals that uniform solutions that satisfy individual rationality always exist when all countries hold private information about their own reduction costs there only exists one solution that always satisfies individually rationality without use of side payments and the requirement of dominant strategy implementation the solution that selects the smallest individually preferred uniform reduction which also give a theoretical explanation of the lowest common denominator effect

dynamic pricing and warranty policies for products with fixed lifetime abstract we consider a repairable product with known market entry and departure times a warranty policy is offered with product purchase under which a customer can have a failed item repaired free of charge in the warranty period it is assumed that customers are heterogeneous in their risk attitudes toward uncertain repair costs incurred after the warranty expires the objective is to determine a joint dynamic pricing and warranty policy for the lifetime of the product which maximizes the manufacturer s expected profit in the first part of the analysis we consider a linearly decreasing price function and a constant warranty length we first study customers purchase patterns under several different pricing strategies by the manufacturer and then discuss the optimal pricing and warranty strategy in the second part we assume that the warranty length can be altered once during the product lifetime in developing a joint pricing and warranty policy numerical studies show that a dynamic warranty policy can significantly outperform a fixed length warranty policy

progressive taxation redistribution and labor supply the analysis of the effect of progression on labor supply is extended to a model with many consumers the condition for progression to increase labor supply given constant aggregate tax revenue is derived and shown to depend on the income effects resulting from redistribution it is then shown that the optimal linear income tax schedule involves a degree of progression which on the margin does reduce labor supply